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EX-21 - SUBSIDIARIES - UNI CORE HOLDINGS CORPv325608_ex21.htm
EX-31.2 - CERTIFICATION - UNI CORE HOLDINGS CORPv325608_ex31-2.htm
EX-32.2 - CERTIFICATION - UNI CORE HOLDINGS CORPv325608_ex32-2.htm
EX-31.1 - CERTIFICATION - UNI CORE HOLDINGS CORPv325608_ex31-1.htm
EX-32.1 - CERTIFICATION - UNI CORE HOLDINGS CORPv325608_ex32-1.htm

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

 

xANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2012

oTRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to __________________

 Commission File Number 0-30430

 

Uni Core Holdings Corporation

 

(Formerly known as “Intermost Corporation”)

 

(Exact name of registrant as specified in its charter)

 

Wyoming 87-0418721
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)

 

Room 1207-8, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong

 (Address of principal executive offices, including zip code) 

Registrant’ telephone number including area code (852) 2827-6898

 

Securities pursuant to section 12(b) of the Act:
NONE

 

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 par value

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.

Yes o                No S

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  x         No o   

 

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o      

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer o Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company x

 

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).

Yes o       No x

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and ask price of such common equity: As of September 30, 2012, the aggregate value of voting and non-voting common equity held by non-affiliates was $518,391.

 

 
 

  

TABLE OF CONTENTS

  

      Page
       
PART I  
       
  ITEM 1. BUSINESS 5
  ITEM 1A. RISK FACTORS 12
  ITEM 1B. UNRESOLVED STAFF COMMENTS 16
  ITEM 2. PROPERTY 16
  ITEM 3. LEGAL PROCEEDINGS 16
  ITEM 4. MINE SAFETY DISCLOSURE 16
       
PART II  
       
  ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. 17
  ITEM 6. SELECTED FINANCIAL DATA 18
  ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 19
  ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 24
  ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 24
  ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 24
  ITEM 9A. CONTROLS AND PROCEDURES 25
  ITEM 9B. OTHER INFORMATION 25
       
PART III  
       
  ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE  
    GOVERNANCE. 26
  ITEM 11. EXECUTIVE COMPENSATION 28
  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 30
  ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 31
       
  ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 31
       
PART IV  
       
  ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 32
       
SIGNATURES AND EXHIBITS 73

 

2
 

 

Note Regarding Forward Looking Statements

 

 This Annual Report on Form 10-K and any information incorporated herein by reference contains “forward-looking statements.” These forward-looking statements are based on our current expectations, assumptions, estimates and projections about our business and our industry and involve a number of risks and uncertainties, as well as assumptions that, if they were to materialize or if they prove incorrect, would likely cause our results to differ materially from those expressed or implied by such forward-looking statements. Although our forward-looking statements reflect the good faith judgment of our management, these statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from results and outcomes discussed in the forward-looking statements.

 

Words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “could,” “should,” hope,” “seek,” “may,” and other similar expressions (including their use in the negative) identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, the following:

 

·our lack of capital and whether or not we will be able to raise capital when we need it,

 

·government regulation of the Internet and Internet services in China,

 

·our ability to successfully compete in our markets and industries,

 

·our ability to find suitable acquisition targets and, once acquired, to integrate these acquisitions into our business;

 

·adverse changes to the political, economic or social conditions in China

 

and other factors, some of which will be outside our control. You are cautioned not to place undue reliance on these forward-looking statements, which relate only to events as of the date on which the statements are made. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. You should refer to and carefully review the information in future documents we file with the Securities and Exchange Commission.

 

Forward-looking statements include, but are not limited to, statements under the captions “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as other captions in this Annual Report. You should be aware that the occurrence of any of the events or risk factors discussed under the heading “Risk Factors” and elsewhere in this Annual Report could substantially harm our business, results of operations and financial condition. If any of these events occur, the trading price of our common stock could decline and you could lose all or a part of the value of your shares of our common stock.

 

The cautionary statements made in this Annual Report are intended to be applicable to all related forward-looking statements wherever they may appear in this Annual Report. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report. We disclaim any intention to update these statements.

 

3
 

 

Information on Currency Translation

 

All amounts in this Annual Report are in Renminbi (“Rmb”) unless indicated to be in United States Dollars (“$” or “US$”). Our sales are principally in Rmb. The translation of Rmb amounts into US dollars are for reference purposes only and have been made at the exchange rate of Rmb6.3143 for US$1. The People’s Bank of China sets and publishes daily a base exchange rate with reference primarily to the supply and demand of/for Rmb against the US dollar in the market during the prior day. The People’s Bank of China also takes into account other factors such as the general conditions existing in the international foreign exchange markets. Although Chinese governmental policies were introduced in 1996 to reduce restrictions on the convertibility of Rmb into foreign currency for current amount items, conversion of Rmb into any other currency for capital items, such as foreign direct investment, loans or security, requires the approval of the State Administration for Foreign Exchange. Rmb which had been tightly pegged at Rmb8.28 for US$1 for the previous decade, was revalued on July 21, 2005 to Rmb8.11 for US$1 following the removal of the peg to the US dollar and pressure from the United States. The Peoples Bank of China also announced that the Rmb would be pegged to a basket of foreign currencies, rather than being strictly tied to the US dollar and would trade within a narrow 0.3% band against this basket of currencies, which is dominated by the US dollar, Euro, Japanese Yen and South Korean Won, with a smaller proportion made up of the British pound, Thai Baht and Russian Ruble. The translation of Rmb amounts in this Annual Report on Form 10-K is not a representation that the Rmb amounts could actually be converted into US dollars at that rate or at any other rate on that date or on any other date.

 

4
 

 

PART I

 

ITEM 1.BUSINESS

 

History and Development of the Company

 

Uni Core Holdings Corporation (as used in this Annual Report on Form 10-K, unless the context otherwise requires, the terms “we,” “us,” “the Company,” “UCHC,” and “UniCore” refer to Uni Core Holdings Corporation and its subsidiaries) was incorporated as La Med Tech, Inc. under the laws of the State of Utah on March 6, 1985. The Company changed its name to Entertainment Concepts International in 1987, to Lords & Lazarus, Inc. in 1988, and to Utility Communications International, Inc. in 1996 and to Intermost Corporation in 1998 and to Uni Core Holdings Limited in 2009.

 

From the date of incorporation through October 1998, the Company’s operations were limited to efforts to identify and acquire or merge with, one or more operating businesses. In October 1998, the Company acquired all of the issued shares of Intermost Limited, a British Virgin Islands Company (“IML”), by issuing to the then shareholders of IML a total of 4,970,000 shares of the Company’s common stock, par value $0.001 per share (the “Merger”). Following the Merger, (i) IML became a wholly-owned subsidiary of the Company, (ii) the shareholders of IML held 58.7% of all issued and outstanding shares of the Company, (iii) the Company changed its name to Intermost Corporation, (iv) the Company terminated all its prior business activities and adopted IML’s business plan, and (v) all officers and directors of the Company resigned and were replaced by officers and directors of IML.

 

In February 2003, the Company reincorporated (changed its domicile) from Utah to the State of Wyoming.

 

IML was incorporated in January 1998 to develop a Chinese-language Internet business portal and to render services in connection therewith in the People’s Republic of China (“China”). During the period following the Merger, in an effort to implement this business plan, the Company entered into agreements with and completed acquisitions of, some businesses that provided or supported Internet services. The Company also endeavored to develop its own Internet services businesses, including e-commerce business solutions. However, the global decline in the demand for Internet services after mid-2000, which resulted in a significant economic slowdown that affected many of the companies with which we do business, materially undermined the effectiveness of our efforts. While we continued (and still continue) to offer web design and hosting services to customers in China through our subsidiary, ChinaE.com Information Technology Ltd. (“ChinaE”), we also began to look for ways to diversify or expand our business.

 

In November 2002 ChinaE purchased eight licenses for HanWEB Publishing Server 3.0, an online real time translation engine that translates traditional Chinese characters, used in most of the world, to simplified Chinese characters, which are used only in China, and vice versa, and six licenses for HanVoice Web to Phone Server 1.0, a real time Internet to telephone conversion server for Cantonese, Putonghua and English. These were purchased from KanHan Technologies Ltd. (“KanHan”) at a cost of $150K. The Company was one of two distributors of these licenses in China.

 

With the assistance of KanHan, the Company opened an office in Guangzhou in April 2003. The office was staffed with two persons who were responsible for introducing these products to businesses and government agencies in Guangdong Province. For a period of approximately one year, KanHan subsidized the costs related to maintaining this office and developing a market for these products. The amount of the subsidy was approximately $12,800 per month. The office was closed in March 2004 and the Company is no longer receiving the subsidy, although it continues to market the licenses.

 

5
 

 

In May 2003, the Company’s wholly owned subsidiary, IMOT Information Technology (Shenzhen) Ltd. (“IMOT Technology”), received approval from the governments of Shenzhen and Shanghai for its proposed acquisition of 51% of the issued and outstanding shares of Shanghai Newray Photographic Equipment Co., Ltd. (“Shanghai Newray”) from Shanghai Newray Business Development Co., Ltd. (“Shanghai Newray Business”), the owner of 75.5% of the issued and outstanding capital stock of Shanghai Newray. Shanghai Newray is located in Shanghai and is engaged in the sale of digital photographic equipment. Approval of the governments of Shenzhen and Shanghai was required to complete the acquisition, which was memorialized in a Shareholding Transfer Agreement entered into on May 23, 2003 between IMOT Technology and Shanghai Newray Business.

 

Pursuant to the Shareholding Transfer Agreement, IMOT Technology paid Shanghai Newray Business Rmb200,000 (approximately $24,000) in cash to reimburse Shanghai Newray Business for certain expenses related to the acquisition and agreed to transfer to Shanghai Newray Business 4 million shares of the Company’s restricted common stock. The cash used to reimburse Shanghai Newray Business for its expenses was paid with the Company’s funds.

 

On October 3, 2003 IMOT Technology entered into an agreement for the acquisition of 25% of the issued and outstanding shares of Shanghai Fortune Venture Limited (“Shanghai Fortune”) from certain shareholders of Shanghai Fortune. Shanghai Fortune has the right to operate equity exchange transactions in Shanghai, and through its investment in Xi’an Assets and Equity Exchange, operate an equity exchange in Xi’an. In China, equity, including intellectual property rights, may be listed on and transferred through such exchanges. The share transfer was approved by the government of Shanghai on April 12, 2004. The consideration for this acquisition was Rmb600,000 (approximately $72,464) in cash plus 10 million shares of our restricted common stock. The value of the common stock was determined to be $0.24 per share, based upon the average of the closing prices for the 10-day period from September 22, 2003 to October 1, 2003. The shares were issued on April 14, 2004.

 

On May 23, 2006, UCHC signed an agreement to sell the 25% shareholding investment in Shanghai Fortune to Mr. Li Laohu. The net asset value of Shanghai Fortune as of December 31, 2005, the latest audited financial statements date, was Rmb21,957,791. The consideration received by UCHC for the sale of the 25% shareholding was agreed at redemption of 6.5 million shares of restricted common stock of UCHC with a value of US$0.18 per share, which was the closing price of UCHC share of common stock as of May 23, 2006, held and transferred by Mr. Li Laohu, Mr. Li Xiaoqin and Ms. Huang Xiujuan.

 

Since December 6, 2002, Shanghai Fortune has been an official registered member of the Shanghai Technology Exchange (the “STE”) and was entitled to conduct exchange business with the STE. The STE was the major entity in the Shanghai Equity Exchange Market. Shanghai Fortune had the exclusive right to manage and operate the North Shanghai Branch (the “NSB”) of the STE. The NSB had the right to conduct the same exchange business as STE and share 80% of the profits with the STE.

 

Shanghai Fortune was also a founder and major participant in the Yangtze River Delta Equity Exchange Market Place (the “YRDE”). The YRDE included more than 14 major exchanges in Shanghai and the surrounding cities and was the largest equity exchange market place in China.

 

However, in December 2003, the STE and another exchange were merged into the Shanghai United Assets and Equity Exchange (the “SUAEE”). The SUAEE is a non-profit government-sponsored organization.

 

As a result of the merger of the STE, although Shanghai Fortune continues to maintain its membership, it is currently still unclear how the NSB and the YRDE will conduct business going forward, and how Shanghai Fortune will participate in the equity exchange markets following the issuance of final regulations by the local PRC government. Due to the uncertainty of the content and timing of governmental regulations, UCHC entered into the May 23, 2006 agreement for the sale of its interest in Shanghai Fortune for $1.17 million

 

6
 

 

On August 10, 2004, we purchased 51% of the issued and outstanding shares of Golden Anke Technology Ltd. (“Golden Anke”) from two of its shareholders, Tu Guoshen and Li Zhiquan, for UCHC Technology for $3.24 million, payable by issuance of 12 million shares of our common stock. The value of our common stock was determined by applying a 20% discount to the average closing price during the period from January 20 to March 19, 2004.

 

On or about February 15, 2007 we sold approximately two percent (2%) of the outstanding shares in Golden Anke to an unaffiliated minority stockholder so that this minority stockholder could seek an independent listing of Golden Anke on a UK exchange, thus reducing our ownership from approximately 51% to approximately 49%. We recently discovered that Golden Anke is no longer seeking a public listing and negotiated an exit settlement under which it will buy back our 49% ownership interest for US$1 million. To date we have collected $200,000 of this amount.

 

In September 2, 2004, IML incorporated a 100% owned subsidiary, ChinaE.com Technology (Shenzhen) Ltd. (“ChinaE Tech”), to take over the business of ChinaE to provide and support Internet services including, but not limited to, web-hosting, web design, domain name registration and software development.

 

On December 8, 2004, IMOT Technology entered into an agreement for the acquisition of 15% of the issued and outstanding shares of Shenzhen International Hi-Tech Exchange (“Hi-Tech Exchange”) from Shenzhen Merchant Technology Investment Co., Ltd. Hi-Tech Exchange is an enterprise authorized by the People’s Republic of China’s government to carry out business in the transfer of hi-tech property rights and corporate equity interests. The share transfer was approved by the government of Shenzhen on February 25, 2005. The consideration for this acquisition was 2,470,355 shares of our common stock. The value of the common stock was determined to be $0.22 per share based upon the average of the closing prices for the period from October 18, 2004 to November 18, 2004. The shares were issued on February 28, 2005. Subsequently, on December 8, 2006, we redeemed all of these 2,470,355 shares for an aggregate redemption price of US$805,214.75.

 

On January 6, 2005, all necessary government approvals were obtained to complete the transfer of 80% of the issued and outstanding shares of Hainan Concord Financial Products Development Co., Ltd. (“Hainan Concord”) from Guangzhou Ditai Communication Co., Ltd. and Zhai Xiya to IMOT Technology. Pursuant to the Share Transfer Agreement signed on December 11, 2004 the purchase price paid for the stock was $917,874. On January 12, 2005 we issued to the selling shareholders 5 million shares of our restricted common stock, in full payment of the purchase price. The value of our common stock was determined by applying a 15% discount to the average closing price for the 10 day trading period from November 16, 2004 to November 30, 2004. Hainan Concord’s principal business is to issue and manage multi-functional membership cards for the people who participate in private equity exchange in Hainan. Hainan Concord also provides financial institutions with research and development services for their financial products and instruments.

 

On October 19, 2005, all necessary government approvals were obtained to complete the transfer of 21% of the issued and outstanding shares of Hainan Special Economic Zone Equity Exchange Center (the “Exchange Center”) from Hainan Concord Investment Holding Co., Ltd. and Guangzhou Keensheng Science and Technology Development Co., Ltd. Pursuant to the Stock Exchange Agreement, the Company issued to the Exchange Center Stockholders 5 million shares of the Company’s common stock having a value of RMB8,799,350 (approximately US$1,085,000). The consideration for the transaction was agreed to after arm’s-length negotiations between the unrelated parties. On October 19, 2005, we issued to the selling shareholders 5 million shares of our common stock in full payment of the purchase price.

 

On July 13, 2006, IML incorporated a 100% owned subsidiary, Leader Palace International Ltd. (“LPI”), to explore businesses in Taiwan region. LPI started to negotiate an investment in touch panel manufacturing and such negotiations are still ongoing.

 

7
 

 

On December 15, 2009, the Company entered into five sale and purchase agreements with the shareholders of APT Paper Group Limited (“APT”) to purchase all shares of APT at a consideration of not less than US$22,000,000 which will be paid by way of the Company shares fixed at the share price of US$0,05. The acquisition of APT was completed on May 31, 2010 and the Company has aggregately issued 440 million Company shares on Jun 1, 2010 for exchange as consideration for the APT shares. The business of APT is manufacturing paper packaging products. After the acquisition, the Company controls the new combined companies and the Company’s original senior management team remained on the same original position oversight of the operation of the entire group of companies.

 

On December 21, 2009, Uni Core Holdings Corporation (UCHC) entered into Investment Cooperation Agreement (Agreement) with the shareholders of Shaanxi Prosperous Agriculture Company Limited (Prosperous Agriculture) to acquire 51% equity of Prosperous Agriculture by two phrases and exchanged in total 11 millions of UCHC shares. This transaction has not yet finished.

