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
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in
United Statesdollars and all references to "common shares" refer to the common shares in our capital stock. As used in this quarterly report and unless otherwise indicated, the terms "we", "us" and "our" mean UAN Cultural & Creative Co., Ltd., and our wholly owned subsidiary, UAN Cultural and Creative Company Limited, a Hong Kongcorporation, unless otherwise indicated.
We were incorporated on
August 10, 2005under the laws of the State of Delawareto serve as a vehicle to effect a merger, capital stock exchange, asset acquisition or other similar business combination with an entity that has an operating business in the security industry. Our principal executive offices are located at 102 North Ave, Mt. Clemens, Michigan48043. Our telephone number is (586) 430-5605. We completed an initial public offering on March 15, 2006based on that business plan. Stockholder funds raised in the offering were segregated in a trust account and we were obligated to return the segregated funds to the investors in the event that we did not complete a business combination within 18 months (24 months, under certain circumstances). By the end of the 18 month period we had not engaged in any operations, generated any revenues, or incurred any debt or expenses other than in connection with the initial public offering. Since we were not able to consummate our business plan and no business combination was completed within the required time period, we liquidated the segregated funds held in the trust account, returned the funds to the investors in the offering, redeemed the Class B common stock the investors acquired in the offering and reconstituted our company as an ongoing business corporation. As a result of the foregoing, we became a public shell company. The securities issued in our initial public offering consisted of Class A common stock, which is now regular common stock; Class W warrants; Class Z warrants; Class B common stock, which was redeemed from the stockholders when the funds raised in the initial public offering were returned to them and is no longer outstanding; Class A units, which consisted of two shares of Class A common stock and ten Class Z warrants; and Class B units, which consisted of two shares of Class B common stock and two Class W warrants. The Class W and Class Z warrants have expired. 16 We experienced a change in control on June 30, 2010, both at the stockholder and director levels, as the result of the purchase of 35,095,100 shares of our common stock, approximately 95.6% of our common stock which was issued and outstanding on that date, by eight persons and the simultaneous reconstitution of our board of directors. Our new board of directors created a new business plan and initiated a business involving the sale and appraisal of authentic and high quality works of art, primarily paintings, initially in Taiwan. In July 2010, two of our stockholders, David Chen-Te Yenand Yuan-Hao Chang, loaned us $300,000and $200,000, respectively. David Chen-Te Yen, our former president and the chairman of our board of directors, owns approximately 42.1% of our common stock. These loans were evidenced by demand promissory notes bearing interest at the rate of 8% per annum, compounded daily. The $300,000loan from David Chen-Te Yenwas repaid in December 2010; accrued interest of $8,482remains unpaid as at the date of this report. The $200,000loan from Yuan-Hao Changwas repaid on November 1, 2011. The related accrued interest of $27,317was repaid in March 2012. In August 2010, we changed our name to UAN Cultural & Creative Co., Ltd.and effected a 1 new for 10 old reverse stock split of our common stock. We commenced operations in August 2011. In October and November 2010, we completed an "offshore" private placement of 50,000,000 shares of common stock at a price of $0.02per share, which generated gross proceeds of $1,000,000. We used the funds from these loans and from our private placement to initiate and further our art business plan.
Concurrently, with our acquisition of UAN Hong Kong, the operations of our old
December 1, 2012, our board of directors decided to abandon our art gallery business in Taiwanas it was not able to generate sufficient revenue or financing interest to merit continuation. Consequently, we discontinued the operations of our subsidiary, UAN Yeh, and we became a development stage company to serve as a vehicle to effect a merger, capital stock exchange, asset acquisition or other similar business combination with an operating business.
