RAYONT INC. - Quarter Report: 2016 June (Form 10-Q)

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2016

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

For the transition period from __________ to _________

SEC File No. 333-179082

Issuer's telephone number: 630-288-2500

N/A 

(Former name, former address and former three months, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No 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. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

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

As of August 1, 2016 there were 36,731,495 shares issued and outstanding of the registrant's common stock.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements  

A & C United Agriculture Developing Inc

(A Development Stage Enterprise)

Unaudited Financial Statements

As of June 30 2016 and 2015

Table of Contents

A & C UNITED AGRICULTURE DEVELOPING INC

NOTES TO FINANCIAL STATEMENTS

NOTE A - BUSINESS DESCRIPTION

A & C United Agriculture Developing Inc., or the "Company," is a Nevada corporation formed on February 7, 2011. Our principal executive office is located at Oak Brook Pointe, Suite 500, 700 Commerce Drive, Oak Brook IL 60523. Tel: 630-288-2500.

In addition to the U.S. operation, the Company established a subsidiary A & C Agriculture Developing (Europe) AB in Stockholm, Sweden in October 24, 2013, which is located at Gamla Sodertaljevagen 134A, 141 70 Segeltorp, Sweden.

Since the inception, the Company's long-term goal has been to solve some of the major challenges in China, such as pollution and food safety issues for the general public, as well as raising funds to grow the business. The Company believes that the best solution is to integrate and manage all links along the food production chain – seeds, farming, processing.

The Company has been and will be putting more resources in the seed business as it is still the main source of the Company's revenue. However, the Company has also been and will continue be working to leverage the resources that it believes can be obtained via strategic alliances in the future on both sides of the Pacific Ocean in order to expand the business scope.

Development Stage Company

The Company is considered to be in the development stage as defined in Statement of Financial Accounting Standards (SFAS) ASC 915, "Development Stage Entities". The Company has devoted substantially all of its efforts to establishing a new business and for which either of the following conditions exists: planned principal operations have not commenced; or the planned principal operations have commenced, and rising of capital and attempting to raise sales. 

Basis of accounting

The financial statements reflect the assets, revenues and expenditures of the Company on the accrued basis of accounting. The Company's fiscal year end is the last day of September 30.

Concentration of credit risk

The Company maintains its cash in bank accounts which, at times, may exceed the federally insured limits.  The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash.

A & C UNITED AGRICULTURE DEVELOPING INC

NOTES TO FINANCIAL STATEMENTS

NOTE B - SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect certain amounts reported in the financial statements and disclosures.  Accordingly, actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly-liquid investments with an original maturity of three months or less when purchased to be cash equivalents.  As of June 30, 2016, the company had cash and cash equivalents of $27,230.

Property, Plant, and Equipment Depreciation

Property, plant, and equipment are stated at cost.  Depreciation is being provided principally by straight line methods over the estimated useful lives of the assets. Expenditures for maintenance and repairs, which do not improve or extend the expected useful lives of the assets, are expensed to operations while major repairs are capitalized.

The vehicle was recorded as fixed asset to depreciate over 5 years with straight line method. On December 5, 2012, the Company purchased a $27,206 passenger vehicle.

As of June 30, 2016, the company has property, plant, and equipment at a net cost of $8,162, and $19,044 of accumulated depreciation expense was recorded. 

Account Receivable

As of June 30, 2016, the Company had account receivable of $430,552.

Inventory

The inventory was valued at cost of purchase from suppliers. As of June 30, 2016, the Company has $32,951 various vegetable seeds in stock in USA. And the inventories purchase from USA were stored at the garage of Yidan Liu's house at no charges and written agreement; and the inventories purchase from Europe were stored at the garage of Jun Huang's house at Sweden at no charges and written agreement.

A & C UNITED AGRICULTURE DEVELOPING INC

NOTES TO FINANCIAL STATEMENTS

NOTE B - SIGNIFICANT ACCOUNTING POLICIES (Continued)

Prepaid Expense

As of June 30, 2016, the Company had prepaid rent expense of $169.

Stock-Based Compensation

The Company accounts for stock issued for services using the fair value method.  In accordance with FASB ASC 718, Stock-Based Compensation, the measurement date of shares issued for services is the date at which the counterparty's performance is complete.

On June 30, 2011, 344,495 shares was issued to Michael Williams @ $0.1 per share for legal service value $34,450.

On July 16, 2012, 150,000 shares were issued to Michael Williams for legal services of $30,000 at $0.20 per share.

On June 20, 2012, 25,000 shares were issued to Pivo Associates for services of $5,000 at $0.20 per share.