 

Management is continuing its efforts to identify and explore acquisition, merger and development opportunities.

 

Products and Services

 

Internet, Electronic Equity Platform and Business Consulting Services

 

Through China Equity Platform Holding Group Limited (“CEPHGL”), our subsidiary, we offer web design, web hosting, domain name registration, software development and office automation software and online or electronic platforms services to our clients. We operate within what is commonly referred to as the “business-to-business” segment of the Internet market, where products and services are offered principally to businesses, as compared to the “business-to-consumer” segment of the Internet services market, where products and services are offered to consumers directly.

 

We also conduct business consulting services and advisory services to Chinese SMEs seeking fundraising through CEPHGL. Relying on our established relationship with regional private equity exchanges, we can access the tens of thousands of SMEs registered therein and develop our own clients among them. The business consulting business complements our electronic equity services platform business by building up relationships with SMEs. Our services include business and strategy planning, business restructuring, corporate financing, M&A advisory, personnel arrangement, investment relationship, etc. Generally, we assist SMEs to streamline their operations, reduce costs and improve management and we draw revenue in the form of consulting fees.

 

Equity Exchange

 

Equity exchanges are platforms that permit privately-owned and state-owned equity transactions. Subject to the parameters established by the government of China, equity exchanges provide services for the purchase and sale of equity rights, debts, intellectual property rights and technology property rights. Equity listed on the exchanges may be traded through negotiation, auction and bids.

 

Our subsidiary, Hainan Concord’s principal business is to issue and manage multi-functional membership cards for the people who participate in private equity exchange in Hainan, and has an exclusive agreement with Hainan Exchange Centre Non-Public Company Registration Co., Ltd. to issue multi-functional membership and credit cards to their members.

 

Through our 9% investment in Shenzhen United Property And Share Rights Exchange (Formerly known as Hi-Tech Exchange) and 12.6% investment in Exchange Center, we have further expanded our investment in Shenzhen and Hainan, China. Shenzhen Exchange and Exchange Center are authorized by the government of China to engage in the business of transferring equity and corporate equity interests in Shenzhen and Hainan.

 

8
 

  

At this time the various equity exchanges in China work, for the most part, independently of one another. We believe that this is inefficient. We are in the process of using our software technology to develop, and we hope to eventually implement, an electronic information and trading platform for equity exchanges that will enable the flow of information regarding rights transfers, as well as payments, among the different equity exchanges in China, including those owned and operated by Shenzhen Exchange and Exchange Center.

 

Paper Products

 

Starting from October 1998, there was a decrease in China’s exports with issues on wooden packaging. The Chinese Government had requested urgent resolution on related strategies and tactics to resolve the issues. This is the main reason and force seeking replacement to wooden packaging materials, honeycomb paper material is an ideal substitute and quickly became popular in the industry of packaging.

 

Our subsidiary, APT entered into the business at the very early stage of the industry when honeycomb paper products were still an unknown industry to most of the paper products companies. APT highly promoted the products and became the industry leader in the Pearl River Delta Region having a significant market share.

 

Agriculture Products

 

Shaanxi Prosperous Agriculture Company Limited ("Prosperous Agriculture"), one of UCHC's subsidiaries, further strengthens its operation and innovate services by introducing a new model of promotion service "Double Hundred" before the beginning of the selling season to expand the depth of the direct sales chain system operation.

 

To execute the "Double Hundred" program, every direct sales store locates 100 high-quality growers and opens 100 road shows in the respective region. The launch of this program allows Prosperous Agriculture to get closer to the farmers to achieve a seamless connection in order to gain the recognition and support of the farmers. Furthermore, the foundation of direct sales chain store operation shall become much stronger through the integration of distinct dominant resources to achieve in-depth operation and promotion, and to raise the reputation and brand awareness of the direct sales chain model.

 

Competition

 

Internet, Electronic Equity Platform and Business Consulting Services

 

The market for Internet services and software is intensely competitive and we expect it to become more competitive in the future. Increased competition could result in pricing pressures, low operating margins and the realization of little or no market value. Currently, our competitors are primarily other Chinese owned and operated Internet services and software development companies.

 

Most of our current and potential competitors may have longer operating histories, larger customer bases, greater brand recognition and greater financial, marketing and other resources than we do, and may enter into strategic or commercial relationships on more favorable terms than we can. In addition, new technologies and the expansion of existing technologies may increase competitive pressure on us.

 

9
 

 

In January 2010, Google, our major competitor, allegedly fell prey to a cyber attack from hackers believed to be working for the Chinese government. In March 2010, Google announced that it would be shutting down its China-based site and redirecting Chinese users to its uncensored Hong Kong site. The incident demonstrated the need for self-censorship in China.

 

On February 17, 2012, the Company disposed the China Equity Platform Holding Company Limited and will no longer engage in electronic equity exchange business although we are still in the consultancy business.

 

Equity Exchange

 

There is no national equity exchange in China. It has been estimated that there are approximately 100 equity exchanges in China, most of them small in scale and serving only the local area. There are also a few large equity exchanges serving the largest cities in China, including the Beijing Equity Exchange Center, the Tianjin Equity Exchange Center and the Shanghai Equity Exchange Center. Even the operations of the large equity exchanges are localized.

 

Currently, because of the localized nature of equity exchanges, there is not significant competition among them. However, further development and expansion of other large equity exchanges, or the nationalization of equity exchanges, would be likely to result in an increase in competition. If that were to happen, it could have a material adverse effect on our ability to attract property owners to list their properties for sale on our exchange and to identify and secure investors or buyers for the properties we list. As the Company has disposed the China Equity Platform Holding Company Limited, the Company will no longer engage in equity exchange business.

 

Paper Products

 

Due to increased global awareness of environmental protection in recent years, the demand for honeycomb paper products continues to increase. It therefore attracts many speculators to invest in this high potential industry, most of which are smaller processing plants with a much smaller cost base than us and, therefore, enjoy a very big advantage in lower product costs.

 

Agriculture Products

 

Prosperous Agriculture, 51% of which is owned by UCHC, is headquartered in Xi'an, Shaanxi Province, China. Prosperous Agriculture manufactures and distributes agricultural brands and also establishes a national agricultural resources chain direct sales platform through the opening and acquiring of agricultural resources direct sales outlets and dealers, and by working with well-known manufacturers of agricultural products. Prosperous Agriculture integrated more than 2,000 agricultural resources.

 

Regulation

 

Since we operate principally through our subsidiaries in China, we are subject to and affected by the many laws, regulations, administrative determinations, court decisions and similar constraints that apply to business operations located in China.

 

China has enacted regulations governing Internet connection and the distribution of information via the Internet. Pursuant to Article 6 of the Revised Provisional Regulations Governing the Management of Chinese Computer Information Networks Connected to International Networks, individuals or entities operating computer networks within China, which are connected to the Internet and conduct international information exchange, must use the international access channels provided by the Ministry of Information Industry (“MII”) and obtain various licenses and approvals. Our relevant subsidiaries have secured the necessary licenses and approvals, and access the Internet through ChinaNet, an approved channel of MII.

 

10
 

  

The operation of our equity exchange will be largely dependent upon the development of China’s policies and laws relating to the transfer of private and state-owned equity. The transfer and management of state-owned equity are subject to the supervision of the Administrative Bureau of State-owned Assets, whereas the equity of privately-owned enterprises must be transferred in compliance with the Company Law and related regulations. After February 17, 2012, the Company is no longer engaging in equity exchange business.

 

According to the Provisional Procedures on the Administration of the Transfer of State-owned Equity in Enterprises, all the transfers of state-owned equity must be carried out through duly authorized equity exchange centers. NSB and Xi’an Assets and Equity Exchange have secured the necessary licenses and approvals for their operations and qualify to transfer state-owned equity.

 

We work diligently to assure compliance with all applicable regulations which impact our business, including cooperating with the MII, the Ministry of Public Security and the Administrative Bureau of State-owned Assets. There can be no assurance, however, that additional regulations will not be enacted that might adversely affect our operations.

 

Employees

 

As of June 30, 2012, we employed 675 full-time employees consisting of 15 management executives and 243 administrative & clerical staff and 417 direct labor. None of our employees is member of any labor union, and we have never experienced any business interruption as a result of any labor disputes. We do not provide any special benefit or incentive programs for our employees. We believe that we enjoy good relations with all of our employees.

 

11
 

 

ITEM 1A.RISK FACTORS

 

In addition to other information in this Annual Report, including the risk factors presented in our Management’s Discussion and Analysis elsewhere herein, the following risk factors should be carefully considered in evaluating our business since it operates in a highly changing and complex business environment that involves numerous risks, some of which are beyond our control. The following discussion highlights a few of these risk factors, any one of which may have a significant adverse impact on our business, operating results and financial condition. As a result of the risk factors set forth below and elsewhere in this Annual Report, and the risks discussed in our other Securities and Exchange Commission filings, actual results could differ materially from those projected in any forward-looking statements.

 

We face significant risks, and the risks described below may not be the only risks we face. Additional risks that we do not know of or that we currently consider immaterial may also impair our business operations. If any of the events or circumstances described in the following risk factors actually occurs, our business, financial condition or results of operations could be harmed and the trading price of our common stock could decline.

 

Our success depends on identifying and closing acquisitions of emerging and growing businesses in China.

 

Our success is largely dependent on our identifying good acquisition targets, negotiating and structuring transactions that are beneficial to us, closing those transactions, finding suitable management to operate those businesses and successfully operate and grow the businesses we acquire.

 

We must work cooperatively with governmental authorities.

 

We are engaged in business in a country with a planned economy heavily influenced by government activities and we must work cooperatively with a variety of national, federal, regional, state, provincial, and local government authorities and entities. The economy of China differs significantly from the economies of the “Western” industrialized nations in such respects as structure, level of development, gross national product, growth rate, capital reinvestment, resource allocation, self-sufficiency, rate of inflation and balance of payments position, among others. Only recently has the Chinese government encouraged substantial private economic activities. The Chinese economy has experienced significant growth in the past several years, but such growth has been uneven among various sectors of the economy and geographic regions. Actions by the Chinese government to control inflation have significantly restrained economic expansion in the recent past. Similar actions by the Chinese government in the future could have a significant adverse effect on economic conditions in China and the results of operations of the Company.

 

If we deliver products with defects, our credibility will be harmed and the sales and market acceptance of our products will decrease.

 

Our product and services are complex and may at times contain errors, defects and “bugs.” If we deliver products with errors, defects or bugs, our credibility and the market acceptance and sales of our products would be harmed. Further, if our products contain errors, defects or bugs, we may be required to expend significant capital and resources to alleviate such problems. We may agree to indemnify our customers in some circumstances against liability arising from defects in our products. Defects could also lead to liability, and, as a result of product liability lawsuits against us or against our customers. We carry product and information liability and errors and omissions insurance, but in the event that we are required to defend more than a few such actions, or in the event that we are found liable in connection with such an action, our business and operations may be severely and materially adversely affected.

 

12
 

 

We compete with large companies.

 

We operate in a highly competitive industry. Although we believe that some of our technology is unique, can be protected, and, if adopted, will confer benefits that will be otherwise unavailable for some time, we face very large competitors with greater resources which may adopt various strategies to block or slow our market penetration, thereby straining our more limited resources. We are aware of efforts by competitors to introduce doubt about our financial stability as we compete to make sales and win customers and business. Large competitors may also seek to hinder our operations through attempts to recruit key staff with exceptionally attractive terms of employment, including signing bonuses, or by the offer of highly competitive terms to potential or newly acquired customers.

 

We will need to continue our product development efforts.

 

We believe that our market will be characterized by increasing technical sophistication. We also believe that our eventual success will depend on our ability to continue to provide increased and specialized technical expertise. There is no assurance that we will not fall technologically behind competitors with greater resources. Although we believe that we enjoy a lead in our product development, and are hopeful that our patents provide some protection, we will likely need significant additional capital in order to continue to enjoy such a technological lead over competitors with more resources.

 

If we are unable to protect our intellectual property, our competitive position would be adversely affected.

 

We may rely on patent protection, as well as trademark and copyright law, trade secret protection and confidentiality agreements with our employees and others to protect our intellectual property. Despite our precaution, unauthorized third parties may copy our products and services or reverse engineer or obtain and use information that we regard as proprietary. We have filed eleven patent applications with the United States Patent and Trademark Office and intend to file more. Six patents have been granted; however, we do not know if the remaining applications will be granted or whether we will be successful in prosecuting any future patents. In addition, the laws of some foreign countries do not protect proprietary rights to the same extent as do the laws of the United States. Our means of protecting our proprietary rights may not be adequate and third parties may infringe or misappropriate our patents, copyrights, trademarks and similar proprietary rights. If we fail to protect our intellectual property and proprietary rights, our business, financial condition and results of operations would suffer. We believe that we do not infringe upon the proprietary rights of any third party, and no third party has asserted an infringement claim against us. It is possible, however, that such a claim might be asserted successfully against us in the future. We may be forced to suspend our operations, or to pay significant amounts to defend our rights, and a substantial amount of the attention of our management may be diverted from our ongoing business, all of which would materially adversely affect our business.

 

We focus on the research and development of our proprietary technologies and the marketing of our first product.

 

We believe that these technologies are the basis for marketable commercial products. However, there can be no assurance of this, and it is possible that our proprietary technologies and products will have no commercial benefit or potential. In addition, from our inception to the present, we have not recognized any substantial operating revenues.

 

We depend on our key personnel and may have difficulty attracting and retaining the skilled staff we need to execute our growth plans.

 

Our success will be dependent largely upon the efforts of our management team. The loss of key staff could have a material adverse effect on our business and prospects. To execute our plans, we will have to attract and retain current employees. Competition for highly skilled employees with technical, management, marketing, sales, product development and other specialized training is intense. We may not be successful in attracting or retaining such qualified personnel. Specifically, we may experience increased costs in order to retain skilled employees. If we are unable to attract or retain experienced employees as needed, we would be unable to execute our business plan.

 

13
 

  

We may face rapid technological change.

 

The market for our products and services may be characterized by rapidly changing technologies, extensive research and the introduction of new products and services. We believe that our future success will depend in part upon our ability to continue to enhance our existing products and to develop, manufacture and market new products and services. As a result, we expect to continue to make a significant investment in engineering, research and development. During the fiscal years 2009 and 2010, we spent Rmb75,000_($US10,985) and Rmb420,321 ($US63,418), respectively; the cost of such activities were borne by the Company, not customers. There can be no assurance that we will be able to develop and introduce new products and services or enhance our initial products in a timely manner to satisfy customer needs, achieve market acceptance or address technological changes in our target markets. Failure to develop products and services and introduce them successfully and in a timely manner could adversely affect our competitive position, financial condition and results of operations.

 

If we experience rapid growth, we will need to manage such growth well.

 

We may experience substantial growth in the size of our staff and the scope of our operations, resulting in increased responsibilities for management. To manage this possible growth effectively, we will need to continue to improve our operational, financial and management information systems, will possibly need to create entire departments that do not now exist, and hire, train, motivate and manage a growing number of staff. Due to a competitive employment environment for qualified technical, marketing and sales personnel, we expect to experience difficulty in filling our needs for qualified personnel. There can be no assurance that we will be able to effectively achieve or manage any future growth, and our failure to do so could delay product development cycles and market penetration or otherwise have a material adverse effect on our financial condition and results of operations.

 

We could face information and product liability risks and may not have adequate insurance.

 

Our products may be used in connection with critical business applications. We may become the subject of litigation alleging that one or more of our products are ineffective or disruptive in our treatment of data, or with regard to critical business information. Thus, we may become the target of lawsuits from injured or disgruntled businesses or other users. In the event that we are required to defend more than a few such actions, or in the event that we are found liable in connection with such actions, our business and operations may be severely and materially adversely affected.

 

Future profitability is not guaranteed.

 

We have not recognized any substantial operating revenues to date. Assuming we can attract sufficient financing, and revenues increase, there is no assurance that our plans will be realized or that we will achieve break-even status or profitability in the future.

 

Changes to financial accounting standards may affect our results of operations and cause us to change business practices.

 

We prepare financial statements in conformity with U.S. generally accepted accounting principles. These accounting principles are subject to interpretation by the American Institute of Certified Public Accountants, the Public Company Accounting Oversight Board, the SEC and various other bodies formed to interpret and create appropriate accounting principles. A change in those principles can have a significant effect on our reported results and may affect our reporting of transactions completed before a change is announced. Changes to those rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct business. For example, accounting principles affecting many aspects of our business, including rules relating to equity-related compensation, have recently been revised. The Financial Accounting Standards Board and other agencies finalized changes to U.S. generally accepted accounting principles that required us, starting January 1, 2006, to record a charge to earnings for employee stock option grants and other equity incentives. We will have significant ongoing accounting charges resulting from option grant and other equity incentive expensing that could reduce net income or increase losses. In addition, since we historically used equity-related compensation as a component of our total employee compensation program, the accounting change could make the use of equity-related compensation less attractive and therefore make it more difficult to attract and retain employees.

