As filed with the Securities and
Exchange Commission on March 15, 2021
Registration Statement No. 333-253936
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1/A
(Amendment No. 1)
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
IONIX TECHNOLOGY, INC.
(Exact name of registrant as specified in
its charter)
Nevada
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|
3679
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45-0713638
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(State or other jurisdiction of
incorporation or organization)
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|
(Primary Standard
Industrial Code Number)
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|
(I.R.S. Employer
Identification Number)
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Rm 608, Block B, Times Square, No. 50
People Road, Zhongshan District, Dalian City, Liaoning Province, China 116001
+86-411-88079120
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(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
|
Cheng Li
Chief Executive Officer
Rm 608, Block B, Times Square, No. 50
People Road, Zhongshan District, Dalian City, Liaoning Province, China 116001 +86-411-88079120
|
(Name, Address, Including Zip Code, and
Telephone Number,
Including Area Code, of Agent for Service)
|
Copy to:
Jessica M. Lockett, Esq.
Lockett + Horwitz,
A Professional Law Corporation
14 Orchard, Suite 200
Lake Forest, CA 92630
(949) 540-6540
(949) 540-6578 —
Facsimile
Approximate date of commencement of proposed
sale of the securities to the public: From time to time after the effective date of this registration statement.
If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box. x
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
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¨
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Accelerated filer
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¨
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Non-accelerated filer
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x
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Smaller reporting company
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x
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|
|
Emerging growth company
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¨
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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 7(a)(2)(B) of the Securities Act. ¨
CALCULATION OF REGISTRATION FEE
Title of Securities to be Registered
|
|
Number of
shares
of common
stock to be
registered (1)
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|
|
Proposed
Maximum
Offering Price
Per Share
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|
|
Proposed
Maximum
Aggregate
Offering Price
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|
|
Amount of
Registration
Fee
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Common Stock, $0.001 par value per share
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|
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35,869,999
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|
|
$
|
0.25
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(2)
|
|
$
|
8,967,499.75
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|
|
$
|
978.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
35,869,999
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|
|
|
|
|
|
$
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8,967,499.75
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|
|
$
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978.35
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|
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(1)
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This Registration Statement covers the resale under a separate resale prospectus (the “Resale Prospectus”) by selling
shareholders (“Selling Shareholders”) of the Registrant of up to 35,869,999 common stocks previously issued to the
Selling Shareholders as named in the Resale Prospectus.
|
Pursuant to Rule 416, the
securities being registered hereunder include such indeterminate number of additional securities as may be issued after the date
hereof as a result of stock splits, stock dividends or similar transactions.
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(2)
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Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(c) under the Securities Act, based on
the average of the high and low prices for our common stock reported on the OTCQB marketplace on March 1, 2021 of $0.290 and $0.210.
The shares offered hereunder may be sold by the Selling Security Holder from time to time in the open market, through privately
negotiated transactions, or a combination of these methods at market prices prevailing at the time of sale or at negotiated prices.
|
The registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment
which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.
PRELIMINARY
PROSPECTUS SUBJECT TO COMPLETION, DATED MARCH 15, 2021
The information in this
prospectus is not complete and may be changed. The Selling Shareholders may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it
is not soliciting offers to buy these securities in any state where the offer or sale is not permitted.
IONIX TECHNOLOGY, INC.
35,869,999 Shares of Common Stock
This prospectus relates
to the offering and resale by the Selling Shareholders identified herein of up to an aggregate of 35,869,999 shares of the Company’s
common stock, par value $0.001 per share (the “Common Stock”) as set forth in the Resale Prospectus.
Our Common Stock is
traded on the over-the-counter market (OTCQB) under the symbol “IINX”. However, the Common Stock offered by this prospectus
may also be offered by the Selling Shareholders to or through underwriters, dealers, or other agents, directly to investors, or
through any other manner permitted by law, on a continued or delayed basis. Please see “Plan of Distribution” beginning
on page 26 of this prospectus.
We are not selling
any shares of Common Stock in this offering, and we will not receive any proceeds from the sale of shares by the Selling Shareholders.
The registration of the securities covered by this prospectus does not necessarily mean that any of the securities will be offered
or sold by the Selling Shareholders. The timing and amount of any sale is within the respective Selling Shareholders’ sole
discretion, subject to certain restrictions.
Our
Common Stock is traded on the over-the-counter market under the symbol “IINX.”
On March 12, 2021, the closing price of our Common Stock as reported by OTC Markets Group,
Inc.’s OTCQB Market was $0.22.
Investing in
our securities involves a high degree of risk. See “Risk Factors” in the section entitled “Risk
Factors” on page 10 of this prospectus for a discussion of certain risk factors that should be considered by
prospective purchasers of the Common Stock offered under this prospectus.