On March 12, 2013, 50,000 shares were issued to three shareholders @ $0.25 per share for consulting service value $12,500.

On April 29, 2013, 12,000 shares were issued to Blue Future, Inc for consulting and advising services of $3,000 at $0.25 per share.

On December 26, 2013, 250,000 shares were issued to Griffin Produce Company, Inc @ $0.2 per share for consulting and advising service value $50,000.

On February 1, 2015, 60,000 shares were issued to Michael Williams for legal services of $6,000 at $0.10 per share.

On February 2, 2015, 60,000 shares were issued to Globex Transfer LLC for DTC professional services of $6,000 at $0.10 per share.

A & C UNITED AGRICULTURE DEVELOPING INC

NOTES TO FINANCIAL STATEMENTS

NOTE B - SIGNIFICANT ACCOUNTING POLICIES (Continued)

Basics and Diluted Net Loss per Common Share

The Company computes per share amounts in accordance with Statement of Financial Accounting Standards (SFAS) ASC 260, Earnings per Share (EPS).  ASC 260 requires presentation of basis and diluted EPS.  Basic EPS is computed by dividing the income (loss) available to Common Shareholders by the weighted-average number of common shares outstanding for the period.  Diluted EPS is based on the weighted-average number of shares of common stock and common stock equivalents outstanding during the periods.

The Company only issued one type of shares, i.e., common shares only.  There are no other types securities were issued.  Accordingly, the diluted and basics net loss per common share are the same.

Long Term Liabilities

In December 5th, 2012, the Company purchased a vehicle at a financing amount of $27,585.36 with 36 monthly equal payments. The Company had paid off the auto loan in September 2015. As of June 30, 2016, the Company has zero car loans. 

Revenue Recognition

In accordance with the FASB Accounting Standards Codification (ASC) 605-15-25 "Revenue Recognition for Sales of Product", the Company recognizes revenue when it is realized or realizable and earned.  The revenue from the product sales transaction shall be recognized at time of sale if the following conditions are met:

Revenues include sales of seeds in Asia, Europe, and North America.

A & C UNITED AGRICULTURE DEVELOPING INC

NOTES TO FINANCIAL STATEMENTS

NOTE B - SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition (Continued)

The Company had total revenue of $331,055 and $306,260 for the quarter ended June 30, 2016 and 2015 respectively.

The Company had total revenue of $1,274,622 and $687,896 for nine months period ended June 30, 2016 and 2015 respectively and $3,764,034 for the period of February 7, 2011 to June 30, 2016.

Cost of Goods Sold

The Company's purchase cost is primarily from supplier, U.S seed companies. Based upon management's experience in the industry, we believe vegetable seeds supply in United State for the varieties we intend to sell is plenty. We believe that with advanced technology and mature global seed accessibility, U.S seed companies can provide the varieties Chinese end users are looking for. We are focused on finding the right variety. We first will collect specifications from Chinese end users, and then we will match them with the variety here. We ask samples or sometimes we purchase small amount of seed.  We will then try them in various locations in China at different planting season. The challenge we have is that not all the varieties we may initially select will prove to work in China. The trial cycle can be over a year in some cases.

We do not anticipate offering any material right of return on our product although we may reimburse buyers on a case-by-case basis if seed which passed our trials does not perform well for a particular grower through no fault of the grower.

The Company had $28,956 inventory as of March 31, 2016.

From the period of April 01, 2016 to June 30, 2016, the Company purchase $320,259 vegetable seeds from US suppliers and Europe suppliers; and there are $32,951 inventories as of June 30, 2016.

For the fiscal quarter ended June 30, 2016, the Company had related cost of goods sold expense and freight cost of $12,261, and have purchase discount of $29,083.

As a result, a total of $299,442 cost of goods sold was recorded for the fiscal quarter ended June 30, 2016; and $3,373,387 cost of goods sold was recorded for the period of February 7, 2011 to June 30, 2016.

A & C UNITED AGRICULTURE DEVELOPING INC

NOTES TO FINANCIAL STATEMENTS

NOTE B - SIGNIFICANT ACCOUNTING POLICIES (Continued)

Operating Leases

The Company entered into a lease for its corporate offices in under terms of non-cancelable operating leases. The lease term is from March 1, 2016 through February 28, 2017 and requires a roughly $170 monthly lease payment, and this office is located at 700 Commerce Drive, STE 500, Oak Brook IL 60523, USA.

Operating Expense

Operation expense consists of selling, general and administrative expenses, and depreciation expense.

