10-K

2020-10-15

IONIX TECHNOLOGY, INC.  

 

FORM 10-K

(Annual Report)  

 

 

 

 

Filed 09/28/20 for the Period Ending 06/30/20

 

 

      Telephone    86-411-88079120

     CIK     0001528308

     Symbol     IINX

  SIC Code     3841 - Surgical and Medical Instruments and Apparatus Industry     Electrical Components & Equipment

     Sector     Industrials Fiscal Year     06/30


 

 

UNITED STATES

SECURITIES AND EXCHANGE COmmISSION

Washington, D.C. 20549

 

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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, a 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 

 

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

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

 

Title   of each class

Trading Symbol(s)

Name of the principal U.S. market

Common Stock, par value $0.0001 per share

IINX

OTCQB marketplace of OTC Markets, Inc.

 Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of September 28, 2020, there were 116,100,917 shares of common stock issued and outstanding, par value $0.0001 per share.

 

As of September 28, 2020, there were 5,000,000 shares of preferred stock issued and outstanding, par value $0.0001 per share.

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $106,925,663 based upon the price ($1.78) at which the common stock was last sold as of December 31, 2019, the last business day of the registrant’s most recently completed second fiscal quarter, multiplied by the approximate number of shares of common stock held by persons other than executive officers, directors and five percent stockholders of the registrant without conceding that any such person is an “affiliate” of the registrant for purposes of the federal securities laws.


 DOCUMENTS INCORPORATED BY REFERENCE: None 

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PART I

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEmENTS

 

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “foresee,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. These risks and uncertainties include the following:

 

·         The availability and adequacy of our cash flow to meet our requirements;

·         Economic, competitive, demographic, business and other conditions in our local and regional markets;

·         Changes or developments in laws, regulations or taxes in our industry;

·         Actions taken or omitted to be taken by third parties including our suppliers and competitors, as well as legislative, regulatory, judicial and other governmental authorities;

·         Competition in our industry;

·         The loss of or failure to obtain any license or permit necessary or desirable in the operation of our business;

·         Changes in our business strategy, capital improvements or development plans;

·         The availability of additional capital to support capital improvements and development; and

·         Other risks identified in this report and in our other filings with the Securities and Exchange Commission or the SEC.

 

This report should be read completely and with the understanding that actual future results may be materially different from what we expect. The forward looking statements included in this report are made as of the date of this report and should be evaluated with consideration of any changes occurring after the date of this Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward- looking statements, whether as a result of new information, future events or otherwise.

 

Use of Term

 

Except as otherwise indicated by the context, references in this Annual Report to the words "we,""our,""us," the "Company,""IINX," or “Ionix” refers to Ionix Technology, Inc. All references to “USD” or United States Dollars refer to the legal currency of the United States of America.

 

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ITEm 1.       BUSINESS

 

Corporate  Background

 

Ionix Technology, Inc. (the “Company”, formerly known as Cambridge Projects Inc.), a Nevada corporation, was formed on March 11, 2011. The Company was originally formed to pursue a business combination through the acquisition of, or merger with, an operating business. The Company filed a registration statement on Form 10 with the U.S. Securities and Exchange Commission (the “SEC”) on August 23, 2011, and focused its efforts to identify a possible business combination.

 

On November 20, 2015, the Company’s former majority shareholder and chief executive offer, Locksley Samuels (“Seller”), completed a private common stock purchase agreement (the “SPA”) to sell his entire 21,600,000 shares of the Company’s common stock to Shining Glory Investments Limited (“Purchaser”). In connection with the SPA, the Board appointed Ms. Doris Zhou as the Company’s Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and director on November 20, 2015, and Seller concurrently resigned from all positions with the Company. As a result of the SPA, a change in control occurred as (i) Purchaser acquired approximately 65.45% of the Company’s common stock, and (ii) the Company’s sole officer and director after the SPA was Ms. Zhou, who has since resigned.

 

On November 30, 2015, the Company’s board of directors (the “Board”) and the majority of its shareholders approved that (i) the Company change its name from “Cambridge Projects Inc.” to “Ionix Technology, Inc.”, (ii) the Company voluntarily changed its ticker symbol in connection with the name change, and (iii) the Company execute a 3:1 forward stock split, which will increase the Company’s issued and outstanding shares of common stock from 33,001,000 to 99,003,000 (the “Corporate Actions). The Company filed an application with the Financial Industry Regulatory Authority (“FINRA”) to effectuate the Corporate Actions and filed a Form 8-K on December 10, 2015, in regards to the Corporate Actions. On February 3, 2016, FINRA approved the Corporate Actions, which took effect on the market on February 4, 2016. As a result, (i) the Company’s name is now “Ionix Technology, Inc.”, (ii) its new trading symbol is “IINX”, (iii) the 3:1 forward stock split is effective, payable upon surrender, and (iv) the Company’s new CUSIP number is 46222Q107.

 

On February 17, 2016, the Board ratified, approved, and authorized the Company’s acquisition of a wholly-owned subsidiary, Well Best International Investment Limited, a limited liability company formed under the laws of Hong Kong Special Administrative Region (“Well Best”) on September 14, 2015. Well Best was acquired by Qingchun Yang, its current director, on November 10, 2015. One hundred percent interest in Well Best was transferred to Ionix Technology on February 15, 2016.Well Best’s purpose is to act as an investment holding company and pursue new business ventures conducted in the Asia Pacific region excluding China. Well Best has had no activities since inception.

 

On November 7, 2016, the Company’s Board of Directors approved and ratified the incorporation of Lisite Science Technology (Shenzhen) Co., Ltd ("Lisite Science"), a limited liability company formed under the laws of China on June 20, 2016. Well Best is the sole shareholder of Lisite Science. As a result, Lisite Science is an indirect, wholly-owned subsidiary of the Company. Lisite Science focused on marketing the high-end intelligent electronic equipment, specifically a power bank which is a 5 volt 2 amp, 20000mAh lithium ion battery powered portable device offering charging time of 12-18 hours 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. Lisite Science commenced operations in September of 2016.

 

On November 7, 2016, the Company’s Board of Directors approved and ratified the incorporation of Shenzhen Baileqi Electronic Technology Co., Ltd. ("Baileqi Electronic"), a limited liability company formed under the laws of China on August 8, 2016. Well Best is the sole shareholder of Baileqi Electronic. As a result, Baileqi Electronic is an indirect, wholly-owned subsidiary of the Company. Baileqi Electronic focused on marketing the LCD and module for civil electronic products. The module of new energy power system refers to an LCD screen that is 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. Baileqi Electronics commenced operations in September of 2016.On September 1, 2016, Baileqi Electronics entered into a manufacturing agreement with Shenzhen Baileqi Science and Technology Co., Ltd. ("Shenzhen Baileqi S&T") to manufacture products for Baileqi Electronics.

 

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On December 29, 2016, the Company’s Board of Directors approved and ratified the acquisition of 99.9% of the issued and outstanding stock of Welly Surplus International Limited, a limited company formed under the laws of Hong Kong on January 18, 2016, in exchange for 99,999 HK dollars (the “Acquisition”). As a result of the Acquisition, the Company became the majority shareholder of Welly Surplus, owning 99.99% of the issued and outstanding stock of Welly Surplus, and Welly Surplus is now a majority owned subsidiary of the Company. As the closing of the Acquisition, Ms. Zhou was appointed as a member of the board of directors of Welly Surplus. Welly Surplus will act as the accounting and financial base for the Company and shall focus on assisting the Company with all of the Company’s financial affairs. Welly surplus had no activities since inception.

 

On April 7, 2017, Ben William Wong (“Wong”) and Yubao Liu, an individual (“Liu”) entered into a Stock Purchase Agreement (the “Agreement”) whereby Wong agreed to sell and Liu agreed to purchase 5,000,000 shares of the Company’s restricted preferred stock, representing 100% of the total issued and outstanding preferred stock (“Company Preferred Stock”). In consideration for the Company Preferred Stock, Liu agreed to pay to Wong a total of 5,000,000 RMB on or before April 30, 2017. The Agreement closed on April 20, 2017 (the “Closing”). Additionally, on April 5, 2017, Liu and Shining Glory Investments Limited, a British Virgin Islands company (“Shining Glory”), of which Wong is the sole officer and director, entered into a purchase agreement whereby Liu acquired 1 ordinary common stock share (the “Shining Glory Share”) representing approximately 100% of Shining Glory’s outstanding shares of common stock. In consideration for the Shining Glory Share, Liu paid to Wong a total of $1 USD and Wong resigned as a Director of Shining Glory. Concurrently, Liu was appointed as the sole director of Shining Glory. The agreement between Shining Glory and Liu closed on April 20, 2017.

 

On February 20, 2018, the Company ratified and approved the appointment of Jialin Liang as President and a member of the board of directors of Changchun Fangguan Photoelectric Display Technology Co. Ltd ("Fangguan Photoelectric"). On February 20, 2018, the Company’s Board of Directors approved and ratified the incorporation of Fangguan Photoelectric. Fangguan Photoelectric is a wholly owned subsidiary of Well Best International Investment Limited and an indirect wholly-owned subsidiary of Ionix Technology, Inc. (the “Company”). Fangguan Photoelectric focused on marketing LCDs for the Company. In October 2018, Jialin Liang resigned as President and Director of Fangguan Photoelectric. Mr Biao Shang became his successor.

 

On June 28, 2018, the Board of Directors of Ionix Technology, Inc. (the “Company”) approved and ratified the incorporation of Dalian Shizhe New Energy Technology Co., Ltd. (“Shizhe New Energy”) and the Company ratified and approved the appointment of Mr. Liang Zhang as President and a member of the board of directors of Shizhe New Energy . Shizhe New Energy is a wholly owned subsidiary of Well Best International Investment Limited and an indirect wholly- owned subsidiary of Ionix Technology, Inc. In May 2019, Liang Zhang resigned as President and Director of Shizhe New ENERGY. Mr Shikui Zhang became his successor.

 

On December 27, 2018, the Company entered into a Share Purchase Agreement (the “Purchase Agreement”) with Jialin Liang and Xuemei Jiang, each of whom is shareholder (the “Shareholders”) of Changchun Fangguan Electronics Technology Co., Ltd. (PRC) (“Fangguan Electronics”). Pursuant to the terms of the Purchase Agreement, the Shareholders, who together own 95.14% of the ownership rights in Fangguan Electronics, agreed to execute and deliver the Business Operation Agreement dated December 27, 2018 (the “Business Operation Agreement”), the Equity Interest Pledge Agreement dated December 27, 2018 (the “Equity Interest Pledge Agreement”), the Equity Interest Purchase Agreement dated December 27, 2018 (the “Equity Interest Purchase Agreement”), the Exclusive Technical Support Service Agreement dated December 27, 2018 (the “Services Agreement”) and the Power of Attorney dated December 27, 2018 (the “Power of Attorney” and together with the Business Operation Agreement, the Equity Interest Pledge Agreement, the Equity Interest Pledge Agreement and the Services Agreement, the “VIE Transaction Documents”) to the Company in exchange for the issuance of an aggregate of 15,000,000 shares of the Company’s common stock, par value

$.0001 per share (the “Common Stock”), thereby causing Fangguan Electronics to become the Company’s variable interest entity. Together with Purchase Agreement, in exchange of 15 million shares of the Company’s common stock, the Shareholders also agreed to convert shareholder loan of RMB 30 million (approximately $4.4 million) to capital and make cash contribution of RMB 9.7 million (approximately $1.4 million) to capital. The entirety of the transaction will hereafter be referred to as the “Transaction.”

 

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Description of VIE Transaction Documents

 

The material contractual agreements between Changchun Fangguan Photoelectric Display Technology Co. Ltd. (PRC) (“Fangguan Photoelectric”), Fangguan Electronics and its shareholders consist of the following agreements:

 

Business Operation Agreement – This agreement allows Fangguan Photoelectric to manage and operate Fangguan Electronics. Under the terms of the Business Operation Agreement, Fangguan Photoelectric may direct the business operations of Fangguan Electronics, including, but not limited to, borrowing money from any third party, distributing dividends or profits to shareholders, adopting corporate policy regarding daily operations, financial management, and employment, and appointment of directors and senior officers.

 

Exclusive Technical Support Service Agreement – This agreement allows Fangguan Photoelectric to collect 100% of the net profits of Fangguan Electronics. Under the terms of the Service Agreement, Fangguan Photoelectric is the exclusive provider of equipment, advice and consultancy to Fangguan Electronics related to its general business operations, among other things. Fangguan Photoelectric owns all intellectual property rights arising from its performance under the Service Agreement.

 

Power of Attorney – The Shareholders have each executed and delivered to Fangguan Photoelectric a Power of Attorney pursuant to which Fangguan Photoelectric has been granted the Shareholders’ voting power in Fangguan Electronics. Each Power of Attorney is irrevocable and does not have an expiration date.

 

Equity Interest Purchase Agreement – Fangguan Photoelectric and the Shareholders entered into an exclusive option agreement pursuant to which the Shareholders have granted Fangguan Photoelectric or its designee(s) the irrevocable right and option to acquire all or a portion of such Shareholders’ equity interests in Fangguan Electronics. Pursuant to the terms of the agreement, Fangguan Photoelectric and the Shareholders have agreed to certain restrictive covenants to safeguard the rights of Fangguan Photoelectric under the Equity Interest Purchase Agreement. Fangguan Photoelectric may terminate the Equity Interest Purchase Agreement upon prior written notice. The Option Agreement is valid for a period of five (5) years from the effective date, which may be extended by Fangguan Photoelectric.

 

Equity Interest Pledge Agreement – Fangguan Photoelectric and the Shareholders entered into an agreement pursuant to which the Shareholders have pledged all of their equity interests in Fangguan Electronics to Fangguan Photoelectric. The Equity Interest Pledge Agreement serves to guarantee the performance by Fangguan Electronics of its obligations under the VIE Transaction Documents. Pursuant to the terms of the Equity Interest Pledge Agreement, the Shareholders have agreed to certain restrictive covenants to safeguard the rights of Fangguan Photoelectric. Upon an event of default under the agreement, Fangguan Photoelectric may foreclose on the pledged equity interests.

 

As a result of the Transaction, the Company, through its subsidiaries and variable interest entity, is now engaged in the business of the research and development, manufacturing, and marketing of liquid crystal materials, displays and modules in the PRC. All business operations are conducted through our wholly-owned subsidiaries, including Fangguan Photoelectric, and through Fangguan Electronics, our variable interest entity. Fangguan Electronics is considered to be a variable interest entity because we do not have any direct ownership interest in it, but, as a result of a series of contractual agreements between Fangguan Photoelectric, our wholly-owned subsidiary, and Fangguan Electronics and its shareholders, we are able to exert effective control over Fangguan Electronics and receive 100% of the net profits or net losses derived from the business operations of Fangguan Electronics.

 

Prior Operations and Agreements

 

On August 19, 2016, the Board ratified, approved, and authorized the Company, as the sole member of Well Best, on the formation of Xinyu Ionix Technology Company Limited (“Xinyu Ionix”), a company formed under the laws of China on May 19, 2016. As a result Xinyu Ionix is a wholly-owned subsidiary of Well Best and an indirect wholly-owned subsidiary of the Company. The initial plan of Xinyu Ionix was about to focus on developing and designing lithium batteries as well as to act as an investment company that may acquire other businesses located in China. However, due to the high cost and low efficiency, since the approval date of May 19, 2016, Xinyu Ionix conducted no business.

 

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On April 30, 2017, Well Best International Investment Limited (“Well Best”), a wholly-owned subsidiary of the Company, transferred all of its rights, title and interest to all 100% of the issued and outstanding common stock of Xinyu Ionix Technology Company Limited (“Xinyu Ionix”) to Zhengfu Nan for RMB 100($14.49 USD) pursuant to a Share Transfer Agreement dated April 30, 2017 (the “Agreement”). Following the execution of the Agreement, Mr. Nan owns 100% of Xinyu Ionix and assumes all liabilities of Xinyu Ionix. As a result Xinyu Ionix is no longer a wholly-owned subsidiary of Well Best or an indirect wholly- owned subsidiary of the Company.

 

Business Summary

 

Since January 2016, the Company has shifted its focus to becoming an aggregator of energy cooperatives to achieve optimum price and efficiency in creating and producing technology and products that emphasize long life, high output, high energy density, and high reliability. By and through its wholly owned subsidiary, Well Best and the indirect subsidiaries, Baileqi Electronics, Lisite Science, Welly Surplus, Fangguan Photoelectric, Fangguan Electronics and Shizhe New Energy, the Company has commenced its main operations of high-end intelligent electronic equipment and photoelectric display products, became the New energy service provider and IT solution provider, which are in the new-type rising industries.

 

The Company applied various operating approachs. Baileqi Electronics, Lisite Science, Fangguan Photoelectric and Shizhe New Energy focus on the sales of goods and the rendering of service while Fangguan Electronics has been engaged in the business of the research and development, manufacturing, and marketing of liquid crystal materials, displays and modules in the PRC.

