10Q Mar 31, 2020

2020-05-20


 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2020 or

   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Transition Period from  to .

 

Commission File Number 000-54485

 

IONIX TECHNOLOGY, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Nevada 45-0713638

 

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

Rm 608, Block B, Times Square, No.50 People Road, Zhongshan District, Dalian City, Liaoning Province, China 116001

(Address of Principal Executive Offices) (Zip Code)

 

+86-411-88079120

(Registrant’s Telephone Number, Including Area Code)

 

 

    Not applicable_

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

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 No .

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer

Non-accelerated filer Smaller reporting company

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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 No .

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of May 15, 2020, there were 114,193,057 shares of common stock issued and outstanding, par value $0.0001 per share.


 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Certain information included in this Quarterly Report on Form 10-Q and other filings of the Registrant under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as information communicated orally or in writing between the dates of such filings, contains or may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements in this Quarterly Report on Form 10-Q, including without limitation, statements related to our plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from expected results. Among these risks, trends and uncertainties are the availability of working capital to fund our operations, the competitive market in which we operate, the efficient and uninterrupted operation of our computer and communications systems, our ability to generate a profit and execute our business plan, the retention of key personnel, our ability to protect and defend our intellectual property, the effects of governmental regulation, and other risks identified in the Registrant’s filings with the Securities and Exchange Commission from time to time.

 

In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms or other comparable terminology. Although the Registrant believes that the expectations reflected in the forward-looking statements contained herein are reasonable, the Registrant cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither the Registrant, nor any other person, assumes responsibility for the accuracy and completeness of such statements. The Registrant is under no duty to update any of the forward-looking statements contained herein after the date of this Quarterly Report on Form 10-Q.


 

 

IONIX TECHNOLOGY, INC. FORM 10-Q

March 31, 2020

 

INDEX

 

Page

 

Part I – Financial Information F-1

 

Item 1. Financial Statements (Unaudited) F-1

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation 25

Item 3. Quantitative and Qualitative Disclosures about Market Risk 28

Item 4. Controls and Procedures 28

Part II – Other Information 29

Item 1. Legal Proceedings 29

Item 1A. Risk Factors 29

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 29

Item 3. Defaults Upon Senior Securities 30

Item 4. Mine Safety Disclosures 30

Item 5. Other Information 30

Item 6. Exhibits 30

Signatures 31

Certifications


 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

IONIX TECHNOLOGY, INC.


CONSOLIDATED BALANCE SHEETS

(Unaudited)


March 31, 2020


June 30, 2019

ASSETS

Current Assets:




Cash and cash equivalents (Note 3   at VIE)

$ 1,834,763


$ 509,615

Notes receivable (Note 3 at VIE)

23,721


120,182

Accounts receivable - non-related   parties (Note 3 at VIE)

3,494,207


3,639,030

- related parties

420,906


340,026

Inventory (Note 3 at VIE)

3,045,127


3,379,146

Advances to suppliers - non-related   parties (Note 3 at VIE)

354,820


129,423

- related parties

264,797


269,498

Prepaid expenses and other current   assets (Note 3 at VIE)

593,122


269,495

Total Current Assets

10,031,463


8,656,415





Property, plant and equipment, net   (Note 3 at VIE)

6,812,910


7,508,637

Right-of-use assets – operating leases

20,825


-

Intangible assets, net (Note 3 at VIE)

1,430,449


1,496,399

Deferred tax assets (Note 3 at VIE)

51,460


54,361

Total Assets (Note 3 at VIE)

$ 18,347,107


$ 17,715,812





LIABILITIES AND STOCKHOLDERS’ EQUITY




Current Liabilities:




Short-term bank loan (Note 3 at VIE)

$ 2,540,543


$ 2,618,296

Accounts payable (Note 3 at VIE)

2,569,420


2,732,327

Advance from customers (Note 3 at VIE)

59,165


114,158

Convertible notes payable, net of   debt discount and loan cost

347,427


-

Derivative liability

446,852


-

Due to related parties (Note 3 at VIE)

2,032,723


2,105,338

Operating lease liabilities –   current portion

7,646


-

Accrued expenses and other current   liabilities (Note 3 at VIE)

199,015


368,319

Total Current Liabilities (Note 3 at VIE)

8,202,791


7,938,438





Operating lease liabilities

12,462


-

Total Liabilities (Note 3 at VIE)

8,215,253


7,938,438





COMMITMENT AND CONTINGENCIES








Stockholders’ Equity:




Preferred stock, $.0001 par value, 5,000,000 shares authorized, 5,000,000 shares issued and outstanding

 

500


 

500

Common stock, $.0001 par value, 195,000,000 shares authorized, 114,193,057 and 114,003,000 shares issued and outstanding as of March 31, 2020 and June 30, 2019,




respectively

11,419


11,400

Additional paid in capital

9,262,509


8,829,487

Retained earnings

787,894


539,866

Accumulated other comprehensive loss

(372,429)


(45,840)

Total Stockholders' Equity attributable to the Company

9,689,893


9,335,413

Noncontrolling interest

441,961


441,961

Total Stockholders’ Equity

10,131,854


9,777,374

Total Liabilities and Stockholders’ Equity

$ 18,347,107


$ 17,715,812

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-1


 

 

IONIX TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

For the Three Months Ended For the Nine Months Ended March 31, March 31,

2020 2019 2020 2019

 

Revenues (See Note 2 and Note 9 for related party amounts)

 

$ 2,752,170

 

$ 2,894,802

 

$ 17,585,468

 

$ 7,841,437






Cost of Revenues (See Note 9 for related





party amounts)

2,506,518

2,271,380

14,850,194

6,618,015






Gross profit

245,652

623,422

2,735,274

1,223,422

 

Operating expenses                                                                                                                                                                                                                                               

Selling, general and administrative expense

 

499,616

 

392,367

 

1,378,241

 

686,132

Research and development expense

                      139,029

                      158,562

                      645,880

                      158,562

Total operating expenses

                      638,645

                      550,929

                   2,024,121

                      844,694






Income (loss) from operations

(392,993)

72,493

711,153

378,728






Other income (expense):





Interest expense, net of interest income

(213,267)

(34,412)

(470,500)

(34,412)

Subsidy income

-

-

50,018

-

Change in fair value of derivative liability

                       (22,608)

                                  -

                      108,844

                                  -

Total other expense

(235,875)

(34,412)

(311,638)

(34,412)






Income (loss) before income tax provision

(628,868)

38,081

399,515

344,316






Income tax provision (benefit)

(29,962)

17,017

151,487

139,245

Net income (loss)

(598,906)

21,064

248,028

205,071

 

Other comprehensive income (loss)                                                                                                                                                                                                                  

Foreign currency translation adjustment

                     (165,507)

                        56,484

                    (326,589)

                        28,523

Comprehensive income (loss)

$ (764,413)

$ 77,548

$ (78,561)

$ 233,594

 

Earnings (Loss) Per Share - Basic

 

$ (0.01)

 

$ 0.00

 

$ 0.00

 

$ 0.00

Weighted average number of common





shares outstanding - Basic

114,104,735

114,003,000

114,036,665

104,148,985






Earnings (Loss) Per Share - Diluted

$ (0.01)

$ 0.00

$ 0.00

$ 0.00

Weighted average number of common





shares outstanding - Diluted

113,913,240

114,003,000

114,036,665

104,148,985

The accompanying notes are an integral part of these consolidated financial statements.

 

F-2


 

 

IONIX TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

 

                 Preferred Stock Common Stock Additional Accumulated Other

 

Paid-in

 

Retained

 

Comprehensive Income Non-controlling

 

Number of Shares Amount Number of Shares Amount

 

Capital

 

Earnings

 

(loss)

 

interest Total

 

Balance at June 30, 2019 5,000,000 $ 500 114,003,000 $ 11,400 $ 8,829,487 $ 539,866 $ (45,840) $ 441,961 $ 9,777,374

 

Stock warrants

-

-

-

-

20,022

-

-

-

20,022











Net income

-

-

-

-

-

711,276

-

-

711,276











Foreign currency translation adjustment

-

-

-

-

-

-

(416,785)

-

(416,785)











Balance at September 30, 2019

5,000,000

500

114,003,000

11,400

8,849,509

1,251,142

(462,625)

441,961

10,091,887











Stock warrants

-

-

-

-

84,613

-

-

-

84,613











Net income

-

-

-

-

-

135,658

-

-

135,658











Foreign currency translation adjustment

-

-

-

-

-

-

255,703

-

255,703











Balance at December 31, 2019

5,000,000

500

114,003,000

11,400

8,934,122

1,386,800

(206,922)

441,961

10,567,861











Issuance of common stock for   advisory services

-

-

150,000

15

262,485

-

-

-

262,500











Issuance of common stock for   conversion of convertible notes

-

-

40,057

4

23,045

-

-

-

23,049











Stock warrants

-

-

-

-

42,857

-

-

-

42,857











Net loss

-

-

-

-

-

(598,906)

-

-

(598,906)











Foreign currency translation adjustment

-

-

-

-

-

-

(165,507)

-

(165,507)











Balance at March 31, 2020

5,000,000

$ 500

114,193,057

$ 11,419

$ 9,262,509

$ 787,894

$ (372,429) $

441,961

$ 10,131,854

 

Preferred Stock Common Stock Additional Accumulated Other

 

 

Paid-in

 

 

Retained

 

 

Comprehensive Income Non-controlling

 

Number of Shares Amount Number of Shares Amount

 

Capital

 

Earnings

 

(loss)

 

interest Total

 

Balance at June 30, 2018 5,000,000 $ 500 99,003,000 $ 9,900 $ 237,246 $ 142,819 $ 7,950 $ - $ 398,415

 

Net income

-

-

-

-

-

177,153

-

-

177,153











Foreign currency translation adjustment

-

-

-

-

-

-

(7,922)

-

(7,922)











Balance at September 30, 2018

5,000,000

500

99,003,000

9,900

$ 237,246

319,972

28

-

567,646











Issuance of 15,000,000 shares of   common stock in exchange for 95.14% ownership rights of a variable interest entity

 

-

 

-

 

15,000,000

 

1,500

 

8,650,396

 

-

 

-

 

441,961

 

9,093,857











Net income

-

-

-

-

-

6,854

-

-

6,854











Foreign currency translation adjustment

-

-

-

-

-

-

(20,039)

-

(20,039)











