NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31,
2019 AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
|
|
1.
|
ORGANIZATION
AND BUSINESS BACKGROUND
|
Wunong
Asia Pacific Company Limited (fka Panama Dreaming Inc.) (“Asia Pacific” or the “Company” or “we”
or “us”), have been prepared in accordance with accounting principles generally accepted in the United States of America.
Asia Pacific was incorporated in Nevada on June 23, 2011 for the purpose of offering real estate consulting services to persons
located in North America who are interested in investing in real estate located in Panama.
On
November 5, 2012, the Company filed Articles of Merger with the Nevada Secretary of State to change its name from “Panama
Dreaming Inc.” to “Asia Pacific Boiler Corporation”, to be effected by way of a merger with its wholly-owned
subsidiary Asia Pacific Boiler Corporation, which was created solely for the name change.
Also
on November 5, 2012, the Company filed a Certificate of Change with the Nevada Secretary of State to give effect to a forward
split of its authorized, issued and outstanding shares of common stock on a 4 new for 1 old basis and, consequently, the Company’s
authorized common stock increased from 100,000,000 to 400,000,000 shares, and the Company’s issued and outstanding common
shares increased from 7,950,000 to 31,800,000, all with a par value of $0.00001. The Company’s preferred stock remained
unchanged with 100,000,000 preferred shares authorized, par value $0.00001, and no preferred shares issued or outstanding.
The
forward split and name change became effective with the Over-the-Counter Bulletin Board at the opening of trading on November
9, 2012.
On
November 6, 2014, the Company changed the fiscal year end to December 31 from June 30. These financial statements and this
Form 10-K for the period ended December 31, 2017.
Merger
with Million Place Investments Ltd.
On
August 5, 2014, we entered into and closed a share exchange agreement with Million Place Investments Ltd. (“Million Place”)
and the shareholders of Million Place. Pursuant to the terms of the share exchange agreement, we agreed to acquire
all 10,000 of the issued and outstanding shares of Million Place’s common stock in exchange for the issuance by our company
of 7,500,000 shares of our common stock to the shareholders of Million Place. As a result of these transactions, Million Place
has become our wholly owned subsidiary. We would have 39,300,000 issued and outstanding common shares upon issuance of the 7,500,000
shares of common stock. On November 19, 2015, we authorized and issued the 7,500,000 shares of common stock.
Business
of Million Place Investments Ltd.
Million
Place was incorporated on April 30, 2012 under the laws of the British Virgin Island (BVI) to engage in any lawful corporate undertaking,
including but not limited to mergers and acquisitions.
Pursuant
to a Share Transfer Agreement dated December 3, 2012, Million Place purchased from John Gong, 14.7 million shares at Renminbi
(RMB) 1.00 per ordinary share (approximately $2,227,273 in the aggregate) in the share capital of Inner Mongolia Yulong Pump Production
Company Limited (Yulong Pump) thereby acquiring an equity interest of 49% in Yulong Pump. Yulong Pump is a China foreign
joint venture corporation engaged in the sale and manufacture of industrial equipment, and in the acquisition, development and
exploitation of residential, commercial, and industrial real estate assets. The business of Yulong Pump is further described
below. In acquiring a 49% interest in Yulong Pump, Million Place became the deemed cooperative foreign joint venture partner
of Yulong Pump.
WUNONG ASIA PACIFIC
COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31,
2019 AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
Pursuant
to PRC law, the partners in a cooperative foreign joint venture are permitted to share profits on an agreed basis and not necessarily
in proportion to capital contribution. The joint venture is not required to be a distinct legal entity from its partners
and management and financial control of the foreign joint venture may be determined at the discretion of the partners by mutual
agreement provided that, upon termination of the joint venture, all fixed assets will become the property of the Chinese participant
in the joint venture. Pursuant to the December 3, 2012 Share Transfer Agreement, Million Place was entitled to appoint the
board of directors of Yulong Pump. Further, absent an agreement between Million Place and Yulong Pump, the articles of association
of Yulong Pump provide for distribution of dividends amongst its shareholder in proportion to the number of shares held by them.
On April 25, 2015, Million Place entered
into a Share Sale &Purchase Agreement with Xiushan Qin , our former President, former Chief Executive Officer and former Director,
whereby Mr. Qin, who is the beneficial owner of a 51% interest in Yulong Pump, granted to Million Place the option to purchase
an additional 2% equity interest in Yulong Pump (being 600,000 shares) for the aggregate purchase price of RMB 1.00 per share or
approximately $96,278 in the aggregate. The option is perpetual and without provision for termination. With its acquisition
of a 49% equity interest together with an option to purchase an aggregate 51% equity interest, Million Place is seeking to establish
a majority equity stake in Yulong Pump.