 

The Company, Well Best, Welly Surplus, Baileqi Electronics, Lisite Science, Fangguan Photoelectric, Fangguan ElectronicsPhotoelectric and Shizhe New Energy are actively seeking additional new prospects for technology enhancements, design, manufacturing and production of the Company’s operation of high-end intelligent electronic equipment and more cutting-edge LCD technologies, such as Liquid Crystal Module (“LCM“)theportable power banks and TFT products and future product development, and to provide New energy service and IT solution.

 

We are engaged in the business of research and development, manufacturing, and marketing of liquid crystal materials, displays and modules in the PRC. The Company operates through a corporate structure consisting of subsidiaries, variable interest entities (“VIE”), and contractual arrangements. A VIE is a term used by the U.S. Financial Accounting Standards Board to describe a legal business structure whose financial support comes from another corporation which exerts control over the VIE. All of the Company’s business operations are structured around a series of contractual agreements, the VIE Transaction Documents, including the ones between Fangguan Photoelectric, our wholly-owned subsidiary, and Fangguan Electronics and its shareholders. Through the VIE Transaction Documents, we are able to exert effective control over Fangguan Electronics and receive 100% of the net profits derived from the business operations of Fangguan Electronics.

 

Products and Projects

 

Civil Electronics

 

With the high-speed development in the new energy industry, the high-tech and relevant key accessories still play an essential role in the energy industry supply chain. LCD displays are widely used in the end products of the new energy industry.

 

Since the beginning of 2017, the Company has expanded its focus to development and production of LCD’s and modules for civil electronic products and portable power packs. By and through its wholly owned subsidiary, Well Best and the indirect wholly owned subsidiary, Baileqi Electronics and Fangguan Photoelectric, the Company has commenced its operations in China. Baileqi is working on an upgrade to traditional LCD screens with display modules that use the crystal method (“TCM”) and control muddle system integration for professional manufacturing. Today, TCM is widely used in many areas, including electronic operation data displays for renewable energy vehicles, BMS information feedback, HD projectors, communication equipment, and particularly in intelligent robots.

 

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LCD-From China’s Perspective

 

China is one of the largest display panel producers in the world, according to the data provided by China Optics and Optoelectronics Industry Association LCB.Recently, the liquid crystal panels in mainland China reached the top rank in the world in terms of both revenue and output area. China is and has been a big display manufacturing country, however, China is now at a crucial time for change and attempting to evolve from a big country to a powerful display manufacturing country.China is developing out of a “catch up” position intoa phase of advance or qual footing with other competing countriesand has an opportunity to become an industrial leader in the near future. It is understood that in the past year, there were multiple panel manufacturing lines have been put into production or started construction in China, especially the Gen 10.5/11 panel manufacturing lines and many Gen 6 AMOLED manufacturing lines were under construction, which just brings China closer and closer to the position of being one of, if not the largest production regionsfor display panels in the world. China has a number of OLED panel lines put into production or expansion. The scale of investment in OLED is expected to reach $30 billion to $50 billion over the next 3-5 years. BOE, CSOT, Visionox, Tianma and many other manufacturers have launched products such as flexible display, full-screen display, special-shaped display and so on, the domestic high-end displays in China are developing rapidly. The capacity of display panels of China is expected to become the first among all the countries in 2021.

 

LCD-From Industrial Perspective

 

 

At present, the OLED panel Market for mobile phones is almost monopolized by South Korea, with Samsung display accounting for 93.5% and LGD accounting for 2.1%. The influence of Chinese manufacturers is very small, with 2.0% of VINSIONOX, 1.4% of EverDisplay Optronics (EDO) and 0.6% of BOE, which together are less than 5%. From 2019, China began to exert influence on the OLED market. It is estimated that BOE's shipment will reach 50 million pieces (with an annual increase of 1900%), EDO 30 million (with an annual increase of 417%), Vinsionox's 20 million pieces (with an annual increase of 150%), and Tianma's 10 million pieces (with an annual increase of 1011%).

 

Distribution Methods of Products

 

The Company’s products are currently directly shipped from the manufacturers to the distributors and retailers. Marketing and sales departments were established through the Company’s indirect subsidiaries to cope with the growth of the Company. We explore thepotential customer bases using internal resources. Currently, we have both the long-term contracts with our customers and manufacture according to the purchase orders received. In the future, we will continue to seek additional channels of distribution for our products to include wholesale stores and mass retailers. The Company plans to focus primarily on distributing its products regionally, starting in Greater China, and will then seek to expand its distribution channels across the U.S. and internationally.

 

Manufacturing

 

In the next decade, a new high-end TFT-OLED product will dominate the market demand. The company has been seeking the opportunities of implementation of OLED production lines in Shenzhen. Upon the completion of the projected OLED production lines construction, the company will build and expand itself on LCD production base in northern China and OLED production base in southern China.

 

Suppliers of Materials

 

The elements necessary for our products are and will be sourced from several different suppliers located primarily in China on an order-by-order basis. These materials include ITO coated conductive glasses, liquid crystals, integrated circuits and etc. Some of the materials in our products are not readily available in large quantities or are available on a limited basis only. Further, the limited availability of some of these materials could cause significant fluctuations in their costs.

 

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The Company, Baileqi Electronics, Fangguan Electronics and Lisite Science acquire materials from the following list of principal suppliers, dependent on availability and price points:

 

·         Panshi Tengfei Electronics Ltd

·         Keenest

·         Shenzhen Yonglitong Electric Technology Ltd.

·         Shenzhen Huachuang Zhongwei Electric Ltd.

 

*This list of suppliers is subject to change at any time.

 

Our management researches and develops our sources of materials used in the manufacturing of our products. The materials that we source are and will be sent to our manufacturer in China to create our products. The Company does not have any long-term contracts with our suppliers and we cannot be assured that they will be able to meet our demands.

 

Intellectual Property

 

As part of our business, we will seek to protect our intellectual property rights in various ways, including through trademarks, copyrights, trade secrets, including know-how, patents, patent applications, employee and third-party nondisclosure agreements, intellectual property licenses and other contractual rights.

 

Government Regulations Affecting Our Business

 

At this stage in our business, we are unaware of any government regulations that are directly affecting our business, however, as we grow our business activities may become subject to various governmental regulations in different countries in which we operates, including regulations relating to: various business/investment approvals; trade affairs, including customs, import and export control; competition and antitrust; anti-bribery; advertising and promotion; intellectual property; broadcasting, consumer and business taxation; foreign exchange controls; personal information protection; product safety; labor; human rights; conflict; occupational health and safety; environmental; and recycling requirements.

 

Employees of the Company

 

The Company has no significant employees other than our officers and directors. As of June 30, 2020, the Company has no employees, however, our indirect subsidiary Baileqi Electronic has four employees, Lisite Science has three employees, Fangguan Photoelectric has 2 employees as of June 30, Fangguan Electronics has about 188 employees and Dalian Shizhe New Energy has 6 employees. We intend to increase the size of our management team and hire additional employees in the future to manage the continued growth of our company and to increase our sales force and marketing efforts.

 

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WHERE YOU CAN GET ADDITIONAL INFORmATION

 

We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy our reports or other filings made with the SEC at the SEC’s Public Reference Room, located at 100 F Street, N.E., Washington, DC 20549. You can obtain information on the operations of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You can also access these reports and other filings electronically on the SEC’s web site, www.sec.gov.

 

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 1B.   UNRESOLVED STAFF COmmENTS

 

None.

 

ITEm 2.       PROPERTIES

 

Our mailing address in the US is that of our registered agent, at 3773 Howard Hughes Pkwy, Suite 500S, Las Vegas, NV 89169. We changed our address from No. 279 Zhongnan Road to Rm 608, Block B, Times Square, No. 50 People Road Zhongshan District, Dalian City, Liaoning Province, China..

 

One of our subsidiary office in China consists of 7,500 square feet (701 square meters) of office and warehouse space located at 4F, Tea Tree B Building, Guwu Sanwei Industrial Park, Xixiang Street, Baoan District, Shenzhen, Guangdong Province, China 518000. This office is leased by Baileqi Electronic, our indirect subsidiary, for approximately $30,000 (RMB210,300) annually. This lease will expire on May 31, 2021. 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. On July 20, 2020, Lisite Science further extended the lease with Keenest for one more year until July 20, 2021 with annual rent of approximately $1,500 (RMB10,000).

 

We believe that this space is adequate for our current and immediately foreseeable operating needs.

 

ITEm 3.     LEGAL PROCEEDINGS

 

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 4.      mINE SAFETY DISCLOSURE

 

Not applicable.

 

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PART II

 

ITEm  5.     mARKET FOR REGISTRANTCOmmON EQUITY, RELATED STOCKHOLDER mATTERS AND SmALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

 

market Information

 

Our common stock is currently quoted on OTCQB. Our common stock commenced quotation on the OTCQB under the trading symbol “CPJT”. On February 4, 2016, our symbol was changed to “IINX” to reflect the Company’s name change to Ionix Technology, Inc. Our common stock began trading in April 2015. Because we are quoted on the OTCQB, our common stock may be less liquid, receive less coverage by security analysts and news media, and generate lower prices than might otherwise be obtained if it were listed on a national securities exchange.

 

The following table sets forth the high and low bid prices for our Common Stock per quarter as reported by the OTCQB for the quarterly periods indicated below based on our fiscal year end June 30. These prices represent quotations between dealers without adjustment for retail mark-up, markdown or commission and may not represent actual transactions.

 

Fiscal Quarter

High


Low


First Quarter (Jul. 1, 2018– Sept. 30, 2018)

$

2.50

$

1.75

Second Quarter (Oct. 1, 2018 – Dec. 31, 2018)


2.47


2.05

Third Quarter (Jan. 1, 2019– Mar. 31, 2019)


3.00


2.50

Fourth Quarter (Apr. 1, 2019– Jun. 30, 2019)


2.70


2.11






First Quarter (Jul. 1, 2019– Sept. 30, 2019)

$

2.00

$

1.70

Second Quarter (Oct. 1, 2019– Dec. 31, 2019)

$

1.93

$

1.33

Third Quarter (Jan. 1, 2020 – Mar. 31, 2020)

$

1.85

$

0.95

Fourth Quarter (Apr. 1, 2020 – Jun. 30, 2020)

$

1.91

$

0.975

 

Record Holders





As of June 30, 2020, the approximate number of registered holders of our common stock was 189. As of June 30, 2020, there were 114,174,265 shares of common stock issued and outstanding and there were 5,000,000 shares of preferred stock issued and outstanding. There were no shares of common stock subject to outstanding warrants, and there were no shares of common stock subject to outstanding stock options.

 

Dividends

 

On November 30, 2015, the Company’s board of directors and majority of its shareholders approved a 3:1forward stock split which increased the Company’s issued and outstanding shares of common stock from 33,001,000 to 99,003,000 (the “Forward Split”). The Forward Split was approved by FINRA and took effect on the market on February 4, 2016. The Forward Split shares were payable upon surrender of certificates to the Company’s transfer agent.

 

We have not declared or paid any cash dividends on our common stock nor do we anticipate paying any in the foreseeable future. Furthermore, we expect to retain any future earnings to finance our operations and expansion. The payment of cash dividends in the future will be at the discretion of our Board of Directors and will depend upon our earnings levels, capital requirements, any restrictive loan covenants and other factors the Board considers relevant.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

None.

 

 

25


 

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

 

The following sets forth certain information concerning securities which were sold or issued by us without the registration of the securities under the Securities Act of 1933 in reliance on exemptions from such registration requirements within the past three years:

 

On February 17, 2016, the Company entered into a subscription agreement to sell 5,000,000 preferred shares (the “Preferred Shares”) for $50,000 in cash ($0.01 per share). No commissions were paid to any broker or third party for this transaction.

 

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.

 

In December 2019, the Company engaged Maxim Group LLC (“Maxim”) for financial advisory and investment banking services 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 for the services. On May 19, 2020, the Company and Maxim mutually agreed to terminate all rights and obligations under their agreements and in May 2020, Maxim returned 75,000 shares of common stock shares to the Company for cancellation.

 

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 conditions of the convertible note dated as July 25, 2019.

 

On May 19, 2020, the Company issued a total of 16,484 shares of common stock to Power Up Lending Group Ltd for the conversion of debt in the principal amount of $15,000 according to the conditions of the convertible note dated as July 25, 2019.

 

On May 29 2020, the Company issued a total of 19,724 shares of common stock to Power Up Lending Group Ltd for the conversion of debt in the principal amount of $15,000 according to the conditions of the convertible note dated as July 25, 2019.

 

On June 18, 2020, the Company issued a total of 20,000 shares of common stock to Crown Bridge Partners, LLC for the conversion of debt in the principal amount of $3,615.6 according to the conditions of the convertible note dated as November 12, 2019.

 

On July 9, 2020, the Company issued a total of 42,079 shares of common stock to Power Up Lending Group Ltd for the conversion of debt in the principal amount of $20,000 according to the conditions of the convertible note dated as July 25, 2019.

 

On July 13, 2020, the Company issued a total of 68,500 shares of common stock to Labrys Fund, LP for the conversion of debt in the principal amount of

$37,503.75 according to the conditions of the convertible note dated as January 10, 2020.

 

On August 19, 2020, the Company issued a total of 222,891 shares of common stock to Power Up Lending Group Ltd for the conversion of debt in $19,000.00 of the principal amount of the Note together with $4,916.22 of accrued and unpaid interest thereto, totaling $23,916.22 according to the conditions of the convertible note dated as July 25, 2019.

 

On August 20,2020, the Company issued a total of 600,000 shares of common stock to Labrys Fund, LP for the conversion of debt in the principal amount of

$54,180 according to the conditions of the convertible note dated as January 10, 2020. The remaining principal balance due under this convertible note after these conversions is $55,166.

 

On September 1, 2020, the Company issued a total of 75,000 shares of common stock to Firstfire Global Opportunities Fund LLC for the conversion of debt in the principal amount of $10,200 according to the conditions of the convertible note dated as September 11, 2019.

 

On September 14, 2020, the Company issued a total of 350,000 shares of common stock to Firstfire Global Opportunities Fund LLC for the conversion of debt in the principal amount of $13,550 according to the conditions of the convertible note dated as September 11, 2019.The remaining principal balance due under this convertible note after these conversions is $141,250.

 

26


 

On September 24, 2020, the Company issued a total of 568,182 shares of common stock to Morningview Financial, LLC for the conversion of debt in the principal amount of $15,000 according to the conditions of the convertible note dated as November 20, 2019.The remaining principal balance due under this convertible note after these conversions is $150,000.

 

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.

Exemption From Registration. The shares of Common Stock and Preferred Stock referenced herein were issued in reliance upon one of the following exemptions: (a)The shares of Common Stock referenced herein were issued in reliance upon the exemption from securities registration afforded by the provisions of

Section 4(2) of the Securities Act of 1933, as amended, ("Securities Act"), based upon the following: (a) each of the persons to whom the shares of Common Stock

were issued (each such person, an "Investor") confirmed to the Company that it or he is an "accredited investor," as defined in Rule 501 of Regulation D promulgated under the Securities Act and has such background, education and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities, (b) there was no public offering or general solicitation with respect to the offering of such shares, (c) each Investor was provided with certain disclosure materials and all other information requested with respect to the Company, (d) each Investor acknowledged that all securities being purchased were being purchased for investment intent and were "restricted securities" for purposes of the Securities Act, and agreed to transfer such securities only in a transaction registered under the Securities Act or exempt from registration under the Securities Act and (e) a legend has been, or will be, placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequently registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act.

 

(b)The shares of common stock referenced herein were issued pursuant to and in accordance with Rule 506 of Regulation D and Section 4(2) of the Securities Act. We made this determination in part based on the representations of the Investor(s), which included, in pertinent part, that such Investor(s) was an “accredited investor” as defined in Rule 501(a) under the Securities Act, and upon such further representations from the Investor(s) that (a) the Investor is acquiring the securities for his, her or its own account for investment and not for the account of any other person and not with a view to or for distribution, assignment or resale in connection with any distribution within the meaning of the Securities Act, (b) the Investor agrees not to sell or otherwise transfer the purchased securities unless they are registered under the Securities Act and any applicable state securities laws, or an exemption or exemptions from such registration are available, (c) the Investor either alone or together with its representatives has knowledge and experience in financial and business matters such that he, she or it is capable of evaluating the merits and risks of an investment in us, and (d) the Investor has no need for the liquidity in its investment in us and could afford the complete loss of such investment. Our determination is made based further upon our action of (a) making written disclosure to each Investor prior to the closing of sale that the securities have not been registered under the Securities Act and therefore cannot be resold unless they are registered or unless an exemption from registration is available, (b) making written descriptions of the securities being offered, the use of the proceeds from the offering and any material changes in the Company’s affairs that are not disclosed in the documents furnished, and (c) placement of a legend on the certificate that evidences the securities stating that the securities have not been registered under the Securities Act and setting forth the restrictions on transferability and sale of the securities, and upon such inaction of the Company of any general solicitation or advertising for securities herein issued in reliance upon Rule 506 of Regulation D and Section 4(2) of the Securities Act.