Balance at December 31, 2018

5,000,000

500

114,003,000

11,400

8,887,642

326,826

(20,011)

441,961

9,648,318











Return of capital

-

-

-

-

(58,155)

-

-

-

(58,155)











Net income

-

-

-

-

-

21,064

-

-

21,064











Foreign currency translation adjustment

-

-

-

-

-

-

56,484

-

56,484











Balance at March 31, 2019

5,000,000

$ 500

114,003,000

$ 11,400

$ 8,829,487 $

347,890

$ 36,473 $

441,961

$ 9,667,711

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-3


 

 

IONIX TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

For the Nine Months Ended March 31,

2020 2019

 

Changes in operating assets and liabilities:                                                                                                                                                                                                          

 

CASH FLOWS FROM OPERATING ACTIVITIES


Net income

$ 248,028

$ 205,071

Adjustments required to reconcile net income to net cash provided by (used in) operating activities:



Depreciation and amortization

580,625

184,172

Deferred taxes

1,306

(15,732)

Stock compensation for advisory services

79,891

-

Change in fair value of derivative liability

(108,844)

-

Non-cash interest

351,474

-

Gain on disposal of property and equipment

(7,018)

-

Accounts receivable - non-related parties

37,312

593,935

Accounts receivable - related parties

(92,348)

(22,607)

Inventory

237,193

(774,776)

Advances to suppliers - non-related parties

(232,695)

13,826

Advances to suppliers - related parties

(3,352)

(114,802)

Prepaid expenses and other current assets

(150,496)

(75,559)

Accounts payable - non-related parties

(83,000)

(645,258)

Accounts payable - related parties

-

(198,782)

Advance from customers

(52,380)

(61,014)

Accrued expenses and other current liabilities

(164,326)

10,938

Net cash provided by (used in)   operating activities

641,370

(900,588)




CASH FLOWS FROM INVESTING ACTIVITIES



Acquisition of property, plant and equipment

(193,610)

(38,375)

Proceeds received from sale of equipment

121,715

-

Cash received from acquisition

                                  -

                      687,591

Net cash provided by (used in)   investing activities

(71,895)

649,216




CASH FLOWS FROM FINANCING ACTIVITIES



Notes receivable

94,292

54,451

Proceeds from issuance of   convertible notes payable

722,190

-

Return of capital to   non-controlling interests

-

(58,155)

Proceeds from (repayment of) loans from related parties

                       (28,979)

                      591,766

Net cash provided by financing activities

787,503

588,062




Effect of exchange rate changes on cash

(31,830)

46,668




Net increase in cash and cash equivalents

1,325,148

383,358




Cash and cash equivalents,   beginning of period

509,615

111,462




Cash and cash equivalents, end of period

$ 1,834,763

$ 494,820

 

Supplemental disclosure of cash flow information                                                                                                                                                                                         

 

Cash paid for income tax

$ 154,538 $

144,124

Cash paid for interests

$ 102,457 $

35,250

 

Non-cash investing and financing activities                                                                                                                                                                                                     

Issuance of 15,000,000 shares of common stock in exchange for

95.14% ownership rights of a variable interest entity $ - $ 8,651,896

Issuance of common stock for advisory services $ 262,500 $ -

Issuance of 40,057 shares of common stock for conversion of

convertible notes $ 23,049 $ -

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-4


 

 

IONIX TECHNOLOGY, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020 (UNAUDITED)

 

NOTE 1 - NATURE OF OPERATIONS

 

Ionix Technology, Inc. (the “Company” or “Ionix”), formerly known as Cambridge Projects Inc., is a Nevada corporation that was formed on March 11, 2011. By and through its wholly owned subsidiaries and an entity controlled through VIE agreements in China, the Company sells the high-end intelligent electronic equipment, which includes the portable power banks for electronic devices, LCM and LCD screens and provides IT and solution-oriented services in China.

 

NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of presentation

 

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of March 31, 2020 and the results of operations and cash flows for the periods ended March 31, 2020 and 2019. The financial data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited. The results for the three and nine months ended March 31, 2020 are not necessarily indicative of the results to be expected for the entire year ending June 30, 2020 or for any subsequent periods. The balance sheet at June 30, 2019 has been derived from the audited consolidated financial statements at that date.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations. These unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended June 30, 2019 as included in our Annual Report on Form 10-K as filed with the SEC on September 30, 2019.

 

Basis of consolidation

 

The consolidated financial statements include the accounts of Ionix, its wholly owned subsidiaries and an entity which the Company controls 95.14% and receives 100% of net income or net loss through VIE agreements. All significant inter-company balances and transactions have been eliminated upon consolidation.

 

Certain amounts have been reclassified to conform with current year presentation.

 

Use of Estimates

 

The Company’s consolidated financial statements have been prepared in accordance with US GAAP and this 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 reported amounts of revenue and expenses during the reporting period. The significant areas requiring the use of management estimates include, but are not limited to, the allowance for doubtful accounts receivable and advance to suppliers, the valuation of inventory, provision for staff benefit, recognition and measurement of deferred income taxes and valuation allowance for deferred tax assets. Although these estimates are based on management’s knowledge of current events and actions management may undertake in the future, actual results may ultimately differ from those estimates and such differences may be material to our consolidated financial statements.

 

Revenue recognition

 

The Company adopted the new accounting standard, ASC 606, Revenue from Contracts with Customers, and all the related amendments (new revenue standard) to all contracts using the modified retrospective method beginning on July 1, 2018. The adoption did not result in an adjustment to the retained earnings as of June 30, 2018. The comparative information was not restated and continued to be reported under the accounting standards in effect for those periods. The adoption of the new revenue standard has no impact on either reported sales to customers or net earnings.

 

F-5


 

 

The Company estimates return based on historical results, taking into consideration the type of customers, the type of transactions and the specifics of each arrangement.

 

Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:

 

·       identify the contract with a customer;

·       identify the performance obligations in the contract;

·       determine the transaction price;

·       allocate the transaction price to performance obligations in the contract; and

·       recognize revenue as the performance obligation is satisfied.

 

Under these criteria, for revenues from sale of products, the Company generally recognizes revenue when its products are delivered to customers in accordance with the written sales terms. For service revenue, the Company recognizes revenue when services are performed and accepted by customers.

 

The following table disaggregates our revenue by major source for the three and nine months ended March 31, 2020 and 2019, respectively:

 

For the Nine Months Ended March 31, 2020 2019

 

Sales of LCM and LCD screens -   Non-related parties

$ 14,518,376

$ 5,634,086

Sales of LCM and LCD screens -   Related parties

718,194

115,897

Sales of portable power banks

1,719,127

1,831,387

Service contracts

629,771

260,067

Total

$ 17,585,468

$ 7,841,437

 

For the Three Months Ended March 31, 2020 2019

 

Sales of LCM and LCD screens - Non-related parties $ 2,487,465 $ 2,760,934 Sales of LCM and LCD screens - Related parties 73,802 -

Sales of portable power banks 181,033 -

Service contracts 9,870 133,868

Total $ 2,752,170 $ 2,894,802

 

All the operating entities of the Company are domiciled in the PRC. All the Company’s revenues are derived in the PRC during the three and nine months ended March 31, 2020 and 2019.

 

Leases

 

In February 2016, the FASB established Topic 842, Leases, by issuing Accounting Standards Update (ASU) No. 2016-02, which requires lessees to recognize leases on balance sheet and disclose key information about the leasing arrangements. The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months.

 

F-6


 

 

The new standard is effective for us on July 1, 2019, with early adoption permitted. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. The Company adopted the new standard on July 1, 2019 and use the effective date as our date of initial application. Consequently, financial information is not provided for the dates and periods before July 1, 2019. The new standard provides a number of optional expedients in transition. The Company elected the package of practical expedients which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs.

 

The new standard has a material effect on our financial statements. The most significant effects are related to the recognition of new ROU assets and lease liabilities on our balance sheet for our real estate operating leases. The Company has entered into an office lease arrangement in China with a lease term longer than 12 months under which we are the lessee. (See Note 5)

 

Earnings Per Share

 

Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of incremental shares issuable upon exercise of stock options and warrants and conversion of convertible debt. Such potentially dilutive shares are excluded when the effect would be to reduce a net loss per share or increase a net income per share.

 

The reconciliation of our basic to diluted weighted average common shares follows:

 

 

Three Months Ended March 31

 

 

Nine Months Ended March 31

 


2020

2019 2020 2019



Basic weighted average common shares

114,104,735

114,003,000 114,036,665 104,148,985

Effect of potentially dilutive securities



- Warrants

(191,495)

- - -

- Convertible notes

-

- - -

Diluted weighted average common shares

113,913,240

114,003,000 114,036,665 104,148,985

 

During the nine months ended March 31, 2020, the Company had outstanding convertible notes and warrants which represent 899,753 shares of commons stock. These shares of common stock were excluded from the computation of diluted earnings per share since their effect would have been antidilutive.

 

During the three months ended March 31, 2020, the Company had outstanding convertible notes and warrants which represent 842,313 shares of commons stock, among which 613,147 shares of common stock for convertible notes were excluded from the computation of diluted earnings per share since their effect would have been antidilutive.

 

Foreign currencies translation

 

 

The reporting currency of the Company is the United States Dollar (“US$”). The Company’s subsidiaries in the People’s Republic of China (“PRC”) maintain their books and records in their local currency, the Renminbi Yuan (“RMB”), which is the functional currency as being the primary currency of the economic environment in which these entities operate.

 

In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not the US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. Stockholders’ equity is translated at historical rates. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statements of stockholders’ equity.

 

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction.

 

The exchange rates used to translate amounts in RMB into U.S. Dollars for the purposes of preparing the consolidated financial statements are as follows:

 

F-7


 

 

March 31, 2020 June 30, 2019

 

文本框: Balance sheet items, except for equity accounts                                                                                                                                           7.0851                             6.8747

 

Nine Months Ended March 31, 2020 2019

 

文本框: Balance sheet items, except for equity accounts                                                                                                                                           7.0851                             6.8747

 

文本框: Items in statements of comprehensive income (loss) and cash flows                                                                                                          6.9799                             6.6639

 

Fair Value of Financial Instruments

 

文本框: Balance sheet items, except for equity accounts                                                                                                                                           7.0851                             6.8747

 

文本框: Items in statements of comprehensive income (loss) and cash flows                                                                                                          6.9799                             6.6639

 

The carrying value of the Company’s financial instruments: cash and cash equivalents, accounts receivable, inventory, prepayments and other receivables, accounts payable, income tax payable, other payables and accrued liabilities approximate at their fair values because of the short-term nature of these financial instruments.