On
May 22, 2015, Million Place entered into a Joint Venture Contract with Yulong Pump pursuant to which the companies 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 will be solely responsible all operations and management of the joint venture and shall have 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. Both Million
Place and Yulong Pump shall be entitled to engage in business that is competitive with the joint venture. Pursuant
to the Joint Venture Contract, Yulong Pump has allocated its 143,106 square foot commercial property located in Wulateqianqi,
Mongolia to the joint venture operation. That property is currently under construction and is further described below.
Additional assets or operations may be allocated to the joint venture on an ongoing basis. As of today, the joint venture
contract has not been completed.
Business
of Inner Mongolia Yulong Pump Production Company Limited
Inner
Mongolia Yulong Pump Production Company Limited (“Yulong Pump”) was incorporated on October 6, 1998 under the laws
of the Peoples’ Republic of China to engage in any lawful corporate undertaking, including, but not limited to, selected
mergers and acquisitions.
WUNONG ASIA PACIFIC COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31,
2019 AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
In
1998, Yulong Pump paid a total of RMB 799,000 ($131,985) to acquire land use rights in Wuchuan, Inner Mongolia for the purposes
of establishing a manufacturing facility where. From 1998 until 2008, Yulong Pump was engaged in the manufacture of industrial
water pumps for a variety of applications in Wuchuan, Inner Mongolia. In 2008, Yulong Pump ceased its water pump manufacturing
activities due to a decrease in demand for its products and increasing obsolescence of its manufacturing infrastructure.
The land use rights for the Wuchuan property expire in 2046 and are eligible for renewal subject to additional costs. The
Wuchuan property, is located in the city centre of Wuchuan, a suburb of Hohhot. Yulong pump intends to explore the potential
for commercial development of these lands. The land use right has not been transferred to Yulong Pump as of December
31, 2017. Yulong Pump has written off the net amount of land use right as of December 31, 2017.
Since
the termination of its water pump manufacturing operations, Yulong Pump has engaged in the identification and acquisition of other
industrial manufacturing assets, and in the acquisition, development and exploitation of residential, commercial, and industrial
real estate assets.
In
2008, Yulong Pump transformed itself from a local resident China company to a foreign joint venture company. As a result, the
Company has become an entity with the status of a foreign joint venture company with registered capital of RMB ¥30
million (approximately USD$4,839,181), which consists of 30 million shares of authorized, issued and outstanding voting common
stock with a par value of RMB ¥1.0 per share (USD$0.16).
In
2013, Yulong Pump applied to the Foreign Investment Committee of Inner Mongolia Autonomous Region to raise the registered capital
from RMB 30 million to RMB 600 million (approximately USD$96,783,624). This was approved in November 2013.
During 2013, Yulong Pump raised RMB188,355,325
(USD$31,114,083) as a contribution from its president and CEO, Xiushan Qin .
On August 5, 2013 Yulong Pump entered
into Real Estate Sales Contracts (Lease Agreements) with WulateqianqiHua Yuan Real Estate Limited Company pursuant to which Yulong
Pump acquired the land use rights, expiring on September 15, 2080, to the third, fourth and fifth floors of a 6 story commercial
building under development and located in Wulanteqianqi, Mongolia, China. The leasehold area of the property is approximately
143,106 square feet. Yulong pump paid RMB 188,355,325 (approximately USD $31,114,000) in consideration of the land use rights.
The Wulateqianqi property was subsequently allocated to the joint venture between Million Place and Yulong Pump pursuant to the
Joint Venture Agreement dated May 22, 2015. Million Place is therefore responsible for the administration and management
of the property and entitled to receive 49% of the joint venture proceeds. The parties intend to lease the facility upon
completion of construction and a potential tenant has been identified.
WUNONG ASIA PACIFIC COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31,
2019 AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
On February 1, 2015, Yulong Pump entered
into a Warranty Deed Agreement with Xiushan Qin , a former officer and former director of the Company, pursuant to which Mr.