 

14
 

  

There is a limited market for our common stock and we do not anticipate paying cash dividends.

 

Our common stock is not listed on any exchange and trades in the over-the-counter (the “OTC”) market in the United States. Additionally, one stockholder holds a majority of our stock. As such, the market for our common stock is limited and is not regulated by the rules and regulations of any exchange in the United States or China. Further, the price of our common stock and its trading volume in the OTC market may be subject to wide fluctuations. Our stock price could decline regardless of our actual operating performance, and stockholders could lose a substantial part of their investment as a result of industry or market-based fluctuations. Our stock trades relatively thinly. If a more active public market for our stock is not sustained, it may be difficult for stockholders to sell shares of our common stock, in which case they may sustain significant losses or lose their entire investments Because we do not anticipate paying cash dividends on our common stock for the foreseeable future, stockholders will not be able to receive a return on their shares unless they are able to sell them. The market price of our common stock will likely fluctuate in response to a number of factors, including but not limited to, the following:

 

·sales, sales cycle and market acceptance or rejection of our products;
·economic conditions within our industry;
·our failure to meet performance estimates or the performance estimates of securities analysts;
·the timing of announcements by us or our competitors of significant products, contracts or acquisitions or publicity regarding actual or potential results or performance thereof; and
·domestic Chinese and international economic, business and political conditions.

 

Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on our stock price.

 

Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC require annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm attesting to and reporting on these assessments. If we fail to adequately maintain compliance with, or maintain the adequacy of, our internal control over financial reporting, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC. If we cannot favorably assess, or our independent registered public accounting firm is unable to provide an unqualified attestation report on our assessment of the effectiveness of our internal control over financial reporting, investor confidence in the reliability of our financial reports may be adversely affected, which could have a material adverse effect on our stock price.

 

Enforceability of Civil Liabilities Against Foreign Persons.

 

Although the Company is a Wyoming corporation, we engage in business primarily in China, our factories, properties, equipment and other assets are located outside the United States in China and our officers and directors are located outside the United States in China. Therefore, investors and stockholders may have considerable difficulty in bringing an original action in courts in the United States or in China under the civil liability provisions of the U.S. federal securities laws, against the Company, its factories or its officers and directors. Investors and stockholders also may have considerable difficulty in effecting service of process in the United States on our officers and directors or in enforcing in courts in China judgments of United States courts against them based on the U.S. federal securities laws.

 

15
 

 

ITEM 1B.UNRESOLVED STAFF COMMENT

 

Not applicable.

 

ITEM 2.PROPERTY

 

Our principal executive office consists of approximately 200 square feet of office space that is located at Room 1207-8, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong. The premises are leased from a related third party with free rental.

 

ChinaE has an operating offices in China consists of approximately 5,600 square feet of office space located at Suite 1506-09, Landmark, 4028 Jintian Road, Futian District, Shenzhen 518026, PRC and 900 square feet of office space located at Room 712, Tower B, Sunshine Commercial Centre, 2001 Jiabin Road, Luohu District, Shenzhen PRC. The premises are leased from an unrelated third party with rental payments and management fees of approximately $126,000 and $13,000 per year respectively. These leases will expire in February 2014 and May 2012 respectively.

 

APT has three factories located at Shenzhen, Qingdao and Suzhou, PRC of which Qingdao factory is owned by APT with a leased term of 50 years ended in October 2058. The Shenzhen factory is approximately 49,700 square meters and located at No. 3 Da Tian Yang Industrial Estate, Dongfang Blvd., Donggang, Baoan, Shenzhen 518105, PRC. The factory is leased from an unrelated third party with rental payments and management fees at approximately $716,000 per year and the lease will expire in September 2035. The Suzhou factory is approximately 10,300 square meters and located at South of Southern Guando Rd., Wang Shan Industrial Estate, Wuzhong Economic Development Zone, Suzhou 215104, PRC. The Suzhou factory is leased from an unrelated third party with rental payments and management fees at approximately $179,000 per year and the lease will expire in July 2016. The Qingdao factory is approximately 92,300 square meters and located at Taiwan Industrial Area, North of Lanzhou East Rd., Jiaozhou, Qingdao City 266300, PRC. The land of factory is under a lease term of 50 years expired in October 2058.

 

All of our office facilities are in good condition and we believe they are adequate to support our operations for the foreseeable future.

 

ITEM 3.LEGAL PROCEEDINGS

 

The Company and its subsidiaries did not have any pending or threatened legal proceedings outstanding as at June 30, 2012.

 

ITEM 4.MINE SAFETY DISCLOSURE

 

Not Applicable.

 

16
 

 

PART II

 

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Our common stock is quoted on the Over-The-Counter Electronic Bulletin Board (the “OTC Bulletin Board”), and is traded under the symbol “UCHC”.

 

The following table represents the high and low bid prices for our common stock on the OTC Bulletin Board for each quarter during the last two fiscal years.

 

      High   Low  
Fiscal 2011              
               
   Quarter ended September 30, 2010   0.19   0.10  
   Quarter ended December 31, 2010   0.15   0.07  
   Quarter ended March 31, 2011   0.12   0.09  
   Quarter ended June 30, 2011   0.13   0.06  
               
Fiscal 2012              
               
   Quarter ended September 30, 2011   0.11   0.0839  
   Quarter ended December 31, 2011   0.095   0.07  
   Quarter ended March 31, 2012   0.075   0.01  
   Quarter ended June 30, 2012   0.029   0.0005  

 

The above bid information reflects inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

 

Holders. As of September 30, 2012, there were approximately 606 holders of record of the Company’s common stock. This number does not include an indeterminate number of shareholders whose shares are held by brokers in street name.

 

Dividends. We have never declared or paid any cash dividend on our common stock and do not expect to declare or pay any cash dividend in the foreseeable future.

 

Recent Purchases and Sales of Unregistered Securities. In the fiscal year ended June 30, 2012, the Company issued common stock to various parties and redeemed common stock. The following transactions have not been reported by the Company in previous quarterly reports. The value of the common stock for each issuance was based on one of the following: the market price of the shares on the date of the transactions, the market price of the shares on the date the negotiations between the parties began or on the fair value of services received. The issuances were as follows:

 

On January 20, 2011, we issued 4,000,000 shares of common stock at $0.1 per share to Wang Fei, Zhao Jing Jing, Wu Qiang, China Equity Platform Holding Group Limited and Star Fair Ventures Corporation as the deposit of exchange of 51% equity of Shaanxi Prosperous Agriculture Company Limited. The total consideration of the exchange of 51% equity of Shaanxi Prosperous Agriculture Company Limited is totally 11 millions of UCHC shares. The stock was issued without compliance with the registration requirements of the Securities Act of 1933 (“Act”) in reliance on the exemption provided by Section 4(2of the Act for transactions by an issuer not involving a public offering and Rule 506 of Regulation D.

On December 9, 2010, we issued 37,500,000 shares of common stock at $0.08 per share to Gain Onway Limited and Alliance Harvest Limited in a private placement and 1,875,000 shares of common stock at $0.08 per share to Wise Link Management Limited as commissions for the aforesaid private placement. The stock was issued without compliance with the registration requirements of the Act in reliance on the exemption from registration provided by Section 4(2) of the Act and Rule 506 of Regulation D. There was no general solicitation or advertising engaged in by the Company in making this offering and the offerees and the parties designated to receive the stock were all accredited investor.

 

17
 

 

On December 21, 2009, Uni Core Holdings Corporation (UCHC) entered into Investment Cooperation Agreement (Agreement) with the shareholders of Shaanxi Prosperous Agriculture Company Limited (Prosperous Agriculture) to acquire 51% equity of Prosperous Agriculture by two phrases and exchanged in total 11 millions of UCHC shares.

 

The first phrase of 21% equity of Prosperous Agriculture transferred to UCHC’s subsidiaries, IMOT Information Technology (Shenzhen) Limited (IMOTSZ), was approved by PRC authority on December 24, 2010. According to the term of the Agreement, UCHC had allotted 4 million shares at $0.1 per share to the parties below on January 18, 2011:

 

Name  No. of
shares
 
Wang Fei   2,232,000 
Wu Qiang   1,116,000 
Zhao Jing Jing   372,000 
China Equity Platform Holding Group Limited   160,000 
Star Fair Ventures Corporation   120,000 

 

The second phrase of 30% equity of Prosperous Agriculture transferred to UCHC’s subsidiaries, IMOT Information Technology (Shenzhen) Limited, was approved by PRC authority on December 1, 2011.

 

Auditors will start to evaluate the net assets value of 51% equity of Prosperous Agriculture in late of April 2012.

 

During this financial year, for the reason of services rendered, we issued totaling 28,000,000 shares of common stock at fair market value to Brighton Capital Ltd, George Capps, TG Private Equity Inc, DC Global Consultancy Ltd, Region Capital Ltd, Hung Kwok Wing & FG Management Co. Ltd. In addition, the company issued 170,334,867, 190,643,687 and 341,650,000 to Asher Enterprises, Inc., Magna Group, LLC, and Tonaquint, Inc. respectively for the purpose of convertible loan in cash.

 

Stock options issued to directors at fair market value, including of Fred Peck, Chia Hsun Wu, Shinohara Hiroshi & Thomas Lee, the company issued 19,000,000 in total for this year

 

On 13 March 2012, we issued 50,000,000 to FG Management Co. Ltd. for compensation the disposition of collateral under secured convertible promissory note 5 September 2011 During July 2011 to June 2012, we issued 20,000,000 shares to FG Management Co., Ltd. and 8,000,000 shares to another six parties.

 

Securities Authorized for Issuance Under Equity Compensation Plans. On December 1, 2003 our Board of Directors adopted and on January 28, 2004 our stockholders approved the Intermost Corporation 2003 Equity Incentive Plan (“Plan”) pursuant to which the Board of Directors may grant awards of shares of our common stock and options to purchase shares of our common stock to our employess, officers and directors and our consultants independent contractors and advisers. As of June 30, 2012, no awards had been granted from the Plan. See “Other Compensation and Employment Arrangements” under “Item 11. EXECUTIVE COMPENSATION,” for more information.

 

ITEM 6.SELECTED FINANCIAL DATA

 

We are a “smaller reporting company” and, pursuant to Item 301(c) of Regulation S-K, we are not required to provide the information required by this Item.

 

18
 

 

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

 

Critical Accounting Policies and Estimates

 

Management’s discussion and analysis of results of operations and financial condition are based upon the Company’s consolidated financial statements, set forth elsewhere in the Annual Report. These statements have been prepared in accordance with generally accepted accounting principles as used in the United States. These principles require management to make certain estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

The following critical accounting policies rely upon assumptions, judgments and estimates and were used in the preparation of the Company’s consolidated financial statements:

 

Revenue Recognition

 

Revenues are recognized (i) with respect to services, at the time a project (or a milestone thereof) is completed and accepted by the customer, and (ii) with respect to products, at the time products are delivered to customers and collectability for such sales is reasonably assured. We have adopted Staff Accounting Bulletin No.101, Revenue Recognition (“SAB 101”) in our financial statements. SAB 101 provides in part further interpretive guidance for public companies on the recognition, presentation, and disclosure of revenues in financial statements. The adoption of SAB 101 did not have a material impact on our revenue recognition practices.

 

Accounts Receivable

 

We typically extend credit to our customers. From time to time, e-commerce solution services are provided under fixed-price contracts where the revenues and the payment of related receivable balances are due upon the achievement of certain milestones. Management estimates the probability of collection of the receivable balances and provides an allowance for doubtful accounts based upon its judgment in assessing the realization of these receivable balances taking into account aging, historical experience, the customer’s financial condition and general economic conditions.

 

Long-lived assets and goodwill

 

The Company periodically evaluates the carrying value of long-lived assets held or used whenever events and circumstances indicate that the carrying value of the asset may no longer be recoverable. An impairment loss, measured on the fair value of the asset, is recognized if expected future undiscounted cash flows are less than the carrying value of the assets.

 

We evaluate goodwill, at a minimum, on an annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable in accordance with ASC 350 “Intangibles – Goodwill and Other,” formerly SFAS No. 142 “Goodwill and Other Intangible Assets.” Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. The fair values of the reporting units are estimated using discounted cash flows approach. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second step is performed to measure the amount of impairment loss, if any.

 

19
 

  

Overview

 

We believe that the People’s Republic of China represents an exciting emerging world market whose role in the global economy is increasing steadily. China’s economic growth rate, measured by its gross domestic product, has consistently been higher than 7% per year over each of the past 10 years. This economic growth is attributable to many factors, including investment in the country’s infrastructure, increased privatization of businesses and an abundant source of labor. Currently, we offer products and services to businesses and consumers located primarily in China. Our plan is to take advantage of China’s economic growth to expand our existing businesses and, possibly, in the future, to sell our products and services outside of China. We also have begun to acquire diverse businesses that are not dependent on, or directly related to, each other. We believe that diversification is a good hedge against the collapse of a single industry, such as the global collapse of the technology industry that occurred in 2000. We expect that any acquisitions we make will improve our financial condition, although we cannot guarantee any such result.

 

Currently our revenues are generated primarily by our subsidiaries, ChinaE and ChinaE Tech, both of which distribute licenses for Chinese language translation software and offer web design and hosting services.

 

In response to the economic recovery, we began to diversify our business, so that we will no longer be dependent on one market for revenue. Generally, the issuance of our common stock represents some or all of the purchase price we pay for an acquired business. We believe that the continued active trading of our common stock will be important to the principals of target companies and future acquisitions may be dependent on the active trading of our common stock. However, our common stock has not been actively traded and, if our common stock continues to trade with limited volume and at current levels we may not be able to make acquisitions as planned.

 

During the fiscal year ended June 30, 2012 we incurred a net operating loss of $7,956,452. Our auditor, Albert Wong & Co., CPA, has issued a “going concern” opinion for our financial statements as of June 30, 2012, as a result of out recurring losses from operations, a significant accumulated deficit, and our continuing to experience negative cash flows.

 

Results of Operations

 

Following is summary financial information reflecting our operations for the periods indicated.

 

       Year Ended June 30 
   2012   2011 
Net revenues  $22,990,061   $19,735,344 
Cost of revenues   (21,264,457)   (19,125,664)
Gross profit/(loss)   1,725,604    609,680 
Selling, general and administrative expenses   (5,845,709)   (5,811,357)
Exchange differences   65,333    (91,542)
Amortization of intangible assets   (1,202,685)   (10,663)
Amortization of goodwill   (10,136,655)   (2,854,023)
Written off loan receivables   -    - 
Recovering / Written off trade receivables   0    (38,154)
Interest income   (711,483)   (596,924)
Investment income   0    950,542 
Loss from operations   (16,105,595)   (7,842,441)
Impairment of associate company   (758,900)     
Other income, net   (287,934)   - 
Loss before taxation   (17,152,429)   (7,842,441)
Taxation   -    - 
Loss before minority interest   (17,152,429)   (7,842,441)
Minority interest   0    (114,011)
Net loss   (17,152,429)   (7,956,452)

20
 

 

Year Ended June 30, 2012 Compared to Year Ended June 30, 2011

 

Net revenues.

 

Net revenues for the year ended June 30, 2012 increased by $17,029K1, or 629.3%, to $19,735K from $2,706K for the year ended June 30, 2011.

 

Net revenues during fiscals 2012 and 2011 were derived principally from sales of paper products and e-commerce solutions. The term “e-commerce solutions” includes web site design and development and web hosting.

 

The following table reflects the total net revenues and percentage of net revenues by major category and location for the periods indicated:

 

   Year Ended June 30   Year Ended June 30 
   2012   2011   2012   2011 
   US$   US$         
Net Revenues by major category                    
Sales of paper products   22,942,474    19,375,862    99.8%   98%
E-commerce solutions                    
  - website design and development   -    -    - %    -% 
Consulting service income   47,587    359,482    0.2%   2%
                     
    22,990,061    19,735,344    100%   100%

 

   Year Ended June 30    Year Ended June 30 
   2012   2011   2012   2011 
   US$   US$         
Net Revenues by location                    
British Virgin Islands        175,797    -%    1%
People’s Republic of China   22,990,061    19,559,547    100%   99%
                     
    22,990,061    19,735,344    100%   100%

 

Costs of Revenues.

 

Costs of revenues consist principally of the production cost of paper products for the year ended June 30, 2012 and 2011. The costs of revenues for the year ended June 30, 2012 and 2011 consist principally of direct material cost, direct labor, manufacturing overhead, depreciation, and other costs including travel employee benefits and office expenses.