You should rely
only on the information contained in this prospectus or any prospectus supplement or amendment hereto. We have not authorized anyone
to provide you with different information.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is March
15, 2021
TABLE OF CONTENTS
PROSPECTUS SUMMARY
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5
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THE OFFERING
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8
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION
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8
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RISK FACTORS
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10
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
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24
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SELLING SHAREHOLDERS
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24
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USE OF PROCEEDS
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25
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PLAN OF DISTRIBUTION
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26
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MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND PURCHASES OF EQUITY
SECURITIES
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27
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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29
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BUSINESS
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38
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DIRECTORS AND EXECUTIVE OFFICERS
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57
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EXECUTIVE COMPENSATION
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63
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
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69
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DESCRIPTION OF COMMON STOCK
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71
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INTERESTS OF NAMED EXPERTS AND COUNSEL
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72
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WHERE YOU CAN FIND MORE INFORMATION
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72
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INDEX TO FINANCIAL STATEMENTS
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F-1
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You may only rely
on the information contained in this prospectus or that we have referred you to. We have not authorized anyone to provide you with
different information. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities
other than the Common Stock offered by this prospectus. This prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any Common Stock in any circumstances in which such offer or solicitation is unlawful. Neither the delivery
of this prospectus nor any sale made in connection with this prospectus shall, under any circumstances, create any implication
that there has been no change in our affairs since the date of this prospectus is correct as of any time after its date.
PROSPECTUS SUMMARY
This summary highlights
selected information appearing elsewhere in this prospectus. While this summary highlights what we consider to be important information
about us, you should carefully read this entire prospectus before investing in our Common Stock, especially the risks and other
information we discuss under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operation” and our consolidated financial statements and related notes beginning on page F-1. Our
fiscal year end is June 30 and our fiscal year ended June 30, 2020 is sometimes referred to herein as fiscal year 2020. Some of
the statements made in this prospectus discuss future events and developments, including our future strategy and our ability to
generate revenue, income and cash flow. These forward-looking statements involve risks and uncertainties which could cause actual
results to differ materially from those contemplated in these forward-looking statements. See “Cautionary Note Regarding
Forward-Looking Statements”. Unless otherwise indicated or the context requires otherwise, the words “we,” “us,”
“our”, the “Company” or “our Company” or refer to Ionix Technology, Inc., a Nevada corporation.
Corporate Background
Ionix Technology, Inc. (the “Company”,
formerly known as Cambridge Projects Inc.), a Nevada corporation, was formed on March 11, 2011.
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 17, 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.
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.”
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.
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.
Competition
As the display market
develops, we expect to experience intense competition from numerous domestic and foreign companies, including well-established
corporations possessing worldwide manufacturing and production facilities, greater name recognition and significantly greater financial,
technical and marketing resources than us, as well as from emerging companies who may have advanced technologies. We cannot assure
you that we will be able to compete successfully against current and future competition, and the failure to do so would have a
materially adverse effect upon our business, operating results and financial condition.
Our Growth Strategy
IINX is active
in promoting the worldwide application of green energy solutions. We are always pursuing more optimized green energy solutions
together with our customers. In 2021, we confront the rapid growth of the new energy industry, however, high and new technology
and its relevant accessories still play pivotal roles in the existing industrial chain. In the meantime, we have also chosen a
more extensive applied terminal product in new energy industry- the Liquid Crystal Displays (LCD), as an important composition
part of our business.
Our Offices
We maintain our principal
executive offices at Rm 608, Block B, Times Square, No. 50 People Road, Zhongshan District, Dalian City, Liaoning Province, China
116001. Our telephone number is (646) 801-2803. Our website is www.theiinx.com. The information contained on our website as that
can be assessed through our website does not constitute part of this prospectus.
THE OFFERING
Common stock offered by the Selling Shareholders
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We are offering up to an aggregate of 35,869,999 shares of the
Common Stock
|
|
|
|
|
|
|
|
|
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Common stock outstanding before and after this offering
|
|
162,582,058 shares
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Use of Proceeds
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|
We will not receive any proceeds from the sale of common stock by the Selling Shareholders. All of the net proceeds from the sale of our common stock will go to the Selling Shareholders as described below in the sections entitled “Selling Security Holders” and “Plan of Distribution”. We have agreed to bear the expenses relating to the registration of the common stock for the Selling Shareholders.
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Risk factors
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|
This investment involves a high degree of risk. See the information contained in “Risk Factors” beginning on page 10 of this prospectus.