Qin has agreed to transfer to Yulong Pump by July 31, 2015 all outstanding securities of Hohhot Devotion Boiler General Company
Private Limited (“Hohhot Devotion Boiler”). The Warranty Deed Agreement does not provide for financial consideration
Together, Hohhot Devotion Boiler and Yulong Pump are planning to begin construction of a new state of the art boiler manufacturing
factory with a planned investment of approximately USD$250 million when the said amount has been raised. The companies intend to
commence staffing and training of the new boiler plant employees concurrently with the start of construction. Yulong Pump and Hohhot
Devotion Boiler also intend to rezone for commercial and residential use industrial land owned by Hohhot Devotion Boiler in Inner
Mongolia. As at the date of this report, the acquisition of Hohhot Devotion Boiler by Yulong Pump remains incomplete,
and there is no guarantee that any such acquisition will be completed. Further, there is no guarantee that Yulong Pump or
Hohhot Devotion Boiler will successfully financing the construction of their planned boiler facility. On August 5, 2015, the warranty
deed was extended to October 31, 2015. As at the date of this report, the acquisition has not been completed. There is no
guarantee that the transfer will be completed or that it will be completed on terms favorable to Yulong Pump. Throughout
the three months ended March 31, 2019 and year ended December 31, 2018, Yulong Pump had no business activities.
Through
our wholly owned subsidiary, Million Place, together with its joint venture partner, Yulong Pump, we adopted a multi-pronged business
plan involving the acquisition, development and exploitation of residential, commercial, and industrial real estate assets, the
manufacture and sale of industrial water pumps and accessories and industrial boilers, and the provision of consultancy services
for the design of industrial boiler systems.
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$1
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inner
Mongolia Yulong Pump Production Company Limited
|
|
The
PRC, a limited liability company
|
|
Manufacture
of water pump systems
|
|
RMB30,000,000
|
|
|
49
|
%
|
The
Company and its subsidiary are hereinafter referred to as (the “Company”).
WUNONG ASIA PACIFIC COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31,
2019 AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
|
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
These
accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles
in the United States of America (“U.S. GAAP”).
In
preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts
of assets and liabilities in the balance sheet and revenues and expenses during the years reported. Actual results may differ
from these estimates.
The
consolidated financial statements include the financial statements of the Company and its subsidiary. All significant inter-company
balances and transactions within the Company have been eliminated upon consolidation.
The
Company accounts for the investment in associate in which the Company does not hold a controlling financial interest but have
significant influence over operating and financial policies using the equity method. Under the equity method, the investment is
recorded at cost and adjusted for the proportionate share of net earnings or losses and other comprehensive income or loss, cash
contributions made and distributions received, and other adjustments, as appropriate. The Company performs a periodic evaluation
of an investment to determine whether the fair value of each investment is less than the carrying value, and, if so, whether such
decrease in value is deemed to be other-than-temporary. The Company has provided an impairment loss in full to the investment
in an associate during 2015 fiscal year. As at March 31, 2019 and December 31, 2018, the investment in an associate was reduced
to zero.
WUNONG ASIA PACIFIC COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31,
2019 AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
The
basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding.
Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the
weighted average number of common shares outstanding plus potential dilutive securities. For the three months ended March 31,
2019, there were no potentially dilutive securities outstanding.
The
Company accounts for income taxes under the Financial Accounting Standards Board of Financial Accounting Standard ASC 740, “Accounting
for Income Taxes ” (“ASC 740”). Under ASC 740, 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 tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the 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. There was no current or deferred income tax expense or benefits for the periods ending March 31, 2019 and 2018.
Income
taxes are determined in accordance with the provisions of 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 months ended March 31, 2019, the Company did not have any interest and penalties associated with tax positions. As of
March 31, 2019 and December 31, 2018, the Company did not have any significant unrecognized uncertain tax positions.
WUNONG ASIA PACIFIC COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31,
2019 AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
Parties,
which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly,
to control the other party or exercise significant influence over the other party in making financial and operational decisions.
Companies are also considered to be related if they are subject to common control or common significant influence.
|
|
●
|
Fair
value of financial instruments
|
The
carrying value of the Company’s financial instruments (excluding short-term bank borrowing and convertible promissory notes):
cash and cash equivalents, accounts payable, accounts payable to a related party and advance from a related party approximate
at their fair values because of the short-term nature of these financial instruments.
Management
believes, based on the current market prices or interest rates for similar debt instruments, the fair value of its obligation
under finance lease and short-term bank borrowing approximate the carrying amount.