For the fiscal quarter ended June 30 2016 and 2015, there was a total of $59,265 and $59,283 operating expenses respectively. For the cumulative period from February 7, 2011 (Date of Inception) to June 30, 2016, there was a total of $1,033,370 operating expenses.

The Details were showed in Exhibit A.

Payroll Expense

Started from January 2013, the Company stayed the annually salary amount of Officer Yidan Liu for $ 60,000. The Social Security tax and Medicare tax were paid by both employer and employees in USA; employees also withheld portion of Federal and State tax calculate by each individual's status. All of the tax was submitted to Internal Revenue Service and local government at a monthly basis.

Started from September 2014, the Company hired an employee to taking care of the office operation in Sweden subsidiary at a cost of SEK 8,000 monthly.

Started from November 2015, the Company started paying salary amount to Officer Jun Huang for SEK 33,000 monthly.

The total payroll expense for the fiscal quarter ended June 30, 2016 and 2015 is $34,459 and $20,326 respectively, which included the payroll taxes to the government and the net salary to the officers and employee.

Professional Fees

Professional fees are consist of accounting and auditing fee, legal fee, consulting expenses, SEC filing fee, and other professional expenses. The total professional fees were $14,560 and $1,922 for the fiscal quarter ended June 30, 2016 and 2015 respectively.

A & C UNITED AGRICULTURE DEVELOPING INC

NOTES TO FINANCIAL STATEMENTS

NOTE B - SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements

The following pronouncements have become effective during the period covered by these financial statements or will become effective after the end of the period covered by these financial statements:

Management does not anticipate that the adoption of these standards will have a material impact on the financial statements.

A & C UNITED AGRICULTURE DEVELOPING INC

NOTES TO FINANCIAL STATEMENTS

NOTE B - SIGNIFICANT ACCOUNTING POLICIES (Continued)

Comprehensive Income

The company's comprehensive income is comprised of net income, unrealized gains and losses on marketable securities classified foreign currency translation adjustments, and unrealized gains and losses on derivative financial instruments related to foreign currency hedging.

Foreign Currency Translation

The Company has determined the United States dollars (USD) to be its functional currency for A&C United Agriculture Developing Inc., U.S.A and Swedish Krona (SEK) to be its functional currency in European business.  Assets and liabilities were translated to U.S. dollars at the period-end exchange rate.  Statement of operations amounts were translated to U.S. dollars using the first date of each month during the year.  Gains and losses resulting from translating foreign currency financial statements are accumulated in other comprehensive income (loss), a separate component of shareholders' equity.

As of June 30, 2016, the Company had foreign currency translation loss of $1,241.

NOTE C - RELATED PARTY TRANSACTIONS

Common Shares Issued to Executive and Non-Executive Officers and Directors

* Based upon total outstanding shares 36,731,495 as of June 30, 2016.

A & C UNITED AGRICULTURE DEVELOPING INC

NOTES TO FINANCIAL STATEMENTS

Loans from Officers/Shareholders

As of June 30, 2016, the officers loaned $59,835 to the Company for purchases and operating, and marketing expenses.  The outstanding balance bears no interest, is due on demand and is not the subject of a written note or agreement.

NOTE D - SHAREHOLDERS' EQUITY

Under the Company's Articles of Incorporation of the Company, the Company is authorized to issue 500,000,000 shares of common stock with a par value of $0.001.

On February 7, 2011, the Company was incorporated in the State of Nevada.

On February 7, 2011, two founders of the Company, Jun Huang and Yidan Liu purchased 30,000,000 shares at $0.001 per share.  The proceeds of $30,000 were received.

On May 31, 2011, additional 4,105,000 shares were issued to 113 shareholders at price of $0.1 per share or $410,500 common stock.

On June 30, 2011, 344,495 shares was issued to Michael Williams @ $0.1 per share for legal service value $34,450.

On July 16, 2012, 150,000 shares were issued to Michael Williams @ $0.2 per share for legal service value $30,000.

On July 20, 2012, 25,000 shares were issued to Pivo Associate Inc @ $0.2 per share for consulting service value $5,000.

On December 2012, additional 1,175,000 shares were issued to 12 shareholders and at price of $0.2 per share or $235,000 common stock.

On December 2012, 500,000 shares were issued to 7 new shareholders at price of $0.2 per share or $100,000 common stock.

On March 12, 2013, 50,000 shares were issued to three shareholders @ $0.25 per share for consulting service value $12,500.

On April 29, 2013, 12,000 shares were issued to Blue Future, Inc @ $0.25 per share for consulting and advising service value $3,000.