 

(c)  The shares of Common Stock referenced herein were issued pursuant to and in accordance with Rule 903 of Regulation S of the Act. We completed the offering of the shares pursuant to Rule 903 of Regulation S of the Act on the basis that the sale of the shares was completed in an "offshore transaction", as defined in Rule 902(h) of Regulation S. We did not engage in any directed selling efforts, as defined in Regulation S, in the United States in connection with the sale of the shares. Each investor represented to us that the investor was not a "U.S. person", as defined in Regulation S, and was not acquiring the shares for the account or benefit of a U.S. person. The agreement executed between us and each investor included statements that the securities had not been registered pursuant to the Act and that the securities may not be offered or sold in the United States unless the securities are registered under the Act or pursuant to an exemption from the Act. Each investor agreed by execution of the agreement for the shares: (i) to resell the securities purchased only in accordance with the provisions of Regulation S, pursuant to registration under the Act or pursuant to an exemption from registration under the Act; (ii) that we are required to refuse to register any sale of the securities purchased unless the transfer is in accordance with the provisions of Regulation S, pursuant to registration under the Act or pursuant to an exemption from registration under the Act; and (iii) not to engage in hedging transactions with regards to the securities purchased unless in compliance with the Act. All certificates representing the shares were or upon issuance will be endorsed with a restrictive legend confirming that the securities had been issued pursuant to Regulation S of the Act and could not be resold without registration under the Act or an applicable exemption from the registration requirements of the Act.

 

27


 

Purchases of Equity Securities by the Small Business Issuer and Affiliated Purchasers

 

None.

 

ITEm 6.       SELECTED  FINANCIAL DATA

 

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  7.     mANAGEmENTDISCUSSION  AND ANALYSIS  OF FINANCIAL  CONDITION  AND RESULTS  OF   OPERATION

 

The following discussion should be read in conjunction with our audited financial statements and notes thereto included herein. We caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or our behalf. We disclaim any obligation to update forward-looking statements.

 

Results of Operation for the Years Ended June 30, 2020 and 2019 Revenues

During the year ended June 30, 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 years ended June 30, 2020 and 2019, total revenues were $20,599,228 and $12,348,492 respectively. The total revenues increased by $8,250,736 or 67% from the year ended June 30, 2019 to the year ended June 30, 2020.

 

Among the significant increase of $8,250,736 in total revenues for the year ended June 30, 2020, $11,282,104 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 $3,031,369 related to the other business (excluding Fangguan Electronics) for the year ended June 30, 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 $2,378,359 respectively for the year ended June 30, 2020.

 

28


 

Cost of Revenue

 

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

 

During the year ended June 30, 2020 and 2019, the total cost of revenues was $17,506,433 and $10,153,217, respectively. The total cost of revenues increased by

$7,353,216 or 72 % from the year ended June 30, 2019 to the year ended June 30, 2020.

 

Among the significant increase of $7,353,216 in total cost of revenues for the year ended June 30, 2020 compared to 2019, $9,986,095 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 $2,632,879 related to the other business (excluding Fangguan Electronics) for the year ended June 30, 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 $2,053,837 for the year ended June 30, 2020.

 

Gross Profit

 

During the year ended June 30, 2020 and 2019, the gross profit was $3,092,795 and $2,195,275 respectively.

 

Our gross profit margin was at 15.0% during the year ended June 30, 2020 as compared to 17.8% for the year ended June 30, 2019.

 

The decrease in 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.

 

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 year ended June 30, 2020 and 2019, selling, general and administrative expenses were $1,937,054 and $1,255,523, respectively.

 

 

29


 

The difference can be attributed to the depreciation and amortization expenses, payroll expenses, professional fees and other expenses incurred during the year ended June 30, 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 year ended June 30, 2020 and 2019, research and development expenses were $805,570 and $323,309, respectively.

All research and development expenses were incurred by Fangguan Electronics.

 

Other Incomes (Expenses)

 

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

 

During the year ended June 30, 2020 and 2019, other incomes (expenses) were $(455,040) and $(69,371), respectively.

 

The difference of interest expense was mainly due to the new issuances of convertible notes during the year ended June 30, 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 year ended June 30, 2020.

 

The subsidy income was from Fangguan Electronics which received government subsidies in July, December 2019 and May 2020.

 

The change in fair value of derivative liability can be attributed to the new issuances of convertible notes during the year ended June 30, 2020.

 

The loss on extinguishment of debt can be attributed to the conversion and restruction of convertible notes in the principal amount of $170,516 during the year ended June 30, 2020.

 

30


 

Net Income (Loss)

 

During the years ended June 30, 2020 and 2019, our net income (loss) was $(277,668) and $397,047, respectively.

 

The change can be attributed to the significant increase of interest expenses from the new issuances of convertible notes during the year ended June 30, 2020.

 

Liquidity and Capital Resources Cash Flow from Operating Activities

During the year ended June 30, 2020, net cash provided by operating activities was $936,479 compared to net cash used in operating activities of $ 1,546,825 for the year ended June 30, 2019. The change was mainly due to an increase of $901,005 resulting from adjustments to net income for non-cash items, and a increase of $2,257,014 in cash inflow from changes in operating assets and liabilities in the year ended June 30, 2020 compared to same period in 2019.

 

Cash Flow from Investing Activities

 

During the year ended June 30, 2020, net cash provided by investing activities was $50,492 compared to net cash provided by investing activities of $2,084,752 for the year ended June 30, 2019. Cash used in the acquisition of the equipment increased by $152,859 in the year ended June 30, 2020 compared to same period in 2019 due to the expansion of the production line in Fangguan Electronics in 2020. 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 year ended June 30, 2020, cash used in financing activities was $190,501, compared to net cash used in financing activities of $142,531. The change was primarily due to the repayment of bank loans of $3,271,381 during the year ended June 30, 2020.

 

As of June 30, 2020, we have a working capital of $1,583,538.

 

Our total current liabilities as of June 30, 2020 were $7,582,756 and mainly consist of $2,034,735 for a short-term bank loan, $2,637,792 in accounts payable, the amount due to related parties of $1,716,919, the convertible notes payable net of debt discount and loan cost of $514,390 , the derivative liability of $276,266. The Company’s major shareholder 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.

 

31


 

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.

 

We will require approximately $430,000 to fund our working capital needs as follows:


Audit   and accounting

220,000

Legal   Consulting fees

70,000

Salary   and wages

100,000

Edgar/XBRL filing, transfer agent and miscellaneous

40,000

Total

$                        430,000

 

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.

 

Critical Accounting Policies

 

While our significant accounting policies are more fully described in Note 2 to our financial statements, we believe the following accounting policies are the most critical to aid you in fully understanding and evaluating this management discussion and analysis

 

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.

 

The Company bases its estimates of return 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;

 

32


 

·          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.

 

Comprehensive income

 

ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statement of stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

 

Accounts receivable

 

Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from shipment. Credit is extended based on evaluation of a customer’s financial condition, the customer’s credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. At the end of each period, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers.

 

Use of Estimates

 

The Company’s consolidated financial statements have been prepared in accordance with US GAAP. 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, estimated useful life of intangible assets, provision for staff benefits, 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.

 

Foreign currencies translation

 

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. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statement of operations.

 

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 statement of stockholders’ equity.

 

33


 

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:

微信截图_20201015150853.png



Recently Issued Accounting Pronouncements

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under this guidance, lessees will be required to recognize on the balance sheet a lease liability and a right-of-use asset for all leases, with the exception of short-term leases. The lease liability represents the lessee’s obligation to make lease payments arising from a lease, and will be measured as the present value of the lease payments. The right-of-use asset represents the lessee’s right to use a specified asset for the lease term, and will be measured at the lease liability amount, adjusted for lease prepayment, lease incentives received and the lessee’s initial direct costs. The standard also requires a lessee to recognize a single lease cost allocated over the lease term, generally on a straight-line basis. The new guidance is effective for fiscal years beginning after December 15, 2018. ASU 2016-02 is required to be applied using the modified retrospective approach for all leases existing as of the effective date and provides for certain practical expedients. Early adoption is permitted. The Company is currently evaluating the potential impact of adopting this new standard on its consolidated statements and related disclosures.

 

In February 2018, FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 provides entities the option to reclassify certain "stranded tax effects" resulting from the recent US tax reform from accumulated other comprehensive income ("AOCI") to retained earnings. Under the ASU, reporting entities will select an accounting policy to either reclassify all stranded tax effects caused by tax reform from AOCI to retained earnings, or continue recycling stranded effects (including those caused by tax reform) through earnings in future periods. Further, disclosure of either policy is required in all cases. The reclassification from AOCI to retained earnings is presented in the statement of shareholders equity. The ASU is effective for all entities in fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted for public business entities for which financial statements have not yet been issued, and for all other entities for which financial statements have not yet been made available for issuance. Entities have the option to record the reclassification either retrospectively to each period in which the income tax effects of tax reform are recognized, or at the beginning of the annual or interim period in which the amendments are adopted. The Company determined that the adoption of this new standard has no material impact on its consolidated statements and related disclosures.

 

Compensation—Stock Compensation. In June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvement to Nonemployee Share-based Payment Accounting to amend the accounting for share-based payment awards issued to nonemployees. Under the revised guidance, the accounting for awards issued to nonemployees will be similar to the model for employee awards. The update is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company adopted this new standard effective on January 1, 2019. The adoption of ASU 2018-07 did not have a material impact on the Group’s consolidated financial statements.

 

Fair Value Measurement. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements. Under the guidance, public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The guidance is effective for all entities for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years, but entities are permitted to early adopt either the entire standard or only the provisions that eliminate or modify the requirements. The Company is currently in the process of evaluating the impact of the adoption of this guidance on its consolidated financial statements.

 

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  7A.    QUANTITATIVE  AND  QUALITATIVE  DISCLOSURE  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.

 

34


 

微信截图_20201015151039.png

 

 

35


 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANT

 

To the Stockholders and Board of Directors of Ionix Technology, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Ionix Technology, Inc. and subsidiaries ("the Company") as of June 30, 2020 and 2019, and the related consolidated statements of comprehensive income (loss), stockholders' equity and cash flows for each of the years in the two-year period ended June 30, 2020 and related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended June 30, 2020, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

 

/s/ Prager Metis CPAs, LLC

We have served as the Company's auditor since 2018. Hackensack, New Jersey

September 28, 2020

 

 

F-1


 

 


IONIX TECHNOLOGY, INC. CONSOLIDATED  BALANCE SHEETS



June   30, 2020


June   30, 2019

ASSETS

Current Assets:





Cash and cash equivalents (Note 3 re VIE)


$                1,285,373


$                  509,615

Notes receivable (Note 3 re VIE)


125,798


120,182

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


3,273,141


3,639,030

-   related parties


-


340,026

Inventory (Note 3 re VIE)


3,263,850


3,379,146

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


540,259


129,423

- related parties


357,577


269,498

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


320,296


269,495

Total Current Assets (Note 3 re VIE)


9,166,294


8,656,415






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


6,573,937


7,508,637

Intangible assets, net (Note 3 re VIE)


1,424,404


1,496,399

Deferred tax assets (Note 3 re VIE)


20,743


54,361

Total Assets (Note 3 re VIE)


$              17,185,378


$             17,715,812

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:                                                                                                                                                                                                                                         

 

Short-term bank loan (Note 3 re VIE)

$                2,034,735

$               2,618,296

Accounts payable (Note 3 re VIE)

2,637,792

2,732,327

Advance from customers (Note 3 re VIE)

43,077

114,158

Convertible notes payable, net of debt discount and loan cost

514,390

-

Derivative liability

276,266

-

Due to related parties (Note 3 re VIE)

1,716,919

2,105,338

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

359,577

368,319

Total Current Liabilities (Note 3 re VIE)

7,582,756

7,938,438

Total Liabilities (Note 3 re VIE)

7,582,756

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,

114,174,265 and 114,003,000 shares issued and outstanding as of June 30, 2020

and   2019, respectively

 

 

11,417

 

 

11,400

Additional   paid in capital

9,243,557

8,829,487

Retained earnings

262,198

539,866

Accumulated other comprehensive loss

(357,011)

(45,840)

Total Stockholders' Equity attributable to the Company

9,160,661

9,335,413

Noncontrolling interest

441,961

441,961

Total Stockholders’ Equity

9,602,622

9,777,374

Total Liabilities and Stockholders’ Equity

$              17,185,378

$              17,715,812

 

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

 

 

F-2


 

IONIX TECHNOLOGY, INC.

CONSOLIDATED STATEmENTS OF COmPREHENSIVE INCOmE (LOSS)

 微信截图_20201015151255.png

F-3


 

IONIX TECHNOLOGY, INC.

CONSOLIDATED STATEmENTS OF STOCKHOLDERS' EQUITY

 

 微信截图_20201015151446.png

 

F-4


 

 

IONIX TECHNOLOGY, INC. CONSOLIDATED STATEmENTS OF CASH FLOWS



For the Years Ended June 30,


2020                              2019

CASH FLOWS FROm OPERATING ACTIVITIES

 

Net   income (loss)

$                 (277,668)   $                397,047

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


Depreciation   and amortization

752,251                         372,896

Deferred taxes

32,268                          (14,767)

Stock compensation for advisory services

131,250                                    -

Change in fair value of derivative liability

(151,899)                                   -

Loss on extinguishment of debt

45,958                                    -

Non-cash interest

500,675                                    -

Gain on disposal of property and equipment

(51,369)                                   -

Changes in operating assets and liabilities:


Accounts receivable - non-related parties

262,427                        (106,621)

Accounts receivable - related parties

332,483                        (229,275)

Inventory

17,664                        (419,953)

Advances to suppliers - non-related parties

(417,459)                          39,913

Advances to suppliers - related parties

(96,541)                        (72,405)

Prepaid expenses and other current assets

(59,004)                      (191,410)

Accounts payable - non-related parties

(15,600)                   (1,254,803)

Accounts payable - related parties

-                        (196,373)

Advance   from customers

(68,248)                          33,868

Accrued expenses and other current liabilities

(709)                          95,058

Net cash provided by (used in) operating activities

936,479                     (1,546,825)

 

CASH FLOWS FROm INVESTING ACTIVITIES

Acquisition of property, plant and equipment

 

 

(193,697)                        (40,838)

Acquisition of intangible assets

-                            (1,670)

Proceeds received from sale of equipment

244,189                                    -

Cash received from acquisition

-                         687,591

Cash received from subscription receivable in relation to acquisition

-                      1,439,669

Net cash provided by investing activities

50,492                      2,084,752

 

CASH FLOWS FROm FINANCING ACTIVITIES

Notes receivable

 

 

(9,156)                        (53,865)

Proceeds   from bank loans

2,760,036                                    -

Repayment   of bank loans

(3,271,381)                                   -

Proceeds from issuance of convertible notes payable

722,190                                    -

Repayment of note payable

(46,374)                                   -

Return of capital to non-controlling interests

-                          (58,155)

Repayment of loans from related parties

(345,816)                        (30,511)

Net cash used in financing activities

(190,501)                      (142,531)



Effect of exchange rate changes on cash

(20,712)                            2,757



Net increase in cash and cash equivalents

775,758                         398,153



Cash and cash equivalents, beginning of year

509,615                         111,462



Cash and cash equivalents, end of year

$                1,285,373    $                  509,615

 

Supplemental disclosure of cash flow information

Cash   paid for income tax

 

 

$                   170,543     $                  267,440

Cash   paid for interests

$                   140,330     $                    70,419

 

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 75,000 shares of common stock for advisory services

$                   131,250

$                              -

Issuance of 96,265 shares of common stock for conversion of convertible notes

$                   135,345

$                              -


 

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

 

 

F-5


 

IONIX TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEmENTS June 30, 2020

 

NOTE 1 - NATURE OF OPERATIONS

 

Business

 

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.

 

Acquisition

 

On December 27, 2018, the Company entered into a Share Purchase Agreement (the “Purchase Agreement”) with Jialin Liang and Xuemei Jiang, each of whom are shareholders (the “Shareholders”) of Changchun Fangguan Electronics Technology Co., Ltd. (“Fangguan Electronics”). Pursuant to the terms of the Purchase Agreement, the Shareholders, who together own 95.14% of the ownership rights in Fangguan Electronics, agreed to execute and deliver the Business Operation Agreement, the Equity Interest Pledge Agreement, the Equity Interest Purchase Agreement, the Exclusive Technical Support Service Agreement (the “Services Agreement”) and the Power of Attorney, all together dated December 27, 2018 are referred to the “VIE Agreements”, to the Company in exchange for the issuance of an aggregate of 15,000,000 shares of the Company’s common stock, par value $.0001 per share, thereby causing Fangguan Electronics to become the Company’s variable interest entity. Together with VIE agreements, the Shareholders also agreed to convert shareholder loan of RMB 30 million  (approximately

$4.4 million) to capital and make cash contribution of RMB 9.7 million (approximately $1.4 million) to capital. The entirety of the transaction will hereafter be referred to as the “Transaction”. As a result of the Transaction, the Company is able to exert effective control over Fangguan Electronics and receive 100% of the net profits or net losses derived from the business operations of Fangguan Electronics. Fangguan Electronics manufactures and sells Liquid Crystal Module (" LCM") and LCD screens in China based in Changchun City, Jilin Province, People’s Republic of China. (See Note 3 and Note 9).