Our Current Business
December 1, 2012and the date of this report, we are a shell company as that term is defined in Rule 12b-2 of the Exchange act. Our management is presently engaged in the search and evaluation of available opportunities to preserve our business as a going concern and to create shareholder value by effecting a merger, capital stock exchange, asset acquisition or other similar business combination with an operating business. Our company is currently considered to be a "blank check" company. The Securities and Exchange Commission("SEC") defines those companies as any (i) "development stage company that has no specific business plan or purpose or has indicated that its business is to engage in a merger or acquisition with an unidentified company or companies, or other entity or person; and (ii) is issuing a 'penny stock'," within the meaning of Rule 3a51-1 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 17
Because of the nature of blank check companies, the
SECdoes not allow them to use some of the exemptions from the registration requirements when selling their securities. In addition, a blank check company registering for a securities offering may be subject to additional requirements for the protection of investors, including depositing most of the raised funds in an escrow account until an acquisition is agreed to and requiring shareholder approval of any identified acquisition. Under Rule 12b-2 under the Exchange Act, our company also qualifies as a "shell company," because it has no or nominal assets (other than cash) and no or nominal operations. Many states have enacted statutes, rules and regulations limiting the sale of securities of "blank check" companies in their respective jurisdictions. Management does not intend to undertake any efforts to cause a market to develop in our equity or debt securities until we have successfully concluded a business combination. Our company intends to comply with the periodic reporting requirements of the Exchange Act for so long as it is subject to those requirements.
Results of Operations
Three Months Ended
Three Months Ended June 30, 2014 2013 Revenue $ Nil $ Nil Cost of Sales $ Nil $ Nil Operating Expenses
$ 28,307 $ 43,877
Total Other (Income) / Expense $ Nil
$ (1 )Loss from discontinued operations, net of tax $ 27$ Nil Net Income (Loss) $ (28,334 )$
(43,876 ) Revenues
We discontinued our art gallery business on
Our operating expenses for the three months ended
June 30, 2014consisted of selling, general and administrative expenses, which include bank service charges, printing costs, legal and accounting fees, rent, telephone, travel expense, consulting fees, media relations fees, transfer agency fees and other miscellaneous administrative expenses. Our selling, general and administrative expenses were $28,307during the three months ended June 30, 2014compared to $43,877during the same period in 2013. Our company reduced its spending in legal and travel fees in search of new business venture.
We earned nominal income of
$0from interest during the three months ended June 30, 2014compared to $1of interest income during the three month ended June 30, 2013. The decrease in income during the second quarter of fiscal 2014 resulted primarily from lower cash balance in the bank.
Provision for Income Tax
To date we have made no provisions for income tax. Our company has certain deferred tax asset such as net operating loss carryover and foreign tax credit to offset future income.
18 Net Income (Loss) We had a net loss of
$28,334for the three months ended June 30, 2014, compared to our net loss of $43,876incurred in the three months ended June 30, 2013. Our net loss of $28,307was attributable to selling, general and administrative expenses incurred for the three months ended June 30, 2014. Our net loss of $43,877was attributable to selling, general and administrative expenses, and $1of interest income incurred for the three months ended June 30, 2013.
Six Months Ended
Six Months Ended June 30, 2014 2013 Revenue $ Nil $ Nil Cost of Sales $ Nil $ Nil Operating Expenses
Total Other (Income) / Expense $ Nil
$ 21Loss from discontinued operations, net of tax $ 39,191$ Nil Net Income (Loss) $ (101,663 )$
(73,539 ) Operating Expenses
Our operating expenses for the six months ended
June 30, 2014consisted of selling, general and administrative expenses, which include bank service charges, printing costs, legal and accounting fees, rent, telephone, travel expense, consulting fees, media relations fees, transfer agency fees and other miscellaneous administrative expenses. Our selling, general and administrative expenses were $62,472during the six months ended June 30, 2014compared to $73,560during the same period in 2013. Our company reduced its spending in legal and travel fees in search of new business venture.
We earned nominal income of
$0from interest during the six months ended June 30, 2014compared to $21of interest income during the six month ended June 30, 2013. The decrease in income during the second quarter of fiscal 2014 resulted primarily from lower cash balance in the bank.