 

The Company also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:

 

Level 1: Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets;

 

Level 2: Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques (e.g. Black-Scholes Option-Pricing model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs; and

 

Level 3: Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models.

 

Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

 

The Company has the derivative liabilities measured at fair value on a recurring basis which are valued at level 3 measurement (See Note 12).

 

Convertible Instruments

 

文本框: Balance sheet items, except for equity accounts                                                                                                                                           7.0851                             6.8747

 

文本框: Items in statements of comprehensive income (loss) and cash flows                                                                                                          6.9799                             6.6639

 

The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”.

 

Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

 

The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

 

F-8


 

 

The Company accounts for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities.

 

Common Stock Purchase Warrants

 

The Company classifies as equity any contracts that require physical settlement or net-share settlement or provide a choice of net-cash settlement or settlement in the Company’s own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own stock as defined in ASC 815-40 ("Contracts in Entity's Own Equity"). The Company classifies as assets or liabilities any contracts that require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside our control) or give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).

 

Recent accounting pronouncements

 

From time to time, new accounting pronouncements are issues by the Financial Accounting Standards Board or other standard bodies that may have an impact on the Company’s accounting and reporting. The Company believes that any recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations, and cash flows when implemented.

 

Risk factor

 

Due to the outbreak of the Coronavirus Disease 2019 (COVID-19) in the PRC, the Company’s operational and financial performance, has been affected by the epidemic during the three months period ended March 31, 2020. The Company has been keeping continuous attention on the situation of the COVID-19, assessing and reacting actively to its impacts on the financial position and operating results of the Company as below:

 

·        During PRC national economic shutdown that was imposed to limit the spread of COVID-19 from this early February to mid-March, our financial condition and results of operations were adversely affected. Since the restarting of our operation near the end of this March, our financial performances have been recovering continuously.

 

·        As the outbreak in China has been subsiding recently and the Chinese government responded with the package of support including tax-cut and financial assistance, we keep our continuous attention on the situation of the COVID-19, assess and react actively to its impacts on our future operating results or near-and-long-term financial condition. Up to the date of this report, the assessment is still in progress.

 

·        Since we restored our operation near the end of this March after signs that COVID-19 was under control, we assessed that 1) COVID-19-related impacts on our cost of capital or access to capital and funding sources and our sources or uses of cash have been insignificant; 2) There is no material uncertainty about our ongoing ability to meet the covenants of our credit agreements; 3) No any material liquidity deficiency has been identified and we do not expect to disclose or incur any material COVID-19-related contingencies;4) COVID-19-related impacts on the assets on our balance sheet or our ability to timely account for those assets have been insignificant; and 5) The possibilities for COVID-19 to trigger any material impairments, increases in allowances for credit losses, restructuring charges, other expenses, or changes in accounting judgments that have had or are reasonably likely to have a material impact on our financial statements are low. Looking forward, we keep our continuous attention on the situation of the COVID-19, assess and react actively to its impacts on issues mentioned above.

 

·        During PRC national economic shutdown that was imposed to limit the spread of COVID-19 from this early February to mid-March, COVID-19-related circumstances such as remote work arrangements adversely affected our ability to maintain operations. Since the lifting of the national shutdown order near the end of this March, our operations including financial reporting systems, internal control over financial reporting and disclosure controls and procedures have already resumed. Currently we keep our continuous attention on the situation of the COVID-19, assess and react actively to its impacts on our future business continuity plans or whether material resource constraints in implementing these plans. Up to the date of this report, the assessment is still in progress.

 

F-9


 

 

·        During PRC national economic shutdown that was imposed to limit the spread of COVID-19 from this early February to mid-March, the demands for our products or services were severely affected. Since the restarting of our operation near the end of this March, the demands have been rebounding continuously. And we are optimistic about an eventual recovery in demand to pre-pandemic levels.

 

·        During PRC national economic shutdown that was imposed to limit the spread of COVID-19 from this early February to mid-March, our supply chain or the methods used to distribute our products or services were severely affected. Since the lift of the national shutdown order near the end of this March, we expect all of our supply chains or the methods would return to normal gradually.

 

NOTE 3 – VARIABLE INTEREST ENTITY

 

On December 27, 2018, the Company entered into VIE agreements with two shareholders of Changchun Fangguan Electronics Technology Co., Ltd. (PRC) (“Fangguan Electronics”) to control 95.14% of the ownership rights and receive 100% of the net profit or net losses derived from the business operations of Fangguan Electronics. In exchange for VIE agreements and additional capital contribution, the Company issued 15 million shares of common stock to two shareholders of Fangguan Electronics.

 

The transaction was accounted for as a business combination using the acquisition method of accounting. The assets, liabilities and the operations of Fangguan Electronics subsequent to the acquisition date were included in the Company’s consolidated financial statements.

 

Following unaudited pro forma combined statement of operations are based upon the historical financial statements of the Company and Fangguan Electronics for the nine months ended March 31, 2019 and are presented as if the acquisition had occurred at the beginning of the period.

 

For the Nine Months Ended March 31, 2019

 


Fangguan


Ionix


Pro Forma


Pro Forma


Electronics


Technology


Adjustments


Combined

 

Revenues

$ 7,722,432


$ 7,841,437


$ (1,606,120)


$ 13,957,749

Cost of revenues

6,602,451


6,618,015


(1,173,150)


12,047,316

Gross profit

1,119,981


1,223,422


(432,970)


1,910,433

Operating expenses

926,013


844,694


-


1,770,707

Income (loss) from operations

193,968


378,728


(432,970)


139,726

Other income (expense)

5,155


(34,412)


-


(29,257)

Income tax provision

29,972


139,245


-


169,217

Net income (loss)

$ 169,151


$ 205,071


$ (432,970)


$ (58,748)

 

Through power of attorney, equity interest purchase agreement, and equity interest pledge agreement, 95.14% of the voting rights of Fangguan Electronics’ shareholders have been transferred to the Company so that the Company has effective control over Fangguan Electronics and have the power to direct the activities of Fangguan Electronics that most significantly impact its economic performance.

 

Through business operation agreement with the shareholders of VIE, the Company shall direct the business operations of Fangguan Electronics, including, but not limited to, adopting corporate policy regarding daily operations, financial management, and employment, and appointment of directors and senior officers.

 

Through the exclusive technical support service agreement with the shareholders of VIE, the Company shall provide VIE with necessary technical support and assistance as the exclusive provider. And at the request of the Company, VIE shall pay the performance fee, the depreciation and the service fee to the Company. The performance fee shall be equivalent to 5% of the total revenue of VIE in any fiscal year. The depreciation amount on equipment shall be determined by accounting rules of China. The Company has the right to set and revise annually this service fee unilaterally with reference to the performance of VIE.

 

F-10


 

 

The service fee that the Company is entitled to earn shall be the total business incomes of the whole year minus performance fee and equipment depreciation. This agreement allows the Company to collect 100% of the net profits of the VIE. Except for technical support, the Company did not provide, nor does it intend to provide, any financial or other support either explicitly or implicitly during the periods presented to its variable interest entity.

 

If facts and circumstances change such that the conclusion to consolidate the VIE has changed, the Company shall disclose the primary factors that caused the change and the effect on the Company’s financial statements in the periods when the change occurs.

 

There are no restrictions on the consolidated VIE’s assets and on the settlement of its liabilities and all carrying amounts of VIE’s assets and liabilities are consolidated with the Company’s financial statements. In addition, the net income of Fangguan Electronics after Fangguan Electronics became the VIE of the Company is free of restrictions for payment of dividends to the shareholders of the Company.

 

Risks associated with the VIE structure

 

 

The Company believes that the contractual arrangements with its VIE and respective shareholders are in compliance with PRC laws and regulations and are legally enforceable. However, uncertainties in the PRC legal system could limit the Company’s ability to enforce the contractual arrangements. If the legal structure and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government could:

 

·        revoke the business and operating licenses of the Company’s PRC subsidiary and its VIE;

·        discontinue or restrict the operations of any related-party transactions between the Company’s PRC subsidiary and its VIE;

·        limit the Company’s business expansion in China by way of entering into contractual arrangements;

·        impose fines or other requirements with which the Company’s PRC subsidiary and its VIE may not be able to comply;

·        require the Company or the Company’s PRC subsidiary and its VIE to restructure the relevant ownership structure or operations; or

·        restrict or prohibit the Company’s use of the proceeds from public offering to finance the Company’s business and operations in China.

 

The Company’s ability to conduct its business through its VIE may be negatively affected if the PRC government were to carry out of any of the aforementioned actions. As a result, the Company may not be able to consolidate its VIE in its consolidated financial statements as it may lose the ability to exert effective control over its VIE and its respective shareholders and it may lose the ability to receive economic benefits from its VIE. The Company, however, does not believe such actions would result in the liquidation or dissolution of the Company, its PRC subsidiary and its VIE. The following financial statement amounts and balances of its VIE were included in the accompanying consolidated financial statements after elimination of intercompany transactions and balances:

 

 


Balance as of March 31, 2020

Balance as of June 30, 2019

Cash and cash equivalents

$ 1,665,104

$ 361,849

Notes receivable

23,721

120,182

Accounts receivable - non-related parties

3,226,121

3,402,986

Inventory

2,432,916

2,916,515

Advances to suppliers - non-related parties

346,160

106,146

Prepaid expenses and other current assets

49,655

63,756

Total Current Assets

7,743,677

6,971,434




Property, plant and equipment, net

6,807,436

7,506,849

Intangible assets, net

1,430,449

1,496,399

Deferred tax assets

45,854

54,361

Total Assets

$ 16,027,416

$ 16,029,043




Short-term bank loan

$ 2,540,543

$ 2,618,296

Accounts payable

2,528,657

2,637,039

Advance from customers

31,346

32,372

Due to related parties

1,406,033

1,449,064

Accrued expenses and other current liabilities

89,803

148,287

Total Current Liabilities

6,596,382

6,885,058

Total Liabilities

$ 6,596,382

$ 6,885,058

 

F-11


 

 

NOTE 4 - INVENTORIES

 

Inventories are stated at the lower of cost (determined using the weighted average cost) or net realizable value. Inventories consist of the following:

 


March 31, 2020

June 30, 2019

Raw materials

$ 626,393

$ 471,189

Work-in-process

436,945

1,719,426

Finished goods

1,981,789

1,188,531

Total Inventories

$ 3,045,127

$ 3,379,146

 

The Company recorded no inventory markdown for the three and nine months ended March 31, 2020 and 2019.

