NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018
AND 2017
(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.
Merge 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
$2,227,273 in the aggregate) in the share capital of Inner Mongolia Yulong Pump Production Company Limited (Yulong Pump) thereby
acquiring an equity interest of 49% in Yulong Pump. Yulong Pump is a China foreign joint venture corporation engaged in the
sale and manufacture of industrial equipment, and in the acquisition, development and exploitation of residential, commercial,
and industrial real estate assets. The business of Yulong Pump is further described below. In acquiring a 49% interest
in Yulong Pump, Million Place became the deemed cooperative foreign joint venture partner of Yulong Pump.
WUNONG ASIA PACIFIC COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018
AND 2017
(Currency expressed in United States
Dollars (“US$”), 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 Qin Xiu Shan, 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.
In 1998, Yulong Pump paid a total of
RMB 799,000 ($131,985) to acquire land use rights in Wuchuan, Inner Mongolia for the purposes of establishing a manufacturing
facility where. From 1998 until 2008, Yulong Pump was engaged in the manufacture of industrial water pumps for a variety of
applications in Wuchuan, Inner Mongolia. In 2008, Yulong Pump ceased its water pump manufacturing activities due to a
decrease in demand for its products and increasing obsolescence of its manufacturing infrastructure. The land use
rights for the Wuchuan property expire in 2046 and are eligible for renewal subject to additional costs. The Wuchuan
property, is located in the city centre of Wuchuan, a suburb of Hohhot. Yulong pump intends to explore the potential for
commercial development of these lands. The land use right has not been transferred to Yulong Pump as of December 31, 2017.
Yulong Pump has written off the net amount of land use right as of December 31, 2017.
WUNONG ASIA PACIFIC COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018
AND 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
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 the year 2013, Yulong Pump raised
RMB188,355,325 (USD$31,114,083) as a contribution from its president and CEO, Qin Xiu San.
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
property is under construction with completion anticipated by Fall of 2016. 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.
On February 1, 2015, Yulong Pump entered
into a Warranty Deed Agreement with Qin Xiu San, 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.
Hohhot Devotion Boiler is a PRC company with approximately 300 employees engaged in the manufacture and sale of industrial
boilers, and in real estate development in the Hohhot region of Inner Mongolia, China. It is the largest manufacturer of
boilers in Inner Mongolia. Together, Devotion Boiler and Yulong Pump are concurrently planning to begin construction in March
2015 of a new state of the art boiler manufacturing factory with a planned investment of approximately USD$250 million. The companies
intend to commence staffing and training of the new boiler plant employees concurrently with the start of construction. Yulong
Pump and Devotion Boiler also intend to rezone for commercial and residential use industrial land owned by Devotion Boiler in Inner
Mongolia. As at the date of this report, the acquisition of Devotion Boiler by Yulong Pump remains incomplete, and there
is no guarantee that any such acquisition will be completed. Further, there is no guarantee that Yulong Pump or Devotion
Boiler will successfully financing the construction of their planned boiler facility. On August 5, 2015, the warranty deed was
extended to October 31, 2015. As at the date of this report, the acquisition has not been completed and our company is seeking
a further extension until June 30, 2016. There is no guarantee that the transfer will be completed or that it will be completed
on terms favorable to Yulong Pump. Throughout the years ended December 31, 2017 and December 31, 2018, Yulong Pump had no business
activities.
WUNONG ASIA PACIFIC COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018
AND 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
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”).
|
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 December 31,
2018 and 2017, the investment in an associate was reduced to zero.
WUNONG ASIA PACIFIC COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018
AND 2017
(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 years ended December 31, 2017 and 2016, 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 December 31, 2017 and 2016.
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 years ended December 31, 2018 and
2017, the Company did not have any interest and penalties associated with tax positions. As of December 31, 2018 and 2017, the
Company did not have any significant unrecognized uncertain tax positions.
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.
WUNONG ASIA PACIFIC COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018
AND 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
|
●
|
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.
|
●
|
Recent
accounting pronouncements
|
In May 2014, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09,
Revenue from Contracts with Customers
.
The standard provides companies with a single model for accounting for revenue arising from contracts with customers and supersedes
current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize
revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards
transfer to the customer under the existing revenue guidance. The guidance permits companies to either apply the requirements retrospectively
to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment. In August 2015,
the FASB issued ASU 2015-14, Deferral of the Effective Date, which defers the required adoption date of ASU 2014-09 by one
year. As a result of the deferred effective date, ASU 2014-09 will be effective for the Company in its first quarter of fiscal
2018. Early adoption is permitted but not before the original effective date of the new standard of the first quarter of fiscal
2017. The following ASUs were subsequently issued by the FASB to clarify the implementation guidance in some areas and add practical
expedients: In March 2016, ASU 2016-08,
Revenue from Contracts with Customers: Principal versus Agent Consideration
s; in
April 2016, ASU 2016-10,
Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing
; in
May 2016, ASU 2016-12,
Revenue from Contracts with Customers: Narrow Scope Improvements and Practical Expedients
; and in
December 2016, ASU 2016-20,
Technical Corrections and Improvements to Revenue from Contracts with Customers.