Net Income (Loss)
We had a net loss of
$101,663for the six months ended June 30, 2014, compared to our net loss of $73,539incurred in the six months ended June 30, 2013. Our net loss of $62,472was attributable to selling, general and administrative expenses incurred for the six months ended June 30, 2014. Our net loss of $73,560was attributable to selling, general and administrative expenses, and $21of interest expense incurred for the six months ended June 30, 2013. 19
Liquidity and Capital Resources
Working Capital At At June 30, December 31, 2014 2013 Current Assets
$ 2,257 $ 6,381Current Liabilities $ 294,140 $ 233,528Working Capital (Deficit) $ (291,883 ) $ (227,147 )Cash Flows Six Months Six Months Ended Ended June 30, June 30, 2014 2013
Net Cash provided by (used in) Operating Activities
Net Cash used in Investing Activities $ Nil $
Net Cash provided by (used in) Financing Activities
86,248 As of
June 30, 2014we had total assets of $2,257, total liabilities of $294,140, and shareholders' deficit of $291,883, compared to total assets of $26,270, total liabilities of $233,528and shareholders' deficit of $207,258as of December 31, 2013. Our current assets as at June 30, 2014were $2,257, including cash and cash equivalents of $2,257. As at December 31, 2013we had current assets of $6,381including cash and cash equivalents of $4,117and current assets from discontinued operations of $2,264. Cash and cash equivalents as of June 30, 2014decreased by $1,860from December 31, 2013. Our working capital deficit was $291,883as at June 30, 2014compared to a working capital deficit of $227,147as at December 31, 2013.
Net cash used in our operating activities during the six months ended
Net cash provided by financing activities in the six months ended
June 30, 2014was $80,071, compared to $86,248used in financing activities in the six months ended June 30, 2013. The net decrease in cash provided by financing activities in 2014 resulted primarily from lower proceeds of advances from shareholders and officers. The operations of our company had been funded by contributions and short-term loans from our directors and shareholders. Our company is actively pursuing additional funding and a potential merger or acquisition candidate and strategic partners, which would enhance owners' investment. There can be no assurance our company will be successful in its effort to secure additional financing. Our company's ability to continue as a going concern is contingent upon its ability to secure financing and attain profitable operations. 20 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 Commissionand should be read in conjunction with our company's audited financial statements and footnotes thereto for the year ended December 31, 2013, included in our company's Form 10-K filed on April 15, 2014. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of Americahave 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 months ended June 30, 2014are 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. All significant intercompany accounts and transactions between our company and its subsidiaries have been eliminated in consolidation.
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 losses. Discontinued Operations On
December 1, 2012, our company ceased its Taiwan'sbusiness operations. The consolidated financial statements have been recast to present the Taiwan'sbusiness operation as discontinued operations as described in "Note 5 - Discontinued Operations." Unless noted otherwise, discussion in the Notes to consolidated financial statements pertain to continuing operations.
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in
the United States of Americarequires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents are deposits in financial institutions as well as short-term money market instruments with maturities of three months or less when purchased.
Concentration of Credit Risk Financial instruments that potentially subject our company to a significant concentration of credit risk consist primarily of cash and cash equivalents. Our company maintains deposits in federally insured financial institutions in excess of federally insured limits. However, management believes our company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. 21 Comprehensive Income Our company adopted
Financial Accounting Standards Board("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.
Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing income (loss) available to common stockholders by the weighted average common shares outstanding for the period and Class B common stock outstanding prior to its redemption. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. The average market price of the common shares is below the exercise price of the outstanding warrants therefore not included in the calculation for dilutive share.