 

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 Transaction date were included in the Company’s consolidated financial statements.

 

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

 

Basis of presentation

 

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

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.

 

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.

 

F-6


 

Cash and cash equivalents

 

Cash consists of cash on hand and cash in bank. Cash equivalents represent investment securities that are short-term, have high credit quality and are highly liquid. Cash equivalents are carried at fair market value and consist primarily of money market funds.

 

Accounts Receivable

 

Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from shipment. Credit is extended based on evaluation of a customer's financial condition, the customer’s credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. At the end of each period, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions may be taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of June 30, 2020 and 2019, the company has accounts receivable balance from non-related party of $3,273,141 and $3,639,030, net of allowance for doubtful accounts of $139,609 and $143,768, respectively. No bad debt expense was recorded during the years ended June 30, 2020 and 2019.

 

Inventories

 

Inventories consist of raw materials, working-in-process and finished goods. Inventories are valued at the lower of cost or net realizable value. We determine cost on the basis of the weighted average method. The Company periodically reviews inventories for obsolescence and any inventories identified as obsolete are written down or written off. Although we believe that the assumptions we use to estimate inventory write-downs are reasonable, future changes in these assumptions could provide a significantly different result.

 

Advances to suppliers

 

Advances to suppliers represent prepayments for merchandise, which were purchased but had not been received. The balance of the advances to suppliers is reduced and reclassified to inventories when the raw materials are received and pass quality inspection.

 

Property, plant and equipment

 

Property, plant and equipment are recorded at cost less accumulated depreciation and any impairment. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use. Repairs and maintenance costs are normally expensed as incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalized as an additional cost of the asset.

 

When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in the statement of comprehensive income (loss) in the reporting period of disposition.

 

Depreciation is calculated on a straight-line basis over the estimated useful life of the assets after taking into account their respective estimated residual value. The estimated useful life of the assets is as follows:

微信截图_20201015152558.png

Intangible assets

 

Land use right is recorded as cost less accumulated amortization. Land use rights represent the prepayments for the use of the parcels of land in the PRC where the Company’s production facilities are located, and are charged to expense over their respective lease periods of 50 years. According to the laws of the PRC, the government owns all of the land in the PRC. Company or individuals are authorized to use the land only through land use rights granted by the PRC government for a certain period (usually 50 years).

 

F-7


 

Purchased intangible assets are recognized and measured at fair value upon acquisition. Intangible assets acquired separately and with finite useful lives are carried at costs less accumulated amortization and any accumulated impairment losses. Amortization for intangible assets with finite useful lives is provided on a straight- line basis over their estimated useful lives. Alternatively, intangible assets with indefinite useful lives are carried at cost less any subsequent accumulated impairment losses. The estimated useful lives of the intangible assets are as follows:

 微信截图_20201015152644.png

 

Gains or losses arising from derecognition of the intangible asset are measured at the difference between the net disposal proceeds and the carrying amount of the assets and are recognized in the statement of comprehensive income (loss) when the asset is disposed.

 

Impairment of long-lived assets

 

In accordance with the provisions of ASC Topic 360, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as property, plant and equipment held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.

 

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.

 

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 years ended June 30, 2020 and 2019, respectively:

                                                                                                                                                      For the Years Ended June 30,


2020

2019

Sales of LCM and LCD screens - Non-related parties

$                     17,470,966

$                       8,819,979

Sales of LCM and LCD screens - Related parties

713,008

695,478

Sales of portable power banks

1,709,799

2,238,503

Service contracts

705,455

594,532

Total

$                     20,599,228

$                     12,348,492

 

All the operating entities of the Company are domiciled in the PRC. All the Company’s revenues are derived in the PRC during the years ended June 30, 2020 and 2019.

 

F-8


 

Cost of revenues

 

Cost of revenues includes cost of raw materials purchased, inbound freight cost, cost of direct labor, depreciation expense and other overhead. Write-down of inventory for lower of cost or net realizable value adjustments is also recorded in cost of revenues.

 

Related parties and transactions

 

The Company identifies related parties, and accounts for, discloses related party transactions in accordance with ASC 850, "Related Party Disclosures" and other relevant ASC standards.

 

Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence.

 

Transactions between related parties commonly occurring in the normal course of business are considered to be related party transactions. Transactions between related parties are also considered to be related party transactions even though they may not be given accounting recognition. While ASC does not provide accounting or measurement guidance for such transactions, it requires their disclosure nonetheless.

 

Income taxes

 

Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and discloses in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.

 

As of June 30, 2020 and 2019, the Company did not have any significant unrecognized uncertain tax positions.

 

Comprehensive income (loss)

 

Comprehensive income (loss) is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. Comprehensive income (loss) for the periods presented includes net income (loss), change in unrealized gains (losses) on marketable securities classified as available-for-sale (net of tax), foreign currency translation adjustments, and share of change in other comprehensive income of equity investments one quarter in arrears.

 

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.

 

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 no material effect on our consolidated financial statements as the Company does not have a lease with a term longer than 12 months as of June 30, 2020 (See Note 5).

 

F-9


 

Earnings (losses) per share

 

Basic earnings (losses) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted earnings (losses) 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:

 微信截图_20201015152823.png

 

During the year ended June 30, 2020, the Company had outstanding convertible notes and warrants which represent 899,753 shares of commons stock, among which 670,587 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. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statements of comprehensive income (loss).

 

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:

 微信截图_20201015152934.png

 

Fair Value of Financial Instruments

 

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.

 

F-10


 

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 13).

 

Convertible Instruments

 

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.

 

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

 

The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued.

 

F-11


 

In February 2018, FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 provides entities the option to reclassify certain “stranded tax effects” resulting from the recent US tax reform from accumulated other comprehensive income (“AOCI”) to retained earnings. Under the ASU, reporting entities will select an accounting policy to either reclassify all stranded tax effects caused by tax reform from AOCI to retained earnings, or continue recycling stranded effects (including those caused by tax reform) through earnings in future periods. Further, disclosure of either policy is required in all cases. The reclassification from AOCI to retained earnings is presented in the statement of shareholders equity. The ASU is effective for all entities in fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted for public business entities for which financial statements have not yet been issued, and for all other entities for which financial statements have not yet been made available for issuance. Entities have the option to record the reclassification either retrospectively to each period in which the income tax effects of tax reform are recognized, or at the beginning of the annual or interim period in which the amendments are adopted. The Company determined that the adoption of this new standard has no material impact on its consolidated statements and related disclosures.

 

Compensation—Stock Compensation. In June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvement to Nonemployee Share-based Payment Accounting to amend the accounting for share-based payment awards issued to nonemployees. Under the revised guidance, the accounting for awards issued to nonemployees will be similar to the model for employee awards. The update is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company adopted this new standard effective on January 1, 2019. The adoption of ASU 2018-07 did not have a material impact on the Company’s consolidated financial statements.

 

Fair Value Measurement. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements. Under the guidance, public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The guidance is effective for all entities for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years, but entities are permitted to early adopt either the entire standard or only the provisions that eliminate or modify the requirements. The Company is currently in the process of evaluating the impact of the adoption of this guidance on its consolidated financial statements.

 

In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU 2020-01”), which is intended to clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The Company is currently evaluating the effect of adopting this ASU on the Company’s consolidated financial statements.

 

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 year ended June 30, 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.

 

F-12


 

·         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.

 

·         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 – ACQUISITION AND VARIABLE INTEREST ENTITY

 

On December 27, 2018, the Company entered into VIE agreements with two shareholders of 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. (See Note 1 and Note 9).

 

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.

 

The purchase price was allocated to the fair value of the tangible and intangible assets acquired and liabilities assumed. The Company recorded the fair value of the assets acquired and liabilities assumed as of the acquisition date based on the appraisal report. The purchase price allocated to assets acquired and liabilities assumed as of the acquisition was as follows:

                                                                                                                                                                                                Amounts 

Cash   and cash equivalents

$                             687,591

Notes receivable

67,441

Accounts   receivable, net

2,926,786

Accounts receivable from related parties

46,603

Inventories, net

2,753,359

Advances   to suppliers, net

165,819

Other receivables

61,900

Property, plant and equipment, net

7,832,750

Intangible   assets, net

1,512,104

Deferred   tax assets

54,632

Short-term   bank loan

(2,622,683)

Accounts payable

(3,715,537)

Advance   from customers

(23,654)

Due to   related parties

(1,917,747)

Accrued expenses and other current liabilities

(150,517)

Subscription receivable

1,415,010

Noncontrolling interest

(441,961)

Total consideration

$                          8,651,896

 

The subscription receivable was received in full in April 2019.

 

F-13


 

Following unaudited pro forma combined statement of operations are based upon the historical financial statements of the Company and Fangguan Electronics for the year ended June 30, 2019 and are presented as if the acquisition had occurred at the beginning of the period.

微信截图_20201015153109.png

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.

 

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.

 

F-14


 

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 June   30, 2020


Balance as of June   30, 2019

Cash   and cash equivalents

$                       1,266,426


$                          361,849

Notes receivable

125,798


120,182

Accounts receivable - non-related parties

3,069,629


3,402,986

Inventory

2,639,839


2,916,515

Advances to suppliers - non-related parties

530,670


106,146

Prepaid expenses and other current assets

58,103


63,756

Total   Current Assets

7,690,465


6,971,434





Property, plant and equipment, net

6,568,874


7,506,849

Intangible   assets, net

1,424,404


1,496,399

Deferred   tax assets

20,743


54,361

Total Assets

$                     15,704,486


$                     16,029,043





Short-term   bank loan

$                       2,034,735


$                       2,618,296

Accounts payable

2,637,792


2,637,039

Advance   from customers

27,501


32,372

Due to   related parties

1,407,145


1,449,064

Accrued expenses and other current liabilities

61,856


148,287

Total   Current Liabilities

6,169,029


6,885,058

Total Liabilities

$                       6,169,029


$                       6,885,058

 

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:

 


June 30, 2020

June 30, 2019

Raw materials

$                       666,981

$                       471,189

Work-in-process

500,331

1,719,426

Finished goods

2,096,538

1,188,531

Total Inventories

$                    3,263,850

$                    3,379,146

 

The Company recorded no inventory markdown for the years ended June 30, 2020 and 2019.

 

NOTE 5 - OPERATING LEASE



For the year ended June 30, 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. On July 20, 2020, Lisite Science further extended the lease with Keenest for one more year until July 20, 2021 with annual rent of approximately $1,500 (RMB10,000). (See Note 10).

 

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. On June 5, 2020, Baileqi Electronic further extended the lease with Shenzhen Baileqi S&T for one more year until May 31, 2021 with monthly rent of approximately $2,500 (RMB17,525). (See Note 10).

 

F-15


 

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 year ended June 30, 2020, the Company made $109,563 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 year ended June 30, 2020, including the impact of adopting the new leases standard.

 

On June 30, 2020, this lease agreement was early terminated on a mutually agreed basis between the Company and the landlord. The Company paid the lessor a termination fee of approximately $1,400 (RMB10,000). The lease asset and liability were extinguished accordingly and decreased to zero as of June 30, 2020.

 

NOTE 6 – PROPERTY, PLANT AND EQUIPmENT, NET

 

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



June 30, 2020


June 30, 2019


 



Buildings

$                       4,601,685


$                       4,661,535

Machinery   and equipment

2,822,686


3,036,339

Office equipment

67,091


60,052

Automobiles

98,848


101,793

Subtotal

7,590,310


7,859,719

Less: Accumulated depreciation

(1,016,373)


(351,082)

Property, plant and equipment, net

$                       6,573,937


$                       7,508,637

 

Depreciation expense related to property, plant and equipment was $723,346 and $357,799 for the years ended June 30, 2020 and 2019, respectively.

 

As of June 30, 2020 and 2019, buildings were pledged as collateral for bank loans (See Note 8). NOTE 7 – INTANGIBLE ASSETS, NET

Intangible assets consist of the following:



June 30, 2020


June 30, 2019


 



Land   use right

$                        1,442,456


$                       1,485,428

Computer software

25,039


25,785

Subtotal

1,467,495


1,511,213

Less: Accumulated amortization

(43,091)


(14,814)

Intangible   assets, net

$                        1,424,404


$                       1,496,399

 

Amortization expense related to intangible assets was $28,905 and $15,097 for the years ended June 30, 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 June 30, 2020 and 2019, 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$2.62 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. On May 20,2020, Fangguan Electronics partially repaid this bank loan of approximately US$706,000 (RMB5,000,000).

 

F-16


 

In addition, during May and Jun 2020, Fangguan Electronics issued two one-year commercial acceptance bills with amount of approximately US$198,000 (RMB1,404,904) and maturity date at May 21, 2021 and June 11, 2021. On May 22, 2020 and June 16, 2020, the two commercial acceptance bills were discounted with Industrial Bank at an interest rate of 3.85% and the balance of the two commercial acceptance bills converted to bank loans with Industrial Bank based on a mutual agreement from both parties. This loan was also secured by the same collateral as the above RMB18 million loan under the same bank.

 

NOTE 9 - STOCKHOLDERS' EQUITY

 

Issuance of new shares for acquisition of VIE

 

On December 27, 2018, the Company entered into VIE agreements with two shareholders of 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, the Company issued 15 million shares of common stock to two shareholders of Fangguan Electronics (See Note 1 and Note 3).

 

Forgiveness of related party loan and capital contribution in relation to acquisition

 

In connection with the acquisition of Fangguan Electronics, Fangguan Electronics completed a capital increase of approximately USD 5.8 million (RMB39,711,500) to invest in its OLED flexible screen business. The capital increase of Fangguan Electronics is a personal investment of approximately USD 5.8 million (RMB39,711,500) from Jialin Liang and Xuemei Jiang, members of the Company's board of directors. Among them, Jialin Liang increased capital of about USD 4.7 million (RMB32,211,500), including USD 4.4 million (RMB30,000,000) from conversion of debt to equity and USD 0.3 million (RMB2,211,500) of cash contribution; and Xuemei Jiang increased capital of USD 1.1 million (RMB7,500,000) of cash contribution.

 

Return of capital

 

On March 19, 2019, Fangguan Electronics returned capital of $58,155 to its non-controlling shareholder. Stock Issued for Services

The Company engaged Maxim Group LLC (“Maxim”) 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 based on the quoted market price to Maxim Group LLC as a part of its compensation.

 

On May 19, 2020, the Company and Maxim mutually agreed to terminate all rights and obligations. Pursuant to the Settlement Agreement dated May 19, 2020, Maxim returned 75,000 shares of common stock valued at $131,250 to the Company for cancellation. The net cost of $131,250 was amortized in full during the year ended June 30, 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. The conversion resulted in a loss on extinguishment of debt of

$7,813.

 

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. The conversion resulted in a loss on extinguishment of debt of

$2,901.

 

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 conversion resulted in a loss on extinguishment of debt of

$4,360.

 

On May 19, 2020, the Company issued a total of 16,484 shares of common stock to Power Up Lending Group Ltd for the conversion of debt in the principal amount of $15,000 according to the conditions of the convertible note dated as July 25, 2019. The conversion resulted in a loss on extinguishment of debt of

$7,868.

 

 

F-17


 

On May 29, 2020, the Company issued a total of 19,724 shares of common stock to Power Up Lending Group Ltd for the conversion of debt in the principal amount of $15,000 according to the conditions of the convertible note dated as July 25, 2019. The conversion resulted in a loss on extinguishment of debt of

$2,840.

 

The remaining principal balance due under this convertible note after these conversions is $39,000.

 

On June 18, 2020, the Company issued a total of 20,000 shares of common stock to Crown Bridge Partners, LLC for the conversion of debt in the principal amount of $3,615.6 according to the conditions of the convertible note dated as November 12, 2019. The conversion resulted in a loss on extinguishment of debt of

$15,473. The remaining principal balance due under this convertible note after this conversion is $51,384.

 

NOTE 10 - RELATED PARTY TRANSACTIONS AND BALANCES

 

Purchase from related party

 

During the year ended June 30, 2020, the Company’s subsidiaries, Lisite Science and Baileqi Electronic, purchased $1,630,684 and $37,393 from Keenest and Shenzhen Baileqi S&T which were owned by the Company’s stockholders who own approximately 1.9% and 1.1% respectively of the Company’s outstanding common stock as of June 30, 2020. The amounts of $1,630,684 and $37,393 were included in the cost of revenue for the year ended June 30, 2020.

 

During the year ended June 30, 2019, the Company’s subsidiaries, Lisite Science and Baileqi Electronic, purchased $1,993,512 and $911,121 from Keenest and Shenzhen Baileqi S&T which were owned by the Company’s stockholders who own approximately 1.9% and 1.1% respectively of the Company’s outstanding common stock. The amounts of $1,993,512 and $911,156 were included in the cost of revenue for the year ended June 30, 2019.

