ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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UNIVERSAL SOLAR TECHNOLOGY, INC.
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||
(Exact name of registrant as specified in its charter)
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||
Nevada
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26-0768064
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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No. 1 Pingbei Road 2, Nanping Science &Technology Industrial Park, Zhuhai City, Guangdong Province
The People’s Republic of
China 519060
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(Address of principal executive offices including zip code)
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86-756 8682610
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||
(Registrant’s telephone number, including area code)
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||
N/A
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||
(Former name, former address and former fiscal year, if changed since last report)
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Large accelerated filer¨
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Accelerated filer¨
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Non-accelerated filer ¨
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Smaller reporting companyý
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PART I.
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FINANCIAL INFORMATION
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1
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Item 1.
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Financial Statements
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1
|
Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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9
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Item 3.
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Quantitative and Qualitative Disclosures about Market Risk
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14
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Item 4.
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Controls and Procedures
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14
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PART II.
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OTHER INFORMATION
|
15
|
Item 1.
|
Legal Proceedings
|
15
|
Item 1A.
|
Risk Factors
|
15
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Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
15
|
Item 3.
|
Defaults upon Senior Securities
|
15
|
Item 4.
|
Mine Safety Disclosures
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15
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Item 5.
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Other Information
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15
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Item 6.
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Exhibits
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16
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SIGNATURES
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17
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PART I.
|
FINANCIAL INFORMATION
|
Item 1.
|
Financial Statements.
|
UNIVERSAL SOLAR TECHNOLOGY, INC. AND SUBSIDIARIES
|
||||||||
CONSOLIDATED BALANCE SHEETS
|
September 30, 2014
|
Decmber 31, 2013
|
|||||||
ASSETS
|
( Unaudited )
|
|||||||
CURRENT ASSETS
|
||||||||
Cash and cash equivalents
|
$
|
4,192
|
$
|
12,250
|
||||
Accounts receivable
|
147,774
|
19,145
|
||||||
Inventories
|
148,503
|
764,267
|
||||||
Prepaid expenses and other current assets
|
1,042,306
|
1,151,834
|
||||||
TOTAL CURRENT ASSETS
|
1,342,775
|
1,947,496
|
||||||
Land use right, net of accumulated amortization of $58,126 and$52,222, respectively
|
411,000
|
424,561
|
||||||
Property, plant and equipment, net of accumulated depreciation of $717,224 and $593,311, respectively
|
2,734,543
|
2,914,789
|
||||||
Construction in process
|
295,815
|
300,644
|
||||||
TOTAL ASSETS
|
$
|
4,784,133
|
$
|
5,587,490
|