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|
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Common stock symbol
|
|
Our Common Stock is listed in the over-the-counter market under the symbol “IINX”.
|
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following summary
consolidated statements of operations and balance sheet data for the fiscal year ended June 30, 2020, have been derived from our
audited consolidated financial statements included elsewhere in this prospectus, and the six months ended December 31, 2020 have
been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The historical financial
data presented below is not necessarily indicative of our financial results in future periods, and the results for the six months
ended December 31, 2020 is not necessarily indicative of our operating results to be expected for the full fiscal year ending June
30, 2021 or any other period. You should read the summary consolidated financial data in conjunction with those financial statements
and the accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Our consolidated financial statements are prepared and presented in accordance with United States generally accepted accounting
principles, or U.S. GAAP. Our consolidated financial statements have been prepared on a basis consistent with our audited financial
statements and include all adjustments, consisting of normal and recurring adjustments that we consider necessary for a fair presentation
of the financial position and results of operations as of and for such periods.
Ionix Technology, Inc.
Statements of Operations Data:
(in thousands, except for share and per
share data)
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|
|
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Years ended June 30,
|
|
|
|
Six Months Ended,
December 31, 2020
(Unaudited)
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|
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2020
(Audited)
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2019
(Audited)
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|
|
2018
(Audited)
|
|
STATEMENT OF OPERATIONS DATA:
|
|
|
|
|
|
|
|
|
|
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Net revenue
|
|
$
|
5,941
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|
|
$
|
20,599
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|
|
$
|
12,348
|
|
|
$
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6,423
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|
Cost of goods sold
|
|
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5,269
|
|
|
|
17,506
|
|
|
|
10,153
|
|
|
|
5,682
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|
Gross profit
|
|
|
672
|
|
|
|
3,093
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|
|
|
2,195
|
|
|
|
741
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|
Research and development expenses
|
|
|
277
|
|
|
|
806
|
|
|
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323
|
|
|
|
-
|
|
General and administrative expenses
|
|
|
658
|
|
|
|
1,937
|
|
|
|
1,256
|
|
|
|
270
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|
Operating Income (loss)
|
|
|
(263
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)
|
|
|
350
|
|
|
|
616
|
|
|
|
471
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|
Other income (expense)
|
|
|
(651
|
)
|
|
|
(455
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)
|
|
|
(69
|
)
|
|
|
-
|
|
Net Income (loss) before tax
|
|
|
(914
|
)
|
|
|
(105
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)
|
|
|
547
|
|
|
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471
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|
Income taxes provision (benefit)
|
|
|
(26
|
)
|
|
|
173
|
|
|
|
150
|
|
|
|
145
|
|
Net Income (loss)
|
|
|
(888
|
)
|
|
|
(278
|
)
|
|
|
397
|
|
|
|
326
|
|
Net Earnings (loss) per share
|
|
|
(0.01
|
)
|
|
|
(0.00
|
)
|
|
|
0.00
|
|
|
|
0.00
|
|
Weighted average number of shares
|
|
|
121,402,466
|
|
|
|
114,077,157
|
|
|
|
106,605,740
|
|
|
|
99,003,000
|
|
Balance Sheet Data:
(in thousands)
|
|
As of
December 31,
2020
|
|
|
As of June
30, 2020
|
|
|
As of June
30, 2019
|
|
BALANCE SHEET DATA:
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
(Audited)
|
|
Total current assets
|
|
$
|
9,530
|
|
|
$
|
9,166
|
|
|
$
|
8,656
|
|
Total assets
|
|
|
18,087
|
|
|
|
17,185
|
|
|
|
17,715
|
|
Total current liabilities
|
|
|
7,122
|
|
|
|
7,583
|
|
|
|
7,938
|
|
Total liabilities
|
|
|
7,122
|
|
|
|
7,583
|
|
|
|
7,938
|
|
Stockholders’ Equity (deficit)
|
|
|
10,965
|
|
|
|
9,602
|
|
|
|
9,777
|
|
RISK FACTORS
Purchasing our Common
Stock involves a high degree of risk. You should consider carefully the risks described below, together with all of the other information
included or incorporated by reference in this prospectus, including the risks and uncertainties included in other reports and filings
made with the SEC, as well as any updates thereto contained in subsequent filings with the SEC or any free writing prospectus,
before deciding whether to purchase our securities in this offering. All of these risk factors are incorporated herein in their
entirety. The risks described below and incorporated by reference are material risks currently known, expected or reasonably foreseeable
by us. However, the risks described below are not the only ones that we face. Additional risks not presently known to us or that
we currently deem immaterial may also affect our business, operating results, prospects or financial condition. If any of these
risks actually materialize, our business, prospects, financial condition, and results of operations could be seriously harmed.
This could cause the trading price of our common stock and the value of the warrants to decline, resulting in a loss of all or
part of your investment.
Risks Relating to the Company’s
Business
Our independent auditors have expressed
substantial doubt about our ability to continue as a going concern.
