The following Management's Discussion and Analysis should be read in conjunction with Ionix Technology, Inc.’s. financial statements and the related notes thereto. The Management's Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Report on Form 10-Q. The Company’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Report on Form 10-Q.
The following discussion should be read in conjunction with our unaudited consolidated financial statements and related notes and other financial data included elsewhere in this report. See also the notes to our consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended June 30, 2016, filed with the Commission on October 11, 2016.
Results of Operations for the three months ended September 30, 2016 and 2015 and for the Years Ended June 30, 2016, and 2015
Net Loss
During the three months ended September 30, 2016 and 2015, net loss was $17,708 and $4,742, respectively, which included net income from continuing operation of $17,391 and $NIL, respectively. The change in net income from continuing operation is primarily the result of the commencement of operations in the PRC.The net loss from discontinued operation of Taizhou Ionix is $35,099 and $Nil, respectively. The net loss from discontinued operation of Qi system is $Nil and $4,742
,
respectively.
During the year ended June 30, 2016 and 2015, net loss was $44,431 and $116,282, respectively, which included net loss from continuing operation of $37,892 and $0, respectively, and net loss from discontinued operation of $6,539 and $116,282, respectively. The change in net loss is primarily the result of the commencement of operations in the PRC.
Revenue
The Company’s historical revenue has been derived from the production and sale of both standardized and specialized products, specifically 18650-2000mAh lithium ion batteries for use in lithium cell electronic bicycles, balance cars, scooters, electric vehicles, special vehicles at low speed, energy storage, and other products. In September of 2016, the Company began operations related to production of a 5 volt 2 amp, 20000mAh lithium ion battery powered portable device (a “power bank”) 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 and a module of new energy power system/ 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.
During the three months ended September 30, 2016 and 2015, revenue was $887,259 and $NIL, respectively. The difference can be attributed to the commencement of our business and generating revenue from the sale of lithium batteries in the PRC.
Total revenue during the period ended September 30, 2016 was comprised of $798,529 generated from the sale of standardized lithium ion battery cells and approximately $88,730 in revenue generated from the sale of specialized products made tailored to our customer’s needs. The revenue generated from the sale of specialized products represented approximately 10% of our total revenue for the three months ended September 30, 2016.
During the year ended June 30, 2016 and 2015, revenue was $1,970,345 and $0, respectively. The difference can be attributed to the commencement of our business and generating revenue from the sale of lithium batteries in the PRC.
Total revenue during the year ended June 30, 2016 was comprised of $1,772,845 generated from the sale of standardized lithium ion battery cells and approximately $197,500 in revenue generated from the sale of specialized products made tailored to our customer’s needs. The revenue generated from the sale of specialized products represented approximately 10% of our total revenue for the year ended June 30, 2016
Cost of Revenue
During the three months ended September 30, 2016 and 2015, the cost of revenue was $795,133 and $NIL, respectively. For the three months ended September 30, 2016, the cost of revenue included the cost of raw materials and the sub- contracting processing fee paid to Jiangxi Huanming Technology Ltd (“Jiangxi Huanming”) and Baileqi Electronic
, pursuant to the manufacturing agreement between Xinyu Ionix and Jiangxi Huanming and Baileqi Electronic, respectively.
During the year ended June 30, 2016 and 2015, the cost of revenue was $1,844,471 and $0, respectively. In 2016, the cost of revenue included the cost of raw materials and the sub- contracting processing fee paid to
Taizhou Jiunuojie Electronic Technology Ltd., pursuant to the manufacturing agreement between Taizhou Ionix and Jiunuojie.
Gross Profit
During the three months ended September 30, 2016 and 2015, gross profit was $92,126 and $NIL, respectively. Our gross profit maintained at 10% during the quarter ended September 30, 2016.
During the year ended June 30, 2016 and 2015, gross profit was $125,874 and $0, respectively. Our gross profit maintained at 6.4% during the year ended June 30, 2016.
Selling, General and Administrative Expenses
During the three months ended September 30, 2016 and 2015, selling
,
general and administrative expenses were $55,643 and $NIL, respectively. In comparison, during the year ended June 30, 2016, general and administrative expenses were $147,470. Our general and administrative expenses mainly comprised of payroll expenses, transportation, office expense, professional fees and other miscellaneous expenses. The expenses were significantly more in 2016 as we have commenced the operation in the PRC during this period.
Loss from Discontinued Operations
QI system business was terminated on November 15, 2015. Hence the Company has presented results of QI system operations as a discontinued operation in the consolidated statements of comprehensive loss.
During the three months ended September 30, 2016 and 2015, loss from discontinued operation of QI system was Nil and $4,742, respectively, all of which were general and administrative expense, mainly included consulting fees, audit and legal fees.
During the year ended June 30, 2016 and 2015, loss from discontinued operation of QI system was $6,539 and $116,282, respectively, all of which were general and administrative expense, mainly included consulting fees, audit and legal fees.
On August 19, 2016, Well Best entered into a share transfer agreement whereby Well Best sold 100% of its equity interest in Taizhou Ionix Technology Co. Ltd. (“Taizhou Ionix”) to Mr. GuoEn Li, the sole director and officer of Taizhou Ionix for
approximately RMB 30,000 ( approximately $5,000USD). During the three months ended September 30, 2016 and 2015, loss from discontinued operation of Taizhou Ionix was $35,099 and Nil, respectively.
Liquidity and Capital Resources
Cash Flow from Operating Activities
During the three months ended September 30, 2016 and 2015, $639,331 cash was provided by operating activities compared with $(5,242) used in operating activities, respectively. There was an increase in accounts payable, advances from customers and accrued expenses and other liabilities which were partially offset by an increase in accounts receivable, advance to suppliers, inventory and prepaid expense.. In comparison, during the year ended June 30, 2016 and 2015, the Company used $970,512 cash for operating activities compared with $23,726, respectively.
During the three months ended September 30, 2016 and 2015, net cash used in discontinued operations was $NIL and $(5,242), respectively. During the year ended June 30, 2016 and 2015, net cash used in discontinued operations was $14,039 and $23,726, respectively
Cash Flow from Investing Activities
During the three months ended September 30, 2016 and 2015, the Company used $916,044 and $NIL in cash for investing activities, respectively. During the three months ended September 30, 2016, the Company’s subsidiary, Xinyu Ionix, made advances of $916,044 to Mr. Nan, a director and the general manager of Xinyu Ionix. There was no formal agreement between the Company and Mr. Nan relating to the advances. During the subsequent period, Mr. Nan used the fund to settle the accounts payable on behalf of Xinyu Ionix. As of November 7, 2016, approximately $450,000 had been paid to suppliers to settle accounts payable on behalf of Xinyu Ionix.
During the years ended June 30, 2016 and 2015, the Company used $NIL and $NIL in cash for investing activities, respectively.
Cash Flow from Financing Activities
During the
three months ended September 30, 2016
, the Company received $423,043 in cash from financing activities, which consisted primarily of an increase in due to related party items. In comparison, during the three months ended September 30, 2015, the Company received $5,200 in cash from financing activities, which resulted from net cash provided by discontinued operations.
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.
Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
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.