 

NOTE 5 - OPERATING LEASE

 

For the nine months ended March 31, 2020, the Company had three real estate operating leases for office, warehouses, manufacturing facilities and two boat operating leases under the terms from four months to three years.

 

Lisite Science Technology (Shenzhen) Co., Ltd ("Lisite Science") leases office and warehouse space from Shenzhen Keenest Technology Co., Ltd. (“Keenest”), a related party, with annual rent of approximately $1,500 (RMB10,000) for one year until July 20, 2020. (See Note 9)

 

Shenzhen Baileqi Electronic Technology Co., Ltd. ("Baileqi Electronic") leases office and warehouse space from Shenzhen Baileqi Science and Technology Co., Ltd. (“Shenzhen Baileqi S&T”), a related party, with monthly rent of approximately $2,500 (RMB17,525) and the lease period is from June 1, 2019 to May 31, 2020. (See Note 9)

 

Dalian Shizhe New Energy Technology Co., Ltd. (“Shizhe New Energy”) leases a boat from a non-related party with monthly rent of approximately $7,200 (RMB50,000) for one year from March 1, 2019 to February 28, 2020. On July 1, 2019, Shizhe New Energy leased another boat from the same non-related party with monthly rent of approximately $7,200 (RMB50,000) for four months from July 10, 2019 to November 10, 2019.

 

The Company made an accounting policy election not to recognize lease assets and liabilities for the leases listed above as all lease terms are 12 months or shorter.

 

On November 1, 2019, the Company leased an office space located in Dalian, China as its principal executive office under non-cancelable operating lease agreement for three years, which expires through October 31, 2022. The monthly rent is approximately $715 (RMB5,000). The Company adopted the new standard to recognize lease asset and liability for this lease after examining the criteria established.

 

For the nine months ended March 31, 2020, the Company made $99,604 of fixed cash payments related to operating leases. Non-cash activities involving ROU assets obtained in exchange for lease liabilities were $19,711 for the nine months ended March 31, 2020, including the impact of adopting the new leases standard.

 

F-12


 

 

As of March 31, 2020, the Company recognized operating lease liabilities of $20,108, among which $7,646 is classified as current portion and $12,462 is classified as non-current portion, and Right-of-use assets of $20,825 based on the present value of the remaining minimum rental payments under the current leasing standards for existing operating leases.

 

March 31, 2020 June 30, 2019

 

 

Operating lease liabilities Current portion of long-term debt $ $7,646 $ - Long-term debt 12,462 -

Total operating lease liabilities $ 20,108 $ -

 

NOTE 6 – PROPERTY, PLANT AND EQUIPMENT, NET

 

The components of property, plant and equipment were as follows:

 

March 31, 2020 June 30, 2019

 

Buildings $ 4,598,048 $ 4,661,535

Machinery and equipment 2,934,748 3,036,339

Office equipment 64,853 60,052

Automobiles 98,769 101,793

Subtotal 7,696,418 7,859,719

Less: Accumulated depreciation (883,508) (351,082)

Property, plant and equipment, net $ 6,812,910 $ 7,508,637 Depreciation expense related to property, plant and equipment was $558,789 and $176,458 for the nine months ended March 31, 2020 and 2019, respectively. Depreciation expense related to property, plant and equipment was $174,381 and $176,458 for the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, buildings were pledged as collateral for bank loans (See Note 8).

NOTE 7 – INTANGIBLE ASSETS, NET

 

Intangible assets consist of the following:

 

   March 31, 2020 June 30, 2019     

 

Land use right $ 1,441,316 $ 1,485,428

Computer software 25,019 25,785

Subtotal 1,466,335 1,511,213

Less: Accumulated amortization (35,886) (14,814)

Intangible assets, net $ 1,430,449 $ 1,496,399

 

Amortization expense related to intangible assets was $21,836 and $7,714 for the nine months ended March 31, 2020 and 2019, respectively.

 

F-13


 

 

Amortization expense related to intangible assets was $7,164 and $7,714 for the three months ended March 31, 2020 and 2019, respectively.

 

Fangguan Electronics acquired the land use right from the local government in August 2012 which expires on August 15, 2062. As of March 31, 2020, land use right was pledged as collateral for bank loans (See Note 8).

 

NOTE 8 – SHORT-TERM BANK LOAN

 

On November 12, 2018, Fangguan Electronics entered into a short-term loan agreement with Industrial Bank to borrow approximately US$2.5 million (RMB 18 million) for a year with annual interest rate of 5.22%. The borrowing was collateralized by the Company’s buildings and land use right. In addition, the borrowing was guaranteed by the Company’s shareholder and CEO of Fangguan Electronics, Mr. Jialin Liang, and his wife Ms. Dongjiao Su. The loan was renewed for one year from November 19, 2019 to November 18, 2020.

 

NOTE 9 - RELATED PARTY TRANSACTIONS AND BALANCES

 

Purchase from related party

 

During the nine months ended March 31, 2020, the Company purchased $1,642,532 and $37,495 from Keenest and Shenzhen Baileqi S&T which were owned by the Company’s stockholders who own approximately 1.7% and 1.3% respectively of the Company’s outstanding common stock as of March 31, 2020. The amounts of

$1,642,532 and $37,495 were included in the cost of revenue for the nine months ended March 31, 2020.

 

During the nine months ended March 31, 2019, the Company’s subsidiaries, Lisite Science and Baileqi Electronic, purchased $1,610,058 and $629,438 from Keenest and Shenzhen Baileqi S&T which were owned by the Company’s stockholders who own approximately 1.7% and 1.3% respectively of the Company’s outstanding common stock as of March 31, 2019. The amounts of $1,610,058 and $565,165 were included in the cost of revenue for the nine months ended March 31, 2019.

 

During the three months ended March 31, 2020, the Company purchased $177,995 and $0 from Keenest and Shenzhen Baileqi S&T which were owned by the Company’s stockholders who own approximately 1.7% and 1.3% respectively of the Company’s outstanding common stock as of March 31, 2020. The amounts of

$177,995 and $0 were included in the cost of revenue for the three months ended March 31, 2020.

 

During the three months ended March 31, 2019, Lisite Science and Baileqi Electronic purchased $0 and $112,176 from Keenest and Shenzhen Baileqi S&T which were owned by the Company’s stockholders who own approximately 1.7% and 1.3% respectively of the Company’s outstanding common stock as of March 31, 2019. The amounts of $0 and $111,116 were included in the cost of revenue for the three months ended March 31, 2019.

 

During the three and nine months ended March 31, 2019, the Company’s subsidiary, Changchun Fangguan Photoelectric Display Technology Co. Ltd ("Fangguan Photoelectric"), purchased $0 and $1,498,744 from Fangguan Electronics before Fangguan Electronics became a variable interest entity of the Company on December 27, 2018 (See Note 3). The president of Fangguan Electronics was the president and a member of the board of directors of Fangguan Photoelectric before he resigned and left Fangguan Photoelectric in October 2018. The amounts of $0 and $1,130,052 were included in the cost of revenue for the three and nine months ended March 31, 2019.

 

Advances to suppliers - related parties

 

 

Lisite Science made advances of $264,797 and $269,498 to Keenest for future purchases as of March 31, 2020 and June 30, 2019, respectively. Sales to related party and accounts receivable from related party

 

During the nine months ended March 31, 2020 and 2019, Baileqi Electronic sold materials of $718,194 and $93,838 respectively to Shenzhen Baileqi S&T. During the three months ended March 31, 2020 and 2019, Baileqi Electronic sold materials of $73,802 and $0 respectively to Shenzhen Baileqi S&T. The trade-related balance receivable from Shenzhen Baileqi S&T was $420,906 and $340,026 as of March 31, 2020 and June 30, 2019, respectively.

 

F-14


 

 

During the three and nine months ended March 31, 2019, Fangguan Photoelectric sold products of $0 and $22,059 to Fangguan Electronics before Fangguan Electronics became a variable interest entity of the Company on December 27, 2018 (See Note 3).

 

Lease from related party

 

Lisite Science leases office and warehouse space from Keenest, a related party, with annual rent of approximately $1,500 (RMB10,000) for one year until July 20, 2020.

 

Baileqi Electronic leases office and warehouse space from Shenzhen Baileqi S&T, a related party, with monthly rent of approximately $2,500 (RMB17,525) and the lease period is from June 1, 2019 to May 31, 2020.

 

Due to related parties

 

 

Due to related parties represents certain advances to the Company or its subsidiaries by related parties. The amounts are non-interest bearing, unsecured and due on demand.

 

March 31, 2019 June 30, 2019

 

Ben Wong

(1)

$ 143,792


$ 143,792

Yubao Liu

(2)

452,544


498,769

Xin Sui

(3)

2,016


2,016

Baozhen Deng

(4)

6,606


3,900

Baozhu Deng

(5)

-


5,303

Jialin Liang

(6)

900,747


928,314

Xuemei Jiang

(7)

505,286


520,750

Liang Zhang

(8)

-


625

Zijian Yang

(9)

-


1,869

Shikui Zhang

(10)

21,732


-



$ 2,032,723


$ 2,105,338

 

(1) Ben Wong was the controlling shareholder of Shinning Glory until April 20, 2017, which holds majority shares in Ionix Technology, Inc.

 

(2) Yubao Liu is the controlling shareholder of Shinning Glory since April 20, 2017, which holds majority shares in Ionix Technology, Inc.

 

(3) Xin Sui is a member of the board of directors of Welly Surplus.

 

(4)  Baozhen Deng is a stockholder of the Company, who owns approximately 1.3% of the Company’s outstanding common stock, and the owner of Shenzhen Baileqi S&T.

 

(5) Baozhu Deng is a relative of Baozhen Deng, a stockholder of the Company.

 

(6) Jialin Liang is the president, CEO, and director of Fangguan Electronics.

 

(7) Xuemei Jiang is the vice president and director of Fangguan Electronics.

 

(8) Liang Zhang is the legal representative of Shizhe New Energy until May 2019.

 

(9) Zijian Yang is the supervisor of Shizhe New Energy.

 

(10) Shikui Zhang serves as the legal representative and general manager of Shizhe New Energy since May 2019.