We incurred a net loss from during six
months ended December 31, 2020, and we expect to incur further losses in the development of its business, all of which raises substantial
doubt about the Company’s ability to continue as a going concern. The Company had an accumulated deficit of $626,226 as of
December 31, 2020. The Company incurred loss from operation and did not generate sufficient cash flow from its operating activities
for the six months ended December 31, 2020. These factors, among others, raise substantial doubt about the Company’s ability
to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Our consolidated financial statements have
been prepared assuming that the Company will continue as a going concern. The Company plans to rely on the proceeds from loans
from both unrelated and related parties to provide the resources necessary to fund the development of the business plan and operations.
The Company is also pursuing other revenue streams which could include strategic acquisitions or possible joint ventures of other
business segments. However, no assurance can be given that the Company will be successful in raising additional capital. There
have been no changes to our ability to continue as a going concern as of our latest unaudited financial statements for the period
ended December 31, 2020 set forth in Form 10-Q filed with the commission on February 16, 2021.
Our business depends on new products
and technologies.
The market for our products is characterized
by rapid changes in product design and manufacturing process technologies. Our success depends to a large extent on our ability
to develop and manufacture new products and technologies to match the varying requirements of different customers in order to establish
a competitive position and become profitable. Our growth is supported by continuous investment in time, resources and capital to
identify and develop new products and new services for the market via geographic expansion and market penetration. If we are unable
to either develop new screen or monitor products on our own or acquire licenses for new screen and monitor products from other
parties, our ability to grow revenues and market share will be adversely affected. In addition, we may not be able to recover our
investment in the development and commercialization of new screen products, given that some of our research and development projects
may be interrupted, unsuccessful, not as profitable as initially contemplated or we may not be able to obtain necessary and continuing
financing to complete such development.
We generally do not have long-term
contracts with our customers.
Our
business has primarily operated on the basis of short-term purchase orders. We receive some longer term purchase agreements and
procurement contracts, but we cannot guarantee that we will continue to do so. Our current purchase agreements, depending on the
circumstances, can be cancelled or revised without penalty. We plan production primarily on the basis of internally generated forecasts
of demand based on communications with customers, and available industry data which makes it difficult to accurately forecast revenues.
If we fail to accurately forecast operating results, our business may suffer and the market price of our shares may decline.
The manufacture of flexible OLED
and LCD screens encompasses several complex processes resulting in irregular production schedules, including production delays
and interruptions, which could adversely affect our operating results.
Our
product technology and manufacturing processes evolve from time to time which can result in production challenges and difficulties.
We cannot assure you that we will be able to produce our products in sufficient quantity and quality to maintain existing customers’
demand and attract new customers. In addition, we cannot assure you that we will not experience manufacturing problems within our
facility in Changchun, which could result in delays in delivery of orders or product introductions if any material problems occur
to us.
Several steps of our production
processes are dependent upon certain critical machines and tools which could result in delivery interruptions and foregone revenues.
We
currently have little equipment redundancy in our manufacturing facility. Some steps of our production process rely on key equipment
and operators. At present, we have almost no redundancy of production equipment, but we have set up equipment support department.
In case of any major interruption in the operation of manufacturing facilities or serious failure of key equipment, our equipment
support department will start the emergency plan to repair the equipment and replace the damaged parts as soon as possible, so
as to resume production in time. If we experience any significant disruption in the operation of our manufacturing facility or
a serious failure of a critical piece of equipment, we may be unable to supply our screen products to our customers in a timely
manner. Interruptions in our manufacturing process could be caused by equipment problems, the introduction of new equipment into
the manufacturing process or delays in the delivery of new manufacturing equipment. Lead-time for delivery, installation, testing,
repair and maintenance of manufacturing equipment can be extensive. We have experienced production interruptions in the past, which
fortunately did not result in losses, however, in the event of future production interruptions no assurance can be given that we
will not lose potential sales or be unable to meet production orders due to future production interruptions in our manufacturing
line.
We
rely on a limited number of source suppliers.
We
depend on a limited number of source suppliers for certain raw materials, components, and services. These include glass, silicon
wafers, circuit boards, graphic integrated circuits, passive components, materials and chemicals, and equipment support. We maintain
several single-source supplier relationships either because alternative sources are not available or because the relationship is
advantageous to us due to performance, quality, support, delivery, capacity, or price considerations (or a combination thereof).