 

The following table reflects the principal components of costs of revenues and the percentage of net revenues represented by each component for the periods indicated:

  

 

1 As used in this Annual Report on Form 10-K, the letter “K” appearing immediately after a dollar amount denotes rounding to the nearest $1,000; as an example, $380,499 may be rounded to “$380K”

 

21
 

 

   Total Cost of Revenues   Percentage to Total Net Revenues 
   Year Ended June 30   Year Ended June 30 
   2012   2011   2012   2011 
   US$   US$         
Direct materials   17,150,873    15,157,973    74.60%   76.81%
Direct labor   1,216,891    1,173,022    5.29%   5.94%
Manufacturing overhead   2,531,538    2,117,789    11.01%   10.73%
Depreciation   256,513    555,036    1.12%   2.81%
Other   108,642    121,844    0.47%   0.62%
                     
Total   21,264,457    19,125,664    92.49%   96.91%

 

Compared to the 2011 fiscal year, the total costs of revenues for the 2012 fiscal year increased by $2,139K, or 11.18%, to $21,264K..

 

Selling, General and Administrative Expense.

 

Selling, general and administrative expense (“SG&A”) consists principally of (1) sales commissions, advertising, trade show and seminar expenses, and direct-field sales expense, (2) salaries for administrative and sales staff, (3) corporate overhead, and (4) allowances for bad and doubtful accounts. The following table reflects the principal components of SG&A and the percentage of net revenues represented by each component for the periods indicated:

 

   Total SG & A    Percentage to Total Net Revenues 
   Year Ended June 30   Year Ended June 30 
   2012   2011   2012   2011 
   US$   US$         
Sales and marketing salaries and                    
commission   743,551    688,519    3.49%   3.23%
Other sales and marketing expenses   235,704    997,496    5.05%   1.03%
Rental obligation   599,454    539,656    2.73%   2.61%
Administrative salaries   1,630,741    1,079,971    5.47%   7.09%
Corporate overhead   2,636,259    2,505,715    12.70%   11.47%
                     
Total   5,845,709    5,811,357    29.44%   25.43%

 

The principal components of SG&A during the 2012 year were sales and marketing salaries and commissions, other marketing expenditures, administrative salaries and benefits, and other corporate overhead expenses, which include legal and professional fees, general office expenses, traveling expenses, general employee benefit expense, depreciation, consultancy fees, and allowance for bad and doubtful accounts.

 

For the 2012 fiscal year, SG&A increased by $34K or 0.59%, to $5,846K as compared to $5,811K for the 2011 fiscal year. Sales and marketing salaries and commissions increased by $55K or 7.99% during the 2012 fiscal year, to $743K, as compared to $689K for the 2011 fiscal year. During the 2012 fiscal year, administrative salaries increased by $550K or 51%, to $1,631K, as compared to $1,080K in the 2011 fiscal year. Other corporate overhead expense increased during the 2012 fiscal year by $131K or 5.2%, to $2,636K, as compared to $2,506K in the 2011 fiscal year.

 

22
 

 

Minority Interest.

 

For Sale of China Equity Platform Holding Group Ltd. We do not have any minority interest this year.

 

Liquidity and Capital Resources

 

To date, we have funded our operations with cash from our operating activities, sales of our securities and by using our common stock to make acquisitions and purchases.

 

At June 30, 2012 we had cash and cash equivalents of $507K and net current liabilities of $5,575K as compared to $2,178K of cash and cash equivalents and $1,763K of net current liabilities as of June 30, 2011.

 

Net cash used in operating activities totaled $6,426K during the 2012 fiscal year while net cash provided by operating activities was $3,209K during the 2011 fiscal year. Cash used in operating activities was partially offset by non-cash charges, including depreciation expense in the amount of $1,005K and amortization of intangible assets in the amount of $1,256K.

 

Net cash used in investing activities was $265K for the 2012 fiscal year while net cash used in investing activities was $177K for the 2011 fiscal year. Funds provided by investing activities derived from the amount of funds used in acquiring office equipments in 2012 and funds used in investing activities consisted of addition of office equipment and intangible assets in 2011.

 

Net cash provided by financing activities was $2,856K for the 2012 fiscal year while net cash used in financing activities was $3,976K for the 2011 fiscal year. Funds provided by financing activity were mainly from the issuance of common stocks, the increase in bank loan and convertible loan stocksduring the 2012 fiscal year.

 

We had no long term debt as of June 30, 2012. Except as otherwise described herein, we have no plans to make any major capital expenditures during the next 12 months and we are not aware of any trends or uncertainties that could affect sales of our products. We do not have any off balance sheet arrangements.

 

We have implemented various cost management measures to reduce our overhead. The Company will likely need to borrow money or obtain additional equity financing in order to sustain operations. At present, we have no commitments, arrangements or understandings for funding and there is no assurance that necessary funding will be available to us, or that any such funding would be on acceptable terms. If we need financing and cannot obtain it, we may be required to severely curtail, or even cease, our operations.

 

Factors Affecting Revenues and Profitability. Our operating results have been, and will continue to be, affected by a wide variety of factors that could have a material adverse effect on revenues and profitability during any particular period. Some of these factors include:

 

·Our ability to successfully implement our business plan;

 

·Whether or not we will be able to obtain the additional capital necessary to support our operations;

 

·Whether or not we will find joint venture prospects or acquisition prospects with which to enhance our business;

 

·Whether or not we can successfully integrate acquisitions that we make into our business;

 

·The level and rate of acceptance of our products and services by the Chinese people;

 

23
 

 

·Continued growth in the use of the Internet in China;

 

·Entry of new competition (including established companies from outside China and companies with substantially greater resources) into our market;

 

·Fluctuations in the level of orders for services delivered in a quarter;

 

·Rescheduling or cancellation of orders by customers;

 

·Competitive pressures on selling prices;

 

·Changes in product, service or customer mix;

 

·Rapid changes in technology, which result in our technology becoming obsolete;

 

·Availability and cost of computer technicians;

 

·Loss of any strategic relationships;

 

·Loss of our largest customers;

 

·Our ability to introduce new products and services on a timely basis;

 

·New product and service introductions by our competitors;

 

·Fluctuations in exchange rates, and

 

·Adverse changes in the general economic, social or political conditions in the People’s Republic of China.

 

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Refer to Item 15 Financial Statement Schedules, pages 37 to 42.

 

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 

None/Not Applicable.

 

24
 

 

ITEM 9A.CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

We maintain controls and procedures designed to ensure that we are able to collect the information we are required to disclose in the reports we file with the SEC, and to record, process, summarize and disclose this information within the time periods specified by the SEC. Based on an evaluation of our disclosure controls and procedures as of the end of the period covered by this report conducted by management, the Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are not effective to ensure that we are able to record, process, summarize and report the information we are required to disclosure in the reports we file with the SEC within the required time periods.

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) or 15d-15(f) under the Securities Exchange Act of 1934, as amended. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, we assessed the effectiveness of our internal control over financial reporting as of June 30, 2012. We have identified our material weaknesses in internal control over financial reporting due to the deficiencies in relevant education and ongoing training your financial management and staff. We have taken or plan to take and the procedures we have implemented or plan to implement to correct the identified material weakness are:

 

lWe have instituted monthly business reviews led by our Chief Executive Officer and monthly operating and financial statement reviews by various levels of our management team, including our executive officers.

 

lWe are taking steps to create an Audit Committee and a new disclosure review group in order to further formalize our internal review processes related to preparation of our SEC reports and other public disclosures, which will include directors, executive management, senior financial management and senior operating personnel;

 

lWe are expanding our educational assistance to all our accounting staff to ensure a thorough and consistent understanding of changes in accounting principles and modification and enhancements in our internal controls and procedures.

 

We concluded that our internal control over financial reporting was not effective as of June 30, 2012.

 

Our annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. The Dodd-Frank Wall Street Reform and Consumer Protection Act signed by President Obama on July 21, 2010 allows small public companies to have a permanent exemption from the Sarbanes-Oxley Section 404(b) requirement to obtain an audit report of internal controls over financial reporting.

 

Change in Internal Controls Over Financing Reporting

 

During the year ended June 30, 2012 there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9BOTHER INFORMATION

 

None.

 

25
 

 

PART III

 

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Identification of Directors, Executive Officers and Certain Significant Employees

 

The following table sets forth certain information regarding the directors and executive officers of the Company.

 

Name   Age   Position
         
Fred Peck   53   Director
         
Chia Hsun Wu   52   Director and Chief Executive Officer
         
Hiroshi Shinohara   56   Director
         
Thomas Lee   62   Chief Financial Officer

  

There are no family relationships among any of the directors or officers of the Company.

 

None of our directors or executive officers has, during the past five years,

 

·had any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer, either at the time of the bankruptcy or within two years prior to that time,

 

·been convicted in a criminal proceeding and none of our directors or executive officers is subject to a pending criminal proceeding,

 

·been subject to any order, judgment, or decree not subsequently reversed, suspended or vacated of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, futures, commodities or banking activities, or

 

·been found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

 

Business Experience

 

Fred Peck has served as a director of the Company since December 6, 2005. Mr. Peck is a funds manager, transaction superintendent and vice president of Boston Bank Taiwan Branch. He has over 15 years’ experience in portfolio investment, risk investment, capital management, fundraising, acquisition and merger, project fund raising privatization.

 

Chia Hsun Wu has served as a director of the Company since November 3, 2006 and was appointed as the Chief Executive Officer of the Company on October 1, 2009. Mr. Wu has extensive management and industrial experience and is a graduate from Oriental Institute of Technology. Mr. Wu has conducted scientific research at the National Taiwan University of Science and Technology. Mr. Wu is currently the Managing Director of FFBC Holdings Group and President of KG Hospitality Management Co., Ltd. and Chain-Hsun Development Co., Ltd.

 

26
 

  

Hiroshi Shinohara has served as a director of the Company since February 18, 2008. Mr. Shinohara graduated from Osaka University, with extensive experience in corporate financial analysis, business in merging and acquisition. Mr. Shinohara is currently the Managing Director of FFBC Management Co., Ltd., Japan.

 

Wang Hsin Wei has served as an independent director of the Company since February 25, 2010. Mr. Wang obtained his masters degree in risk management and insurance from Feng Chia University in Taiwan. He has over 25 years’ management experience across various businesses, including vehicle-related products, education services and insurance products. Mr. Wang is currently the president of Chun Shin Limited.

 

Thomas Lee was appointed as Chief Financial Officer of the Company on June 13, 2007. Mr. Lee was Chief Financial Officer of Management Recruiters International from June to September 2002.  Mr. Lee simultaneously worked on a project for Superstore International Ltd. which began in September 2002 and ended in August 2003.  From September 2003 to August 2004, Mr. Lee established a public relations company and reviewed a Chinese architecture and re-design project.  In 2004, Mr. Lee rejoined Management Recruiters International as Chief Financial Officer.  In the same year, he joined the Ladies Recreations Club (Hong Kong) as Financial Consultant and Bund 18 Real Estate Management, Ltd (Shanghai) where he continues to serve as the Group Financial Officer.

 

Term of Office

 

All directors named above will serve until the next annual meeting of the Company’s shareholders and until their successors are elected and qualified. Officers will hold their positions at the pleasure of the Board of Directors.

 

Compliance With Section 16(a) of Exchange Act

 

Section 16(a) of the Securities Exchange Act requires our directors, executive officers and persons who own more than 10% of our common stock to file reports of ownership and changes in ownership of our common stock with the Securities and Exchange Commission. Directors, executive officers and persons who own more than 10% of our common stock are required by Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) forms they file.

 

Based solely upon a review of the public files of the SEC, the Company believes that, with respect to its fiscal year ended June 30, 2012, none of the Company’s directors and officers and none of the persons known to the Company to own more than 10% of the Company’s common stock, filed beneficial ownership reports with the Securities and Exchange Commission.

 

We have no committees of the Board of Directors. The entire Board of Directors acts as the audit, nominating and compensation committees.

 

27
 

 

ITEM 11.EXECUTIVE COMPENSATION

 

Our “executive officers” include our current Chief Executive Officer, Chia Hsun Wu; and our Chief Financial Officer, Thomas Lee.

 

The following table sets forth information concerning cash and non-cash compensation paid or accrued to our executive officers during the past fiscal year:

 

Summary Compensation Table

The amounts in the table below are calculated as of June 30, 2012

 

Name and
Principal
Position
  Year   Salary   Bonus   Stock
awards
   Option
Awards
   Non-Equity
Incentive Plan
Compensation
   Non-Qualified
Deferred
Compensation
Earnings
   All Other
Compensation
   Total 
       ($)   ($)   ($)   ($)(4)   ($)   ($)   ($)   ($) 
(a)  (b)   (c)   (d)   (e)   (f)   (g)   (h)   (i)   (j) 
Chia Hsun Wu,   2012    0    0    0    0    0    0    0    0 
CEO (1)   2011    0    0    0    0    0    0    0    0 
                                              
Thomas Lee,   2012    153,165    0    0    0    0    0    0    153,165 
CFO (2)   2011    166,106    0    0    0    0    0    0    166,106 
    2010    114,245    0    0    0    0    0    0    114,245 

 

(1) Mr. Chia Hsun Wu was appointed as Director of the Company on November 3, 2006 and Chief Executive Officer on October 1, 2009.

 

(2) Mr. Thomas Lee was appointed as Chief Financial Officer of the Company on June 13, 2007

 

Director Compensation Table

The amounts in the table below are calculated as of June 30, 2012.

 

Name  Fees Earned
or Paid in
Cash ($)
   Stock
Awards ($)
   Option Awards
($)
   Non-Equity
Incentive Plan
Compensation ($)
   Nonqualified
Deferred
Compensation
Earnings
   All Other
Compensation
($)
   Total ($) 
(a)  (b)   (c)   (d)   (e)   (f)   (g)   (h) 
Chia Hsun Wu
   0    0    0    0    0    0    0 

  

Director’s Compensation

 

The Company reimburses its directors for out-of-pocket expenses incurred on behalf of the Company.

 

Other Compensation and Employment Arrangements

 

The Company has adopted and the stockholders have approved the Intermost Corporation 2003 Equity Incentive Plan. The following discussion is qualified in its entirety by the terms and provisions of the Plan.

 

28
 

 

The Plan authorizes awards of options, awards of stock (“Stock Award”) and the granting of bonus stock (“Stock Bonus”). Persons eligible to receive awards under the Plan include the Company's employees, officers and directors and its consultants, independent contractors and advisors. As of June 30, 2011, all of the Company’s employees, officers and directors were eligible to receive awards under the Plan. The number of persons covered by the Plan may increase if we add additional employees (including officers) and directors. As of the date of this Annual Report, no awards have been granted from the Plan.

 

The Company’s Board of Directors administers the Plan. For purposes of this discussion, the body administering the Plan will be referred to as the Administrator. The Administrator has the authority to determine, at its discretion, the number and type of awards that will be granted, the recipients of the awards, any exercise or purchase price required to be paid, when options may be exercised and the term of option grants. Awards under the Plan are not defined as to any group. The term of the Plan is 10 years from the date the Plan was adopted by the Board of Directors. We have reserved 20,000,000 shares of our common stock for awards to be made under the Plan.

 

The exercise price for stock options granted to officers and directors must be the fair market value of the common stock on the date of grant. The exercise price for stock options granted to eligible persons other than officers and directors may not be less than 85% of the fair market value of the common stock on the date of grant. The term of an option may not exceed 10 years.

 

A Stock Award is an offer by the Company to sell to an eligible person shares of common stock that may or may not be subject to restrictions. Stock Awards granted to officers and directors must be granted at the fair market value of the common stock on the date of the award. Stock Awards granted to eligible persons who are not officers or directors may not be granted at less than 85% of the fair market value of the common stock on the date of the award. Stock Awards may be subject to vesting conditions, as determined by the Administrator.

 

A Stock Bonus is a grant of shares that may be awarded to an eligible person. A Stock Bonus may be subject to vesting conditions, as determined by the Administrator. A Stock Bonus may be awarded for any reason determined by the Administrator, including, but not limited to, extraordinary services rendered to the Company by an eligible person, as an award for performance achieved by the Company or upon satisfaction of performance goals by the eligible person.

 

In the United States, a recipient will not recognize any taxable income at the time an option is granted. However, upon exercise of an option, the recipient will include in income as compensation an amount equal to the difference between the fair market value of the shares on the date of exercise and the recipient's exercise price. The included amount will be treated as ordinary income by the recipient and may be subject to withholding. Upon resale of the shares by the recipient, any subsequent appreciation or depreciation in the value of the shares will be treated as capital gain or loss. There is no tax consequence to the Company as a result of either the grant or the vesting of stock options.

 

29
 

 

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

Common Stock

 

The following table is furnished as of June 30, 2012, to indicate beneficial ownership of shares of the Company’s common stock by (1) each shareholder of the Company who is known by the Company to be a beneficial owner of more than 5% of the Company’s common stock, (2) each director and named officer of the Company, individually, and (3) all officers and directors of the Company as a group.