 

During the nine months ended March 31, 2020, Yubao Liu was refunded $46,225 by Welly Surplus and Well Best after netting off his advances to Well Best. Baileqi Electronic refunded $5,303 to Baozhu Deng and Baozhen Deng advanced $2,706 to Baileqi Electronic. Shizhe New Energy refunded $625 and $1,869 to Liang Zhang and Zijian Yang respectively. Shikui Zhang advanced $21,732 to Shizhe New Energy.

 

F-15


 

 

During the nine months ended March 31, 2019, Yubao Liu advanced $327,286 to Well Best. Baileqi Electronic borrowed $4,470 from Baozhu Deng. In addition, Baozhen Deng refunded $7,680 to Baileqi Electronic. Liang Zhang and Zijian Yang advanced $7,370 and $4,856 to Shizhe New Energy, respectively. Jialin Liang advanced $270,112 (RMB 1.8 million) to Fangguan Electronics.

 

NOTE 10 – CONCENTRATION

 

Major customers

 

 

Customers who accounted for 10% or more of the Company’s revenues (goods sold and services) and its outstanding balance of accounts receivable are presented as follows:

 

For the Nine Months Ended

March 31, 2020 As of March 31, 2020

 

Revenue

 

Percentage of revenue

 

Accounts receivable

 

 

Percentage of accounts receivable

 

Customer A

$ 2,047,553

12%

$ 24,960

1%

Customer B

2,009,817

11%

376,704

10%

Total

$ 4,057,370

23%

$ 401,664

11%

 

For the Nine Months Ended

March 31, 2019 As of March 31, 2019

 

 

Revenue

 

Percentage of total revenue

 

Accounts receivable

 

Percentage of total accounts receivable

 

 

Customer B

2,603,631

33%

205,266

7%

Total

$ 4,100,704

52%

$ 205,266

7%

 

For the Three Months Ended

March 31, 2020 As of March 31, 2020

 

 

文本框: Customer A                                                                                           $                 1,497,073                                    19%   $                                -                                    -%

 

Revenue

 

 

文本框: Customer A                                                                                           $                 1,497,073                                    19%   $                                -                                    -%

 

Percentage of revenue

 

 

文本框: Customer A                                                                                           $                 1,497,073                                    19%   $                                -                                    -%

 

Accounts receivable

 

 

文本框: Customer A                                                                                           $                 1,497,073                                    19%   $                                -                                    -%

 

Percentage of accounts receivable

 

 

文本框: Customer A                                                                                           $                 1,497,073                                    19%   $                                -                                    -%

 

 

Customer A

$ 315,541

11%

$ 24,960

1%

Customer B

748,422

27%

376,704

10%

Total

$ 1,063,963

38%

$ 401,664

11%

 

F-16


 

 

For the Three Months Ended

March 31, 2019 As of March 31, 2019

 

Revenue

 

Percentage of total revenue

 

Accounts receivable

 

 

Percentage of total accounts receivable

 

Customer A $ 654,209 23% $ 205,266 7%

Customer B 320,756 11% 149,798 5%

Total $ 974,965 34% $ 355,064 12%

 

Primarily all customers are located in the PRC. Major suppliers

 

The suppliers who accounted for 10% or more of the Company’s total purchases (materials and services) and its outstanding balance of accounts payable are presented as follows:

 

For the Nine Months Ended

March 31, 2020 As of March 31, 2020 Percentage of

 

 

Total Purchase

 

Percentage of total purchase

 

Accounts payable

 

total accounts payable

 

Supplier A - related party $ 1,642,532 12% $ - -% Supplier B 2,582,034 19% - -% Total $ 4,224,566 31% $ - -%

 

For the Nine Months Ended

March 31, 2019 As of March 31, 2019 Percentage of

 

Total Purchase

 

Percentage of total purchase

 

Accounts payable

 

total accounts payable

 

Supplier A - related party $ 1,610,058 23% $ - -%

Supplier B - related party 1,498,744 21% - -% Supplier C 1,165,459 16% 79,965 2%

Total $ 4,274,261 60% $ 79,965 2%

 

For the Three Months Ended

                       March 31, 2020 As of March 31, 2020                        

Percentage of

 

Total Purchase

 

Percentage of total purchase

 

Accounts payable

 

total accounts payable

 

Supplier A $ 413,924 18% $ - -%

Total $ 413,924 18% $ - -% F-17


 

 

For the Three Months Ended March 31, 2019 As of March 31, 2019

Percentage of

 

Total Purchase

 

 

Percentage of total purchase

 

 

Accounts payable

 

 

total accounts payable

 

Supplier A $ 366,985 15% $ 79,965 2%

Supplier B 231,080 9% 347,047 10%

Total $ 598,065 24% $ 427,012 12%

 

All suppliers of the Company are located in the PRC.

 

NOTE 11 - INCOME TAXES

 

The effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate. The Company operates in United States of America, Hong Kong and the PRC that are subject to taxes in the jurisdictions in which they operate.

 

United States of America

 

The Company is registered in the State of Nevada and is subject to the tax laws of United States of America.

 

For the three and nine months ended March 31, 2020 and 2019, there is no assessable income chargeable to profit tax in United States of America. Under normal circumstances, the Internal Revenue Service is authorized to audit income tax returns during a three-year period after the returns are filed. In unusual circumstances, the period may be longer. Tax returns for the years ended June 30, 2016 and after were still open to audit as of March 31, 2020.

 

Hong Kong

 

 

The Company’s subsidiaries, Well Best and Welly Surplus, are registered in Hong Kong and subject to income tax rate of 16.5%. For the three and nine months ended March 31, 2020 and 2019, there is no assessable income chargeable to profit tax in Hong Kong.

 

The PRC

 

The Company’s subsidiaries in China are subject to a unified income tax rate of 25%. Fangguan Electronics was certified as high-tech enterprises for three years from November 2016 to November 2019 and is taxed at a unified income tax rate of 15%. Fangguan Electronics has renewed the high-tech enterprise certificate which granted it the tax rate of 15% for the three whole calendar years of 2019 -2021.

 

The reconciliation of income tax expense at the U.S. statutory rate of 21% to the Company's effective tax rate is as follows:

 

     For the Nine Months Ended March 31, 2020 2019

 

Tax at U.S. statutory rate $ 83,898 $ 72,306

Tax rate difference between foreign operations and U.S. (77,038) 21,437

Change in Valuation Allowance 151,838 36,163

Permanent difference (7,211) 9,339

Effective tax $ 151,487 $ 139,245

 

F-18


 

 

The provisions for income taxes are summarized as follows:

 

For the Nine Months Ended March 31, 2020 2019

 

 

Current $ 150,181 $ 154,977

Deferred 1,306 (15,732)

Total $ 151,487 $ 139,245

 

As of March 31, 2020, the Company has approximately $1,959,000 net operating loss carryforwards available in the U.S., Hong Kong and China to reduce future taxable income which will begin to expire from 2035. Except for the net operating loss carryforwards of $209,542 from Fangguan Electronics and Shizhe New Energy incurred in the three months ended March 31, 2020, it is more likely than not that the deferred tax assets cannot be utilized in the future because there will not be significant future earnings from the entities which generated the net operating loss. Therefore, the Company recorded a full valuation allowance on its deferred tax assets except for the deferred tax assets of Fangguan Electronics and Shizhe New Energy of $51,460 as of March 31, 2020.

 

In accordance with the current tax laws in the U.S., the Company is subject to a corporate tax rate of 21% on its taxable income. No provision for taxes is made for

U.S. income tax for the nine months ended March 31, 2020 and 2019 as it has no taxable income in the U.S.

 

On December 22, 2017, the “Tax Cuts and Jobs Act” (“The 2017 Tax Act”) was enacted in the United States. Under the provisions of the Act, the U.S. corporate tax rate decreased from 34% to 21%. Accordingly, the Company has re-measured its deferred tax assets on net operating loss carry forwards in the U.S at the lower enacted cooperated tax rate of 21%. However, this re-measurement has no effect on the Company’s income tax expenses as the Company has provided a 100% valuation allowance on its deferred tax assets previously.

 

Additionally, the 2017 Tax Act implemented a modified territorial tax system and imposing a tax on previously untaxed accumulated earnings and profits (“E&P”) of foreign subsidiaries (the “Toll Charge”). The Toll Charge is based in part on the amount of E&P held in cash and other specific assets as of December 31, 2017. The Toll Charge can be paid over an eight-year period, starting in 2018, and will not accrue interest. The 2017 Tax Act also imposed a global intangible low-taxed income tax (“GILTI”), which is a new tax on certain off-shore earnings at an effective rate of 10.5% for tax years beginning after December 31, 2017 (increasing to 13.125% for tax years beginning after December 31, 2025) with a partial offset for foreign tax credits.

 

The Company has determined that this one-time Toll Charge has no effect on the Company’s income tax expenses as the Company has no undistributed foreign earnings at either of the two testing dates of November 2, 2017 and December 31, 2017.

 

For purposes of the inclusion of GILTI, the Company has determined that the Company has no taxable off-shore earnings as of March 31, 2020 and 2019, respectively. Therefore, this is no accrual of US income tax for GILTI as of March 31, 2020.

 

The extent of the Company’s operations involves dealing with uncertainties and judgments in the application of complex tax regulations in a multitude of jurisdictions. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from federal, state and international tax audits. The Company recognizes potential liabilities and records tax liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on its estimate of whether, and the extent to which, additional taxes will be due.

 

NOTE 12 - CONVERTIBLE DEBT

 

Convertible notes

 

As of March 31, 2020, convertible notes payable consists of:




Note Balance


Debt discount

Carrying Value







Power Up Lending Group Ltd

(1)

$ 69,000


$ (16,031)

$ 52,969

Firstfire Global Opportunities Fund LLC

(2)

165,000


(73,934)

91,066

Power Up Lending Group Ltd

(3)

53,000


(24,036)

28,964

Crown Bridge Partners

(4)

55,000


(27,056)

27,944

Morningview Financial LLC

(5)

165,000


(105,441)

59,559

BHP Capital NY

(6)

102,900


(61,069)

41,831

Labrys Fund, LP

(7)

146,850


(101,756)

45,094

Total


$ 756,750


$ (409,323)

$ 347,427

 

F-19


 

 

(1)             On July 25, 2019, the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd to issue and sell, upon the terms and conditions set forth in the agreement a convertible note of the Company, in the aggregate principal amount of $103,000 and received $94,840 in cash on August 1, 2019 after deducting legal fees and other costs. The convertible note bears interest rate at 6% per annum and due on July 25, 2020. The convertible note can be converted into shares of the Company’s common stock at 65% of the average of the two lowest trading prices during the fifteen trading day prior to the conversion date.