 

During the years ended June 30, 2020 and 2019, the Company’s subsidiary, Changchun Fangguan Photoelectric Display Technology Co. Ltd ("Fangguan Photoelectric"), purchased $0 and $1,505,387 from Fangguan Electronics before Fangguan Electronics became a variable interest entity of the Company on December 27, 2018 (See Note 1 and 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 $1,135,061 were included in the cost of revenue for the years ended June 30, 2020 and 2019.

 

Advances to suppliers - related parties

 

Lisite Science made advances of $357,577 and $269,498 to Keenest for future purchases as of June 30, 2020 and 2019, respectively. Sales to related party and accounts receivable from related party

During the years ended June 30, 2020 and 2019, Baileqi Electronic sold materials of $713,008 and $671,606 respectively to Shenzhen Baileqi S&T. The trade- related balance receivable from Shenzhen Baileqi S&T was $0 and $340,026 as of June 30, 2020 and 2019, respectively.

 

During the year ended June 30, 2019, Fangguan Photoelectric sold products of $23,872 to Fangguan Electronics before Fangguan Electronics became a variable interest entity of the Company on December 27, 2018 (See Note 1 and 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. On July 20, 2020, Lisite Science further extended the lease with Keenest for one more year until July 20, 2021 with annual rent of approximately $1,500 (RMB10,000). (See Note 5).

 

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. On June 5, 2020, Baileqi Electronic further extended the lease with Shenzhen Baileqi S&T for one more year until May 31,2021 with monthly rent of approximately $2,500 (RMB17,525). (See Note 5).

 

F-18


 

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.

                                                                                                                                                 June 30, 2020         June 30, 2019 

Ben Wong

(1)

$                      143,792

$                       143,792

Yubao Liu

(2)

102,938

498,769

Xin Sui

(3)

2,016

2,016

Baozhen Deng

(4)

9,437

3,900

Baozhu Deng

(5)

-

5,303

Jialin Liang

(6)(13)

901,460

928,314

Xuemei Jiang

(7)(12)

505,685

520,750

Liang Zhang

(8)

-

625

Zijian Yang

(9)

-

1,869

Shikui Zhang

(10)

28,528

-

Changyong Yang

(11)

23,063

-



$                    1,716,919

$                    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 1.1% of the Company’s outstanding common stock, and the owner of Shenzhen Baileqi S&T.

 

   (5)  Baozhu Deng is a relative of Baozhen Deng and director of Baileqi Electronic.

 

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

 

   (7)  Xuemei Jiang is a stockholder of the Company and 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 is a stockholder of the Company and serves as the legal representative and general manager of Shizhe New Energy since May 2019.

 

(11) Changyong Yang is a stockholder of the Company, who owns approximately 1.9% of the Company’s outstanding common stock, and the owner of Keenest.

 

(12) The liability was assumed from the acquisition of Fangguan Electronics.

 

       (13) The Company assumed liability of approximately $5.8 million (RMB39,581,883) from Jialin Liang during the acquisition of Fangguan Electronics. During the year ended June 30, 2019, approximately $4.4 million (RMB30,000,000) liability assumed was forgiven and converted to capital.

 

During the year ended June 30, 2020, Yubao Liu was refunded $46,312 by Welly Surplus and Well Best after netting off his advances to Well Best. In addition, Yubao Liu agreed to decrease his advances to Well Best of $349,519 (RMB2,474,417) to pay off the trade receivables due from Shenzhen Baileqi S&T to Baileqi Electronic on behalf of Shenzhen Baileqi S&T.

 

During the year ended June 30, 2020, Baileqi Electronic refunded $5,303 to Baozhu Deng and Baozhen Deng advanced $5,537 to Baileqi Electronic. Shizhe New Energy refunded $625 and $1,869 to Liang Zhang and Zijian Yang respectively. Shikui Zhang advanced $28,528 to Shizhe New Energy. Changyong Yang, a stockholder of the Company, advanced $23,063 to Lisite Science.

 

F-19


 

During the year ended June 30, 2019, Yubao Liu advanced $428,311 to Well Best. Baileqi Electronic borrowed $5,303 from Baozhu Deng. In addition, Baozhen Deng refunded $7,585 to Baileqi Electronic. Liang Zhang and Zijian Yang advanced $625 and $1,869 to Shizhe New Energy, respectively. Fangguan Electronics refunded approximately $0.47 million (RMB3.2 million) to Jialin Liang.

 

NOTE 11 – 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:

 

 微信截图_20201015153711.png


 

F-20


 

NOTE 12 - 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 and subject to the corporate tax rate of 21% on its taxable income.

 

For the years ended June 30, 2020 and 2019, the Company did not generate income in United States of America and no provision for income tax was made. 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 June 30, 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 years ended June 30, 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 to 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:


微信截图_20201015153109.png 

F-21


 

The tax effects of temporary differences that give rise to the Company’s net deferred tax assets are as follows:


微信截图_20201015154210.png 

As of June 30, 2020, the Company has approximately $2,488,000 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. It is more likely than not that the deferred tax assets resulted from net operating loss carryforward 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 resulted from net operating loss carryforward as of June 30, 2020.

 

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 determined that the Company did not have tax liabilities resulting from GILTI for the years ended June 30, 2020 and 2019 due to net operating loss carryforwards available in the U.S. Therefore, there was no accrual of GILTI liability as of June 30, 2020 and 2019.

 

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.

 

F-22


 

 

NOTE 13 - CONVERTIBLE DEBT

 

Convertible notes

 

As of June 30, 2020, convertible notes payable consists of:




Note Balance


Debt discount


Carrying Value



 


 



Power Up Lending Group Ltd

(1)

$                     39,000


$                     (1,953)


$                     37,047

Firstfire Global Opportunities Fund LLC

(2)

165,000


(32,909)


132,091

Power Up Lending Group Ltd

(3)

53,000


(13,995)


39,005

Crown   Bridge Partners

(4)

51,384


(15,095)


36,289

Morningview   Financial LLC

(5)

165,000


(64,416)


100,584

BHP   Capital NY

(6)

91,789


-


91,789

Labrys   Fund, LP

(7)

146,850


(69,265)


77,585

Total


$                   712,023


$                 (197,633)


$                   514,390

 

(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 year ended June 30, 2020, Power Up Lending Group Ltd elected to convert $64,000 of the principal amount of the convertible notes into 76,265 shares of the Company’s common stock. The conversion resulted in a loss on extinguishment of debt of $25,782. (See Note 9)

 

(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.

 

During the year ended June 30, 2020, Crown Bridge Partners, LLC elected to convert $3,615.6 of the principal amount of the convertible notes into 20,000 shares of the Company’s common stock. The conversion resulted in a loss on extinguishment of debt of $15,473. (See Note 9)

 

(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.

 

F-23


 

(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.

 

On April 14, 2020, the Company entered into an Amendment to Securities Purchase Agreement with BHP Capital NY, Inc dated on December 3, 2019. The Company agreed to pay off this note holder in 6 installments of $23,186.79 each, with an aggregate amount of $139,120.76 (including principal  of

$137,114.25 and interest of $2,006.51). The repayment resulted in a loss on extinguishment of debt of $4,703.

 

In May and June 2020, the Company paid two installments totaling $46,373 (including principal of $45,325 and interest of $1,048) and note payable balance decreased to $91,789 as of June 30, 2020. During the period from July to September 2020, the Company continued to pay 3 installments of an aggregate amount of $69,561 (including principal of $68,699 and interest of $862). As of the date of this report, the Company has made total five installments payment of an aggregate amount of $115,934 (including principal of $114,024 and interest of $1,910). The Company will pay the last installment of $23,186.79 in October 2020.

 

(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.

 

For the year ended June 30, 2020, the Company recorded the amortization of debt discount of $500,675 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 year ended June 30, 2020

$                          555,696

Converted

(42,308)

Debt settlement

(85,223)

Change in fair value recognized in operations

(151,899)

Balance   at June 30, 2020

$                          276,266

 

The estimated fair value of the derivative instruments was valued using the Black-Scholes option pricing model at issuance date and June 30, 2020, using the following assumptions:

 微信截图_20201015154334.png

 

F-24


 

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.

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

微信截图_20201015154411.png 

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 feature and warrants. Accordingly, $147,492 was allocated to warrants and recorded in additional paid in capital account during the year ended June 30, 2020.

 

The details of the outstanding warrants are as follows:

微信截图_20201015154524.png

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”.

 

F-25


  

The following tables provide the business segment information for the years ended June 30, 2020 and 2019.

 微信截图_20201015154636.png


NOTE 15 - COmmITmENTS AND CONTINGENCIES

Lease commitment


 Lisite Science leases office and warehouse space from Keenest, a related party, with annual rent of approximately $1,500 (RMB10,000) until July 20, 2021. Baileqi Electronic leases office and warehouse space from Shenzhen Baileqi S&T, a related party, with monthly rent of approximately $2,500 (RMB17,525) until May 31, 2021.

The future minimum lease payments for non-cancelable operating leases held by the Company as of June 30, 2020 was $28,643, which will be paid in fiscal year ended June 30, 2021.



NOTE 16- - SUBSEQUENT EVENTS 

Stock Issued for Conversion of Convertible Debt

 

(1)    On July 9, 2020, the Company issued a total of 42,079 shares of common stock to Power Up Lending Group Ltd for the conversion of debt in the principal amount of $20,000 according to the conditions of the convertible note dated as July 25, 2019.

 

On August 19, 2020, the Company issued a total of 222,891 shares of common stock to Power Up Lending Group Ltd for the conversion of debt in the principal amount of $19,000 together with $4,916.22 of accrued and unpaid interest, totaling $23,916.22 according to the conditions of the convertible note dated as July 25, 2019.

 

The remaining principal balance due under this convertible note after these two conversions is zero.

 

(2)    On July 13, 2020, the Company issued a total of 68,500 shares of common stock to Labrys Fund, LP for the conversion of debt in the principal amount of

$37,503.75 according to the conditions of the convertible note dated as January 10, 2020.

 

On August 20, 2020, the Company issued a total of 600,000 shares of common stock to Labrys Fund, LP for the conversion of debt in the principal amount of

$54,180 according to the conditions of the convertible note dated as January 10, 2020.

 

The remaining principal balance due under this convertible note after these two conversions is $55,166.

 

(3)    On September 1, 2020, the Company issued a total of 75,000 shares of common stock to Firstfire Global Opportunities Fund LLC for the conversion of debt in the principal amount of $10,200 according to the conditions of the convertible note dated as September 11, 2019.

 

F-26


 

On September 14, 2020, the Company issued a total of 350,000 shares of common stock to Firstfire Global Opportunities Fund LLC for the conversion of debt in the principal amount of $13,550 according to the conditions of the convertible note dated as September 11, 2019.

 

The remaining principal balance due under this convertible note after these two conversions is $141,250.

 

(4)    On September 24, 2020, the Company issued a total of 568,182 shares of common stock to Morningview Financial, LLC for the conversion of debt in the principal amount of $15,000 according to the conditions of the convertible note dated as November 20, 2019. The remaining principal balance due under this convertible note after this conversion is $150,000.

 

Note Settlement Agreement

 

On September 16, 2020, the Company entered into a Note Settlement Agreement with Power Up Lending Group Ltd., the holder of the Company’s convertible debt. The Note Settlement Agreement terminated their convertible note dated November 4, 2019 after the Company paid an aggregate of $75,000 on September 16, 2020.

 

In addition, to comply with the Amendment agreement signed with BHP Capital NY, Inc on April 14, 2020 regarding its note payable, the Company paid an aggregate of $69,561 (including principal of $68,699 and interest of $862) during July to September 2020. The Company will make the last payment of $23,186.79 in October 2020 to fulfill its obligation in full (See Note 13).

 

F-27


 

ITEm  9.     CHANGES IN AND DISAGREEmENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

Paritz & Company, P.A. ("Paritz"), the independent registered public accounting firm for Ionix Technology, Inc. (the "Company"), announced effective October 16, 2018, that Paritz was acquired by Prager Metis CPA’s LLC (“Prager”), and that all of the employees and partners of Paritz joined Prager.

 

As a result, effective October 16, 2018, Paritz resigned as the Company’s independent registered public accounting firm. The Company’s Board of Directors engaged Prager to serve as the Company’s independent registered public accounting firm effective October 18, 2018.

 

The reports of Paritz on the financial statements of the Company as of and for the fiscal years ended June 30, 2018 and 2017, contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles, except that the audit reports on the financial statements of the Company for the years ended June 30, 2018 and 2017 contained a modification expressing substantial doubt regarding the Company’s ability to continue as a going concern.

 

During the Company’s fiscal years ended June 30, 2018 and 2017 and the subsequent interim period from July 1, 2018 to October 16, 2018, and in connection with the audit of the Company’s financial statements for such periods, there were no disagreements between the Company and Paritz on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Paritz, would have caused Paritz to make reference to the subject matter of such disagreements in connection with its audit reports on the Company’s financial statements.

 

During the Company’s fiscal years ended June 30, 2018 and 2017, and the subsequent interim period from July 1, 2018 to October 16, 2018, there were no reportable events within the meaning of Item 304(a)(1)(v) of Regulation S-K.

 

During the Company’s fiscal years June 30, 2018 and 2017, and the subsequent interim period from July 1, 2018 to October 16, 2018, the Company did not consult with Prager regarding any of the matters set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.

 

The Company has provided Paritz with a copy of the disclosures in the Current Report on Form 8-K filed with the SEC on October 19, 2018 (the “8-K”) and has requested that Paritz furnish it with a letter addressed to the Securities and Exchange Commission stating whether or not Paritz agrees with the statements in the 8- K.

 

ITEm 9A.   CONTROLS AND PROCEDURES

 

As of June 30, 2020, our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as required by Exchange Act Rule 13a-15.Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted 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 in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed by, or under the supervision of, our chief executive officer and chief financial officer, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (GAAP). Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

 

Management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the 2013 Internal Control-Integrated Framework. Based on its evaluation, management has concluded that the Company’s internal control over financial reporting was not effective as of June 30, 2020.

 

36


 

During the year ended June 30, 2020, management identified the following weaknesses, which were deemed to be material weaknesses in internal controls:

 

1 Due to the size of the Company and available resources, there are limited personnel to assist with the accounting and financial reporting function, which results in a lack of segregation of duties.

              2. We did not implement appropriate information technology controls – As at June 30, 2020, the Company retains copies of all financial data and material agreements; however there is no formal procedure or evidence of normal backup of the Company's data or off-site storage of data in the event of theft, misplacement, or loss due to unmitigated factors. 

 

Pursuant to Regulation S-K Item 308(b), this Annual Report on Form 10-K does not include an attestation report of our company’s registered public accounting firm regarding internal control over financial reporting.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. A control system, no matter how well designed and operated can provide only reasonable, but not absolute, assurance that the control system’s objectives will be met. 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 cost.

 

Changes in Internal Control and Financial Reporting

 

There have been no changes in our internal control over financial reporting in the fiscal year ended June 30, 2020, 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.

 

ITEm 9B.                OTHER  INFORmATION

 

On September 29, 2019, our Board of Directors approved and adopted a Code of Ethics which is applicable to our officers, directors, and senior executives, including our Chief Financial Officer, Treasurer and Chief Accounting Officer. This Code embodies our commitment to conduct business in accordance with the highest ethical standards and applicable laws, rules and regulations.

 

37


 

PART III

 

ITEm  10.   DIRECTORS, EXECUTIVE  OFFICERS  AND  CORPORATE GOVERNANCE

 

Identification of Directors and Executive Officers and Term of Office

 

The following table sets forth the names and ages of our current directors and executive officers and those of our wholly owned direct subsidiary and indirect wholly owned subsidiaries. Our Board of Directors appoints our executive officers. Each director of the Company serves for a term of one year or until the successor is elected at the Company’s annual shareholders’ meeting and is qualified, subject to removal by the Company’s shareholders. Each officer serves, at the pleasure of the Board of Directors, for a term of one year and until the successor is elected at the annual meeting of the Board of Directors and is qualified. There are no family relationships among our directors or executive officers. None of our directors or officers has been affiliated with any company that has filed for bankruptcy within the last five years. The Company is not aware of any proceedings to which any of the Company’s officers or directors, or any associate of any such officer or director, is a party adverse to the Company or any of the Company’s subsidiaries or has a material interest adverse to it or any of its subsidiaries.

 

Ionix Technology, Inc.

 

 

Name

Age

Position

Date of Appointment

Cheng Li

65

Chief Executive Officer, Director, and Chairman   of the Board

April   25, 2019

Yue Kou

45

Chief   Financial Officer

May 27, 2016

Yang Yan

40

President   and Treasurer

March   16, 2020

Yubao Liu

46

Director

May 16, 2018

Jialin Liang

52

Director

January   22, 2019

Xuemei Jiang

45

Director

January   22, 2019

Anthony Saviano

51

Independent Director

July   31, 2019

Yongping Wang

52

Independent Director

May 25, 2020

Zhenyu Wang

45

Independent Director

July   31, 2019

Yongsheng Fu

65

Independent Director

July   31, 2019

Qinghua Shi

44

Independent Director

July   31, 2019

Long Xie

44

Secretary   of the Company

January   7, 2020

 

Subsidiaries:

 

Welly Surplus International Limited

 

The following table sets forth the names and ages of Welly Surplus’s directors and executive officers as of June 30, 2020.