 

Class of Stock  

Name and Address of

Beneficial Owner

 

Number of Shares

Beneficially Owned

 

Percent of

Class

   
Common   Global Golden Group Investments Company Limited 1   -   N/A    
Common   FG Management Company Limited 1   99,785,029   6.59 %  
Common   Fred Peck 2   -   N/A    
Common   Wu Chia Hsun 2   -   N/A    
Common   Hiroshi Shinohara 2   -   N/A    
                 
Common   Thomas Lee 2   -   N/A    

  

Equity Compensation Plan Information

 

Plan Category  Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
  (a)
   Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
  Number of securities
remaining available for
future issuance under
Equity compensation
plans (excluding
securities reflected in
column (a))
  (c)
 
Equity compensation plans approved by security holders   0   Not applicable   20,000,000 
Equity compensation plans not approved by security holders   0   Not applicable   0 
Total   0   Not Applicable   20,000,000 

 

30
 

 

ITEM13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

No directors, executive officers or immediate family members of such individuals were engaged in transactions with us or any of our subsidiaries during the fiscal years ended June 30, 2006, June 30, 2007, June 30, 2008, June 30, 2009, June 30, 2010, June 30, 2011, and June 30, 2012. Furthermore, we have no “interlocking” relationships in which any of our executive officers are a member of the board of directors of another entity whose executive officers are a member of our Board of directors.

 

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

The following table sets forth fees billed to us by our auditors during the fiscal years ended June 30, 2012 and June 30, 2011 for: (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements, (ii) services by our auditor that are reasonably related to the performance of the audit or review of our financial statements and that are not reported as Audit Fees, (iii) services rendered in connection with tax compliance, tax advice and tax planning, and (iv) all other fees for services rendered.

 

   June 30, 2012   June 30, 2011 
         
(i)   Audit Fees  $50,000*  $40,000*
(ii)  Audit Related Fees  $-0-$   -0- 
(iii) Tax Fees  $   2,000-   $  2,000- 
(iv) All Other Fees  $-0-   $-0- 

  

* Audit fee for fiscal years ended June 30, 2012 and June 30, 2011 were accrued to the auditors, Albert Wong & Co., CPA.

 

31
 

 

PART IV

 

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

(a)Exhibits

 

Exhibit    
Number   Description of Exhibit
     
2.1   Articles of Merger (1)
     
3.1   Articles of Incorporation (1)
     
3.2   Bylaws (1)
     
10.1   Cooperative Agreement re: formation of Jiayin E-Commerce joint venture (2)
     
10.2   Agreement Regarding Transfer of Properties on 38th Floor, Guomao Building (3)
     
10.3   Shareholding Transfer Agreement dated May 23, 2003 between IMOT Information Technology (Shenzhen) Ltd. and Shanghai Newray Business Development Co., Ltd. (4)
     
10.4   Share Transfer Agreement among IMOT Information Technology (Shenzhen) Ltd., Shenzhen Golden Anke Technology Co. Ltd., Intermost Corporation, Tu Guoshen and Li Zhiquan (5)
     
10.5   Sale and Purchase Agreement among IMOT Information Technology (Shenzhen) Ltd., Shanghai Fortune Venture Limited, North Shanghai Branch of Shanghai Technology Property Right Exchange Center and Intermost Corporation (6)
     
10.6   Distributorship Agreement dated November 28, 2002 between KanHan Technologies Limited and ChinaE.com Information Technology Ltd. (7)
     
10.7   Intermost Corporation 2003 Equity Incentive Plan (8)
     
10.8   Joint Venture Agreement among Intermost Corporation and Entities and/or Individuals Collectively Referred to as “Investors.”*
     
14   Code of Ethics (9)
     
21   Significant Subsidiaries *
     
31.1   Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a)*
     
31.2   Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a)*
     
32.1   Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
     
32.2   Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

 

32
 

 

(1) Incorporated by reference to the respective exhibits filed with the Registrant’s 10-KSB Amendment filed with the SEC on October 15, 2004
(2) Incorporated by reference to the respective exhibits filed with Registrant’s Registration Statement on Form 10-SB (Commission File No. 0-30430).
(3) Incorporated by reference to the respective exhibits filed with the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended March 31, 2000.
(4) Incorporated by reference to the exhibit filed with the Registrant’s Current Report on Form 8-K filed with the SEC on June 9, 2003.
(5) Incorporated by reference to the exhibit filed with the Registrant’s Current Report on Form 8-K filed with the SEC on August 17, 2004.
(6) Incorporated by reference to the exhibit filed with the Registrant’s Current Report on Form 8-K filed with the SEC on April 26, 2004.
(7) Incorporated by reference to the exhibit filed with the Registrant’s Current Report on Form 8-K filed with the SEC on February 14, 2003.
(8) Incorporated by reference to the exhibit filed with the Registrant’s Proxy Statement filed with the SEC on January 6, 2004.
(9) Incorporated by reference to the exhibit filed with the Registrant’s 10-KSB Amendment filed with the SEC on October 25, 2004.
(10) Incorporated by reference to the exhibit filed with the Registrant’s Current Report on Form 8-K filed with the SEC on March 8, 2004.
* Filed herewith.  [Align exhibit numbers with the first line of each description.]  Re Exhibit 16: the disclosure called for by Item 304 – Changes in and Disagreements with Accountants, etc. – only applies to the ast two most recent fiscal years [see Item 304(d)] so the exhibit – accountant’s letter – is no longer required.

  

(b)Reports on Form 8-K

 

On August 13, 2010 the Registrant filed a Current Report to file the Financial Statements of APT acquired and the Pro Forma Financial Information after the completion of acquiring APT.

 

On September 8, 2010 the Registrant filed a Current Report to report that the Company on September 30, 2009 had entered into a consulting agreement with Star Fair Ventures Corporation (“Star Fair”) to engage Star Fair to provide consulting services on, including but not limited to financial advisory, strategic business planning and investor and public relations for a term of one year from October 2009 till September 30, 2010 (“Consulting Agreement”). It was a term of the Consulting Agreement that the Company would issue to Star Fair 12,000,000 additional restricted stock of the company as complete consideration for the services to be provided by Star Fair to the Company.  The Company would further pay 5% finder’s fee for leads on any closed private financing which could be paid with restricted stocks or with cash. On October 15, 2009, the Company issued to Star Fair 12,000,000 additional restricted stocks pursuant to the term of the Consulting Agreement.

 

On November 23, 2010 the Registrant filed a Current Report to report a private placement with Alliance Harvest Limited and Gain Onway Limited for equity financing of $3,000,000 in exchange of 37,500,000 new shares of the Company and issuing to Wise Link Management Limited 1,875,000 shares of the Company as the commission of acting as financial consultant on the aforesaid private placement on November 18, 2010.

 

On January 18, 2011 the Registrant filed a Current Report to report the Company’s entering into a consulting agreement with and engaging Glory Shining Limited to be the Company’s consultant for a term of two years, from January 18, 2011 to January 17, 2013. The Company agreed to pay to Glory Shining Limited a success fee equals to 5% of the total consideration to be paid by the potential investor(s) or any its affiliate within 15 days after the completion of the proposed transaction.

 

33
 

  

On January 18, 2011 the Registrant filed a Current Report to report that the Company on December 21, 2009 had entered into Investment Cooperation Agreement with the shareholders of Shaanxi Prosperous Agriculture Company Limited (Prosperous Agriculture) to acquire 51% equity of Prosperous Agriculture by two phrases and exchanged in total 11 million of Company’s shares. The Company did on January 18, 2011 approve the allotment of the 4 million shares to the shareholders of Prosperous Agriculture as the deposit.

 

On May 13, 2011 the Registrant filed a Current Report to report that the Company was movingtoo new office premises on May 16, 2011.

 

On August 16, 2011 the Registrant filed a Current Report to report that the Company on August 2, 2011 had entered into a consulting agreement with Leadway International Investment Limited (“Leadway”) to engage Leadway to provide consulting services for a term of 12 months from August 2, 2011, including but not limited to, financial advisory, strategic business planning, introduction and liaison of potential strategic partners or investors to invest US$3,000,000 to US$10,000,000.The Company, upon receipt of an investment of US$2,000,000 through the introduction of Leadway, would issue to Leadway 35,000,000 additional shares of restricted stock as complete consideration for the services provided by Leadway to the Company.

 

On October 26, 2011 the Registrant had filed a Current Report to report that on September 30, 2011, the Company received a written notice of resignation from Wang Sin-Wei, one of its director, effective on October 31, 2011.

 

On January 18, 2012 the Registrant had filed a Current Report to report that on December 21, 2009, Uni Core Holdings Corporation (UCHC) entered into Investment Cooperation Agreement (Agreement) with the shareholders of Shaanxi Prosperous Agriculture Company Limited (Prosperous Agriculture) to acquire 51% equity of Prosperous Agriculture by two phrases and exchanged in total 11 millions of UCHC shares.

 

The first phrase of 21% equity of Prosperous Agriculture transferred to UCHC’s subsidiaries, IMOT Information Technology (Shenzhen) Limited (IMOTSZ), was approved by PRC authority on December 24, 2010. According to the term of the Agreement, UCHC had allotted 4 million shares to the parties below on January 18, 2011:

  

Name   No. of
shares  
 
       
Wang Fei   2,232,000  
Wu Qiang   1,116,000  
Zhao Jing Jing   372,000  
China Equity Platform Holding Group Limited   160,000  
Star Fair Ventures Corporation   120,000  

  

The second phrase of 30% equity of Prosperous Agriculture transferred to UCHC’s subsidiaries, IMOT Information Technology (Shenzhen) Limited, was approved by PRC authority on December 1, 2011.

 

Auditors will start to evaluate the net assets value of 51% equity of Prosperous Agriculture in late of April 2012.

 

On February 28, 2012 the Registrant had filed a Current Report to report that on February 27, 2012, the Company signed a Sale and Purchase Agreement with Sunshine Financial Holdings Limited for the sale of –66,716,495– shares of and in China Equity Platform Holding Group Limited at the consideration of RBM10,000,000.

 

 

34
 

 

On June 29, 2012 the Registrant had filed a Current Report to report that on June 28, 2012, the Board of Directors of Uni Core Holdings Corporation (“the Company”) approved the engagement of Albert Wong & Co. LLP (“New Auditor”), an independent U.S. CPA firm which was associated with the Company's existing independent accountants, Albert Wong & Co. (“Previous Auditor”), who has tendered its resignation, as its new independent accountants for the Company’s fiscal year ended June 30, 2012.

 

The report of the Previous Auditor on the Company's consolidated financial statements for the fiscal years ended June 30, 2010 and 2011 did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope, or accounting principles but modified to a going concern. For the years ended June 30, 2010 and 2011, there have been no disagreements between the Company and the Previous Auditor on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements if not resolved to the Previous Auditor’s satisfaction would have caused them to make reference to the subject matter of the disagreement in connection with their reports. For the years ended June 30, 2010 and 2011, there were no "reportable events" as that term is described in Item 304(a)(1)(v) of Regulation S-K.

 

The Company has provided the Previous Auditor with a copy of this Report and the Company has requested that the Previous Auditor furnish a letter addressed to the Commission stating whether it agrees with the statements above. A copy of this letter is filed as an exhibit to this Report.

 

For the years ended June 30, 2010 and 2011, neither the Company nor anyone acting on the Company's behalf consulted the New Auditor with respect to (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's consolidated financial statements, or any other matters (ii) any matter that was either the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K and the related instructions thereto) or reportable events (as described in Item 304(a)(1)(v) of Regulation S-K).

 

On July 12, 2012 the Registrant had filed a Current Report to report that on June 19, 2011, Ironridge Global IV, Ltd. (“Ironridge”) informed Uni Core Holdings Corporation (“the Company”) that the agreement reached on May 21, 2012 whereby Ironridge and the Company settled $1,483,721 in previously outstanding debt of the Company now owned by Ironridge, in exchange for unregistered shares of common stock of the Company is to be cancelled. The Company accepted the cancellation

 

On July 18, 2012 the Registrant had filed a Current Report to report that on June 28, 2012, the Board of Directors of Uni Core Holdings Corporation (“the Company”) approved the engagement of Albert Wong & Co. LLP (“New Auditor”), an independent U.S. CPA firm which was associated with the Company's existing independent accountants, Albert Wong & Co. (“Previous Auditor”), who has tendered its resignation, as its new independent accountants for the Company’s fiscal year ended June 30, 2012.

 

The report of the Previous Auditor on the Company's consolidated financial statements for the fiscal years ended June 30, 2010 and 2011 did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope, or accounting principles but modified to a going concern. For the years ended June 30, 2010 and 2011, there have been no disagreements between the Company and the Previous Auditor on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements if not resolved to the Previous Auditor’s satisfaction would have caused them to make reference to the subject matter of the disagreement in connection with their reports. For the years ended June 30, 2010 and 2011, there were no "reportable events" as that term is described in Item 304(a)(1)(v) of Regulation S-K.

 

During the Company’s audit reports from the Previous Auditor on the financial statements of the Company for the fiscal years ended June 30, 2010 and 2011 and the subsequent interim period through date of resignation, there were no disagreements with the Previous Auditor on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreement(s), if not resolved to the satisfaction of Previous Auditor, would have caused to make reference to the subject matter of the disagreements in connection with its reports; and there were no “reporting events” within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.

 

The Company has provided the Previous Auditor with a copy of this Report and the Company has requested that the Previous Auditor furnish a letter addressed to the Commission stating whether it agrees with the statements above. A copy of this letter is filed as an exhibit to this Report.

 

For the years ended June 30, 2010 and 2011, neither the Company nor anyone acting on the Company's behalf consulted the New Auditor with respect to (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's consolidated financial statements, or any other matters (ii) any matter that was either the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K and the related instructions thereto) or reportable events (as described in Item 304(a)(1)(v) of Regulation S-K).

 

35
 

 

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

The following auditor’s report and financial statements are filed as part of this annual report:

  

  PAGE
   
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                                                                                     37 - 38
   
CONSOLIDATED BALANCE SHEET                                                              39 - 40
   
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME

 41

   
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY             42
   
CONSOLIDATED STATEMENT OF CASH FLOWS 43 - 44
   
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                         45 - 73

 

36
 

 

ALBERT WONG & CO., LLP  
CERTIFIED PUBILC ACCOUNTANTS  
139 Fulton Street, Suite 818B,  
New York, NY 10038-2532  
Tel : 212-226-9088  
Fax: 212-437- 2193  
   
   
To: The board of directors and stockholders of
  Uni Core Holdings Corporation

 

Report of Independent Registered Public Accounting Firm

 

We have audited the accompanying consolidated balance sheet of Uni Core Holdings Corporation and subsidiaries as of June 30, 2012 and the related consolidated statements of income, stockholders' equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

We were not engaged to examine management’s assertion about the effectiveness of the Company’s internal control over financial reporting as of June 30, 2012 included in the Company’s Item 9A “Controls and Procedures” in the Annual Report on Form 10-K and, accordingly, we do not express an opinion thereon.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Uni Core Holdings Corporation as of June 30, 2012 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 19 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 20. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

New York, New York Albert Wong & Co., LLP.
October 11, 2012 Certified Public Accountants

 

37
 

 

 

ALBERT WONG & CO.  
CERTIFIED PUBILC ACCOUNTANTS  
Room 701, 7th Floor, Nan Dao Commercial Building  
359-361 Queen’s Road Central  
Hong Kong  
Tel : 2851 7954  
Fax: 2545 4086  
   
ALBERT WONG  
B.Soc., Sc., ACA., LL.B., CPA(Practising)  
 
 
   
To: The board of directors and stockholders of
  Uni Core Holdings Corporation

 

Report of Independent Registered Public Accounting Firm

 

We have audited the accompanying consolidated balance sheet of Uni Core Holdings Corporation and subsidiaries as of June 30, 2011 and the related consolidated statements of income, stockholders' equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

We were not engaged to examine management’s assertion about the effectiveness of the Company’s internal control over financial reporting as of June 30, 2011 included in the Company’s Item 9A “Controls and Procedures” in the Annual Report on Form 10-K and, accordingly, we do not express an opinion thereon.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Uni Core Holdings Corporation as of June 30, 2011 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 19 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 20. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Hong Kong Albert Wong & Co.
October 11, 2011 Certified Public Accountants

 

38
 

 

UNI CORE HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEETS
AS AT JUNE 30, 2012 AND 2011
(Stated in US Dollars)

 

   Notes   2012   2011 
ASSETS            
Current assets               
Cash and cash equivalents   2(e)   $506,647   $2,177,729 
Accounts receivable, net   2(f)    6,412,599    5,094,329 
Deposits, prepayment and other receivables   3    1,821,609    3,011,746 
Amount due from related company   5    649,767    634,768 
Other loan receivables   6    105,531    112,447 
Inventory   8    1,532,384    1,863,474 
Total current assets       $11,028,537   $12,894,493 
Unlisted investment   2(g)    295,587    949,873 
Investment in associated companies   2(l)    -    1 
Goodwill   4    -    8,779,715 
Plant and equipment, net   7    6,653,927    7,229,808 
Intangible assets, net   9    -    1,234,368 
                