The computation of basic and diluted earnings (loss) per share for the three and six months ended
For the Three Months Ended For the Six Months Ended June 30, June 30, June 30, June 30, 2014 2013 2014 2013 Numerator: Net Income/(Loss) from continuing operation
$ (28,307 ) $ (43,876 ) $ (62,472 ) $ (73,539 )Net income/(loss) from discontinued operation $ (27 ) $ - $ (39,191 )$ - ) Denominator Weighted average common shares outstanding - basic 53,672,708 53,672,708 53,672,708 53,672,708 Dilution associated with W and Z warrants - - - - Weighted average common share outstanding - diluted 53,672,708 53,672,708 53,672,708 53,672,708 Basic earnings (loss) per share Continuing operations $ (0.001 ) $ (0.001 ) $ (0.001 ) $ (0.001 )Discontinuing operations $ (0.001 )$ - $ (0.001 )$ - Diluted earnings (loss) per share Continuing operations $ (0.001 ) $ (0.001 ) $ (0.001 ) $ (0.001 )Discontinuing operations $ (0.000 )$ - $ (0.001 )$ - 22
Fair Value of Financial Instruments
FASB ASC Topic 820, "Fair Value measurement and Disclosures", an Accounting Standard Update. In
September 2009, the FASB issued this Update to amendments to Subtopic 820-10, "Fair Value Measurements and Disclosures". Overall, for the fair value measurement of investments in certain entities that calculates net asset value per share (or its equivalent). The amendments in this Update permit, as a practical expedient, a reporting entity to measure the fair value of an investment that is within the scope of the amendments in this Update on the basis of the net asset value per share of the investment (or its equivalent) if the net asset value of the investment (or its equivalent) is calculated in a manner consistent with the measurement principles of Topic 946 as of the reporting entity's measurement date, including measurement of all or substantially all of the underlying investments of the investee in accordance with Topic 820. The amendments in this Update also require disclosures by major category of investment about the attributes of investments within the scope of the amendments in this Update, such as the nature of any restrictions on the investor's ability to redeem its investments at the measurement date, any unfunded commitments (for example, a contractual commitment by the investor to invest a specified amount of additional capital at a future date to fund investments that will be made by the investee), and the investment strategies of the investees. The major category of investment is required to be determined on the basis of the nature and risks of the investment in a manner consistent with the guidance for major security types in GAAP on investments in debt and equity securities in paragraph 320-10-50-lB. The disclosures are required for all investments within the scope of the amendments in this Update regardless of whether the fair value of the investment is measured using the practical expedient. The amendments in this Update apply to all reporting entities that hold an investment that is required or permitted to be measured or disclosed at fair value on a recurring or non-recurring basis and, as of the reporting entity's measurement date, if the investment meets certain criteria The amendments in this Update are effective for the interim and annual periods ending after December 15, 2009. Early application is permitted in financial statements for earlier interim and annual periods that have not been issued.
Our company is a development stage company as such has not realized any revenues or directly related expenses.
Advertising costs are expensed as incurred and included in selling, general and administrative expenses. Our company has not incurred any advertising expense for the three months ended
June 30, 2014and 2013, respectively.
Foreign Currency Translations
The functional currency of UAN CCC is U.S. Dollar ("USD").
The functional currency of UAN CCC HK is Hong Kong Dollar ("HKD").
The functional currency of UAN CCC's branch in
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 consolidated 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. 23 At
June 30, 2014, the cumulative translation adjustments of $14,876, were classified as items of accumulated other comprehensive income in the stockholders' equity section of the balance sheet. Other comprehensive income (loss) was $(26)and $(667)for three months ended; and $17,038and $(715)for the six months ended June 30, 2014and 2013, respectively. The exchange rates used to translate TWD amounts into USD at ( 1USD=TWD) as follows: Balance Sheet Average Rate Rate June 30, 2014 29.86 30.12 December 31, 2013 30.00 29.70 June 30, 2013 29.93 29.48 The exchange rates used to translate HKD amounts into USD at ( 1USD=HKD) as follows: Balance Sheet Average Rate Rate June 30, 2014 7.75 7.75 December 31, 2013 7.75 7.76 Income Taxes Our company accounts for income taxes following the liability method pursuant to FASB ASC 740 "Income Taxes". Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. Our company records a valuation allowance to offset deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in income in the period that includes the enactment date. Our company accounts for uncertainty in income taxes in accordance with FASB ASC 740-10 "Income Taxes-Overall". Our company has elected to classify interest and penalties related to an uncertain position, if and when required, as part of interest expenses and other expenses, respectively, in the consolidated statements of income and comprehensive income.
Recent Accounting Pronouncements
June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. The amendments in this Update remove the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. For public business entities, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity's financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915. 24 In April 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. This standard will have the impact of reducing the frequency of disposals reported as discontinued operations, by requiring such a disposal to represent a strategic shift that has or will have a major effect on an entity's operations and financial results. However, existing provisions that prohibit an entity from reporting a discontinued operation if it has certain continuing cash flows or involvement with the component after disposal are eliminated by this standard. The ASU also expands the disclosures for discontinued operations and requires new disclosures related to individually significant disposals that do not qualify as discontinued operations. The ASU is effective prospectively beginning January 1, 2015. Early adoption is, however, permitted. This ASU would impact our company's consolidated results of operations and financial condition only in the instance of a disposal as described above.
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.