The
Company also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”),
with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value
hierarchy that prioritizes the inputs used in measuring fair value as follows:
|
|
●
|
Level
1
: Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets;
|
|
|
●
|
Level
2:
Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar
instruments in markets that are not active, and model-based valuation techniques (e.g. Black-Scholes Option-Pricing model)
for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially
the full term of the assets or liabilities. Where applicable, these models project future cash flows and discount the future
amounts to a present value using market-based observable inputs; and
|
|
|
●
|
Level
3
: Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants
would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including
option pricing models and discounted cash flow models.
|
Fair
value estimates are made at a specific point in time based on relevant market information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined
with precision. Changes in assumptions could significantly affect the estimates.
WUNONG ASIA PACIFIC
COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31,
2019 AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
|
|
●
|
Recent
accounting pronouncements
|
In
February 2016, the FASB issued ASU No. 2016-02, Leases. The standard requires that a lessee recognize the assets and liabilities
that arise from operating leases. A lessee should recognize in its balance sheet a liability to make lease payments (the lease
liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term
of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize
lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning
of the earliest period presented using a modified retrospective approach. The guidance in ASU 2016-02 is effective for annual
and interim reporting periods beginning after December 15, 2018.
In
January 2017, the FASB issued ASU No. 2017-04,
Intangibles - Goodwill and Other
, which eliminates step two
of the quantitative goodwill impairment test. Step two required determination of the implied fair value of a reporting unit, and
then a comparison of this implied fair value with the carrying amount of goodwill for the reporting unit, in order to determine
any goodwill impairment. Under the new guidance, an entity is only required to complete a one-step quantitative test,
by comparing the fair value of a reporting unit with its carrying amount, and any goodwill impairment charge is determined by
the amount by which the carrying amount exceeds the reporting unit’s fair value. However, the loss should not exceed the
total amount of goodwill allocated to the reporting unit. The standard is effective for the Company in the first quarter of 2020,
with early adoption permitted as of January 1, 2017, and is to be applied on a prospective basis.
WUNONG ASIA PACIFIC COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31,
2019 AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
In
March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement
Benefit Cost, which changes how employers that sponsor defined benefit pension or other postretirement benefit plans present the
net periodic benefit cost in the statement of operations. The new guidance requires entities to report the service cost component
in the same line item or items as other compensation costs. The other components of net benefit cost are required to be presented
in the statement of operations separately from the service cost component and outside the subtotal of loss from operations. ASU 2017-07
also provides that only the service cost component is eligible for capitalization. The standard is effective for the Company in
the first quarter of 2018, with adoption to be applied on a retrospective basis.
In
May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation: Scope of Modification Accounting, which
provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based
payment award. This ASU does not change the accounting for modifications but clarifies that modification accounting guidance should
only be applied if there is a change to the value, vesting conditions or award classification and would not be required if the
changes are considered non-substantive. The amendments of this ASU are effective for the Company in the first quarter of 2018,
with early adoption permitted.
In
August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities,
which modifies the presentation and disclosure of hedging results. Further, it provides partial relief on the timing of certain
aspects of hedge documentation and eliminates the requirement to recognize hedge ineffectiveness separately in income. The amendments
in this ASU are effective for the Company in the first quarter of 2019.
In
November 2017, the FASB has issued ASU No. 2017-14, Income Statement—Reporting Comprehensive Income (Topic 220), Revenue
Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606). ASU 2017-14 includes amendments to certain SEC
paragraphs within the FASB Accounting Standards Codification (Codification). ASU 2017-14 amends the Codification to incorporate
the following previously issued guidance from the SEC. ‘The amendments in ASU No. 2017-14 amends the Codification to incorporate
SEC Staff Accounting Bulletin (SAB) No. 116 and SEC Interpretive Release on Vaccines for Federal Government Stockpiles (SEC Release
No. 33-10403) that bring existing SEC staff guidance into conformity with the FASB’s adoption of and amendments to ASC Topic
606, Revenue from Contracts with Customers.
In
September 2017, the FASB has issued ASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic
606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July
20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments.” The amendments in ASU No.
2017-13 amends the early adoption date option for certain companies related to the adoption of ASU No. 2014-09 and ASU No. 2016-02.
Both of the below entities may still adopt using the public company adoption guidance in the related ASUs, as amended. The effective
date is the same as the effective date and transition requirements for the amendments for ASU 2014-09 and ASU 2016-02.
Other
accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption
until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.
WUNONG ASIA PACIFIC COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31,
2019 AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
|
|
3.
|
GOING
CONCERN UNCERTAINTIES
|
The
accompanying 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.