TOTAL ASSETS       $17,978,051   $31,088,258 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY               
Current liabilities               
Accounts payable       $5,306,612   $4,598,085 
Accrued liabilities and other payable   10    2,961,858    2,943,009 
Customers deposits        -    19,705 
Advance from a shareholder   11    1,101,273    976,561 
Convertible promissory notes   12    322,851    - 
Short term loan   13    6,911,174    6,118,679 
Business and other taxes payable        -    1,104 
Total current liabilities       $16,603,768   $14,657,143 
TOTAL LIABILITIES       $16,603,768   $14,657,143 

 

See accompanying notes to consolidated financial statements

 

39
 

 

UNI CORE HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEETS (Continued)
AS AT JUNE 30, 2012 AND 2011
(Stated in US Dollars)

 

   Notes   2012   2011 
STOCKHOLDERS’ EQUITY               
                
Preferred stock at $0.001 par value, 5,000,000 (2011: 5,000,000) shares authorized, Nil (2011: Nil) shares issued and outstanding.        -    - 
                
Common stock at $0.001 par value, 2,000,000,000 (2011: 2,000,000,000) shares authorized, 1,514,035,427 (2011: 707,406,873) shares issued and outstanding at June 30, 2012;   15   $1,514,036   $707,407 
Additional paid-in capital   15    58,822,870    57,556,806 
Accumulated deficit        (61,228,904)   (44,076,475)
Non-control interest        -    1,406,863 
Accumulated other comprehensive income   2(t),15   2,266,281    836,514 
                
        $1,374,283   $16,431,115 
                
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY       $17,978,051   $31,088,258 

 

See accompanying notes to consolidated financial statements

 

40
 

 

UNI CORE HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

   Notes   2012   2011 
             
Net revenues   2(m)  $22,990,061   $19,735,344 
Cost of net revenues        (21,264,457)   (19,125,664)
                
Gross profit       $1,725,604   $609,680 
Selling, general and administrative expenses        (6,983,061)   (5,913,562)
                
Loss from operations       $(5,257,457)  $(5,303,882)
Interest income        37,943    12,523 
Interest expense        (749,426)   (609,447)
Dividend income        -    950,542 
Other expenses        (287,934)   - 
Bad debts written off   3(d)   -    (38,154)
        $(6,256,874)  $(4,988,418)
Unusual items               
Loss on disposal of subsidiaries   18    (758,900)   - 
Impairment on Goodwill   4    (8,933,970)   (2,854,023)
                
Provision for impairment on intangible assets   9    (1,202,685)     
Loss before income taxes and minority interests       $(17,152,429)  $(7,842,441)
Income taxes   14    -    - 
                
Net loss before minority interests       $(17,152,429)  $(7,842,441)
Non-control interest        -    (114,011)
                
Net loss       $(17,152,429)  $(7,956,452)
                
Net loss per share:               
-Basic and diluted       $(0.0219)  $(0.0115)
                
Weighted average no. of common stock               
-Basic and diluted        783,066,909    690,079,476 

 

See accompanying notes to consolidated financial statements

 

41
 

 

UNI CORE HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

           Additional   Accumulated             
   No.       paid   Other             
   shares   Common   In   comprehensive   Accumulated   Non-control     
   outstanding   stock   capital   Income/(loss)   deficit   interest   Total 
Balance, July 1, 2011   707,406,873   $707,407   $57,556,806   $836,514   $(44,076,475)  $1,406,863   $16,431,115 
Net (loss)/profit   -    -    -    -    (17,152,429)   -    (17,152,429)
Issuance of common stock   806,628,554   $806,629   $1,266,064   $-   $-   $-   $2,072,693 
Dividend paid                  -    -    (464,733)   (464,733)
Disposal of subsidiaries                  -    -    (942,130)   (942,130)
Foreign currency translation adjustment   -    -    -    1,429,767    -         1,429,767 
Balance, June 30, 2012   1,514,035,427   $1,514,036   $58,822,870   $2,266,281   $(61,228,904)  $-   $1,374,283 

  

See accompanying notes to consolidated financial statements

 

42
 

 

UNI CORE HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

   Note   2012   2011 
Cash flows from operating activities               
Net loss       $(17,152,429)  $(7,956,452)
Provision for impairment on intangible assets        1,202,685    - 
Amortization of intangible assets        24,521    23,906 
Bad debts   3(d)   -    38,154 
Depreciation        1,004,573    1,055,646 
Loss on disposal of fixed assets        2,685    422,391 
Impairment of goodwill   4    8,933,970    2,854,023 
Impairment of investment        1    - 
Consultant fee by issuances of common stock        -    150,000 
Non-control interest        (1,431,581)   114,011 
Issuances of common stock by CEPHGL             - 
                
Adjustments to reconcile net loss to net cash provided by operating activities:               
Accounts receivable, net        (1,190,805)   (367,701)
Deposits, prepayment and other receivable        1,253,835    (1,318,295)
Inventory        372,901    674,493 
Accounts payables        596,329    893,663 
Accrued liabilities and other payable        (50,391)   206,797 
Customers deposits        (20,051)   513 
Deferred revenue        (407)   - 
Business and other taxes payable        (717)   (481)
                
Net cash (used in)/provided by operating activities       $(6,454,881)  $(3,209,332)
                
Cash flows from investing activities               
Acquisition of plant and equipment       $(264,964)  $(174,205)
Acquisition of intangible assets        -    (2,459)
                
Net cash (used in)/provided by investing activities       $(264,964)  $(176,664)

 

43
 

  

UNI CORE HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

   2012   2011 
Cash flows from financing activities          
Advance from a related party  $-   $(195,517)
Advance from a shareholder   101,035    606,874 
Repayment of finance lease   320,940    (296,065)
Bank loans   644,082    310,993 
Insurance of common stock   1,790,051    3,550,000 
           
Net cash provided by financing activities  $2,856,108   $3,976,285 
           
Net (decrease) increase in cash and cash equivalents  $(3,863,737)  $590,289 
Effect of foreign currency translation on cash and cash equivalents   2,192,655    (521,106)
           
Cash and cash equivalents–beginning of year   2,177,729    2,108,546 
           
Cash and cash equivalents–end of year  $506,647   $2,177,729 

 

   2012   2011 
Supplementary cash flow information:          
Interest received  $37,943   $12,523 
Interest expense   (749,426)   (609,447)

 

See accompanying notes to consolidated financial statements

 

44
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

1.ORGANIZATION AND PRINCIPAL ACTIVITIES

 

Uni Core Holdings Corporation (formerly known as Intermost Corporation) (hereinafter referred to as the “Company”, including its subsidiaries and associated companies when the context so requires) was originally incorporated in the State of Utah on March 6, 1985 under the name Utility Communications International, Inc. The Company changed its name from Utility Communications International, Inc. to Uni Core Holdings Corporation on October 23, 1998. In February 2003, the Company re-domiciled from the State of Utah to the State of Wyoming.

 

On October 23, 1998, the Company acquired a 100% interest in Intermost Limited ("IL"), a company incorporated in the British Virgin Islands, by issuing 4,970,000 shares of its common stock with a par value of US$0.001 per share (after the redenomination of par value and a stock split) to the shareholders of IL.

 

The acquisition of IL by the Company was treated as a reverse acquisition since IL was the continuing entity as a result of the exchange reorganization.

 

On May 31, 2010, the Company acquired a 100% interest in APT Paper Group Limited (“APTPGL”), a company incorporated in the Cayman Islands, by issuing 440,000,000 shares of its common stock with a par value of US$0.001 per share to the shareholders of APTPGL. The acquisition was treated as a normal acquisition since the Uni Core management team will control the new combined companies to oversight the entire operation of the whole group of companies.

 

On February 27, 2012, the Company has disposed the entire investment in the China Equity Platform Holding Group Limited.

 

The Company is engaged in providing, directly and through its subsidiaries and associated companies, business equity and financial consulting services in the People’s Republic of China (the "PRC" or "China"). The Company's fiscal year-end is June 30.

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

(a)Method of Accounting

 

The Group maintains its general ledger and journals with the accrual method accounting for financial reporting purposes. The consolidated financial statements and notes are representations of management. Accounting policies adopted by the Group conform to generally accepted accounting principles in the United States of America and have been consistently applied in the presentation of consolidated financial statements, which are compiled on the accrual basis of accounting.

 

45
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

(b)Principles of Consolidation

 

The consolidated financial statements include the accounts of Uni Core Holdings Corporation (the Company) and its eleven subsidiaries (of which three were totally impaired), two associate companies (of which one was totally impaired) and one affiliated company, constituting the group. Significant inter-company transactions have been eliminated in consolidation. The consolidated financial statements include 100% of the assets and liabilities of these majority-owned subsidiaries, and the ownership interests of minority investors are recorded as minority interests.

 

The Company disposed the China Equity Platform Holding Group Limited and its subsidiaries on February 27, 2012 with a consideration at approximate of US$1,600,128 (RMB 10,000,000).

 

The Company’s subsidiaries and affiliated companies and their principal activities as of June 30, 2012 are summarized as follows:

 

Name  Place of
incorporation of
organization
  Percentage of
Equity Interest
Attributable to
the Company
   Principal Activities
Uni Core Holdings Corporation (“IL”)  British Virgin Islands   100%  Investment holding
            
Leader Palace International Limited (LP)  British Virgin Islands   100%  Inactive
            
Intermost (H.K.) Limited (“IHKL”)  Hong Kong   100%  Inactive
            
IMOT Information Technology (Shenzhen) Ltd. (“IITSL”)*  PRC   100%  Inactive
            
China Equity Platform Holding Group Limited (“CEPHGL”)**  British Virgin Islands   0%  Investment holding
            
ChinaE.com E-Commerce Co. Ltd. (Formerly known as China E.com Information Technology Ltd. (“CECITL”))***  PRC   0%  Business equity and financial consulting services
            
ChinaE.com Technology (Shenzhen) Ltd.(“CECTSL”)***  PRC   0%  Business equity and financial consulting services
            
ChinaE.com Investment Consultants (Shenzhen) Company Ltd. (“CECICSL”)****  PRC   0%  Inactive
            
Intermost Focus Advertising Company Ltd.(“IFACL”)****  PRC   0%  Inactive
            
Shenzhen United Property And Share Rights Exchange (fka. “Shenzhen International Hi-Tech Property Right Exchange Centre”) (“SIHTPREC”)*****  PRC   0%  Private equity exchange
            
Hainan Special Economic Zone Property Right Exchange Center (“PREC”)*****  PRC   0%  Private Property Right Exchange
            
Easeway Investments Limited (“EIL”)  British Virgin Islands   100%  Inactive
            
APT Paper Group Limited (“APTPGL”)  Cayman Islands   100%  Investment holding
            
Plan Star Development Limited (“PSDL”)  Hong Kong   100%  Investment holding
            
Jin Long Paper Products Company Limited (“JLPPCL”)  PRC   100%  Manufacturing and wholesale of paper product
            
Ho Ni Long Honeycomb Paper Product (Shenzhen) Company Limited (“HNL”)  PRC   100%  Manufacturing and wholesale of paper product
            
Pheng Hoon Honeycomb Paper Products Pte. Limited (“PHHP”)  Singapore   12.67%  Paper or paper product wholesale

 

46
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

(b)Principles of Consolidation (continued)

 

Name  Place of
incorporation of
organization
  Percentage of
Equity Interest
Attributable to
the Company
   Principal Activities
APT Investment Limited  British Virgin Islands   100%  Investment holding
            
ShenZhen Jin Li Honeycomb Paper Products Equipments Company Limited  PRC   100%  Equipment manufacturing
            
APT Management Limited  British Virgin Islands   100%  Investment holding
            
Su Zhou Eastern Sunrise Company Limited  PRC   100%  Manufacturing and wholesale of paper product
            
Ivanhoe Holdings Limited  Hong Kong   100%  Investment holding
            
Qing Dao Eastern Sunrise Company Limited  PRC   100%  Manufacturing and wholesale of paper product

 

* IITSL is wholly foreign owned enterprises established in the PRC to be operated until 2018.

 

** During the fiscal year of June 30, 2009, the Company has transferred the subsidiary companies, CECITL, CECICSL, IFACL & CECTSL and investments in PRC companies, SIHTPREC & PREC to CEPHGL in exchanging 60% of shareholdings in CEPHGL. The group operations of CEPHGL are consolidated into the Company’s financial statements. As at June 30, 2010, the effective holding rate was reduced from 60% to 53.42% due to issuance of additional common stock. As at February 27, 2012, the Company has disposed the entire China Equity Platform Holding Group Limited with its subsidiaries and investment.

 

47
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

(b)Principles of Consolidation (continued)

 

*** CECTSL and CECITL are wholly foreign owned enterprises established in the PRC to be operated until 2014 and 2018 respectively. They are subsidiaries of CEPHGL and their operations are consolidated into CEPHGL’s financial statements.

 

**** IFACL and CECICSL are equity joint ventures established in the PRC to be operated until 2011 and 2026 respectively. They are subsidiaries of CEPHGL and their operations are consolidated into CEPHGL’s financial statements.

 

***** PREC is equity joint venture established in the PRC to operate for a period of years until 2033. PREC is associated companies of CEPHGL and is accounted for under the equity method of accounting. SIHTPREC is an affiliated company and is accounted for under the cost method.

 

The Company owns certain of its subsidiaries through trusts that were created by a Declaration of Trust executed by Huang Liqiong and Jun Liang in February 2000. The trusts were created by, and therefore are revocable by, IL. Accordingly, IL consolidates the operations of CECITL since it is the beneficial owner of a majority of the outstanding interests and, through its ability to revoke the trusts, retains control of these interests. CECITL has transferred to CEPHGL.

 

(c)Use of estimates

 

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ materially from those estimates.

 

(d)Economic and political risks

 

The Company’s operations are mainly conducted in the PRC and Taiwan (ROC). Accordingly, the Company’s business, financial condition and results of operations in the PRC and Taiwan may be influenced by the political, economic and legal environment in the PRC and Taiwan, and by the general state of the PRC and Taiwan economy.

  

The Company’s major operations in the PRC and Taiwan are subject to special considerations and significant risks not typically associated with companies in North America. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC and Taiwan, and by changes in government administration, governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.

 

48
 

 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

(e)Cash and cash equivalents

 

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company maintains bank accounts only in the PRC, Taiwan and Hong Kong. The Company does not maintain any bank accounts in the United States of America.

 

(f)Account receivable

 

Accounts receivable is carried at the net invoiced value charged to customer. The Company records an allowance for doubtful accounts to cover estimated credit losses. Management reviews and adjusts this allowance periodically based on historical experience and its evaluation of the collectability of outstanding accounts receivable. The Company evaluates the credit risk of its customers utilizing historical data and estimates of future performance.

 

(g)Investments

 

The non-marketable equity security investments are presented at historical cost because the Company does not have significant influence over the underlying investments. These investments are subject to a periodic impairment review. To the extent any impairment is considered other-than-temporary, the investment is written down to its fair value and the loss is recorded as interest income and other, net. The amount of unlisted investment is RMB 6,441,372 of Shenzhen United Property And Share Rights Exchange (f.k.a. “Shenzhen International Hi-Tech Property Right Exchange Centre”) (“SIHTPREC”), no impairment has been found necessary until the entire investment was disposed on February 17, 2012.

 

49
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

(h)Property and equipment

 

Plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method. Estimated useful lives of the plant and equipment are as follows:

 

Computer equipment   3 years
Furniture and office equipment   5 years
Buildings   Over the lease terms
Leasehold improvements   Over the lease terms
Motor vehicles   5 years
Machinery and equipment   5 years

 

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized.

 

(i)Inventories

 

Inventories consist of finished goods, work in progress and raw materials, and stated at the lower of cost or market value. Substantially all inventory costs are determined using the weighted average basis. Finished goods are comprised of direct materials, direct labor and an appropriate proportion of overhead. The management regularly evaluates the composition of its inventory to identify slow-moving and obsolete inventories to determine if additional write-downs are required.

 

(j)Goodwill

 

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. In accordance with Accounting Standards Codification ASC 350 “Intangibles - Goodwill and Other” formerly Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets", goodwill is no longer subject to amortization. Rather, goodwill is subject to at least an annual assessment for impairment, applying a fair-value based test. Fair value is generally determined using a discounted cash flow analysis. See Note 4 for goodwill impairment details.

 

50
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

(k)Accounting for the impairment of long-lived assets

 

Impairment of Long-Lived Assets is evaluated for impairment at a minimum on an annual basis whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10 “Impairments of Long-Lived Assets” formerly SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". An asset is considered impaired if its carrying amount exceeds the future net cash flow the asset is expected to generate. If an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair market value. The recoverability of long-lived assets is assessed by determining whether the unamortized balances can be recovered through undiscounted future net cash flows of the related assets. The amount of impairment, if any, is measured based on projected discounted future net cash flows using a discount rate reflecting the Company's average cost of capital.

 

(l)Associated Company

 

An associated company is a business enterprise in which the Company owns between 20% and 50% of the equity capital, and does not have direct or indirect or joint control, and therefore, has only limited ability to participate in financial and operating policy decisions.