We have established long-term relationships with supplier partners as the result of stable quality, timely delivery and reasonable
price, Even where alternative sources of supply are available, qualification of the alternative suppliers and establishment of
reliable supplies could result in delays and a possible loss of sales, which could materially and adversely affect our operating
results. We do not manufacture the silicon integrated circuits on which we incorporate our OLED technology. Instead, we provide
the design layouts to semiconductor contract manufacturers who manufacture the integrated circuits on silicon wafers. Our inability
to obtain sufficient quantities of components and other materials or services on a timely basis could result in manufacturing delays,
increased costs and ultimately in reduced or delayed sales or lost orders which could materially and adversely affect our operating
results. Generally, we do not have long-term contracts or written agreements with our source suppliers but instead operate on an
as-needed basis.
Our results of operations, financial
condition and business would be harmed if we were unable to balance customer demand and capacity.
As
customer demand for our products changes, and as we enter new markets which may require higher volume mass production, we must
be able to ramp up or adjust our production capacity to meet demand or enter into relationships with high volume manufacturing
partners. We are continually taking steps to address our manufacturing capacity and needs for our products. If we are not able
to expand our manufacturing capacity or enter into relationships with high volume manufacturing partners, our prospects may be
limited and our business and results of operations could be adversely impacted. If we experience delays or unforeseen costs associated
with adjusting our capacity levels, we may not be able to achieve our financial targets. We do not order based on actual demand,
we base our ordering upon market experience and forecasts, as such we have not had issues with vendor lead times exceeding our
customers' required delivery time, however, at this may create risks of over ordering if actual demand is lower than estimated.
Ordering raw material, building finished goods, and scheduling contract manufacturer production for our consumer products based
on forecasts exposes us to numerous risks, including potential inability to service customer demand within an acceptable timeframe,
holding excess inventory or having unabsorbed manufacturing overhead.
We may be subject to product liability
claims, which could divert our resources, cause us to incur substantial liabilities.
We face an inherent business risk of exposure
to product liability claims in the event that the uses of our products are alleged to have caused accidents or bodily injuries.
Any marketing or manufacturing defects pertaining to any of our products could result in product liability claims or adverse publicity.
These risks may exist for the existing products and products in development. Furthermore, we do not currently maintain product
liability insurance as we are not the end product producer, however, if we were to desire product liability insurance there could
be no assurance that we are able to acquire product liability insurance with terms that are commercially feasible.
We face an inherent risk of product liability
claims as a result of the sales of our products. For example, we may be sued if any product we develop allegedly causes injury
or is found to be otherwise unsuitable for consumer purposes. Any such product liability claims may include allegations of defects
in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach
of warranties. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities
or be required to limit commercialization of our product candidate. Regardless of the merits or eventual outcome, liability claims
may result in:
|
●
|
decreased demand for our products and products under development;
|
|
●
|
injury to our reputation and significant negative media attention;
|
|
●
|
significant costs to defend resulting litigation;
|
|
●
|
substantial monetary awards to trial participants or injured consumers;
|
|
●
|
reduced resources of our management to pursue our business strategy; and
|
|
●
|
the inability to commercialize any products that we may develop.
|
We do not currently maintain general liability
insurance; and even if we have a general liability insurance in the future, there is no assurances whether insurance may fully
cover potential liabilities that we may incur. The cost of any product liability litigation or other proceeding, even if resolved
in our favor, could be substantial. Our policy premium may increase as a result of product liability litigation. In addition, insurance
coverage is becoming increasingly expensive. If we are unable to obtain or maintain sufficient insurance coverage at an acceptable
cost or to otherwise protect against potential product liability claims, it could prevent or inhibit the development and commercial
production of our product candidates and the sale of existing products, which could adversely affect our business, financial condition,
results of operations and prospects.
Our internal computer systems, or
those of our third-party contractors or consultants, may fail or suffer security breaches, which could result in a material disruption
of our product development programs.
Despite the implementation of security
measures, our internal computer systems and those of our third-party contractors and consultants are vulnerable to damage from
computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we
do not believe that we have experienced any such system failure, accident, or security breach to date, if such an event were to
occur and cause interruptions in our operations, it could result in a loss of research data for our new screen products which could
result in delays in new product commercialization efforts and significantly increase our costs to recover or reproduce the data.
To the extent that any disruption or security breach results in a loss of or damage to our data or applications or other data or
applications relating to our new LCD and OLED technologies, or inappropriate disclosure of confidential or proprietary information,
we could incur liabilities and the further development of our product candidates could be delayed.
Our success depends on attracting and
retaining highly skilled and qualified technical and consulting personnel.
We must hire highly skilled technical personnel
as employees and as independent contractors in order to develop our products. The competition for skilled technical employees is
intense and we may not be able to retain or recruit such personnel. We compete with companies that possess greater financial and
other resources than we do, and that may be more attractive to potential employees and contractors. To be competitive, we may have
to increase the compensation, including salaries, bonuses, stock options and other fringe benefits, offered to employees in order
to attract and retain such personnel. The costs of attracting and retaining new personnel may have a materially adverse effect
on our operating results.