 

During the three months ended March 31, 2020, Power Up Lending Group Ltd elected to convert $34,000 of the principal amount of the convertible notes into 40,057 shares of the Company’s common stock. (See Note 13)

 

(2)             On September 11, 2019, the Company entered into a Securities Purchase Agreement with Firstfire Global Opportunities Fund LLC to issue and sell, upon the terms and conditions set forth in the agreement a convertible note of the Company, in the aggregate principal amount of $165,000 and received

$143,500 in cash on September 18, 2019 after deducting an original issue discount in the amount of $15,000 (the “OID”), legal fees and other costs. The convertible note bears interest rate at 5% per annum and payable in one year. Conversion price shall be equal to the lower of (i) $2.00 or (ii) 75% multiplied by the lowest traded price of the common stock during the twenty consecutive trading day period immediately preceding the date of the respective conversion.

 

(3)             On November 4, 2019, the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd to issue and sell, upon the terms and conditions set forth in the agreement a convertible note of the Company, in the aggregate principal amount of $53,000 and received $47,350 in cash on November 12, 2019 after deducting legal fees and other costs. The convertible note bears interest rate at 6% per annum and due on November 4, 2020. The convertible note can be converted into shares of the Company’s common stock at 65% of the average of the two lowest trading prices during the fifteen trading day prior to the conversion date.

 

(4)             On November 12, 2019, the Company entered into a Securities Purchase Agreement with Crown Bridge Partners, LLC to issue and sell, upon the terms and conditions set forth in the agreement a convertible note of the Company, in the aggregate principal amount sum up to $165,000 with a purchase price sum up to $156,750. During November 2019, First Tranche of the agreement was executed in the principal amount of $55,000 and the Company received

$50,750 in cash on November 15, 2019 after deducting an OID in the amount of $2,750, legal fees and other costs. The convertible note bears interest rate at 5% per annum and due on November 12, 2020. The convertible note can be converted into shares of the Company’s common stock at 75% multiplied by the lowest traded price of the common stock during the twenty consecutive trading day period immediately preceding the date of the respective conversion.

 

(5)             On November 20, 2019, the Company entered into a Securities Purchase Agreement with Morningview Financial, LLC to issue and sell, upon the terms and conditions set forth in the agreement a convertible note of the Company, in the aggregate principal amount of $165,000 and received $153,250 in cash on November 22, 2019 after deducting an OID in the amount of $8,250, legal fees and other costs. The convertible note bears interest rate at 5% per annum and due on November 20, 2020. Conversion price shall be equal to the lower of (i) $2.00 or (ii) 75% multiplied by the lowest traded price of the common stock during the twenty consecutive trading day period immediately preceding the date of the respective conversion.

 

(6)             On December 3, 2019, the Company entered into a Securities Purchase Agreement with BHP Capital NY, Inc to issue and sell, upon the terms and conditions set forth in the agreement a convertible note of the Company, in the aggregate principal amount of $102,900 and received $95,500 in cash on December 13, 2019 after deducting and OID in the amount of $4,900, legal fees and other costs. The convertible note bears interest rate at 5% per annum and due on December 3, 2020. The convertible note can be converted into shares of the Company’s common stock at 75% of the average of the two lowest trading prices during the fifteen trading day prior to the conversion date.

 

(7)             On January 10, 2020, the Company entered into a convertible promissory note with Labrys Fund, LP to issue and sell, upon the terms and conditions set forth in the agreement a convertible note of the Company, in the aggregate principal amount of $146,850 and received $137,000 in cash on January 13, 2020 after deducting an OID in the amount of $7,350, legal fees and other costs. The note is due on January 10, 2021 and bears interest at 5% per annum. The conversion price shall be equal to 75% multiplied by the lesser of the lowest closing bid price or lowest traded price of the Common Stock during the twenty (20) consecutive trading day period immediately preceding the date of the respective conversion.

 

F-20


 

 

For the three and nine months ended March 31, 2020, the Company recorded the amortization of debt discount of $170,138 and $351,474 for the convertible notes issued, which were included in other income and expenses in the consolidated statement of comprehensive income (loss).

 

Derivative liability

 

Upon issuing of the convertible notes, the Company determined that the conversion feature embedded in the notes referred to above that contain a potential variable conversion amount constitutes a derivative which has been bifurcated from the note and accounted for as a derivative liability, with a corresponding discount recorded to the associated debt. The excess of the derivative value over the face amount of the note, if any, is recorded immediately to interest expense at inception.

 

The derivative liability in connection with the conversion feature of the convertible debt is the only financial liability measured at fair value on a recurring basis. The change of derivative liabilities is as follows:

 

 

Issued during the nine months ended March 31, 2020 $ 555,696

Change in fair value recognized in operations (108,844)

Balance at March 31, 2020 $ 446,852

 

The estimated fair value of the derivative instruments was valued using the Black-Scholes option pricing model at issuance date and March 31, 2020, using the following assumptions:

 

Estimated dividends None

Expected volatility 55.87% to 73.53%

Risk free interest rate 0.70% to 2.08%

Expected term 3.8 to 12 months

 

Warrants

 

In connection with the issuance of the $165,000 convertible promissory note on September 11, 2019, FirstFire Global Opportunities Fund, LLC is entitled, upon the terms and subject to the limitations on exercise and the conditions set forth in the agreement, at any time on or after the date of issuance hereof to purchase from the Company up to 68,750 shares of common stock. Exercise price shall be $2.40, and the warrants can be exercised within 5 years which is before September 11, 2024.

 

In connection with the issuance of the $55,000 convertible promissory note on November 12, 2019, Crown Bridge Partners, LLC is entitled, upon the terms and subject to the limitations on exercise and the conditions set forth in the agreement, at any time on or after the date of issuance hereof to purchase from the Company up to 22,916 shares of common stock. Exercise price shall be $2.80, and the warrants can be exercised within 5 years which is before November 12, 2024.

 

In connection with the issuance of the $165,000 convertible promissory note on November 20, 2019, Morningview Financial LLC is entitled, upon the terms and subject to the limitations on exercise and the conditions set forth in the agreement, at any time on or after the date of issuance hereof to purchase from the Company up to 68,750 shares of common stock. Exercise price shall be $2.80, and the warrants can be exercised within 5 years which is before November 20, 2024.

 

In connection with the issuance of the $146,850 convertible promissory note on January 10, 2020, Labrys Fund, LP is entitled, upon the terms and subject to the limitations on exercise and the conditions set forth in the agreement, at any time on or after the date of issuance hereof to purchase from the Company up to 68,750 shares of common stock. Exercise price shall be $2.80, and the warrants can be exercised within 5 years which is before January 10, 2025.

 

F-21


 

 

The estimated fair value of the warrants was valued using the Black-Scholes option pricing model at grant date, using the following assumptions:

 

Estimated dividends None

Expected volatility 56.23% to 71.08%

Risk free interest rate 1.73% to 1.92%

Expected term 5 years

 

Since the warrants can be exercised at $2.4 or $2.8 and are not liabilities, the face value of convertible notes was allocated between convertible note and warrant based on the fair values of the conversion debt and warrants. Accordingly, $147,491 was allocated to warrants and recorded in additional paid in capital account during the nine months ended March 31, 2020.

 

The details of the outstanding warrants are as follows:

 

Number of shares

 

Weighted Average Exercise Price

 

 

Remaining Contractual Term (years)

 

Outstanding at July 1, 2019 - $ - -

Granted 229,166 2.68 5

Exercised - - -

Cancelled or expired - - -

4.45 to

 

Outstanding at March 31, 2020 229,166 $ 2.68

 

4.78

 

NOTE 13 – STOCKHOLDER’S EQUITY

Stock Issued for Services

 

The Company engaged Maxim Group LLC as its financial advisor to assist the Company in articulating its growth strategy to the investment community and up-list its securities to a National Securities Exchange. On February 10, 2020, the Company issued 150,000 shares of common stock valued at $262,500 to Maxim Group LLC as a part of its compensation. The share-based compensation is amortized over service period from December 16, 2019 to November 30, 2020 and the amortization expense was $79,891 for the three and nine months ended March 31, 2020.

Stock Issued for Conversion of Convertible Debt

 

On January 31, 2020, the Company issued a total of 12,775 shares of common stock to Power Up Lending Group Ltd for the conversion of debt in the principal amount of $12,000 according to the conditions of the convertible note dated as July 25, 2019.

 

On February 18, 2020, the Company issued a total of 11,834 shares of common stock to Power Up Lending Group Ltd for the conversion of debt in the principal amount of $10,000 according to the conditions of the convertible note dated as July 25, 2019.

 

On February 28, 2020, the Company issued a total of 15,448 shares of common stock to Power Up Lending Group Ltd for the conversion of debt in the principal amount of $12,000 according to the conditions of the convertible note dated as July 25, 2019.

 

The remaining principal balance due under this convertible note after these conversions is $69,000.

 

F-22


 

 

NOTE 14 – SEGMENT INFORMATION

 

The Company’s business is classified by management into three reportable business segments (smart energy, photoelectric display and service contracts) supported by a corporate group which conducts activities that are non-segment specific. The smart energy reportable segment derives revenue from the sales of portable power banks that is intended to be utilized as a power source for electronic devices such as the iphone, ipad, mp3/mp4 players, PSP gaming systems, and cameras. The photoelectric display reportable segment derives revenue from the sales of LCM and LCD screens manufactured for small devices such as video capable baby monitors, electronic devices such as tablets and cell phones, and for use in televisions or computer monitors. The service contracts reportable segment derives revenue from providing IT and solution-oriented services. Unallocated items comprise mainly corporate expenses and corporate assets.

 

Although all of the Company’s revenue is generated from Mainland China, the Company is organizationally structured along business segments. The accounting policies of each operating segments are same and are described in Note 2, “Summary of Significant Accounting Policies.”

 

The following tables provide the business segment information for the three and nine months ended March 31, 2020 and 2019.