 

Name

Age

Position

Date of Appointment

Xin Sui

39

President   and Director

December   29, 2016

 

Well Best International Investment Limited

 

The following table sets forth the names and ages of Well Best’s directors and executive officers as of June 30, 2020.

 

Name

Age

Position

Date of Appointment

Qingchun Yang

56

President   and Director

February   17, 2016

 

38


 

Lisite Science Technology (Shenzhen) Co., Ltd.

 

The following table sets forth the names and ages of Lisite Science’s directors and executive officers as of June 30, 2020.

 

Name

Age

Position

Date of Appointment

Yun Yang

37

President   and Director                                             November   7, 2016

 

Shenzhen Baileqi Electronic Technology Co., Ltd

 

The following table sets forth the names and ages of Baileqi Electronic’s directors and executive officers as of June 30, 2020.

 

Name

Age

Position

Date of Appointment

Baozhu Deng

33

President   and Director

November   15, 2017

 

Changchun Fangguan Photoelectric Display Technology Co. Ltd

 

The following table sets forth the names and ages of Fangguan Photoelectric’s directors and executive officers as of June 30, 2020.

 

Name

Age

Position

Date of Appointment

Biao Shang

41

President   and Director

October   20, 2018

 

Dalian Shizhe New Energy Technology Co., Ltd

 

The following table sets forth the names and ages of Dalian Shizhe New Energy’s directors and executive officers as of June 30, 2020.

 

Name

Age

Position

Date of Appointment

Shikui Zhang

45

President   and Director

June   28, 2018

 

 

Information about our Executive Officers

 

The business experience during the past five years of the person presently listed above as an Officer or Director of the Company is as follows:

 

Cheng Li - Mr. Cheng Li has participated in the operation and management of the Company since 2015. From April 2013 to March 2015, Mr. Li served as the general Manager and financial controller of Dalian Huanyu Venture Capital Co., Ltd, where he engaged in project approvals, financing, and investments and accumulated substantial experience in the field of high-tech and financing operations. From 1996 to 2012, Mr. Li served in the Ministry of Industry and Information Technology of Jiamusi city, Heilongjiang Province and the Association for Science and Technology of Jiamusi. He received his undergraduate degree in 1980 from Liaoning Normal University.

 

Yue Kou- Ms. Kou is a member of the Hong Kong Institute of Certified Public Accountants, the Association of Chartered Certified Accountants, and the Chinese Institute of Certified Public Accountants. Ms. Kou has 20 years of solid experience in statutory auditing, international accounting, and publicly listed companies. Ms. Kou started her career as Chief Accountant (1996-1999) with Xinmao Tech Holding Limited, a company in China. From 1999-2002, she was employed as a staff accountant in the Ernst & Young, Beijing Branch focusing on external audit and international accounting conversions. From 2002-2006, she worked as an account manager with China Data Broadcasting Holding Ltd, a publicly listed company on the Hong Kong Stock Exchange. From 2006 to present, Ms. Kou worked as an auditor and financial controller for three different audit firms: (i) Zhongyi (HK) CPA Limited, (ii) Thomas Lee and Partners, and (iii) GDT CPA Limited. Since May 27, 2016, Ms. Kou has worked for Ionix Technology Inc., as the Chief Financial Officer.

 

Yang Yan - Mr. Yang Yan was graduated from Dongbei University of Finance and Economics in 2002 with a Bachelor Degree of Intenational Finance. From April 2003 to December 2006, he served as the manager of Finance Department in Industrial and Commercial Bank of China, Dalian Xigang Branch which was mainly responsible for international settlement business. From March 2007 to October 2016, he served as the general manager of Dalian Huanyu Venture Capital Ltd., which was mainly responsible for investment and financing business. In October 2016, he joined Ionix Technology, Inc. as vice-president of the Company which was mainly responsible for asset restructuring, mergers, investment and financing and other business activities.

 

39


 

Yubao Liu – Mr. Liu was graduated and acquired a Bachelor degree from Harbin University of Science and Technology in 1996, where he majored in Economic Management, and was honorably entitled as a National Economist in 2002. From 2004 to June of 2012, Mr. Liu was employed by Dalian Carbon Fiber Technology Limited (China), where he served in the position of vice managing director. During this period, Mr. Liu was awarded as an International Enterprise (IEM) Senior Management Specialist. With multiple years of working practice, Mr. Liu has published many papers and participated in the development and testing of national new energy Lithium battery and pure electromobiles, and was also involved in formulating related standards.

 

From July of 2012 to April of 2018, Mr. Liu was employed by Dalian Yinlong Accounting & Law Firm, where he was assigned to take charge of operational control, internal auditing, and recapitalization among other things. Mr. Liu possesses both intelligence and virtue, persists in exploiting great causes with enthusiasm, and has made a remarkable contribution to the resource reorganization of enterprise. Mr. Liu is considered to be an expert of his field and a valuable asset to the business, which we believe will ensure rapid company growth and enhance the level of business management.

 

Jialin Liang – Mr. Liang was graduated from Nankai University in 1985 with a major in Microelectronics. Mr. Liang has an extensive experience in microelectronics, and since 2007, serves as general manager of Changchun Fangguan Electronics Technology Co., Ltd. Mr. Liang served as vice general manager of Jilin Zijing Electronics Co., Ltd. from 1997 to 2007. Mr. Liang is a beneficial owner of 8.3% of the Company’s outstanding common stock. Mr. Liang received his bachelor degree in microelectronics from Nankai University.

 

Xuemei Jiang – Ms. Jiang has over 10 years of experience in finance and taxation. Since 20017, she serves as vice general manager of Changchun Fangguan Electronics Technology Co., Ltd. Ms. Jiang received her bachelor degree in accounting from Jilin Finance and Taxation College in China.

 

Anthony Saviano – Mr. Saviano has more than 20 years of experience in finance, management and business development, which he achieved through his self- education and learning experience, including entrepreneurial start-ups in the real estate industries and energy sector. Since 2013, Mr. Saviano has served as the Chief Executive Officer of World Energy Asset Management, Inc., a developmental stage oil and gas company with a focus on well remediation and advanced new technologies in the petroleum industry. Also, since 2015, Mr. Saviano has served as the Chief Executive Officer of Infinity Fund LLC, a privately funded investment and debt solutions group he founded.

 

Yongping Wang – Ms. Wang was graduated and acquired a Bachelor’s degree from China Dongbei University of Finance and Economics in 1992 where she majored in Accounting. From 1992 to 1997, Ms. Wang served as Director of accounting for the Bihai Villa Hotel in Dalian. In this role, Ms. Wang was responsible for daily financial management which included ensuring compliance with regulatory matters such as taxation and banking. During this time, Ms. Wang also became qualified as an Intermediate Accountant of China. From 1997 to 2008, Ms. Wang took over management of the financial department of Dalian Daxian Limited (China) where she aided in the financial audits, was responsible for daily financial management, and she spearheaded a complete capital restructuring of the company. With multiple years of practical experience and knowledge under her belt, Ms. Wang began managing her own business. Since 2008, Ms. Wang has been sharing her knowledge of accounting with others through her accountant training studio by teaching accounting principles through the use of practical teaching methods.

 

 

Zhenyu Wang – Mr. Wang, has over 20 years of experience in the management and marketing. Since 2011, Mr. Wang has served as a project manager at LG Group, focusing in the overall operation of projects. From 1998 to 2011, Mr. Wang was engaged in marketing work for TCL. Mr. Wang graduated from Jiamusi University in 1998 with a bachelor degree in accounting.

 

Yongsheng Fu – Mr. Fu has retired from his service in 2015. Prior to his retirement, from 1999 to 2015, he served as vice director of Jiamusi Electric Heater Factory and was responsible for the production and operation of the factory. Mr. Fu graduated from Jiamusi University in 1982 with a bachelor degree in Economic Statistics.

 

Qinghua Shi – Mr. Shi has served as the Information Director in Zhongyi Trading Companysince since 2011. Prior to that position, from 2005 to 2011, he worked in the business planning department of Dalian Daxian Group Co., Ltd focusing on generating operation and procurement plans. Ms. Shi holds his bachelor degree in logistics management from Dalian Jiaotong University, which he received in 2000.

 

Xin Sui – Mr. Sui received a bachelor degree in Finance from Jiamusi University in 2002. Mr. Sui worked as assistant to the Chairman for Dalian Great Wall Economic and Trade Company from 2007 to 2015 where he assisted in the drafting of regulations and laws of the company, ensured the Company was achieving its business goals, and attended business negotiations on behalf of the Chairman. Mr. Sui incorporated Welly Surplus in 2016 to serve as an investment holding company. Mr. Sui is dedicated to seeking financial resources for Welly Surplus.

 

40


 

Qingchun Yang – Mr. Yang was majored in Economic Management and graduated as an Economist in 1987. From 2007 to 2011, Mr. Yang worked as the senior executive in Dalian Huanyu Venture Capital Co. where he was involved in wealth management experiences and high ability of resources integration. In 2012, Mr. Yang co-founded Jiamusi Huanqiu New Energy Company Limited, where he was in charge of drafting strategic plans and operating plan of the company, including the overall human recourse strategy plan, which is suitable for the short-term and long-term development of companies. Since February 17, 2016, Mr. Yanghas worked as the president and director of Well Best.

 

Yun Yang – Mr. Yang served as the Chief Technology Officer of Shenzhen Jinlisite Science and Technology Corporation Ltd. from July 2007 until May of 2016. Mr. Yang was employed as an assistant to the Chief Engineer of the Shenzhen Jinsiwei Technology Co., Ltd. from 2004 to 2007.From 2016 to present, Mr. Yang has worked as the president and director of Lisite Science Technology(Shenzhen) Co. Ltd. Mr. Yang graduated from Hebei University of Science and Technology wheree majored in Electronic Information Science and Technology and received a bachelor of science degree upon graduation.

 

Baozhu Deng – Ms. Deng was graduated from Shenzhen University with a bachelor degree in International Trade and English. From March 2010 to October 2014, she worked for Shenzhen Baileqi Science and Technology Co., Ltd.as a Marketing Manager. From October 2014 to March 2016, she worked for Shenzhen Guoxian Technology Co., Ltd. as a Purchasing Manager. She has been working for Shenzhen Baileqi Electronic Technology Co., Ltd. since March 2016, firstly as manager. Then on November 15, 2017, she was promoted as the new president and director of Baileqi Electronic.

 

Biao Shang – Mr. Shang has an extensive experience in microelectronics, and since October 2018, he serves as the President and Director of Fangguan Photoelectric.

 

Shikui Zhang – Mr. Zhang was graduated from Liaoning University of Technology, majored in Material Science and Engineering. He used to work in the Material Research Institute of Changchun Bus Factory and served as Project Manager in Shichong Power Development Co., Ltd. He serves as the legal person and General Manager of Dalian Shizhe New Energy Technology Co., Ltd since May 2019.

 

Long Xie-Mr. Xie was graduated from Liaoning University of Technology, majoring in industrial and civil architecture. He successively worked in Dalian TV station as an editor, Wantangshiye Development Co., Ltd. as project manager. Mr. Xie joined the Company since March 2016.

 

Identification of Significant Employees

 

We have no significant employees other than our officers and directors.

 

Family Relationship

 

We currently do not have any officers or directors of our Company who are related to each other.

 

Potential Conflicts of Interest

 

We are not aware of any conflicts of interest with any of our executive officers or directors.

 

Involvement in Certain Legal Proceedings

 

During the past ten years no director, executive officer, promoter or control person of the Company has been involved in the following:

 

(1)               A petition under the Federal bankruptcy laws or any state insolvency law which was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

 

41


 

(2)               Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

(3)               Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:

 

i.    Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

 

ii.     Engaging in any type of business practice; or

 

iii.   Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

 

(4)               Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;

 

(5)               Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;

 

(6)               Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

 

(7)               Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

 

i.   Any Federal or State securities or commodities law or regulation; or

 

ii.   Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

 

iii.    Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 

(8)               Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)

(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

42


 

Committees

 

On August 9, 2019, the Board of Directors established an Audit Committee and a Compensation Committee, and on August 14, 2019, the Board established a Nominating and Corporate Governance Committee, each of which operates under a charter that has been approved by the Board.

 

Audit Committee

 

The Audit Committee (a) assists the Board in fulfilling its oversight of: (i) the quality and integrity of the Company’s financial statements; (ii) the Company’s compliance with legal and regulatory requirements relating to the Company’s financial statements and related disclosures; (iii) the qualifications and independence of the Company’s independent auditors; and (iv) the performance of the Company’s independent auditors; and (b) prepares any reports that the rules of the Securities and Exchange Commission (the “SEC”) require be included in the Company’s annual proxy statement.

 

The initial members of the Audit Committee were Hui Zhang, as Chairman, Anthony Saviano, and Zhenyu Wang.On May 25, 2020, Mr. Hui Zhang resigned as a member of the Board of Directors and Chairman of the Audit Committee of Ionix Technology, Inc., a Nevada corporation (the “Company”). The resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices.

 

On May 25, 2020, effective upon Mr. Zhang’s resignation, Ms. Yongping Wang (“Ms. Wang”) was appointed to serve as a member of the Board of Directors of the Company and Chairman of the Audit Committee and has accepted such appointment. The Board has determined that Ms. Wang is an “audit committee financial expert” as defined by applicable SEC rules and has the requisite financial sophistication as defined under the applicable Nasdaq rules and regulations.

 

The Board has determined that all of the members of the Audit Committee are “independent,” as defined under the Nasdaq Listing Rule 506(a)(2).. In addition, all members of the Audit Committee meet the independence requirements contemplated by Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Further, all members of the Audit Committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the Nasdaq Capital Market. A current copy of the Audit Committee’s charter is available on the Company’s website at www.iinx-tech.com.

 

Compensation  Committee

 

The Compensation Committee (a) assists the Board in discharging its responsibilities with respect to compensation of the Company’s executive officers and directors, (b) evaluates the performance of the executive officers of the Company, and (c) administers the Company’s stock and incentive compensation plans and recommends changes in such plans to the Board as needed.

 

The members of the Compensation Committee are Zhenyu Wang, as Chairman, Yongsheng Fu and Qinghua Shi. The Board has determined that each of the members of the Compensation Committee are “independent,” as defined under the Nasdaq Listing Rule 506(a)(2). A current copy of the Compensation Committee’s charter is available on the Company’s website at www.iinx-tech.com.

 

Nominating and Corporate Governance Committee

 

The Nominating and Corporate Governance Committee assists the Board in (a) identifying qualified individuals to become directors, (b) determining the composition of the Board and its committees, (c) developing succession plans for executive officers, (d) monitoring a process to assess Board effectiveness, and (e) developing and implementing the Company’s corporate governance procedures and policies.

 

The members of the Nominating and Corporate Governance Committee are Yongsheng Fu, as a chairman, Zhenyu Wang and Qinghua Shi. The Board has determined that each of the members of the Nominating and Corporate Governance Committee are “independent,” as defined under the rules of the Nasdaq Capital Market. A current copy of the Nominating and Corporate Governance Committee’s charter is available on the Company’s website at www.iinx-tech.com.

 

Code of Ethics

 

On September 29, 2019, our Board of Directors adopted a Code of Ethics which is applicable to our officers, directors, and senior executives, including our Chief Financial Officer, Treasurer and Chief Accounting Officer. This Code embodies our commitment to conduct business in accordance with the highest ethical standards and applicable laws, rules and regulations. The Company has posted the text of the Code of Ethics on its Internet Website www.iinx-tech.com. We will provide any person a copy of our Code of Ethics, without charge, upon written request to the Company’s Secretary. Requests should be addressed in writing to Rm 610, No.279, Zhongnan Road, Zhongshan District, Dalian, Liaoning, PRC.

 

43


 

Delinquent Section 16(a) Reports

 

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers and persons who beneficially own more than ten percent of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of change in ownership of Common Stock and other equity securities of the Company. Based solely upon a review of Forms 3 and 4 and 5 and amendments filed on EDGAR for the year ended June 30, 2020, the Company determined that the following filers were delinquent in their filings of Form 3 and Form 4, but they all filed their Form 5 reporting their Form 3 and Form 4 holdings timely, except for one director, as shown below:

 

Person

Filing Type

Transaction Date

Required   File Date

Actual   File Date

Cheng Li

3 (1)

April   25, 2019

May 6, 2019

September   27, 2019

Anthony Saviano

3 (2)

July   31, 2019

August   11, 2019

September   27, 2019

Hui Zhang

3 (3)

July   31, 2019

August   11, 2019

September   30, 2019

Zhenyu Wang

3 (4)

July   31, 2019

August   11, 2019

September   27, 2019

Yongsheng Fu

3 (5)

July   31, 2019

August   11, 2019

September   27, 2019

Qinghua Shi

3 (6)

July   31, 2019

August   11, 2019

September   27, 2019

Anthony Saviano

4 (7)

August   28, 2019

September   2, 2019

September   27, 2019

Yongping Wang

3 (8)

May 25, 2020

June 4, 2020

June   19, 2020

Yang Yan

3 (9)

March   16, 2020

March   26, 2020

June   19, 2020

Shiyu Li

3(10)

January   7, 2020

January   17, 2020

January   22, 2020

Xie Long

3(11)

January   7, 2020

January   17, 2020

January   22, 2020

 

(1)                     On April 25, 2019, Cheng Li was appointed as a director of the Company and Chairman of the Board. Mr. Li filed a Form 5 on September 27, 2019 reporting Form 3 holdings. Mr. Li owns 0 shares of the Company’s stock.