A & C UNITED AGRICULTURE DEVELOPING INC

NOTES TO FINANCIAL STATEMENTS

NOTE D - SHAREHOLDERS' EQUITY (Continued)

On December 26, 2013, 250,000 shares were issued to Griffin Produce Company, Inc @ $0.2 per share for consulting and advising service value $50,000.

On February 1, 2015, 60,000 shares were issued to Michael Williams for legal services of $ 6,000 at $0.10 per share.

On February 2, 2015, 60,000 shares were issued to Globex Transfer LLC for DTC professional services of $6,000 at $0.10 per share.

Therefore, as of June 30, 2016, there was total of 36,731,495 shares issued and outstanding.

NOTE E - GOING CONCERN

The Company is currently in the development stage and their activities consist solely of raising capital and attempting to sell products to generate and increase sales revenues.

There is no guarantee that the Company will be able to raise enough capital or generate revenues to sustain its operations and carry out its business plan. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

The financial statements do not include any adjustments relating to the carrying amounts of recorded assets or the carrying amounts and classification of recorded liabilities that may be required should the Company be unable to continue as a going concern.

As of June 30, 2016 the cash and cash equivalent balance was $27,230 and there is cumulative net loss of $ 642,725 for the cumulative period from February 7, 2011 (Date of Inception) to June 30, 2016.

Exhibit A

Item 2. Management's Discussion and Analysis or Plan of Operation.

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes, and other financial information included in this Form 10-Q.

Our Management's Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national, and local general economic and market conditions; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; change in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; the risk of foreign currency exchange rate; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.

Although the forward-looking statements in this Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

Overview

Since inception, the Company's long-term goals have been to work to solve some of the major agricultural challenges in China, such as food safety issue, soil health problem and outdated farming practices, as well as to raise additional capital to grow our business and to help us implement projects that are targeting above mentioned issues. As the Company's name has suggested, the management team believes by unifying the valuable resources the Company is working to access, significant progress toward the above goals can be realized.

The Company has been and will be putting more resources in the seed business as it is still the main source of the Company's revenue. However, the Company has also been and will continue to be working to leverage the resources that it believes can be obtained via strategic alliances in the future on both sides of the Pacific Ocean in order to expand the business scope.

Current Operational Activities

During this quarter, the management team continued to work on the high level strategy in regards of the bio fertilizer project. This project is aiming to introduce an American bio fertilizer product into China market. The manufacture, the potential investors and our company are the main players for this project. After carefully research and study, we strongly believe that in order to succeed the project, a six to eight months' trial phase is crucial prior to a potential massive sale. In this period of time, we plan to achieve three goals: fully understand how the product works in China by location and by crop; comply with all regulation at different levels and start marketing campaign and selling in selected areas and regions. In June, the Singapore group that we reported in previous filings had another meeting with us in Beijing and discussed in greater details regarding the next steps. The outcome of the meeting is that all parties agree that a trial phase we recommended above is necessary and an external fund injection to the Company is needed in order to proceed with the ground works and tasks. However we have no binding contract, agreement or commitment from anyone, including the Singapore group, to secure the funds needed to move forward, and we cannot predict if and/or when we will be able to raise the funds we need to move forward with this project.

We contacted one state-owned Chinese company that is successful in the fertilizer industry. We both are interested in developing the China market for the bio soil product. We both agree that the initial trial is important and, again although we have no binding agreement, we are working collaboratively on it as of now.

During the next 12 months, we anticipate continuing our efforts to raise capital through continued meetings with potential investors, although as noted above, there is no assurance we will raise capital from any of these or other investors as we have no contracts, agreements or commitments from this or other funding sources.

We currently have sufficient cash resources to fund all of our operations for the next 12 months.

Results of Operations

For the fiscal quarter ended June 30, 2016 vs. 2015

Revenue

There was $331,055 and $306,260 revenue generated for the fiscal quarter ended June 30, 2016 and 2015 due to increased sales efforts.

Cost of Revenue

There was $299,442 and $269,296 cost of goods sold incurred for the fiscal quarter ended June 30, 2016 and 2015 respectively. The cost of goods sold increased due to the increasing of revenue.

Expense

Our expenses consist of selling, general and administrative expenses and depreciation expense as follows:

For the fiscal quarter ended June30, 2016 and 2015, there was a total of $59,265 and $59,283 operating expenses respectively. Increases in professional expenses were offset by decreases in rent and travel expenses. For the cumulative period from February 7, 2011 (Date of Inception) to June 30, 2016, there was a total of $1,033,370 operating expenses.