 

For the Nine Months Ended March 31, 2020

 

 


Smart


Photoelectric


Service


Unallocated



energy


display


contracts


items


Total

 

Revenues

$ 1,719,127


$ 15,236,570


$ 629,771


$ -


$ 17,585,468

Cost of Revenues

1,642,532


12,786,020


421,642


-


14,850,194

Gross profit

76,595


2,450,550


208,129


-


2,735,274

Operating expenses

10,094


1,491,200


25,326


497,501


2,024,121

Income (loss) from operations

66,501


959,350


182,803


(497,501)


711,153

Net income (loss)

$ 59,915


$ 779,838


$ 165,603


$ (757,328)


$ 248,028

For the Nine Months Ended March 31, 2019

 

 


Smart


Photoelectric


Service


Unallocated



energy


display


contracts


items


Total

 

Revenues

$ 1,831,387


$ 5,749,983


$ 260,067


$ -


$ 7,841,437

Cost of Revenues

1,630,188


4,789,880


197,947


-


6,618,015

Gross profit

201,199


960,103


62,120


-


1,223,422

Operating expenses

11,728


574,524


39,270


219,172


844,694

Income (loss) from operations

189,471


385,579


22,850


(219,172)


378,728

Net income (loss)

$ 141,214


$ 261,823


$ 21,204


$ (219,170)


$ 205,071

For the Three Months Ended March 31, 2020

 


Smart


Photoelectric


Service


Unallocated



energy


display


contracts


items


Total

 

Revenues

$ 181,033


$ 2,561,267


$ 9,870


$ -


$ 2,752,170

Cost of Revenues

177,995


2,256,426


72,097


-


2,506,518

Gross profit (loss)

3,038


304,841


(62,227)


-


245,652

Operating expenses

3,960


377,641


8,109


248,935


638,645

Loss from operations

(922)


(72,800)


(70,336)


(248,935)


(392,993)

Net income (loss)

$ 347


$ (83,297)


$ (64,462)


$ (451,494)


$ (598,906)

 

F-23


 

 

For the Three Months Ended March 31, 2019

 


Smart


Photoelectric


Service


Unallocated



energy


display


contracts


items


Total

 

Revenues

$ -


$ 2,760,934


$ 133,868


$ -


$ 2,894,802

Cost of Revenues

-


2,184,085


87,295


-


2,271,380

Gross profit

-


576,849


46,573


-


623,422

Total operating expenses

2,882


486,969


26,403


34,675


550,929

Income (loss) from operations

(2,882)


89,880


20,170


(34,675)


72,493

Net income (loss)

$ (2,866)


$ 39,811


$ 18,792


$ (34,673)


$ 21,064

 

NOTE 15 - SUBSEQUENT EVENTS

 

The Company has evaluated the existence of significant events subsequent to the balance sheet date through the date the financial statements were issued and has determined that there were no subsequent events or transactions which would require recognition or disclosure in the financial statements.

 

F-24


 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Revenues

 

During the three months ended March 31, 2020 and 2019, total revenues were $2,752,170 and $2,894,802 respectively. The total revenues decreased by $142,632 or 5% from the three months ended March 31, 2019 to the three months ended March 31, 2020. During the three months ended March 31, 2020, COVID-19 affected the operational and financial performance of the Company: PRC national economic shutdown that was imposed to limit the spread of COVID-19 from this early February to mid-March. At the same time we temporarily closed all of our factories while transportations in or out of them were suspended, and experienced an unprecedented “ supplier chain break” . Since the restarting of our operations near the end of this March, our financial performances have been recovering continuously while transportations have returned to normal, all of the supplier chain were restored and all of our factories resumed working.

 

During the nine months ended March 31, 2020 and 2019, total revenues were $17,585,468 and $7,841,437 respectively. The total revenues increased by $9,744,031 or 124% from the nine months ended March 31, 2019 to the nine months ended March 31, 2020.

 

Among the significant increase of $9,744,031 in total revenues for the nine months ended March 31, 2020, $11,581,460 increase was the revenue from Fangguan Electronics which was acquired on December 27, 2018. The acquisition expanded the Company’s operations in the fields of LCM in the PRC and significantly increased the volume of goods (LCD, etc.) being sold.

 

The increase in total revenues due to acquisition of Fangguan Electronics was partially offset by the decreases of $1,837,429 related to the other business (excluding Fangguan Electronics) for the nine months ended March 31, 2020 compared to 2019. After Fangguan Electronics was acquired, all business of Fangguan Photoelectric was replaced by Fangguan Electronics, which caused total revenues to decrease by $2,407,535 respectively for the nine months ended March 31, 2020.

 

Cost of Revenue

 

 

Cost of revenues included the cost of raw materials, labor, depreciation, overhead and finished products purchased.

 

During the three months ended March 31, 2020 and 2019, the total cost of revenues was $2,506,518 and $2,271,380, respectively. The total cost of revenues increased by $235,138 or 10% from the three months ended March 31, 2019 to the three months ended March 31, 2020.

 

During the nine months ended March 31, 2020 and 2019, the total cost of revenues was $14,850,194 and $6,618,015 respectively. The total cost of revenues increased by $8,232,179 or 124% from the nine months ended March 31, 2019 to the nine months ended March 31, 2020.

 

Among the significant increase of $8,232,179 in total cost of revenues for the nine months ended March 31, 2020 compared to 2019, the $9,991,514 increase can be directly attributed to the acquisition of Fangguan Electronics on December 27, 2018.

 

The increase in total cost of revenues due to acquisition of Fangguan Electronics was partially offset by the decreases of $1,759,335 related to the other business (excluding Fangguan Electronics) for the nine months ended March 31, 2020 compared to 2019. After Fangguan Electronics was acquired, all business of Fangguan Photoelectric was replaced by Fangguan Electronics, which caused total cost of revenues to decrease by $2,076,990 for the nine months ended March 31, 2020.

 

Gross Profit

 

 

During the three months ended March 31, 2020 and 2019, the gross profit was $245,652 and $623,422, respectively.

 

Our gross profit margin was at 9% during the three months ended March 31, 2020 as compared to 22% for the three months ended March 31, 2019.

 

25


 

 

The decrease in both gross profit and gross profit margin can be attributed to the fact that starting from second fiscal quarter, the Company adopted the new business strategy to have low gross profits and increase sales volume.

 

During the nine months ended March 31, 2020 and 2019, the gross profit was $2,735,274 and $1,223,422 respectively.

 

Our gross profit margin maintained at 16% during both the nine months ended March 31, 2020 and the nine months ended March 31, 2019. Selling, General and Administrative Expenses

 

Our selling, general and administrative expenses mainly comprised of payroll expenses, transportation, office expense, professional fees, freight and shipping costs, rent, and other miscellaneous expenses.

 

During the three months ended March 31, 2020 and 2019, selling, general and administrative expenses were $499,616 and $392,367, respectively. During the nine months ended March 31, 2020 and 2019, selling, general and administrative expenses were $1,378,241 and $686,132, respectively.

The difference can be attributed to the depreciation and amortization expenses, payroll expenses, professional fees and other expenses incurred during the three and nine months ended March 31, 2020 after Fangguan Electronics became a variable interest entity of the Company on December 27, 2018.

 

Research and Development Expenses

 

Our research and development expenses are mainly comprised of payroll expenses of research staff, and other miscellaneous expenses. During the three months ended March 31, 2020 and 2019, research and development expenses were $139,029 and $158,562, respectively.

During the nine months ended March 31, 2020 and 2019, research and development expenses were $645,880 and $158,562, respectively. All research and development expenses were incurred by Fangguan Electronics.

 

Other Incomes (Expenses)

 

 

Other expenses consisted of interest expense, net of interest income. Other incomes consisted primarily of a change in fair value of derivative liability and subsidy income.

 

During the three months ended March 31, 2020 and 2019, other incomes (expenses) were $(235,875) and $(34,412), respectively. During the nine months ended March 31, 2020 and 2019, other incomes (expenses) were $(311,638) and $(34,412), respectively.

The difference of interest expense was mainly due to the new issuances of convertible notes during the three and nine months ended March 31, 2020. In addition, the acquisition of Fangguan Electronics on December 27, 2018 also contributed to the increase of interest expense as Fangguan Electronics borrowed short-term bank loan during the three and nine months ended March 31, 2020.

 

The subsidy income was from Fangguan Electronics which received government subsidies in July and December 2019.

 

The change in fair value of derivative liability can be attributed to the new issuances of convertible notes during the three and nine months ended March 31, 2020.

 

26


 

 

Net Income (Loss)

 

 

During the three months ended March 31, 2020 and 2019, our net income (loss) was $(598,906) and $21,064, respectively.

 

The change can be attributed to the decrease in gross profits and the increase of expenses during the three months ended March 31, 2020. During the nine months ended March 31, 2020 and 2019, our net income was $248,028 and $205,071, respectively.

The difference can be attributed to increase in gross profits netting off by the increase of expenses during the nine months ended March 31, 2020 due to the acquisition of Fangguan Electronics.

 

Liquidity and Capital Resources

 

Cash Flow from Operating Activities

 

Duri ng the nine months ended March 31, 2020, net cash provided by operating activities was $641,370 compared to net cash used in operating activities of

$900,588 for the nine months ended March 31, 2019. The change was mainly due to the increase of $42,957 in the net income, an increase of $728,994 resulting from adjustments to net income for non-cash items, and a decrease of $770,007 in cash outflow from changes in operating assets and liabilities in the nine months ended March 31, 2020 compared to same period in 2019.

 

Cash Flow from Investing Activities

 

During the nine months ended March 31, 2020, net cash used in investing activities was $71,895 compared to net cash provided by investing activities of $649,216 for the nine months ended March 31, 2019. Cash used in the acquisition of the equipment increased by $155,235 in the nine months ended March 31, 2020 compared to same period in 2019 due to acquisition of Fangguan Electronics. In addition, the Company also received cash of $687,591 in December 2018 due to the acquisition of Fangguan Electronics.

 

Cash Flow from Financing Activities

 

 

During the nine months ended March 31, 2020, cash provided by financing activities was $787,503, which was primarily due to the proceeds received from issuance of convertible notes. During the nine months ended March 31, 2019, the Company received $588,062 in cash for financing activities, which was primarily attributable to the proceeds from the related party loans offsetting by the return of capital to non-controlling interests.

 

As of March 31, 2020, we have a working capital of $1,828,672.