Our success depends in a large part
on the continuing service of key personnel.
Changes in management could have an adverse
effect on our business. We are dependent upon the active participation of several key management personnel and will also need to
recruit additional management in order to expand according to our business plan. The failure to attract and retain additional talented
management or personnel could have a material adverse effect on our operating results and financial performance.
Our operating results are substantially
dependent on the development and acceptance of new products and technology innovations.
Our future success may depend on our ability
to develop new and lower cost solutions for existing and new markets and for customers to accept those solutions. We must introduce
new products in a timely and cost-efficient manner, and we must secure production orders for those products from our customers.
The development of new products is a highly complex process, and we historically have experienced delays in completing the development
and introduction of new products. Some or all of those technologies or products may not successfully make the transition from the
research and development phase. Even when we successfully complete a research and development effort with respect to a particular
product or technology, it may fail to gain market acceptance. The successful development and introduction of these products depends
on a number of factors, including the following:
|
·
|
achievement of technology advances required to make commercially viable devices;
|
|
·
|
the accuracy of our predictions of market requirements;
|
|
·
|
acceptance of our new product designs;
|
|
·
|
acceptance of new technology in certain markets;
|
|
·
|
the availability of qualified research and development and product development personnel;
|
|
·
|
our timely completion of product designs and development;
|
|
·
|
our ability and available resources to expand sales;
|
|
·
|
our ability to develop repeatable processes to manufacture new products in sufficient quantities and
at low enough costs for commercial sales; and
|
|
·
|
our customers' ability to develop competitive products incorporating our products.
|
If any of these or other factors become
problematic, we may not be able to develop and introduce these new products in a timely or cost-effective manner.
If government agencies change the
subsidies or tax policies from which we benefit or certain customers discontinue or curtail their funding for our research and
development programs, our business may suffer.
We have received beneficial tax treatments
from the central government of the PRC because of our designation as a high-tech company from November 2016 to November 2019 and
received a small one-time governmental subsidy in 2016. If the PRC central government changes its tax policies for high-tech companies,
we may not be able to maintain our current favorable tax treatments. Furthermore, some of our subsidiaries perform research and
development services to non-profit organizations, such as universities. If the funding for some or all of our research clients
is discontinued or reduced, our research clients could limit or discontinue our research programs and our business results and
financial conditions could be adversely affected.
Our business is subject to environmental
regulations and possible liability arising from potential employee claims of exposure to harmful substances used in the development
and manufacture of our products.
We are subject to various governmental
regulations related to toxic, volatile, experimental and other hazardous chemicals used in our design and manufacturing process.
Our failure to comply with these regulations could result in the imposition of fines or in the suspension or cessation of our operations.
Compliance with these regulations could require us to acquire costly equipment or to incur other significant expenses. We develop,
evaluate and utilize new chemical compounds in the manufacture of our products. While we attempt to ensure that our employees are
protected from exposure to hazardous materials, we cannot assure you that potentially harmful exposure will not occur or that we
will not be liable to injured employees as a result.
Risks Relating to Intellectual Property
We may not be successful in protecting our intellectual
property and proprietary rights.
We rely on a combination of patents, trade
secret and know-how protection, and other arrangements to establish and protect our proprietary technologies. If we fail to successfully
enforce our intellectual property rights, our competitive position could suffer, which could harm our operating results. Patents
may not be issued for our current patent applications; third parties may challenge, invalidate or circumvent any patent issued
to us; unauthorized parties could obtain and use information that we regard as proprietary despite our efforts to protect our proprietary
rights; rights granted under patents issued to us may not afford us any competitive advantage; others may independently develop
similar technology or design around our patents; and protection of our intellectual property rights may be limited in certain foreign
countries. On April 30, 2007, the U.S. Supreme Court, in KSR International Co. vs. Teleflex, Inc., mandated a more expansive
and flexible approach towards a determination as to whether a patent is obvious and invalid, which may make it more difficult for
patent holders to secure or maintain existing patents. Any future infringement or other claims or prosecutions we may bring against
third parties based on our intellectual property could have a material adverse effect on our business. Any such claims could be
time consuming to assert, result in costly litigation, divert management's attention and resources, or result in our entering into
royalty or licensing agreements.
In addition to patent protection, we try
to protect our trade secrets, know-how and other non-patented proprietary information relating to our product development and manufacturing
activities through appropriate efforts to maintain its secrecy, including requiring employees and third parties to sign confidentiality
agreements. We cannot be sure that these efforts will be successful or that the confidentiality agreements will not be breached.
We also cannot be sure that we would have adequate remedies for any breach of such agreements or other misappropriation of our
trade secrets or that our trade secrets and proprietary know-how will not otherwise become known or be independently discovered
by others.