(2)                      On July 31, 2019, Anthony Saviano was appointed as an independent director of the Company. Mr. Saviano filed a Form 5 on September 27, 2019 reporting Form 3 holdings. Mr. Saviano owns 0 shares of the Company’s stock. The Form 5 was filed timely.

(3)                        On July 31, 2019, Hui Zhang was appointed as an independent director of the Company. Mr. Zhang filed a Form 5 on September 30, 2019 reporting Form 3 holdings. Mr. Zhang owns 0 shares of the Company’s stock. The Form 5 was filed timely.

(4)                      On July 31, 2019, Zhenyu Wang was appointed as an independent director of the Company. Mr. Wang filed a Form 5 on September 27, 2019 reporting Form 3 holdings. Wang owns 0 shares of the Company’s stock. The Form 5 was filed timely.

(5)                        On July 31, 2019, Yongsheng Fu was appointed as an independent director of the Company. Mr. Fu filed a Form 5 on September 27, 2019 reporting Form 3 holdings. Mr. Fu owns 0 shares of the Company’s stock. The Form 5 was filed timely.

(6)                          On July 31, 2019, Qinghua Shi was appointed as an independent director of the Company. Mr. Shi filed a Form 5 on September 27, 2019 reporting Form 3 holdings. Mr. Shi owns 0 shares of the Company’s stock. The Form 5 was filed timely.

(7)                           On August 28, 2019, Anthony Saviano purchased 30,000 shares from a natural person shareholder, Enan Wang (Ahnan) through a Stock Purchase Agreement, and the transaction was fully settled on September 13, 2019. Mr. Saviano filed a Form 5 on September 27, 2019 reporting Form 4 holdings. The Form 5 was filed timely.

(8)                         On May 25, 2020, Yongping Wang was appointed as an independent director of the Company. Ms. Wang filed a Form 3 on June 19, 2020 reporting Form 3 holdings. The original filing was amended to reflect the correct amount of shares owned on September 28, 2020. Ms. Wang owns 500,000 shares of the Company’s stock. The delay in Ms. Wang’s filing was a result of delay in obtaining a CIK code due to COVID-19 interruptions in business.

(9)                             On March 16, 2020, Yang Yan was appointed as President and Treasurer of the Company. Form 3 on June 19, 2020 reporting Form 3 holdings. Mr. Yan owns 0 shares of the Company’s stock. The delay in Mr. Yan’s filing was a result of delay in obtaining a CIK code due to COVID-19 interruptions in business.

(10)                  On January 7, 2020, Shuyu Li was appointed as President and Treasurer of the Company. Mr. Li filed a Form 3 on January 22, 2020 reporting Form 3 holdings of 0 shares of the Company’s stock.

(11)                   On January 7, 2020, Long Xie was appointed as Secretary of the Company. Mr. Long Xie filed a Form 3 on January 22, 2020 reporting Form 3 holdings of 100,000 shares of the Company’s stock.

 

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ITEm 11.     EXECUTIVE  COmPENSATION

 

Summary Compensation Table

 

The following table sets forth the compensation paid to our executive officers, and those of Well Best and its subsidiaries, and Welly Surplus for the fiscal years ended June 30, 2020 and 2019. Unless otherwise specified, the term of each executive officer is that as set forth under that section entitled, “Directors, Executive Officers, Promoters and Control Persons -- Term of Office”.

 

 

 

 

Name and Principal Position

 

Year Ended June 30,

 

 

 

Salary ($)

 

 

 

Bonus($)

 

 

Stock Awards ($)

 

 

OptionAwards ($)

 

Non-Equity Incentive Plan Compensation ($)

Nonqualified Deferred CompensationEarnings

($)

 

 

All Other Compensation($)

 

 

 

Total($)

Cheng Li(1)

Chief Executive Officer, Director and Chairman

2019

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

2020

$2,174

Nil

Nil

Nil

Nil

Nil

Nil

$2,174

Yue Kou(2)

Chief Financial Officer

2019

$8,900

Nil

Nil

Nil

Nil

Nil

Nil

$8,900

2020

$8,900

Nil

Nil

Nil

Nil

Nil

Nil

$8,900

Yang Yan(3)

Treasurer and President

2019

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

2020

$1,258

Nil

Nil

Nil

Nil

Nil

Nil

$1,258

Yubao Liu(4)

Director and Former CEO, Secretary, Treasurer

2019

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

2020

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Xin Sui (5) President and Director   of Welly Surplus

2019

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

2020

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Qingchun Yang(6) President and Director   of Well Best

2019

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

2020

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Yun Yang (7) President and Director   of Lisite Science

2019

$6,100

Nil

Nil

Nil

Nil

Nil

Nil

$6,100

2020

$310

Nil

Nil

Nil

Nil

Nil

Nil

$310

Shuyu Li(8)

Former President Treasurer, Director of Overseas Business

2019

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

2020

$1,258

Nil

Nil

Nil

Nil

Nil

Nil

$1,258

Biao Shang(9)

Director of

Fangguan Photoelectric

2019

2020

$13,342

$8,300

Nil Nil

Nil Nil

Nil Nil

Nil Nil

Nil Nil

Nil Nil

$13,342 8,300

Baozhu Deng(10) President and Director   of Baileqi Electronics

2019

$8,300

Nil

Nil

Nil

Nil

Nil

Nil

$8,300

2020

$5,382

Nil

Nil

Nil

Nil

Nil

Nil

$5,382

Shikui   Zhang (11)

President and

Director   of Shizhe New Energy

2019

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

2020

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Long   Xie (12)

Secretary of the Company

2019

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

2020

1,258

Nil

Nil

Nil

Nil

Nil

Nil

$1,258

Jialin Liang (13) Director of the Board of the Company

2019

7,000

Nil

Nil

Nil

Nil

Nil

Nil

$7,000

2020

17,143

Nil

Nil

Nil

Nil

Nil

Nil

$17,143

Xuemei Jiang (14) Director of the Board of the Company

2019

$5,700

Nil

Nil

Nil

Nil

Nil

Nil

$5,700

2020

$15,714

Nil

Nil

Nil

Nil

Nil

Nil

$15,714

Bailiang Yang (15) Former Chairman of the Board   of the Company; former   Director of the Company

2019

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

2020

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Chunde   Song (16)

Former Director

2019

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

2020

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

 

Notes to Summary Compensation Table:

 

(1)  On April 25, 2019, the Board appointed Cheng Li, age 64, as a director and Chairman of the Board. On January 7, 2020, Mr. Li was appointed as Chief

 

Executive Officer of the Company. Mr. Li’s salary is $2,174

 

45


 

   (2)  Ms. Kou was appointed as Chief Financial Officer of the Company on May 27, 2016. Ms. Kou’s salary is $8,900. 

   (3)  Mr. Yan was appointed to serve as the president and treasurer of the Company March 16, 2020. Mr. Yan's salary is $1,258 . 

       (4)  Mr. Liu was appointed to serve as the Company’s Chief Executive Officer, President, Secretary, Treasurer and as Chairman of the Board of Directors of the Company on May 16, 2018. Mr. Liu’s salary is $0 . On January 22, 2019, Mr. Liu resigned from his position as chairman of the Board of Directors (the “Board”); and on January 7, 2020, he effectively resigned from all positions held in the Company. On January 15, 2020 he was appointed as a director of the Company again. 

   (5)  Mr. Sui was appointed as Director of Welly Surplus on December 29, 2016. Mr. Sui’s salary is $0 . 

   (6)  Mr. Q. Yang was appointed as a director of Well Best, a wholly owned subsidiary of the Company, on February 17, 2016. His annual salary package is $0. 

   (7)  Mr. Yun Yang was appointed as President and a director of Lisite Science on November 7, 2016. His annual salary package is $310. 

        (8) Mr. Li was appointed as President and Treasurer on January 7, 2020 and resigned on March 16, 2020. He remained director of overseas business until April 12, 2020, when he resigned. Mr. Li’s salary was $1,258. 

        (9) Mr. Shang was appointed as Fangguan Photoelectric’s directors and executive officers on October 20, 2018. Mr. Shang's salary is $8,300. 

        (10)On November 15, 2017, Ms. Baozhu Deng was appointed as President and a director of Baileqi Electronics. Mr.Deng's salary is $5,382.

        (11)  Mr. Zhang was appointed as President and a member of the board of directors of Shizhe New Energy on May 24, 2019. Shizhe New Energy is a wholly owned subsidiary of Well Best and an indirect wholly-owned subsidiary of the Company. Mr. Zhang’s salary is $0 . The salary of his predecessor (Liang Zhang) has been$0 . 

(12) Mr. Xie was appointed as Secretary of the Company on January 7, 2020. Mr. Xie’s salary is $1,258. 

(13) On January 22, 2019, the Board also appointed Jialin Liang, age 52, as a member of the Board. Mr. Liang’s salary is $17,143 

(14) On January 22, 2019, the Board also appointed Xuemei Jiang, as a member of the Board. Ms. Jiang salary is $15,714. 

       (15)  On January 22, 2019, the Board appointed Bailiang Yang, age 54, as a director and Chairman of the Board. On April 25, 2019, Bailiang Yang resigned from his position as the Chairman of the Board and a director of the Company.Mr.Yang's Salary is $0. 

      (16)  Mr. Song was appointed to serve as a member of the Board of Directors of the Company on May 16, 2018. Mr. Song’s salary is $0 USD . On July 31, 2019, Mr. Song resigned as a member of the Board of Directors.

 

Narrative Disclosure to Summary Compensation Table

 

As of June 30, 2020 and 2019, none of Ionix Technology, Welly Surplus, and Well Best or its subsidiaries, had any compensatory plans or arrangements, including payments to be received from Ionix, Welly Surplus, Well Best or its subsidiaries with respect to any executive officer, that would result in payments to such person because of his or her resignation, retirement or other termination of employment with the Company, Well Best, or its subsidiaries, any change in control, or a change in the person’s responsibilities following a change in control of the Company, Well Best, or its subsidiaries.

 

46


 

Independent Directors Compensation Table

 

 

 

 

 

Name of Independent Director

 

Year Ended June 30,

 

 

 

Salary($)

 

 

 

Bonus($)

 

 

Stock Awards ($)

 

 

OptionAwards ($)

 

Non-Equity Incentive Plan Compensation ($)

Nonqualified Deferred CompensationEarnings

($)

 

 

 

All Other Compensation ($)

 

 

 

Total($)

Anthony Vincent Saviano (1)

2020

55,000

Nil

Nil

Nil

Nil

Nil

Nil

55,000

 

Yongsheng   Fu (2)

2020

430

Nil

Nil

Nil

Nil

Nil

Nil

430

Zhenyu   Wang (3)

2020

430

Nil

Nil

Nil

Nil

Nil

Nil

430

Qinghua   Shi (4)

2020

430

Nil

Nil

Nil

Nil

Nil

Nil

430

Yongping   Wang (5)

2020

860

Nil

Nil

Nil

Nil

Nil

Nil

860

Hui   Zhang (6)

2020

2,473

Nil

Nil

Nil

Nil

Nil

Nil

2,473

 

Notes to Independent Director Compensation Table:

 

(1)  On July 31, 2019, our Board appointed Anthony Vincent Saviano, age 51, as a director of the Board.

(2)  On July 31, 2019 our Board appointed Yongsheng Fu, age 65, as a director of the Board.

(3)  On July 31, 2019 our Board appointed Zhenyu Wang, age 45, as a director of the Board.

(4)  On July 31, 2019, our Board appointed Qinghua Shi, age 44, as a director of the Board.

(5)  On May 25, 2020, our Board appointed Yongping Wang, age 52, as a director of the Board.

(6)  On July 31, 2019, our Board appointed Hui Zhang, age 54, as a director of the Board; On May 25, 2020, he resigned.

 

Outstanding Equity Awards

 

There are no equity awards outstanding as of June 30, 2020 for Ionix Technology, Welly Surplus, Well Best or its subsidiaries.

 

Stock Options/SAR Grants

 

During our fiscal year ended June 30, 2020 there were no options granted to our named officers or directors.

 

Option Exercises

 

During our Fiscal year ended June 30, 2020 there were no options exercised by our named officers.

 

Compensation of Directors

 

As of June 30, 2020, an aggregate $61,797 in cash compensation was paid to directors for their service on our board of directors. We have an agreement with Mr. Saviano, dated July 29, 2019, for his services as a director for $5,000 a month for a term of one year or until his death, resignation, termination or removal. Other than the agreement with Mr. Saviano, we have no other agreements for compensating our directors for their services in their capacity as directors, although such directors are expected in the future to receive stock options to purchase shares of our common stock as awarded by our board of directors.

 

Pension, Retirement or Similar Benefit Plans

 

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.

 

Indebtedness of Directors, Senior Officers, Executive Officers and Other management

 

None of our directors or executive officers or any associate or affiliate of our company during the last two fiscal years, is or has been indebted to our company by way of guarantee, support agreement, letter of credit or other similar agreement or understanding currently outstanding.

 

47


 

ITEm 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND mANAGEmENT AND RELATED STOCKHOLDER mATTERS

 

Security Ownership of Certain Beneficial Owners and management

 

The following table lists, as of June 30, 2020, the number of shares of common stock that are beneficially owned by (i) each person or entity known to the Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each officer and director of the Company; and (iii) all officers and directors as a group. Information relating to beneficial ownership of common stock by principal shareholders and management is based upon information furnished by each person using “beneficial ownership” concepts under the rules of the Securities and Exchange Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power.

 

Name of Beneficial Owner, Directors   and Officers:

Amount and Nature of Beneficial Ownership

Percentage of Beneficial Ownership (1)

Cheng Li(2)

0

0%

Yue Kou (3)

0

0%

Yang Yan(4)

0

0%

Yubao   Liu (5)

29,109,000

25.50%

Jialin   Liang (6)

9,500,000

8.32%

Xuemei   Jiang (7)

5,500,000

4.82%

Anthony   Saviano (8)

174,668

0.15%

Yongsheng Fu(9)

0

0%

Zhenyu Wang(10)

0

0%

Qinghua Shi(11)

0

0%

Yongping Wang(12)

500,000

0.44%

Xin Sui (13)

0

0%

Qingchun   Yang (14)

0

0%

Yun   Yang (15)

0

0%

Biao   Shang (16)

1,560,000

1.37%

Baozhu   Deng (17)

0

0%

Shikui   Zhang (18)

60,000

0.05%

Long   Xie (19)

100,000

0.09%

All executive officers and directors as a group (19 people)

46,503,668

40.73%




Beneficial Shareholders of Common Stock greater than 5%



Kan   Kang (20)

7,600,000

6.66%

 

Beneficial Owners of Preferred Stock(1):

Amount and Nature of Beneficial Ownership

Percentage of Beneficial Ownership (1)

Yubao Liu(5)

5,000,000

100%

 

(1)  Applicable percentage of ownership is based on 114,174,265 shares of common stock outstanding on June 30, 2020 and 5,000,000 shares of Preferred Stock issued and outstanding on June 30, 2020. Percentage totals are calculated separately based on each class of capital stock. Each share of Preferred Stock entitles the holder to vote 100 shares of common stock; the Preferred Stock is not convertible into common stock. Percentage ownership is determined based on shares owned together with securities exercisable or convertible into shares of common stock within 60 days of June 30, 2020, for each stockholder. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to securities exercisable or convertible into shares of common stock that are currently exercisable or exercisable within 60 days of June 30, 2020, are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

 

(2)  Cheng Li is the CEO, Chairman, and a Director of the Company. Mr. Li’s beneficial ownership includes 0 shares of common stock and 0 shares issuable upon the exercise of stock options.

 

48


 

(3)  Yue Kou is the CFO of Ionix Technology. Ms. Kou’s beneficial ownership includes 0 shares of common stock and 0 shares issuable upon the exercise of stock options.

 

(4)  Yang Yan is the President and treasurer of Ionix Technology. Mr. Yan’s beneficial ownership includes 0 shares of common stock and 0 shares issuable upon the exercise of stock options.

 

(5)  Yubao Liu, is the Former CEO, and current Director of Ionix Technology. Mr. Liu’s ownership includes 100,000 directly and 29,009,000 indirectly through Shining Glory Investments Limited; additionally Mr. Liu is the beneficial owner of 5,000,000 shares of preferred stock which has the authority to vote a total of 500,000,000 common stock votes. Mr. Liu owns 0 shares issuable upon exercise of stock options. Mr. Liu is the sole officer and director of Shining Glory Investments Limited and has dispositive voting and investment control over the shares held by Shining Glory. Thus, in total, Shining Glory and its sole officer and director collectively owns an aggregate 86.15% of the total outstanding voting securities of the Company.