||||
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
|
||||||||
CURRENT LIABILITIES
|
||||||||
Accounts payable
|
$
|
88,147
|
$
|
128,560
|
||||
Accrued interest——related party
|
1,686,446
|
1,348,701
|
||||||
Accrued expenses and other current liabilities
|
289,363
|
283,879
|
||||||
TOTAL CURRENT LIABILITIES
|
2,063,956
|
1,761,140
|
||||||
Due to related-parties
|
13,860,722
|
14,489,456
|
||||||
TOTAL LIABILITIES
|
15,924,678
|
16,250,596
|
||||||
STOCKHOLDERS' DEFICIENCY
|
||||||||
Preferred stock, $0.0001 par value, 10,000,000 shares authorized,
none issued and outstanding
|
-
|
-
|
||||||
Common stock, $0.0001 par value, 22,599,974 shares issued and
outstanding
|
2,260
|
2,260
|
||||||
Additional paid-in capital
|
620,812
|
620,812
|
||||||
Accumulated deficit
|
(11,841,533
|
)
|
(11,175,906
|
)
|
||||
Accumulated other comprehensive income
|
77,916
|
(110,272
|
)
|
|||||
TOTAL STOCKHOLDERS' DEFICIENCY
|
(11,140,545
|
)
|
(10,663,106
|
)
|
||||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY
|
$
|
4,784,133
|
$
|
5,587,490
|
UNIVERSAL SOLAR TECHNOLOGY, INC. AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
|
(Unaudited)
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
SALES
|
$
|
85,563
|
$
|
-
|
$
|
546,434
|
$
|
-
|
||||||||
COST OF SALES
|
152,223
|
-
|
598,677
|
604,018
|
||||||||||||
GROSS LOSS
|
(66,660)
|
-
|
(52,243)
|
(604,018
|
)
|
|||||||||||
OPERATING EXPENSES
|
||||||||||||||||
General and administrative expenses
|
60,365
|
107,928
|
248,778
|
342,421
|
||||||||||||
Selling expenses
|
3,609
|
667
|
3,885
|
2,113
|
||||||||||||
TOTAL OPERATING EXPENSES
|
63,974
|
108,595
|
252,663
|
344,534
|
||||||||||||
LOSS FROM OPERATIONS
|
(130,634
|
)
|
(108,595
|
)
|
(304,906
|
)
|
(948,552
|
)
|
||||||||
Non-operating income
|
-
|
-
|
-
|
8,829
|
||||||||||||
Interest income
|
3
|
25
|
11
|
149
|
||||||||||||
Interest expense - related party
|
(116,898
|
)
|
(124,763
|
)
|
(360,732
|
)
|
(372,478
|
)
|
||||||||
NET LOSS
|
(247,529
|
)
|
(233,333
|
)
|
(665,627
|
)
|
(1,312,052
|
)
|
||||||||
OTHER COMPREHENSIVE INCOME( LOSS )
|
||||||||||||||||
Foreign currency translation adjustment
|
26,431
|
|
(91,175
|
)
|
188,188
|
(109,147
|
)
|
|||||||||
COMPREHENSIVE LOSS
|
$
|
(221,098
|
)
|
$
|
(324,508
|
)
|
$
|
(477,439
|
)
|
$
|
(1,421,199
|
)
|
||||
Loss per common share - basic and diluted
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
$
|
(0.03
|
)
|
$
|
(0.06
|
)
|
||||
Weighted average number of shares outstanding
- basic and diluted
|
22,599,974
|
22,599,974
|
22,599,974
|
22,599,974
|
UNIVERSAL SOLAR TECHNOLOGY, INC. AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
Nine months ended
September 30,
|
||||||||
2014
|
2013
|
|||||||
OPERATING ACTIVITIES:
|
||||||||
Net loss
|
$
|
(665,627
|
)
|
$
|
(1,312,052
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating
activities:
|
||||||||
Depreciation of property and equipment
|
133,341
|
150,407
|
||||||
Amortization of land use right
|
6,739
|
6,691
|
||||||
Inventory allowance
|
-
|
609,513
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(128,840
|
)
|
143,591
|
|||||
Prepaid expenses and other assets
|
90,964
|
(16,372
|
)
|
|||||
Inventories
|
603,038
|
(40,180
|
)
|
|||||
Accounts payable
|
(38,320
|
)
|
(23,117
|
)
|
||||
Accrued expenses and other current liabilities
|
370,236
|
265,690
|
||||||
NET CASH PROVIDED BY(USED IN) IN OPERATING ACTIVITIES
|
371,531
|
(215,829
|
)
|
|||||
CASH FLOWS USED IN INVESTING ACTIVITIES:
|
||||||||
Acquisition of property and equipment
|
-
|
(18,657
|
)
|
|||||
NET CASH USED IN INVESTING ACTIVITIES
|
-
|
(18,657
|
)
|
|||||
CASH FLOWS PROVIDED BY FINANCING ACTIVITES:
|
||||||||
Proceeds from (Repayment of) related parties loans
|
(379,450
|
)
|
82,290
|
|||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
(379,450
|
)
|
82,290
|
|||||
Effect of exchange rate changes on cash
|
(139
|
)
|
(3,937
|
)
|
||||
Decrease in cash
|
(8,058
|
)
|
(156,133
|
)
|
||||
Cash - Beginning of period
|
12,250
|
160,927
|
||||||
Cash - End of period
|
$
|
4,192
|
$
|
4,794
|
||||
Supplemental disclosures of cash flow information:
|
||||||||
Interest paid
|
$
|
-
|
$
|
-
|
||||
Income taxes paid
|
$
|
-
|
$
|
-
|
1.