Third parties may assert claims
against us which could harm our business.
We
may face third party claims that our business practices or products infringe adversely held intellectual property rights. We may
face third party claims that our employees or contractors have misappropriated and unlawfully disclosed to us for our benefit third
party trade secrets or other proprietary information. Defending any such claims, whether or not meritorious, would cause us to
incur costs and may divert the attention of management and technical personnel. Resolution of any such claims by litigation or
settlement may entail payment of damages, changes to our business practices or products, and changes in our relationships with
our customers, employees, or contractors.
Risks Relating to the Display Industry
The display market is highly competitive with several
competing technologies.
We
do business in intensely competitive markets that are characterized by rapid technological change, changes in market requirements
and competition from both other suppliers and our potential OEM customers. Such markets are typically characterized by price erosion.
This intense competition could result in pricing pressures, lower sales, reduced margins, and lower market share. Our ability to
compete successfully will depend on a number of factors, which can be within or outside our control. We expect these factors to
include the following:
|
·
|
our success in designing, manufacturing and delivering
expected new products, including those implementing new technologies on a timely basis;
|
|
·
|
our ability to address the needs of our customers;
|
|
·
|
the quality, performance, reliability, features,
ease of use and pricing of our products;
|
|
·
|
successful expansion of our manufacturing capabilities
and market share;
|
|
·
|
our efficiency of production, and ability to manufacture
and ship products on time;
|
|
·
|
the rate at which OEM customers incorporate our
product solutions into their own products;
|
|
·
|
the market acceptance of our new products; and
|
|
·
|
product or technology introductions by our competitors.
|
In
addition, some of our customers may be reluctant to rely on a relatively small company such as Ionix for a critical component.
We cannot assure you that we will be able to compete successfully against current and future competition, and the failure to do
so would have a materially adverse effect upon our business, operating results and financial condition.
The display industry may be subject to cyclical demand
and overcapacity.
Our
business strategy is primarily dependent on certain customers’ building and selling electronic products that incorporate
our LCD displays as components into those products. Industry-wide fluctuations in demand could cause significant harm to our business.
The LCD display sector may experience overcapacity if additional capacity comes on-line which could lead to pricing pressures and
a difficult market in which to sell our products.
Our competitors have many further advantages over
us.
As
the display market develops, we expect to experience intense competition from numerous domestic and foreign companies, including
well-established corporations possessing worldwide manufacturing and production facilities, greater name recognition and significantly
greater financial, technical and marketing resources than us, as well as from emerging companies who may have advanced technologies.
We cannot assure you that we will be able to compete successfully against current and future competition, and the failure to do
so would have a materially adverse effect upon our business, operating results and financial condition.
In order to increase or maintain
our profit margins we may have to continuously develop new products, product enhancements and new technologies.
In
some markets, prices of established products tend to decline over time. In order to increase or maintain our profit margins over
the long-term, we believe that we will need to continuously develop new products, product enhancements and new technologies that
will either slow price declines of our products or reduce the cost of producing and delivering our products. While we anticipate
many opportunities to reduce production costs over time, there can be no assurance that these cost reduction plans will be successful,
that we will have the resources to fund the expenditures necessary to implement certain cost-saving measures, or that our costs
can be reduced as quickly as any reduction in unit prices. We may also attempt to offset the anticipated decrease in our average
selling price by introducing new products with higher selling prices that may or may not offset price declines in more mature products.
If we fail to do so successfully, our results of operations could be materially and adversely affected.
Our business operations and financial
results may suffer if the shift of the business focus to display screens turns out not to be as successful as predicted.
In
March 2019, after entry into the VIE Agreements with Fangguan, we shifted our business focus to display screens and away from portable
power packs because our management believes that the display screen business has better prospects for long term success. If our
display screen business does not grow as fast and/or profitably as we expect, our future operations and financial results may be
adversely affected.
Risks Relating to Doing Business
Outside the United States
Because Ionix’s primary business
activities are conducted in the PRC, the Company is subject to the risks of doing business internationally, including periodic
foreign economic downturns and political instability, which may adversely affect the Company’s revenue and cost of doing
business.