As
of March 31, 2019, the Company has not generated revenues and has accumulated losses of $5,874,207 since inception. The Company
has suffered from continuous losses with a net loss of $532,000 for the three months ended March 31, 2019. The continuation of
the Company as a going concern through December 31, 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 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.
|
|
4.
|
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 December 31, 2018
and 2017. 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 months ended March 31, 2019.
|
|
5.
|
RELATED
PARTY TRANSACTIONS
|
As
of March 31, 2019, advances from the Company’s Chairman and Chief Executive Officer, Mr. John Gong, amounted to $88,526.
The advance is unsecured, non-interest bearing and repayable on demand.
As
of March 31, 2019, amount due to related parties was $1,443,892. These payables are payments made on behalf of the Company by
two companies controlled by Mr. John Gong, our Chief Executive Officer, and by Wunong Technology (Shenzhen) Co., Ltd, owned by
our major shareholder Peijiang Chen.
WUNONG ASIA PACIFIC COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31,
2019 AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
As
of March 31, 2019, the Company had no shares of its preferred stock issued and outstanding.
As
of March 31, 2019, the Company had a total of 46,500,000 shares of its common stock issued and outstanding.
On April 16, 2018, Mr Peijiang Chen acquired
an aggregate of 25,000,000 issued and outstanding common shares of Wunong Asia Pacific Company Limited. The shares were acquired
in a private transaction from our Chairman, Chief Executive Officer and Director, Mr. John Gong. The purchase price, which was
paid with personal funds of the purchaser, was $0.01 per share or $250,000 in the aggregate.
The
25,000,000 common shares constitute approximately 63.61% of our issued and outstanding voting securities as at the date of this
report. There are no arrangements or understandings among Mr. Peijiang Chen, Mr. John Gong, or any of their respective associates
with respect to the election of directors or other matters pertaining to the Company.
On
March 9, 2019, the Company issued 7,200,000 shares of the Company’s common stock in exchange for services from Surewin Capital
International Limited (Surewin). According to the 12-month-term consulting agreement between the Company and Surewin, Surewin
will assist the Company in the acquisition of Wunong Technology (Shenzhen) Co., Ltd. and the completion of the relevant SEC reporting
disclosures for the proposed acquisition.
United
States
The
Company is incorporated in United States, and is subject to corporate income tax rate of 21%.
On
December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Act”) resulting in significant modifications
to existing law. The Company has completed the accounting for the effects of the Act during the quarter ended December 31, 2018.
The Company’s financial statements for the three months ended March 31, 2019 reflect certain effects of the Act which includes
a reduction in the corporate tax rate from 34% to 21% as well as other changes.
WUNONG ASIA PACIFIC COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31,
2019 AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
As
of March 31, 2019, the Company has $ 5,874,207 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 $1,233,583 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.
|
|
|
The Three months ended March 31,
2019
|
|
|
The year ended December 31,
2018
|
|
|
|
|
|
|
|
|
|
|
Income tax provision at the federal statutory rate
|
|
|
21
|
%
|
|
|
21
|
%
|
|
Effect of operating losses
|
|
|
(21
|
)%
|
|
|
(21
|
)%
|
|
Effective tax rate
|
|
|
-
|
|
|
|
-
|
|
Net
deferred tax assets consist of the following:
|
|
|
As of
|
|
|
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Loss carryfoward – current rate
|
|
$
|
1,233,583
|
|
|
$
|
1,121,863
|
|
|
Valuation allowance
|
|
|
(1,233,583
|
)
|
|
|
(1,121,863
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
WUNONG ASIA PACIFIC COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31,
2019 AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
Basic
net loss per share is computed using the weighted average number of common shares outstanding during the year. The dilutive effect
of potential common shares outstanding is included in diluted net loss per share. The following table sets forth the computation
of basic and diluted net loss per share for the three months ended March 31, 2019 and the year ended December 31, 2018:
|
|
|
March 31, 2019
|
|
|
December 31,
2018
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common shareholders
|
|
$
|
(532,000
|
)
|
|
$
|
(160,404
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding – Basic and diluted
|
|
|
41,140,000
|
|
|
|
39,300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share – Basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
9.
|
COMMITMENTS
AND CONTINGENCIES
|
As
of March 31, 2019, there were no commitments and contingencies involved.
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 March 31, 2019 up through the date was the Company issued the unaudited consolidated
financial statements. During the period, other the events below, the Company did not have any material recognizable subsequent
events.