|
INTERIM FINANCIAL STATEMENTS
|
2.
|
BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
|
3.
|
PREPAID EXPENSES AND OTHER CURRENT ASSETS
|
|
September 30, 2014
|
December 31, 2013
|
||||||
Input Value Added Tax
|
$
|
985,640
|
$
|
1,095,385
|
||||
Other prepaid expenses and other current assets
|
56,666
|
56,449
|
||||||
$
|
1,042,306
|
$
|
1,151,834
|
4.
|
DUE TO RELATED PARTIES
|
Related parties
|
Maturity
date
|
Interest
rate
|
September 30,
2014
|
December 31,
2013
|
|||||||||
Mr. Wensheng Chen, Chief Executive
Officer, Chairman of Board
|
December 31, 2016
|
3.5% | $ | 3,181,685 | $ | 3,201,752 | |||||||
Ms. Ling Chen, President
|
December 31, 2016
|
3.5% | 1,149,208 | 1,167,964 | |||||||||
Zhuhai Yuemao Laser Facility Engineering
Co., Ltd. (“Yuemao Laser”)
|
December 31, 2016
|
3.5% | 473,088 | 481,242 | |||||||||
Yuemao Science & Technology Group
(“Yuemao Technology”)
|
December 31, 2016
|
3.5% | 9,056,741 | 9,638,498 | |||||||||
Total
|
$ | 13,860,722 | $ | 14,489,456 |
5.
|
MAJOR CUSTOMERS
|
6.
|
INCOME TAXES
|
7.
|
COMMITMENTS AND CONTINGENCIES
|
8.
|
SUBSEQUENT EVENTS
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
Related parties
|
Maturity
date
|
Interest
rate
|
September 30,
2014
|
December 31,
2013
|
|||||||||
Mr. Wensheng Chen, Chief Executive
Officer, Chairman of Board
|
December 31, 2016
|
3.5% | $ | 3,181,685 | $ | 3,201,752 | |||||||
Ms. Ling Chen, President
|
December 31, 2016
|
3.5% | 1,149,208 | 1,167,964 | |||||||||
Zhuhai Yuemao Laser Facility Engineering
Co., Ltd. (“Yuemao Laser”)
|
December 31, 2016
|
3.5% | 473,088 | 481,242 | |||||||||
Yuemao Science & Technology Group
(“Yuemao Technology”)
|
December 31, 2016
|
3.5% | 9,056,741 | 9,638,498 | |||||||||
Total
|
$ | 13,860,722 | $ | 14,489,456 |
(1)
|
Capital demand in daily operations. This includes costs associated with being a public company, including legal fees, audit/review fees and other professional fees; and costs incurred by the Company’s operating subsidiary, including wages, utilities and other operating costs. The Company expects its cash requirements under this category to be approximately $40,000 per month.
|
(2)
|
Capital demand for the construction of its solar cell production facility or to acquire an existing solar cell production facility.
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk.
|
Item 4.
|
Controls and Procedures.
|
PART II.
|
OTHER INFORMATION
|
Item 1.
|
Legal Proceedings.
|
Item 1A.
|
Risk Factors.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
Item 3.
|
Defaults upon Senior Securities.
|
Item 4.
|
Mine Safety Disclosures.
|
Item 5.
|
Other Information.
|
Item 6.
|
Exhibits
|
Exhibit No.
|
Description
|
10.7
|
Letter of Confirmation of Interest of Related Party Loans, dated May 5, 2011 between Universal Solar, Wensheng Chen, Zhuhai Yuemao Laser Facility Engineering Co., Ltd. and Yuemao Science & Technology Group
|
10.8
|
Letter of Confirmation of Interest of Related Party Loans, dated May 5, 2011 between Universal Solar and Ling Chen
|
10.9
|
Fengcheng Hong Yu Industrial Development and Investment Co. Loan Agreement (1)
|
10.10
|
Employment Agreement, dated December 29, 2011, between Universal Solar Technology, Inc. and Weilei Lv. (2)
|
10.11
|
Letter of Confirmation of Related Party Loans (3)
|
10.12
|
Letter of Confirmation of Related Party Loans (3)
|
31.1
|
Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended
|
31.2
|
Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as amended
|
32.1
|
Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002 (Chief Executive Officer)
|
32.2
|
Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002 (Chief Financial Officer)
|
(1)
|
Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q on August 12, 2011.