 

The Company's investment in associated companies is accounted for under the equity method of accounting, whereby the investment is initially recorded at cost and the carrying amount is adjusted thereafter for the post acquisition change in the Company's share of the associated company's results of operations.

 

51
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

(m)Revenue recognition

 

The Company recognizes revenue in accordance with ASC 605 “Revenue Recognition”. The Company recognizes revenue when the significant risks and rewards of ownership have been transferred to the customer pursuant to PRC law, including factors such as when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, sales and value-added tax laws have been complied with, and collectability is probable.

 

Revenue from maintenance contracts is recognized on a straight-line basis over the term of the maintenance contract, generally twelve months. The unearned portion of maintenance revenue is classified as deferred revenue and amortized over the life of the contract.

 

Revenue represents the invoiced value of goods sold recognized upon the delivery of goods to customers. Revenue is recognized when all of the following criteria are met:

 

- Persuasive evidence of an arrangement exists;

- Delivery has occurred or services have been rendered;

- The seller’s price to the buyer is fixed or determinable; and

- Collection is reasonably assured.

 

52
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

(n)Stock compensation

 

The Company may periodically issue shares of common stock for services rendered or for financing costs. Such shares are valued based on the market price of the shares on the transaction date.

 

The Company may periodically issue stock options to employees and stock options or warrants to non-employees in non-capital raising transactions for services and for financing costs.

 

ASC 718 "Compensation - Stock Compensation" formerly SFAS No. 123 prescribes accounting and reporting standards for all stock-based compensation plans, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights. may be classified as either equity or liabilities. The Company should determine if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks commercial substance or (b) the present obligation is implied because of an entity's past practices or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity.

 

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50 "Equity -Based Payments to Non-Employees" which codified SFAS 123 and the Emerging Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services". Measurement of share-based payment transactions with non-employees shall be based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction should be determined at the earlier of performance commitment date or performance completion date.

 

In accordance with ASC 718, the cost of stock options and warrants issued to non-employees is measured at the grant date based on the fair value of the award. The fair value of the stock-based award is determined using the Black-Scholes option-pricing model. The resulting amount is charged to expense on the straight-line basis over the period in which the Company expects to receive benefit, which is generally the vesting period.

 

Stock options issued to non-employee directors at fair market value will be accounted for under the intrinsic value method.

 

The Company did not have any stock options outstanding during the year ended June 30, 2012 (2011: Nil). Accordingly, no pro forma financial disclosure is provided herein.

 

53
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

(o)Issuance of shares for service

 

The Company accounts for the issuance of equity instruments to acquire goods and services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more reliably measurable.

 

(p)Advertising

 

The Company expensed all advertising costs as incurred. Advertising expenses included in selling expenses were $nil and $nil for the years ended June 30, 2012 and 2011 respectively.

 

(q)Income taxes

 

The Company uses the accrual method of accounting to determine and report its taxable income and tax credit in the year in which they are available. The Company has implemented ASC 740 “Income Taxes” formerly SFAS No. 109, Accounting for Income Taxes.

 

Income tax liabilities computed according to the United States, People’s Republic of China (PRC), Taiwan (ROC) and Hong Kong SAR tax laws are provided for the tax effects of transactions reported in the financial statements and consists of taxes currently due plus deferred taxes related primarily to differences between the basis of fixed assets and intangible assets for financial and tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future income taxes. A valuation allowance is created to evaluate deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize that tax benefit, or that future realization is uncertain.

 

In respect of the Company’s subsidiaries domiciled and operated in China, Taiwan and Hong Kong, the taxation of these entities can be summarized as follows:

 

The subsidiaries incorporated in PRC are subject to the corporation income tax rate of 25% for 2012 and 2011.

 

The subsidiary incorporated in BVI while operated in Taiwan will be considered a non-resident for tax purposes to the profit-seeking enterprise income tax which is from 0% to 25%. However, it will be subject to profit-seeking enterprise income tax only for its income derived from Taiwan sources.

 

The subsidiaries are subject to Hong Kong profits tax rate of 16.5% (2011: 16.5%).

 

54
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

(q)Income taxes (continued)

 

The Company is subject to United States federal corporate income tax according to Internal Revenue Code Sections 951 and 957. Corporate income tax is imposed on graduated rates in the range of:

 

Taxable Income

 

Rate   Over   But not over   Of Amount Over 
 15%   -    50,000    - 
 25%   50,000    75,000    50,000 
 34%   75,000    100,000    75,000 
 39%   100,000    335,000    100,000 
 34%   335,000    10,000,000    335,000 
 35%   10,000,000    15,000,000    10,000,000 
 38%   15,000,000    18,333,333    15,000,000 
 35%   18,333,333    -    - 

 

(r)Earnings per share

 

The Company computes net income (loss) per share in accordance with ASC 260 “Earnings Per Share” formerly SFAS No. 128. “Earnings Per Share”. ASC 260 requires presentation of both basic and diluted earnings per Share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.

 

55
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

(s)Foreign currency translation

 

The accompanying consolidated financial statements are presented in United States dollars. The functional currencies of the Company are Hong Kong Dollar (HKD), Taiwan Dollar (TWD) and Renminbi (RMB). The consolidated financial statements are translated into United States dollars from HKD, TWD and RMB at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

 

   June 30,
2012
   June 30,
2011
 
Year end HKD : US$ exchange rate   7.7573    7.7834 
Average yearly HKD : US$ exchange rate   7.7738    7.7745 

 

   June 30,
2012
   June 30,
2011
 
Year end TWD : US$ exchange rate   29.5104    28.9100 
Average yearly TWD : US$ exchange rate   29.8245    30.1354 

 

   June 30,
2012
   June 30,
2011
 
Year end RMB : US$ exchange rate   6.3143    6.4635 
Average yearly RMB : US$ exchange rate   6.3519    6.6278 

 

The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.

 

(t)Comprehensive income

 

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other consolidated financial statements. The Company’s current components of other comprehensive income are the foreign currency translation adjustment.

 

56
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

(u)Recent accounting pronouncements

 

In January 2011, the FASB issued ASU 2011-01 an accounting pronouncement related to receivables (“FASB ASC Topic 310”). The amendments in this update temporarily delay the effective date of the disclosures about troubled debt restructurings in ASU 2010-20 for public entities. The delay is intended to allow the Board time to complete its deliberations on what constitutes a troubled debt restructuring. The effective date of the new disclosures about troubled debt restructurings for public entities and the guidance for determining what constitutes a troubled debt restructuring will then be coordinated. Currently, that guidance is anticipated to be effective for interim and annual periods ending after June 15, 2011. The adoption of this pronouncement is not expected to have a material impact on our consolidated financial statements.

 

The FASB has issued Accounting Standards Update (ASU) No. 2011-02, Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring. The FASB believes the guidance in this ASU will improve financial reporting by creating greater consistency in the way GAAP is applied for various types of debt restructurings.

 

The ASU clarifies which loan modifications constitute troubled debt restructurings. It is intended to assist creditors in determining whether a modification of the terms of a receivable meets the criteria to be considered a troubled debt restructuring, both for purposes of recording an impairment loss and for disclosure of troubled debt restructurings.

 

In evaluating whether a restructuring constitutes a troubled debt restructuring, a creditor must separately conclude that both of the following exist: (a) the restructuring constitutes a concession; and (b) the debtor is experiencing financial difficulties. The amendments to FASB Accounting Standards Codification™ (Codification) Topic 310, Receivables, clarify the guidance on a creditor’s evaluation of whether it has granted a concession and whether a debtor is experiencing financial difficulties.

 

For public companies, the new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructurings occurring on or after the beginning of the fiscal year of adoption. For nonpublic entities, the amendments to the Codification in the ASU are effective for annual periods ending on or after December 15, 2012, including interim periods within those annual periods. Early application is permitted.

 

The FASB has issued Accounting Standards Update (ASU) No. 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements. The ASU is intended to improve financial reporting of repurchase agreements (“repos”) and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity.

 

57
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

(u)Recent accounting pronouncements (continued)

 

In a typical repo transaction, an entity transfers financial assets to a counterparty in exchange for cash with an agreement for the counterparty to return the same or equivalent financial assets for a fixed price in the future. FASB Accounting Standards Codification™ (Codification) Topic 860, Transfers and Servicing, prescribes when an entity may or may not recognize a sale upon the transfer of financial assets subject to repo agreements. That determination is based, in part, on whether the entity has maintained effective control over the transferred financial assets.

 

The amendments to the Codification in this ASU are intended to improve the accounting for these transactions by removing from the assessment of effective control the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets. The guidance in the ASU is effective for the first interim or annual period beginning on or after December 15, 2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted.

 

The FASB has issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASU represents the converged guidance of the FASB and the IASB (the Boards) on fair value measurement. The collective efforts of the Boards and their staffs, reflected in ASU 2011-04, have resulted in common requirements for measuring fair value and for disclosing information about fair value measurements, including a consistent meaning of the term “fair value.” The Boards have concluded the common requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRSs.

 

The amendments to the FASB Accounting Standards Codification™ (Codification) in this ASU are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. For nonpublic entities, the amendments are effective for annual periods beginning after December 15, 2011. Early application by public entities is not permitted. Nonpublic entities may apply the amendments in ASU 2011-04 early, but no earlier than for interim periods beginning after December 15, 2011.

 

58
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

(u)Recent accounting pronouncements (continued)

 

The FASB has issued Accounting Standards Update (ASU) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. This ASU amends the FASB Accounting Standards Codification™ (Codification) to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments to the Codification in the ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.

 

ASU 2011-05 should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. Early adoption is permitted.

 

The FASB has issued Accounting Standards Update (ASU) No. 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU 2011-08 is intended to simplify how entities, both public and nonpublic, test goodwill for impairment. ASU 2011-08 permits an entity to first assess qualitative factors to determine whether it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350, Intangibles-Goodwill and Other. The more-likely-than-not threshold is defined as having a likelihood of more than 50%.

 

ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance.

 

59
 

 

In September 2011, the FASB has issued Accounting Standards Update (ASU) No. 2011-09, Compensation-Retirement Benefits-Multiemployer Plans (Subtopic 715-80): Disclosures about an Employer’s Participation in a Multiemployer Plan. ASU 2011-09 is intended to address concerns from various users of financial statements on the lack of transparency about an employer’s participation in a multiemployer pension plan. Users of financial statements have requested additional disclosure to increase awareness of the commitments and risks involved with participating in multiemployer pension plans. The amendments in this ASU will require additional disclosures about an employer’s participation in a multiemployer pension plan. Previously, disclosures were limited primarily to the historical contributions made to the plans. ASU 2011-09 applies to nongovernmental entities that participate in multiemployer plans. For public entities, ASU 2011-09 is effective for annual periods for fiscal years ending after December 15, 2011. For nonpublic entities, ASU 2011-09 is effective for annual periods for fiscal years ending after December 15, 2012. Early adoption is permissible for both public and nonpublic entities. ASU 2011-09 should be applied retrospectively for all prior periods presented.

 

In December 2011, the FASB has issued Accounting Standards Update (ASU) No. 2011-10, Property, Plant, and Equipment (Topic 360): Derecognition of in Substance Real Estate-a Scope Clarification. ASU No. 2011-10 is intended to resolve the diversity in practice about whether the guidance in Subtopic 360-20, Property, Plant, and Equipment—Real Estate Sales, applies to a parent that ceases to have a controlling financial interest (as described in Subtopic 810-10, Consolidation—Overall) in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt. This Update does not address whether the guidance in Subtopic 360-20 would apply to other circumstances when a parent ceases to have a controlling financial interest in a subsidiary that is in substance real estate. ASU 2011-10 should be applied on a prospective basis to deconsolidation events occurring after the effective date; with prior periods not adjusted even if the reporting entity has continuing involvement with previously derecognized in substance real estate entities. For public entities, ASU 2011-10 is effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. For nonpublic entities, ASU 2011-10 is effective for fiscal years ending after December 15, 2013, and interim and annual periods thereafter. Early adoption is permitted.

 

In December 2011, the FASB has issued Accounting Standards Update (ASU) No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. ASU No. 2011-11 is intended to provide enhanced disclosures that will enable users of its financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position. This includes the effect or potential effect of rights of setoff associated with an entity’s recognized assets and recognized liabilities within the scope of this Update. The amendments require enhanced disclosures by requiring improved information about financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with either Section 210-20-45 or Section 815-10-45. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented.

 

In December 2011, the FASB has issued Accounting Standards Update (ASU) No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. ASU No. 2011-11 is intended to supersede certain pending paragraphs in Accounting Standards Update No. 2011-05,Comprehensive Income (Topic 220): Presentation of Comprehensive Income, to effectively defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income. The amendments will be temporary to allow the Board time to redeliberate the presentation requirements for reclassifications out of accumulated other comprehensive income for annual and interim financial statements for public, private, and non-profit entities. All other requirements in ASU No. 2011-05 are not affected by ASU No. 2011-12, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011. Nonpublic entities should begin applying these requirements for fiscal years ending after December 15, 2012, and interim and annual periods thereafter.

 

60
 

 

In July 2012, FASB has issued Accounting Standards Update (ASU) No. 2012-01, Health Care Entities (Topic 954): Continuing Care Retirement Communities — Refundable Advance Fees. This ASU clarifies that an entity should classify an advance fee as deferred revenue when a continuing care retirement community has a resident contract that provides for payment of the refundable advance fee upon reoccupancy by a subsequent resident, which is limited to the proceeds of reoccupancy. Refundable advance fees that are contingent upon reoccupancy by a subsequent resident but are not limited to the proceeds of reoccupancy should be accounted for and reported as a liability. For public entities (including conduit bond obligors), the amendments in ASU No. 2012-01 are effective for fiscal periods beginning after December 15, 2012. For nonpublic entities, the amendments to the codification in the ASU are effective for fiscal periods beginning after December 15, 2013. Early adoption is permitted. The amendments in ASU No. 2012-01 should be applied retrospectively by recording a cumulative-effect adjustment to opening retained earnings (or unrestricted net assets) as of the beginning of the earliest period presented.

 

In July 2012, FASB has issued Accounting Standards Update (ASU) No. 2012-02, Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. This ASU states that an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Codification Subtopic 350-30, Intangibles—Goodwill and Other, General Intangibles Other than Goodwill. Under the guidance in this ASU, an entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. The amendments in this ASU are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance.

 

61
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

3.DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

 

Deposits, prepayments and other receivables are summarized as follow:

 

   2012   2011 
Rental and utilities deposits  $9,724   $216,939 
Advance to employees (c)   114,339    61,528 
Prepaid expenses   28,908    133,563 
Deposit for acquisition (d)   793,741    709,430 
Deposit by court order (b)   -    622,193 
Trade deposit paid   -    457,853 
Other receivables (a)   73,082    57,308 
Deposit for legal services   38,092    16,353 
Advanced to third party (e)   756,283    753,735 
Exchange difference   7,440    (17,156)
           
   $1,821,609   $3,011,746 

 

(a)Other receivables are the amount that will be collected from an associated company, Golden Anke Technology, Ltd. It is unsecured, non-interest bearing, and, due and payable on demand.

 

(b)Fu Xiang Peng and Liu Fang Rong Versus Shenzhen Jinlong Paper Products Co., Ltd., Honilong Honeycomb Paper Product (Shenzhen) Co., Ltd., Shenzhen Jinli Honeycomb Paper Products Equipments Co., Ltd., Suzhou Eastern Sunrise Wall Material Technology Co., Ltd. And Qingdao Eastern Sunrise Co., Ltd. All the parties of this case have reached a settlement agreement, and Shenzhen Jonlong Paper Products Co., Ltd. has deposited relevant amount of money into the specified bank account according to the court’s instruction.

 

(c)Advances to employees are advances for purchases and travelling. They are unsecured, interest free and repayable on demand. The following table provides the rollforward of the activity in the advances to employees:.

 

62
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

3.DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES (continued)

 

(d)On December 21, 2009, Uni Core Holdings Corporation (UCHC) entered into Investment Cooperation Agreement (Agreement) with the shareholders of Shaanxi Prosperous Agriculture Company Limited (Prosperous Agriculture) to acquire 51% equity of Prosperous Agriculture by two phrases and exchanged in total 11 millions of UCHC shares. This transaction is not closed yet and may be subject to further negotiation.

 

(e)Deposit of US$753,735 (RMB5,000,000) for the set-up of Avana Insurance Agency in PRC.

 

4.GOODWILL

 

Pursuant to the Stock Exchange Agreement between the Company and China Equity Platform Holding Group Limited (CEPHGL), the Company has transferred the subsidiary companies, CECITL, CECICSL, IFACL & CECTSL and investments in PRC companies, SIHTPREC & PREC to CEPHGL in exchanging 60% of shareholdings in CEPHGL during the fiscal year end of June 30, 2010. The calculation of goodwill is list as below:

 

   RMB   USD 
100% common stock of CECITL  $(13,920,093)  $(2,038,021)
100% common stock of CECICSL   2,083,043    304,975 
90% common stock of IFACL   (131,979)   (19,323)
100% common stock of CECTSL   15,142,471    2,216,988 
10% common stock of SIHTPREC   1,941,372    284,234 
14% common stock of PREC   8,649,826    1,266,409 
           
Aggregate value  $13,764,640   $2,015,262 
           
60% common stock of CEPHGLL   (10,354,200)   (1,515,944)
           
Goodwill balance at June 30, 2009  $3,410,440   $499,318 

 

Goodwill of $499,318 represented the excess of the purchase price over the fair value of the net tangible asset acquired through the transaction of spin-off of the above-listed subsidiaries.