 

(6)  Jialin Liang is the Director of the Company. Mr. Liang’s beneficial ownership includes 9,500,000 shares of common stock and 0 shares issuable upon the exercise of stock options.

 

(7)  Xuemei Jiang is the Director of the Company. Ms. Jiang’s beneficial ownership includes 5,500,000 shares of common stock and 0 shares issuable upon the exercise of stock options.

 

(8) Anthony Saviano is the Director of the Company. Mr. Saviano’s beneficial ownership includes 174,668 shares of common stock held indirectly through Infinity Fund II LLC and 0 shares issuable upon the exercise of stock options. Saviano has dispositive voting control over Infinity Fund II LLC.

 

(9)  Yongsheng Fu is the Director of the Company. Mr. Fu’s beneficial ownership includes 0 shares of common stock and 0 shares issuable upon the exercise of stock options.

 

(10) Zhenyu Wang is the Director of the Company. Mr. Wang’s beneficial ownership includes 0 shares of common stock and 0 shares issuable upon the exercise of stock options.

 

(11)  Qinghua Shi is the Director of the Company. Mr. Shi’s beneficial ownership includes 0 shares of common stock and 0 shares issuable upon the exercise of stock options.

 

(12)  Yongping Wang is the Director of the Company. Ms. Wang’s beneficial ownership includes 500,000 shares of common stock and 0 shares issuable upon the exercise of stock options.

 

(13)  Xin Sui is President and Director of Welly Surplus International Limited, a wholly owned subsidiary of Ionix Technoloy. Mr. Sui’s beneficial ownership includes 0 shares of common stock of the Company and 0 shares issuable upon the exercise of stock options.

 

(14) Qingchun Yang is the President and Director of Well Best, a wholly owned subsidiary of Ionix Technology. Mr. Yang’s beneficial ownership includes 0 shares of common stock of the Company and 0 shares issuable upon the exercise of stock options.

 

(15)  Yun Yang is the President and Director of Lisite Science Technology, an indirect wholly owned subsidiary of Ionix Technology. Mr. Yang’s beneficial ownership includes 0 shares of common stock of the Company and 0 shares issuable upon the exercise of stock options.

 

(16)  Biao Shang is the President and Director of Fangguan Photoelectric an indirect wholly owned subsidiary of Ionix Technology. Mr. Shang’s beneficial ownership includes 1,560,000 shares of common stock of the Company and 0 shares issuable upon the exercise of stock options.

 

(17) Baozhu Deng is the President and Director of Shenzhen Baileqi Electronic Technology Co., Ltd, an indirect wholly owned subsidiary of Ionix Technology. Ms. Deng’s beneficial ownership includes 0 shares of common stock of the Company and 0 shares issuable upon the exercise of stock options.

 

(18) Shikui Zhang is the President and Director of Dalian Shizhe New Energy Technology Co., Ltd, a limited liability company formed under the laws of the PRC on June 28, 2018. Well Best is the sole shareholder of Shizhe New Energy. As a result, Shizhe New Energy is an indirect, wholly-owned subsidiary of the Company. Mr. Zhang’s beneficial ownership includes 60,000 shares of common stock of the Company and 0 shares issuable upon the exercise of stock options.

 

(19) Long Xie is the Secretary of Ionix Technology. Mr. Xie’s beneficial ownership includes 100,000 shares of common stock of the Company and 0 shares issuable upon the exercise of stock options.

 

49


  (20) Mr. Yang Kan’s beneficial ownership includes 7,600,000 shares of common stock of the Company and 0 shares issuable upon the exercise of stock options.

 

Changes in Control

 

There are no present arrangements or pledges of the Company’s securities which may result in a change in control of the Company.

 

ITEm  13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

 

Director Independence

 

For purposes of determining director independence, we have applied the definitions set out in NASDAQ Rule 5605(a)(2). The OTCBB on which our shares of common stock are quoted does not have any director independence requirements. The NASDAQ definition of “Independent Director” means a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

 

On July 31, 2019, our Board increased the number of members constituting the Board from four (4) to nine (9) and appointed the following five (5 ) new members (“New Directors”): Anthony Vincent Saviano, Hui Zhang, Yongsheng Fu, Zhenyu Wang and Qinghua Shi to the Board. On May 25, 2020, effective upon Mr. Zhang’s resignation, Yongping Wang was appointed to serve as a member of the Board of Directors of the Company and fill the vacancy.

 

In connection with the appointment of New Directors and based upon information requested from and provided by each New Director concerning his background, employment and affiliations, including family relationship, the Board determined that each New Director would qualify as “independent” as that term is defined by Nasdaq Listing Rule 506(a)(2).

 

There are no other arrangements or understandings between New Directors and any other person pursuant to which each New Director was as appointed as member of the Board. In addition, there are no family relationships between each New Director and any of the Company’s other officers or directors.

 

50


 

Related Party Transactions

 

Purchase from related party

 

During the year ended June 30, 2020, the Company’s subsidiaries, Lisite Science and Baileqi Electronic, purchased $1,630,684 and $37,393 from Keenest and Shenzhen Baileqi S&T which were owned by the Company’s stockholders who own approximately 1.9% and 1.1% respectively of the Company’s outstanding common stock as of June 30, 2020. The amounts of $1,630,684 and $37,393 were included in the cost of revenue for the year ended June 30, 2020.

 

During the year ended June 30, 2019, the Company’s subsidiaries, Lisite Science and Baileqi Electronic, purchased $1,993,512 and $911,121 from Keenest and Shenzhen Baileqi S&T which were owned by the Company’s stockholders who own approximately 1.9% and 1.1% respectively of the Company’s outstanding common stock. The amounts of $1,993,512 and $911,156 were included in the cost of revenue for the year ended June 30, 2019.

 

During the years ended June 30, 2020 and 2019, the Company’s subsidiary, Changchun Fangguan Photoelectric Display Technology Co. Ltd ("Fangguan Photoelectric"), purchased $0 and $1,505,387 from Fangguan Electronics before Fangguan Electronics became a variable interest entity of the Company on December 27, 2018 . 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 $1,135,061 were included in the cost of revenue for the years ended June 30, 2020 and 2019.

 

Advances to suppliers - related parties

 

Lisite Science made advances of $357,577 and $269,498 to Keenest for future purchases as of June 30, 2020 and 2019, respectively. Sales to related party and accounts receivable from related party

During the years ended June 30, 2020 and 2019, Baileqi Electronic sold materials of $713,008 and $671,606 respectively to Shenzhen Baileqi S&T. The traderelated balance receivable from Shenzhen Baileqi S&T was $0 and $340,026 as of June 30, 2020 and 2019, respectively.

 

During the year ended June 30, 2019, Fangguan Photoelectric sold products of $23,872 to Fangguan Electronics before Fangguan Electronics became a variable interest entity of the Company on December 27, 2018.

 

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. On July 20, 2020, Lisite Science further extended the lease with Keenest for one more year until July 20, 2021 with annual rent of approximately $1,500 (RMB10,000).

 

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. On June 5, 2020, Baileqi Electronic further extended the lease with Shenzhen Baileqi S&T for one more year until May 31,2021 with monthly rent of approximately $2,500 (RMB17,525).

 

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.

                                                                                                                              June30, 2020               June 30, 2019 

Ben Wong

(1)

$                            143,792


$                             143,792

Yubao Liu

(2)

102,938


498,769

Xin Sui

(3)

2,016


2,016

Baozhen Deng

(4)

9,437


3,900

Baozhu Deng

(5)

-


5,303

Jialin Liang

(6)(13)

901,460


928,314

Xuemei Jiang

(7)(12)

505,685


520,750

Liang Zhang

(8)

-


625

Zijian Yang

(9)

-


1,869

Shikui Zhang

(10)

28,528


-

Changyong Yang

(11)

23,063


-



$                         1,716,919


$                          2,105,338

 

51


 

         (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. He is also a Director of the Company.

 

   (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 1.1% of the Company’s outstanding common stock, and the owner of Shenzhen Baileqi S&T.

 

   (5)  Baozhu Deng is a relative of Baozhen Deng and director of Baileqi Electronic.

 

   (6)  Jialin Liang is a stockholder of the Company and the president, CEO, and director of Fangguan Electronics. He is also a Director of the Company.

 

   (7)  Xuemei Jiang is a stockholder of the Company and the vice president and director of Fangguan Electronics. She is also a Director of the Company.

 

   (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 is a stockholder of the Company and serves as the legal representative and general manager of Shizhe New Energy since May 2019.

 

(11) Changyong Yang is a stockholder of the Company, who owns approximately 1.9% of the Company’s outstanding common stock, and the owner of Keenest.

 

(12) The liability was assumed from the acquisition of Fangguan Electronics.

 

      (13) The Company assumed liability of approximately $5.8 million (RMB39,581,883) from Jialin Liang during the acquisition of Fangguan Electronics. During the year ended June 30, 2019, approximately $4.4 million (RMB30,000,000) liability assumed was forgiven and converted to capital.

 

During the year ended June 30, 2020, Yubao Liu was refunded $46,312 by Welly Surplus and Well Best after netting off his advances to Well Best. In addition, Yubao Liu agreed to decrease his advances to Well Best of $349,519 (RMB2,474,417) to pay off the trade receivables due from Shenzhen Baileqi S&T to Baileqi Electronic on behalf of Shenzhen Baileqi S&T.

 

During the year ended June 30, 2020, Baileqi Electronic refunded $5,303 to Baozhu Deng and Baozhen Deng advanced $5,537 to Baileqi Electronic. Shizhe New Energy refunded $625 and $1,869 to Liang Zhang and Zijian Yang respectively. Shikui Zhang advanced $28,528 to Shizhe New Energy. Changyong Yang, a stockholder of the Company, advanced $23,063 to Lisite Science.

 

During the year ended June 30, 2019, Yubao Liu advanced $428,311 to Well Best. Baileqi Electronic borrowed $5,303 from Baozhu Deng. In addition, Baozhen Deng refunded $7,585 to Baileqi Electronic. Liang Zhang and Zijian Yang advanced $625 and $1,869 to Shizhe New Energy, respectively. Fangguan Electronics refunded approximately $0.47 million (RMB3.2 million) to Jialin Liang

 

Other than the foregoing, none of the directors or executive officers of the Company, nor any person who owned of record or was known to own beneficially more than 5% of the Company’s outstanding shares of its Common Stock, nor any associate or affiliate of such persons or companies, has any material interest, direct or indirect, in any transaction that has occurred during the past fiscal year, or in any proposed transaction, which has materially affected or will affect the Company.

 

With regard to any future related party transaction, we plan to fully disclose any and all related party transactions in the following manner:

 

·         Disclosing such transactions in reports where required;

·         Disclosing in any and all filings with the SEC, where required;

 

52


 

·         Obtaining disinterested directors consent; and

·         Obtaining shareholder consent where required.

 

Review, Approval or Ratification of Transactions with Related Persons

 

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  14.   PRINCIPAL  ACCOUNTING  FEES AND SERVICES.

 

On October 18, 2018, the Company appointed Prager Metis CPAs, LLC as the Company’s registered independent public accounting firm. Our principal independent accountant during the year ended June 30, 2020 was Paritz & Company, P.A. Their pre-approved fees billed to the Company are set forth below:

 微信截图_20201015160153.png

Audit Fees

 

During the fiscal year ended June 30, 2019, we incurred approximately $182,500 in fees to our principal independent accountants for professional services rendered in connection with the audit and review of our financial statements for fiscal year ended June 30, 2019.

 

During the fiscal year ended June 30, 2020, we incurred approximately $217,500 in fees to our principal independent accountants for professional services rendered in connection with the audit and review of our financial statements for fiscal year ended June 30, 2020.

 

Audit-Related Fees

 

The aggregate fees billed during the fiscal years ended June 30, 2020 and 2019 for assurance and related services by our principal independent accountants that are reasonably related to the performance of the audit or review of our financial statements (and are not reported under Item 9(e)(1) of Schedule 14A) was $NIL and

$NIL, respectively.

 

Tax Fees

 

The aggregate fees billed during the fiscal years ended June 30, 2020 and 2019 for professional services rendered by our principal accountant for tax compliance were $8,500 and $NIL, respectively.

 

All Other Fees

 

The aggregate fees billed during the fiscal years ended June 30, 2020 and 2019 for products and services provided by our principal independent accountants (other than the services reported in Items 9(e)(1) through 9(e)(3) of Schedule 14A) was $NIL and $NIL, respectively.

 

53


 

ITEm 15.     EXHIBITS AND FINANCIAL STATEmENT SCHEDULES.

 微信截图_20201015160242.png

*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.

 

54


 

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: September 28, 2020                                                                                                                 By:             /s/ Cheng Li

Name:  Cheng Li

Title:   Chief (Principal) Executive Officer

 

Date: September 28, 2020                                                                                                                 By:             /s/ Yue Kou

Name:  Yue Kou

Title: Chief Financial Officer (Principal Accounting 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.

 

Ionix Technology, Inc.

 

Date: September 28, 2020                                                                                                                 By:             /s/ Cheng Li

Name:  Cheng Li

Title:   Chief Executive Officer and Director

 

Date September 28, 2020                                                                                                                  By:             /s/ Yue Kou

Name:  Yue Kou

Title:   Chief Financial Officer

 

Date: September 28, 2020                                                                                                                 By:             /s/ Yubao liu

Name: Yubao Liu Title:   Director

 

Date: September 28, 2020                                                                                                                 By:             /s/ Jialin Liang

Name: Jialin Liang Title:   Director

 

Date: September 28, 2020                                                                                                                 By:             /s/ Xuemei Jiang

Name: Xuemei Jiang Title:   Director

 

Date: September 28, 2020                                                                                                                 By:             /s/ Anthony Saviano

Name: Anthony Saviano Title:   Independent Director

 

Date: September 28, 2020                                                                                                                 By:             /s/ Yongwing Wang

Name: Yongping Wang Title:   Independent Director

 

Date: September 28, 2020                                                                                                                 By:             /s/ Yongsheng Fu

Name:  Yongsheng Fu

Title:   Independent Director

 

Date: September 28, 2020                                                                                                                 By:             /s/ Zhenyu Wang

Name:  Zhenyu Wang

Title:   Independent Director

 

Date: September 28, 2020                                                                                                                 By:             /s/ Qinghua Shi

Name:  Qinghua Shi

Title:   Independent Director

 

 

55


 

Exhibit 21.1

微信截图_20201015160436.png

 

 

LIST OF SUBSIDIARIES OF IONIX TECHNOLOGY, INC.

(As of September 28 2020)


 

 

1.       Well Best International Investment Limited

·         Subsidiary of: Ionix Technology, Inc. (Wholly Owned by Ionix)

·         Jurisdiction of Formation: Hong Kong Special Administrative Region, September 14, 2015

·         Names under which business is conducted: Well Best International Investment Limited

2.       Lisite Science Technology (Shenzhen) Co., Ltd

·         Subsidiary of: Well Best International Investment Limited (Wholly Owned by Well Best)

·         Jurisdiction of Formation: PRC, June 20, 2016

·         Names under which business is conducted: Lisite Science Technology (Shenzhen) Co., Ltd

3.       Shenzhen Baileqi Electronic Technology Co., Ltd.

·         Subsidiary of: Well Best International Investment Limited (Wholly Owned by Well Best)

·         Jurisdiction of Formation: PRC, August 8, 2016

·         Names under which business is conducted: Shenzhen Baileqi Electronic Technology Co., Ltd.

4.       Welly Surplus International Limited

·         Subsidiary of: Welly Surplus International Limited (99.9% Owned by Ionix)

·         Jurisdiction of Formation: Hong Kong, January 18, 2016

·         Names under which business is conducted: Welly Suplus International Limited.

5.       Changchun Fangguan Photoelectric Display Technology Co., Ltd.

·         Subsidiary of: Well Best International Investment Limited (Wholly Owned by Well Best)

·         Jurisdiction of Formation: PRC, February 1, 2018

·         Names under which business is conducted: Changchun Fangguan Photoelectric Display Technology Co., Ltd.

6.       Dalian Shizhe New Energy Technology Co., Ltd.

·         Subsidiary of: Well Best International Investment Limited (Wholly Owned by Well Best)

·         Jurisdiction of Formation: PRC, June 28, 2018

·         Names under which business is conducted: Dalian Shizhe New Energy Technology Co., Ltd.

 

 

 


  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 Annual Report on Form 10-K of the Registrant for the period ended June 30, 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: September 28, 2020

By:

/s/ Cheng Li


Name: Title:

Cheng Li

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 Annual Report on Form 10-K of the Registrant for the period ended June 30, 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: September 28, 2020

By:

/s/ Yue Kou


Name: Title:

Yue Kou

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 Annual Report on Form 10-K of the Registrant for the period ended June 30, 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-K 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.

 

Ionix Technology, Inc.

 

Date: September 28, 2020                                                               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 Annual Report on Form 10-K of the Registrant for the period ended June 30, 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-K 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.

 

Ionix Technology, Inc.

 

Date: September 28, 2020                                                               By:          /s/ Yue Kou

                 Name:      Yue Kou

                            Title:       Chief (Principal) Accounting and Financial Officer

 

 

 



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