|
(2)
|
Filed as an exhibit to the Current Report on Form 8-K on December 30, 2011.
|
(3)
|
Filed as an exhibit to the Annual Report on Form 10-K on March 28, 2013.
|
Universal Solar Technology, Inc.
|
||
By:
|
/s/Wensheng Chen
|
|
Chief Executive Officer and Chairman of the
Board of Directors
|
||
(Principal Executive Officer)
|
||
November 18, 2014
|
||
By:
|
/s/ WeileiLv
|
|
Chief Financial Officer
|
||
(Principal Financial and Accounting Officer)
|
||
November 18, 2014
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Universal Solar Technology, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.
|
By
|
/s/ Wensheng Chen
|
|
Wensheng Chen
|
||
Principal Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Universal Solar Technology, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
|
4.
|
The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and
|
5.
|
The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.
|
By
|
/s/ WeileiLv
|
|
WeileiLv
|
||
Principal Financial Officer and Principal Accounting Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the period presented therein.
|
By:
|
/s/ Wensheng Chen
|
|
Wensheng Chen
|
||
Principal Executive Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the period presented therein.
|
By:
|
/s/ WeileiLv
|
WeileiLv
|
|
Principal Financial Officer and Principal Accounting Officer
|
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DUE TO RELATED PARTIES
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9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2014
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DUE TO RELATED PARTIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DUE TO RELATED PARTIES |
Due to related parties consists of:
Both Yuemao Laser and Yuemao Technology are PRC companies and controlled by the Company's chairman and Chief Executive Officer, Mr. Wensheng Chen.
Mr. Wensheng Chen, Chairman and Chief Executive Officer of the Company.
As of December 31, 2013, the amount due to Mr. Wensheng Chen was $3,201,752. During nine months of 2014, the loan increased by $47,215 due to various expenses paid by Mr. Chen on behalf of the Company, offset by approximately $67,000 decrease caused by exchange rate difference. The loans borrowed from Mr. Wensheng Chen bear an interest rate of 3.5% per annum. As of September 30, 2014, amount due to Mr. Chen was $3,181,685. Mr. Chen has agreed that the Company can pay the accrued interest when its cash flow status allows.
Ms. Ling Chen, President of the Company
During fiscal 2013, Ms. Ling Chen paid various expenses on behalf of the Company, the amount due to Ms. Ling Chen was $1,167,964 as of December 31, 2013. All loans borrowed from Ms. Ling Chen bear an interest rate of 3.5% per annum. During nine months of 2014, no additional loans were borrowed from Ms. Chen and the difference was due to exchange rate difference. As of September 30, 2014, amount due to Ms. Ling Chen was $1,149,208. Ms. Chen has agreed that the Company can make payment of accrued interest when its cash flow status allows.
Yuemao Science & Technology Group (Yuemao Technology)
Yuemao Technology is a private company established under the laws of the PRC and controlled by our Chairman and Chief Executive Officer, Mr. Wensheng Chen. As of December 31, 2013, the amount due to Yuemao Technology was $9,638,498. During nine months of 2014, the company repaid RMB 2,950,000 (approximately $480,000) loans to Yuemao Technology. As of September 30, 2014, the amount due to Yuemao Technology was $9,056,741.Yuemao Technology agreed that the Company can pay the accrued interest when its cash flow status allows.
Zhuhai Yuemao Laser Facility Engineering Co., Ltd. (Yuemao Laser)
Yuemao Laser is a private company established under the laws of the PRC and controlled by our Chairman and Chief Executive Officer, Mr. Wensheng Chen. As of December 31, 2013, the amounts due to Yuemao Laser were $481,242. During nine months of 2014, no additional loans were borrowed from Yuemao Laser. As of September 30, 2014, the amounts due to Yuemao Laser were $473,088 and the difference was due to exchange rate difference. Yuemao Laser agreed that the Company can pay the accrued interest when its cash flow status allows.
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