 

   RMB   USD 
Goodwill acquired in CEPHGLL transaction during June 30, 2009  $3,410,440   $499,318 
Foreign currency translation adjustment   -    - 
Impairment for the year ended June 30, 2009   -    - 
Elimination: Gain on spin-off subsidiaries   (3,410,440)   (499,318)
           
Consolidated Balance at June 30, 2009  $-   $- 

 

63
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

4.GOODWILL (continued)

 

According to SAB No. 30 (Topic 5E) and SAB No, 81 (Topic 5U), the gain on spin-off subsidiaries are eliminated in the Company’s consolidated financial statements to reverse the immediate gain recognition on the spin-off subsidiaries transaction.

 

Pursuant to the acquisition agreement completed on May 31, 2010 with APT Paper Group Limited, the company issued 440,000,000 common stocks at market price at approximate $0.065 per share as of June 1, 2010. As of June 30, 2012, the goodwill was completely impaired owing to continuously loss of the APT Paper Group Limited which rendered the entire goodwill to be valueless. The transaction was shown as below:

 

   RMB   USD 
Cost of acquisition  $195,309,400   $28,600,000 
Net equity of APT Paper Group Limited   43,867,573    6,422,308 
           
   $151,441,827   $22,177,692 
           
Impairment on Goodwill   (151,441,827)   (22,177,692)
Exchange differences          
           
Goodwill balance at June 30, 2012  $0    0 

 

   RMB   USD 
Cost of acquisition  $195,309,400   $28,600,000 
Net equity of APT Paper Group Limited   43,867,573    6,422,308 
           
   $151,441,827   $22,177,692 
           
Impairment on Goodwill   (94,694,140)   (14,650,598)
Exchange differences   -    1,252,621 
           
Goodwill balance at June 30, 2011  $56,747,687   $8,779,715 

 

64
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

5.AMOUNT DUE FROM RELATED PARTIES

 

Amount due from related parties, it was unsecured, interest free and repayable on demand, it comprises the followings:

 

   2012   2011 
First Federal Holdings Limited  $634,768   $634,768 
Exchange currency difference   14,999    - 
           
   $649,767   $634,768 

 

6.OTHER LOAN RECEIVABLES

 

The Company made a loan to an un-related third party of US$250,000 and US$350,000 on November 28, 2005 and December 12, 2005, respectively with interest rate at 12% p.a. and due and payable on September 28, 2006 and September 12, 2006 respectively. The Company had written off US$123,845. The US$105,531 (2011: US$112,447) balances of the loans are still outstanding and the Company is continuously charging the loan interest accordingly.

 

65
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

7.PLANT AND EQUIPMENT, NET

 

Plant and equipment comprise the followings:

 

   2012   2011 
At cost          
Buildings  $4,890,709   $4,669,747 
Machinery and equipment   8,111,412    8,861,309 
Motor vehicles   273,068    334,870 
Leasehold improvement   108,019    211,052 
Furniture and office equipment   395,190    523,418 
           
   $13,778,398   $14,600,396 
Less: Accumulated depreciation   (7,124,471)   (7,370,588)
           
   $6,653,927   $7,229,808 

 

Depreciation expenses were $1,004,573 and $1,055,646 for the years ended June 30, 2012 and 2011 respectively.

 

8.INVENTORIES

 

Inventories comprise the followings:

 

   2012   2011 
         
Finished goods  $1,012,348   $1,052,959 
Work in process   158,863    72,732 
Raw materials and low value consumables   404,100    737,783 
    1,575,311    1,863,474 
Provision for obsolete stock   (42,927)   - 
Net inventory  $1,532,384   $1,863,474 

 

66
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2011 AND 2010

(Stated in US Dollars)

 

9.INTANGIBLES, NET

 

As of June 30, 2012, a provision of impairment is provided for the entire intangible asset owing to continuously loss of the APT Paper Group Limited which rendered the intangible asset to be valueless. Details of intangibles are as follows:

 

   2012   2011 
         
Land use rights, at cost  $1,200,877   $1,200,877 
Patents and trademark, at cost   53,512    53,512 
Exchange difference   52,694    52,694 
           
   $1,307,083   $1,307,083 
Less: accumulated amortization   (97,236)   (72,715)
Intangibles after amortization  $1,209,847   $1,234,368 
Less: provision for impairment   (1,209,847)   - 
Total intangibles, net  $0   $1,234,368 

 

Amortization expense included in the general and administrative expenses for the years ended 2012 and 2011 were $24,521and $23,906 respectively.

 

10.ACCRUED LIABILITIES AND OTHER PAYABLES

 

Accrued liabilities and other payables are summarized as follows:

 

   2012   2011 
Wages and bonus  $4,942   $97,374 
Consultancy fees   25,695    6,189 
Accrual   826,556    1,249,102 
Other payables to unrelated parties   697,531    355,844 
Audit and review fees   25,000    40,000 
Deposit from customers   1,134,292    888,978 
Loan from shareholder   247,842    305,522 
Other        - 
           
   $2,961,858   $2,943,009 

 

11.ADVANCE FROM A SHAREHOLDER

 

Advance from a shareholder, Pai, Chia-Hui, also known as Fred C.H. Peck, the shareholder of the group, who provided urgent funds for subsidiaries’ operation. The amount is unsecured, interest free and repayable on demand.

 

67
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

12.CONVERTIBLE PROMISSORY NOTES

 

The convertible promissory notes are convertible within six months with interest accrued in accordance to the discount rate of the market price of the stock. There was no embedded feature carried with the convertible note. Details of the convertible note are as follows:

 

Note providers   Note Principal     Interest
rate
    Interest
accrued
    Converted
amount
    Outstanding
amount
 
                               
Ash Enterprises, Inc.     319,500     12%     8,780     228,280     100,000  
Magna Group, LLC     275,000     12%     1,050     196,050     80,000  
Tonaquint, Inc.     631,000     18%     6,775     494,924     142,851  
TOTAL     1,225,500           16,605     919,254      322,851  

  

13.SHORT TERM LOAN

 

Details of short term loans are as follows:

 

   Due date  Interest rate  June 30, 2012 
Bank Of Communications (Shenzhen Branch)  Feb 11, 2013  **Prime +10%   197,963 
Haier Financial Limited Company  Dec 9, 2012  **Prime +40%   2,595,573 
China Development Bank *  Apr 13, 2013  **Prime +10%   3,831,042 
Exchange currency difference         286,596 
            
          6,911,174 

 

   Due date  Interest rate  June 30, 2011 
Bank Of Communications (Shenzhen Branch)  Feb 11, 2012  **Prime +10%   232,072 
Haier Financial Limited Company  Dec 9, 2011  **Prime +40%   1,864,018 
China Development Bank *  Apr 13, 2012  **Prime +10%   3,831,042 
Exchange currency difference         191,547 
            
          6,118,679 

  

* The loan was secured by the Company assets:

 

Land use rights  $1,200,877 
Buildings  $2,937,099 

 

** Prime rate is the periodical interest rate published by The People’s Bank of China.

 

68
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

14.INCOME TAXES

 

The Company and its subsidiaries are subject to income taxes on an entity basis on income arising in, or derived from, the tax jurisdiction in which they operate.

 

The Company is subject to the United States federal corporate income tax at a rate of 33%. IL was incorporated under the International Business Companies Act of the British Virgin Islands and, accordingly, is exempted from payment of the British Virgin Islands income taxes. The subsidiaries established in the PRC are subject to PRC enterprise income taxes at a rate of 15% to 25%. The subsidiary (LP) established in the British Virgin Islands while operated in Taiwan is subject to Taiwan non-resident profit-seeking enterprise income tax, which is from 0% to 25%, only for the income derived from Taiwan sources. IHKL is subject to Hong Kong profits tax at a rate of 16.5%.

 

The reconciliation of the United States federal income tax rate to the effective income tax rate based on loss before income taxes stated in the consolidated statements of operations is as follows:

 

Deferred taxation consisted of:

 

   2012   2011 
         
Net operating loss carry forwards  $16,464,717   $7,956,452 
Valuation allowance   (16,464,717)   (7,956,452)
           
Deferred tax assets, net  $-   $- 

 

The change in valuation allowance from June 30, 2011 to June 30, 2012 is primarily related to the tax effects of the increase in the net operating loss in the current fiscal year. The Company has net operating loss carry forwards totaling approximately $43 million as of June 30 2012 (2011: $36 million), primarily relating to operations in the PRC and Taiwan. A valuation allowance has been established for the full amount of the deferred tax benefit related to those loss carry forwards and other deferred tax assets as management believes that their realization is uncertain. The Company did not have uncertainty tax positions or events leading to uncertainty tax position within the next 12 months. The Company’s 2009, 2010 and 2011 U.S. Corporation Income Tax Return are subject to U.S. Internal Revenue Service examination and the Company’s 2005/2006, 2006/2007, 2007/2008, 2008/2009, 2009/2010, 2010/2011, 2011/2012 Hong Kong Corporations Profits Tax Return filing are subject to Hong Kong Inland Revenue Department examination. The Company’s 2009, 2010 and 2011 China Corporate Income Tax are subject to China State Administration of Taxation examination.

 

69
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

15.STOCKHOLDERS’ EQUITY

 

Year ended June 30, 2012

 

From January to June, 2012, Asher Enterprises, Inc. has exercised conversion right of US$228,280 convertible promissory note to 170,334,867 share of ordinary common stock. From March to June, 2012, Magna Group, LLC has exercised conversion right of US$196,050 convertible promissory note to 190,643,687 share of ordinary common stock. From April to June, Tonaquint Inc. has exercised conversion right of US$316,362 convertible promissory note to 341,650,000 share of ordinary common stock. During January to June, 2012, the total fund raised from the conversion promissory note was $740,692. Total common stock issued was 702,628,554.

 

From March to May, 2012, the Company has issued 78,000,000 share of ordinary common stock with market value of $970,000 to compensate various consultants for consultancy services and disposition of collateral under secured convertible promissory note signed on September 5, 2011. Details are as below:

 

   Number of
shares
 
     
Brighton Capital Ltd.   2,000,000 
George Capps   1,000,000 
TG Private Equity Inc.   2,000,000 
DC Global Consultancy Ltd.   2,000,000 
Region Capital, Ltd.   500,000 
Hung Kwok Wing   500,000 
FG Management Co. Ltd.*   70,000,000 
TOTAL   78,000,000 

 

*Note: FG Management Co. Ltd. is considered as a related party of the Company.

 

On March 15, 2012, the Company has issued 19,000,000 share of ordinary common stock with market value of $285,000 to its officers as stock compensation. Details are as below:

 

   Number of
shares
 
     
Fred Peck   6,000,000 
James Wu   5,000,000 
Shinihara Hiroshi   3,000,000 
Thomas Lee   5,000,000 
      
TOTAL   19,000,000 

 

On March 23, 2012, the Company has issued 7,000,000 share of ordinary common stock with market value of $70,000 as a deposit to acquire 51% of Shaanxi Prosperous Agriculture Company Limited.

 

Year ended June 30, 2011

 

On November 18, 2010, Uni Core Holdings Corporation (“UCHC”) proceeded with a placement exercise with Alliance Harvest Limited and Gain Onway Limited for equity financing. The total fund to be raised will be US$3,000,000 in exchange of 37,500,000 new shares of UCHC.

 

Wise Link Management Limited will get the commission of another 1,875,000 shares of the Company as the financial consultant.

 

On December 21, 2009, Uni Core Holdings Corporation (UCHC) entered into Investment Cooperation Agreement (Agreement) with the shareholders of Shaanxi Prosperous Agriculture Company Limited (Prosperous Agriculture) to acquire 51% equity of Prosperous Agriculture by two phrases and exchanged in total 11 millions of UCHC shares.

 

The first phrase of 21% equity of Prosperous Agriculture transferred to UCHC’s subsidiaries, IMOT Information Technology (Shenzhen) Limited (IMOTSZ), was approved by PRC authority on December 24, 2010.

 

According to the term of the Agreement, the Board of Directors did on January 18, 2011 approved the allotment of the 4 million shares to the parties below:

 

   Number of
shares
 
     
Wang Fei   2,232,000 
Wu Qiang   1,116,000 
Zhao Jing Jing   372,000 
China Equity Platform Holding Group Limited   160,000 
Star Fair Ventures Corporation   120,000 
      
    4,000,000 

 

70
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

16.COMMITMENTS

 

Operating Leases - The Company has operating lease agreements for office premises, which expiring through Dec 2011. Future minimum rental payments under agreements classified as operating leases with non-cancelable terms for the next one year and thereafter are as follows:

 

June 30,     
2013  $1,054,782 
2014 and thereafter   - 
      
   $1,054,782 

 

Rental expense paid for the years ended June 30, 2012 and 2011 were $1,054,782 and $1,357,736 respectively.

 

17.SEGMENT INFORMATION

 

The Company adopted ASC 280 “Segment Reporting” in respect of its operating segments. The Company currently operates in three principle business segments which are: sales of paper products, E-Commerce solutions and Consulting. Sales of paper product are undertaken by its subsidiary APT Group and subsidiary companies in PR China. E-Commerce Solutions comprises revenue from web-site development contracts and maintenance contracts. The Consulting segment comprises services rendered for provision of information on property exchange matters.

 

Each segment is managed separately because each business requires different technology and marketing strategies. The Company evaluates performance based on operating earnings of the respective business units. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The corporate assets include primarily cash and cash equivalents and deposits and other receivables. There were no significant intercompany transactions during any of the reported periods. In determining operating income (loss) by reportable segment, general corporate expenses and other income and expense items of a non-operating nature are not considered; as such items are not allocated to the Company's segments.

 

Based on the revenue information from 2012 and 2011, the Company generated over 90% revenue from APT Group companies which is operating the sales of paper products. Moreover, the Company generated over 90% of revenue from PR China. Accordingly, the Company is not required to provide segment information on product or geographic category.

 

71
 

 

UNI CORE HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

(Stated in US Dollars)

 

18.IMPAIRMENT OF INVESTMENT IN ASSOCIATED AND SUBSIDIARY COMPANIES

 

An investment in an associated company Hainan Special Economic Zone Property Right Exchange Center (PREC) with an equity balance of 1,258,742 was found being impaired and written-off in 2011 statement of income. On February 17, 2012, the entire investment in China Equity Platform Holding Group Limited was disposed for approximated US$1,600,128 (RMB 10,000,000). PREC was included in this disposal transaction.

 

19.GOING CONCERN

 

As shown in the accompanying consolidated financial statements, the Company incurred a net loss of $17,152,429 for the year ended June 30, 2012 and $7,956,452 for the year ended June 30, 2011 and has an accumulated deficit of $61,228,904 as of June 30, 2012 and $44,076,475 as of June 30, 2011. The Company also continues to experience negative cash flows from operations. The Company will be required to raise additional capital to fund its operations, and will continue to attempt to raise capital resources from both related and unrelated parties until such time as the Company is able to generate revenues sufficient to maintain itself as a viable entity. These factors have raised substantial doubt about the Company's ability to continue as a going concern. There can be no assurances that the Company will be able to raise additional capital or achieve profitability. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

The Company plans to strengthen its core business, control its overall expenditures, improve the efficiency of its operations and continue its efforts to expand by acquiring other business opportunities.

 

20.SUBSEQUENT EVENT

 

The investment cooperation agreement with the shareholders of Shaanxi Prosperous Agriculture Company Limited to acquire 51% equity of Shaanxi Prosperous Agriculture Company Limited has not yet finished.

 

From July to September, 2012, the investor continuously exercised converted right the loan of $145,341out of $463,690 loan balance for 1,323,754,543 share of ordinary common stock.

 

The Company has evaluated all other subsequent events through October 11, 2012 the date these consolidated financial statements were issued, and determined that there were no other subsequent events or transactions that require recognition or disclosures in the financial statements except the above- mentioned matters.

 

72
 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  UNI CORE HOLDINGS CORPORATION
     
  By: /s/ China Hsun Wu
    Chia Hsun Wu
    Chief Executive Officer
     
  By: /s/ Thomas Lee
    Thomas Lee
    Chief Financial Officer

 

Dated: October 15, 2012

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

Signature   Title   Date: October 15 , 2012
         
/s/ Fred Peck   Director    
Fred Peck        
         
/s/ China Hsun Wu   Director and Chief Executive Officer    
Chia Hsun Wu        
         
/s/Hiroshi Shinohara   Director    
Hiroshi Shinohara        

 

73