WUNONG ASIA PACIFIC COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018
AND 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
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 March 2016, the FASB issued ASU No.
2016-09,
Improvements to Employee Share-Based Payment Accounting
, which changes the accounting for employee share-based
payments, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification
in the statement of cash flows. Under the new guidance, excess tax benefits associated with share-based payment awards will be
recognized in the income statement when the awards vest or settle, rather than in stockholders’ equity. In addition, it will
increase the number of shares an employer can withhold to cover income taxes on share-based payment awards and still qualify for
the exemption to liability classification. The guidance was effective for the Company in the first quarter of 2017.
In November 2016, the FASB issued ASU No.
2016-18,
Statement of Cash Flows - Restricted Cash
, which requires entities to show the changes in the total of cash,
cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. The guidance will be effective
for the Company in its first quarter of fiscal 2018. Early adoption is permitted, including adoption in an interim period, but
any adjustments must be reflected as of the beginning of the fiscal year that includes that interim period. The new standard must
be adopted retrospectively.
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 YEARS ENDED DECEMBER 31, 2018
AND 2017
(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 YEARS ENDED DECEMBER 31, 2018
AND 2017
(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 December 31, 2018, the Company
has not generated revenues and has accumulated losses of $5,342,207 since inception. The Company has suffered from continuous losses
with a net loss of $160,404 for the year ended December 31, 2018 and experienced negative cash flows from operations. 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 years ended December 31, 2018 and 2017.
|
5.
|
RELATED
PARTY TRANSACTIONS
|
As of December 31, 2018, advances from
the Company’s Chairman, Chief Executive Officer and director, Mr. John Gong, amounted to $88,526 and $88,526, respectively.
The advance is unsecured, non-interest bearing and repayable on demand.
As of December 31, 2018 and 2017, amounts
due to related parties, amounted $1,419,692 and $1,244,968, respectively. These payables are for providing management services
to the Company by companies controlled by Mr. John Gong, our Chief Executive Officer .
WUNONG ASIA PACIFIC COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018
AND 2017
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
As of December 31, 2018 and 2017,
the Company had no shares of its preferred stock issued and outstanding.
As of December 31, 2018 and 2017, the Company
had a total of 39,300,000 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 Asia Pacific Boiler Corporation. 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.
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 year ended December 31, 2018 reflect certain effects of the Act which includes a reduction in the corporate tax rate from
34% to 21% as well as other changes.
As of December 31, 2018, the Company has
$ 5,342,207 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 $1,121,863 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.
|
|
For the years ended
|
|
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
Income tax provision at the federal statutory rate
|
|
|
21
|
%
|
|
|
34
|
%
|
Effect of operating losses
|
|
|
(21
|
%)
|
|
|
(34
|
%)
|
Effective tax rate
|
|
|
-
|
|
|
|
-
|
|
Net deferred tax assets consist of the
following:
|
|
As of
|
|
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Loss carryfoward – current rate
|
|
$
|
1,121,863
|
|
|
$
|
1,088,179
|
|
Valuation allowance
|
|
|
(1,121,863
|
)
|
|
|
1,088,179
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
WUNONG ASIA PACIFIC COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018
AND 2017
(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 years ended December 31, 2018 and 2017:
|
|
Years ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Net loss attributable to common shareholders
|
|
$
|
(160,404
|
)
|
|
$
|
(183,309
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding – Basic and diluted
|
|
|
39,300,000
|
|
|
|
39,300,000
|
|
|
|
|
|
|
|
|
|
|
Net loss per share – Basic and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
9.
|
COMMITMENTS
AND CONTINGENCIES
|
As of December 31, 2017 and December 31,
2018, 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
December 31, 2017 up through the date was the Company issued the audited consolidated financial statements. During the period,
other the the events below, the Company did not have any material recognizable subsequent events.
On March 9, 2019, the Company entered into
a consulting agreement with Surewin Capital International Limited. The consulting agreement provides that Surewin Capital International
Limited will act as consultant and assist the Company in the acquisition of Wunong Technology(Shenzhen) Co., Ltd. In connection
therewith, Surewin Capital International Limited will act as liaison between the directors and senior officers of the Company and
Wunong Technology (Shenzhen) Co., Ltd and assist in the completion of the relevant SEC reporting disclosures in respect of the
proposed acquisition. The consulting agreement will be for a term of 12 months beginning March 9, 2019. The Company will issue
Consultant 7,200,000 shares of the Company’s common stock, $0.00001 par value per share (the “Consulting Shares”)
on the date of execution of the agreement.