 

Our total current liabilities as of March 31, 2020 were $8,202,791 and mainly consist of $2,540,543 for a short-term bank loan, $2,569,420 in accounts payable, the amount due to related parties of $2,032,723, the convertible notes payable net of debt discount and loan cost of $347,427, the derivative liability of $446,852. The Company’s President is committed to providing for our minimum working capital needs for the next 12 months, and we do not expect the previous related party loan be payable for the next 12 months. However, we do not have a formal agreement that states any of these facts. The remaining balance of our current liabilities relates to audit and consulting fees and such payments are due on demand and we expect to settle such amounts on a timely basis based upon shareholder loans to be granted to us in the next 12 months.

 

Future Financings

 

We consider taking on long-term or short-term debt from financial institutions in the immediate future. Besides for the bank funding, we are dependent upon our director and the major shareholder to provide continued funding and capital resources. If continued funding and capital resources are unavailable at reasonable terms, we may not be able to implement our plan of operations. The financial statements do not include any adjustments related to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation.

 

27


 

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Recently Issued Accounting Pronouncements

 

There were no recent accounting pronouncements that have or will have a material effect on the Company’s financial position or results of operations.

 

Contractual Obligations

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act"). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2020.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting subsequent to the fiscal year ended June 30, 2019, which were identified in connection with our management’s evaluation required by paragraph (d) of rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting.

 

Limitations of the Effectiveness of Disclosure Controls and Internal Controls

 

Our management, including our Principal Executive Officer and Principal Financial Officer, does not expect that our disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.

 

28


 

 

The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

PART II - OTHER INFORMATION

 

 

Item 1. Legal Proceedings.

 

From time to time, the Company may become subject to various legal proceedings that are incidental to the ordinary conduct of its business. Although the Company cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters, it makes provision for potential liabilities when it deems them probable and reasonably estimable. These provisions are based on current information and legal advice and may be adjusted from time to time according to developments.

 

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

 

Item 1A. Risk Factors.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

(a) Recent Sales of Unregistered Equity Securities

 

The following sets forth information regarding all unregistered securities sold since January 1, 2020:

 

On February 10, 2020, the Company issued 150,000 shares of common stock to Maxim Group LLC as a part of its compensation, which were valued at $262,500 based on the quoted market price at issuance.

 

On January 31, 2020, the Company issued a total of 12,775 shares of common stock to Power Up Lending Group Ltd for the conversion of debt in the principal amount of $12,000 according to the conditions of the convertible note dated as July 25, 2019.

 

On February 18, 2020, the Company issued a total of 11,834 shares of common stock to Power Up Lending Group Ltd for the conversion of debt in the principal amount of $10,000 according to the conditions of the convertible note dated as July 25, 2019.

 

On February 28, 2020, the Company issued a total of 15,448 shares of common stock to Power Up Lending Group Ltd for the conversion of debt in the principal amount of $12,000 according to the conditions of the convertible note dated as July 25, 2019.

 

On January 10, 2020, the Company entered into a convertible promissory note in the aggregate principal amount of $146,850. In connection with the issuance of this convertible note, holder is entitled, upon the terms and subject to the limitations on exercise and the conditions set forth in the agreement, at any time on or after the date of issuance hereof to purchase from the Company up to 68,750 shares of common stock at an exercise price of $2.80, and warrants exercisable within 5 years from date of issuance.

 

29


 

 

The sales of the above securities were exempt from registration under the Securities Act of 1933, as amended (Securities Act), in reliance upon Section 4(2) of the Securities Act, or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

N/A.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

Exhibit

Number Description of Exhibit

 

 

3.01b Certificate of Amendment to Articles of Incorporation, dated August 7, 2014

3.01c Certificate of Amendment to Articles of Incorporation, dated December 3, 2015

 

 

Filed with the SEC on September 3, 2014 as part of our Current Report on Form 8-K

Filed with the SEC on December 10, 2015 as part of our Current Report on Form 8-K

 

3.02a Bylaws Filed with the SEC on August 23, 2011 as an exhibit to our Registration Statement on Form 10.

3.02b Amended Bylaws, dated August 7, 2014 Filed with the SEC on September 3, 2014 as part of our Current Report on

Form 8-K

4.06 Description of Registrant’s Securities Filed with the SEC on September 30, 2019 as part of our Annual Report on Form 10-K

 

10.1                      Stock Purchase Agreement between Locksley Samuels and Shining Glory Investments Limited, dated November 20, 2015

10.2                      Manufacturing  Agreement,  dated  as  of  August  19,  2016,  by  and between  Jiangxi  Huanming  Technology  Limited  Company  and XinyuIonix Technology Company Limited.

 

Filed with the SEC on November 23, 2015 as part of our Current Report on Form 8-K

Filed with the SEC on August 24, 2016 as part of our Current Report on Form 8-K

 

 

10.4                      Share Purchase Agreement dated December 27, 2018 by and between Ionix Technology, Inc., Changchun Fangguan Electronics Technology Co., Ltd. and the shareholders of Changchun Fangguan Electronics Technology Co., Ltd.

10.5                      Business Operation Agreement dated December 27, 2018 by and between Changchun Fangguan Photoelectric Display Technology Co., Ltd., Changchun Fangguan Electronics Technology Co., Ltd., Jialin Liang and Xuemei Jiang.

10.6                      Exclusive Technical Support Service Agreement dated December 27, 2018 by and between Changchun Fangguan Photoelectric Display Technology Co., Ltd. and Changchun Fangguan Electronics Technology Co., Ltd.

 

 

Filed with the SEC on December 27, 2018 as part of our Current Report on Form 8-K

 

Filed with the SEC on December 27, 2018 as part of our Current Report on Form 8-K

 

Filed with the SEC on December 27, 2018 as part of our Current Report on Form 8-K

 

30


 

 

10.08 Equity Interest Pledge Agreement dated December 27, 2018 by and between Changchun Fangguan Photoelectric Display Technology Co., Jialin Liang and Xuemei Jiang

 

Filed with the SEC on December 27, 2018 as part of our Current Report on Form 8-K

 

31.1                      Certification of Principal Executive Officer Pursuant to Rule 13a-14     Filed herewith.

31.2                      Certification of Principal Financial Officer Pursuant to Rule 13a-14      Filed herewith.

32.1                       CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act   Filed herewith.

32.2                       CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act    Filed herewith. 101.INS*       XBRL Instance Document                                                                   Filed herewith.

101.SCH* XBRL Taxonomy Extension Schema Document Filed herewith. 101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document Filed herewith. 101.LAB* XBRL Taxonomy Extension Labels Linkbase Document Filed herewith. 101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document Filed herewith. 101.DEF* XBRL Taxonomy Extension Definition Linkbase Document Filed herewith.

 

*Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 

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.

 

 

Ionix Technology, Inc.

 

Date: May 15, 2020 By: /s/ Cheng Li

Name: Cheng Li

Title: Chief Executive Officer and Director (Principal Executive Officer)

 

Date: May 15, 2020 By: /s/ Yue Kou

Name: Yue Kou

Title: Chief Financial Officer (Principal Financial Officer)

 

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.

 

31


 

 

Ionix Technology, Inc.

 

Date: May 15, 2020 By: /s/ Cheng Li

Name: Cheng Li

Title: Chief Executive Officer, Director

 

Date: May 15, 2020 By: /s/ Yue Kou

Name: Yue Kou

Title: Chief Financial Officer

 

Date: May 15, 2020 By: /s/ Yan Yang

Name: Yan Yang

Title: President and Treasurer

 

Date: May 15, 2020 By: /s/ Yubao Liu

Name: Yubao Liu Title: Director

 

 

Date: May 15, 2020 By: /s/ Jialin Liang

Name: Jialin Liang Title: Director

 

Date: May 15, 2020 By: /s/ Xuemei Jiang

Name: Xuemei Jiang Title: Director

 

Date: May 15, 2020 By: /s/ Anthony Saviano

Name: Anthony Saviano Title: Independent Director

 

Date: May 15, 2020 By: /s/ Hui Zhang

Name: Hui Zhang

Title: Independent Director

 

Date: May 14, 2020 By: /s/ Yongsheng Fu

Name: Yongsheng Fu Title: Director

 

Date: May 15, 2020 By: /s/ Zhenyu Wang                           

Name: Zhenyu Wang

Title: Independent Director

 

Date: May 15, 2020 By: /s/ Qinghua Shi

Name: Qinghua Shi

Title: Independent Director

 

32


 

 

EXHIBIT 31.01

 

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

 

I, Cheng Li, certify that:

 

1.        I have reviewed this Quarterly Report on Form 10-Q of the Registrant for the period ended March 31, 2020;

 

2.        Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.        Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

 

4.        As the Registrant’s certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

 

a.         Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.        Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.         Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d.        Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

 

5.        As the Registrant’s certifying officer, I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant auditors and the audit committee of the Registrant’s Board of Directors (or persons performing the equivalent functions):

 

a.         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

 

b.        Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

 

Ionix Technology, Inc.

 

Date: May 15, 2020 By: /s/ Cheng Li

Name: Cheng Li

Title: Chief (Principal) Executive Officer


 

 

EXHIBIT 31.02

 

 

CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER

PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

 

I, Yue Kou, certify that:

 

1.        I have reviewed this Quarterly Report on Form 10-Q of the Registrant for the period ended March 31, 2020;

 

2.        Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.        Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

 

4.        As the Registrant’s certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

 

a.         Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.        Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.         Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d.        Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

 

5.        As the Registrant’s certifying officer, I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant auditors and the audit committee of the Registrant’s Board of Directors (or persons performing the equivalent functions):

 

a.         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

 

b.        Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

 

Ionix Technology, Inc.

 

Date: May 15, 2020 By: /s/ Yue Kou

Name: Yue Kou

Title: Chief (Principal) Accounting and Financial Officer


 

 

EXHIBIT 32.01

 

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Cheng Li, the Chief Executive Officer of Ionix Technology, Inc., certify, under the standards set forth and solely for the purposes of 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report on Form 10-Q of the Registrant for the period ended March 31, 2020, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

 

Date: May 15, 2020 Ionix Technology, Inc.

 

By: /s/ Cheng Li

Name: Cheng Li

Title: Chief (Principal) Executive Officer


EXHIBIT 32.02

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Yue Kou, the Chief Accounting and Financial Officer of Ionix Technology, Inc., certify, under the standards set forth and solely for the purposes of 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report on Form 10-Q of the Registrant for the period ended March 31, 2020, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: May 15, 2020 Ionix Technology, Inc.

 

By: /s/ Yue Kou

 

Chief (Principal)

Chief (Principal) Officer

 


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