Our
primary place of business is in the PRC and we have almost all of our employees and management team in the PRC. Foreign economic
downturns may affect our results of operations in the future. Additionally, other facts relating to the operation of the Company’s
business outside of the U.S. may have a material adverse effect on the Company’s business, financial condition and results
of operations, including international economic and political changes.
|
·
|
The imposition of governmental controls or changes in government regulations, including tax laws,
regulations and treaties;
|
|
·
|
changes in, or impositions of, legislative or regulatory requirements regarding the display screen
and power bank industries;
|
|
·
|
compliance with U.S. and international laws involving international operations, including the Foreign
Corrupt Practices Act and export control laws;
|
|
·
|
difficulties in achieving headcount reductions due to unionized labor and works councils;
|
|
·
|
restrictions on transfers of funds and assets between jurisdictions;
|
|
·
|
China- U.S. political instability;
|
|
·
|
Increase on customs levies on materials and products traded between the U.S. and PRC; and
|
|
·
|
Outbreaks of diseases and the fears of a pandemic disease.
|
As the Company continues to operate its
business globally, its success will depend in part, on its ability to anticipate and effectively manage these risks. The impact
of any one or more of these factors could materially adversely affect the Company’s business, financial condition and results
of operations.
The Company may be exposed to liabilities
under the U.S. Foreign Corrupt Practices Act (“FCPA”) and Chinese anti-corruption law.
The Company is subject to the FCPA, and
other laws that prohibit improper payments or offers of payments to foreign governments, foreign government officials and political
parties by U.S. persons as defined by the statute for purposes of obtaining or retaining businesses. The Company may have agreements
with third parties who may make sales in the PRC, the United Kingdom and U.S., during the process of which the Company may be exposed
to corruption. Activities in the PRC can create the risk of unauthorized payments or offers of payments by an employee, consultant
or agent of the Company, because these parties are not always subject to the Company’s control.
Although the Company believes to date it
has complied in all material aspects with the provisions of the FCPA and Chinese anti-corruption law, the existing safeguards and
any future improvements may prove to be less than effective and any of the Company’s employees, consultants or agents may
engage in corruptive conduct for which the Company might be held responsible. Violations of the FCPA or Chinese anti-corruption
law may result in severe criminal or civil sanctions against the Company and individuals and therefore could negatively affect
the Company’s business, operating results and financial condition. In addition, the Chinese government may seek to hold the
Company liable as a successor for FCPA violations committed by companies in which the Company invests or acquires.
If the Company becomes directly subject
to the recent scrutiny, criticism and negative publicity involving U.S.- listed Chinese companies, we may have to expend significant
resources to investigate and resolve the matters. Any unfavorable results from the investigations could harm our business operations,
this offering and our reputation.
Recently, U.S. public companies that have
substantially all of their operations in China, have been subjects of intense scrutiny, criticism and negative publicity by investors,
financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered
on financial and accounting irregularities, lack of effective internal control over financial accountings, inadequate corporate
governance and ineffective implementation thereof and, in many cases, allegations of fraud. As a result of enhanced scrutiny, criticism
and negative publicity, the publicly traded stocks of many U.S. listed Chinese companies have sharply decreased in value and, in
some cases, have become virtually worthless or illiquid. Many of these companies are now subject to shareholder lawsuits and SEC
enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effects
the sector-wide investigations will have on the Company. If the Company becomes a subject of any unfavorable allegations, whether
such allegations are proven to be true or untrue, the Company will have to expend significant resources to investigate such allegations
and defend the Company. If such allegations were not proven to be baseless, the Company would
be severely hampered and the price of the stock of the Company could decline substantially. If such allegations were proven to
be groundless, the investigation might have significantly distracted the attention of the Company’s management.
International operations expose the Company
to currency exchange and repatriation risks, and the Company cannot predict the effect of future exchange rate fluctuations on
its business and operating results.
The Company has its primary business operations
in the PRC. Substantial amounts of revenues are received and expenses are incurred in Chinese dollars and U.S. dollars. Thus, the
Company has exposure to currency fluctuations. The Company cannot assure you that the effect of currency exchange fluctuations
will not materially affect its revenues and net income in the future.
Ionix’s business could be adversely
affected by changes in the U.S. presidential administration and tariffs.
A new U.S. presidential administration
came to power in January 2017 and President Trump has imposed importation tariffs from certain countries such as China and Mexico,
which could affect the sales of certain products if the Company were to sell them to the U.S. Although China and U.S. reached a
Phase-One trade deal in January 2020, the Company’s international business could still be negatively affected by future custom
and tariff changes imposed by either China or the U.S. In addition, the U.S. had its presidential election in November 2020, and
with new President Biden in office, it is unclear what if any impact may result on business between the U.S. and China. Potential
political changes may impose negative impacts on the economic stability in general and adversely affect the Company’s financial
performance.
Risks associated with the VIE structure
On December 27, 2018, the Company entered
into a group of variable interest agreements (the “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 the VIE agreements and an additional capital contribution, the Company issued 15 million
shares of common stock to those two shareholders of Fangguan Electronics. The Company believes that the VIE contractual arrangements
with Fangguan Electronics 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 Fangguan Photoelectric, one of the Company’s
PRC subsidiaries and its VIE Agreements;
|
|
·
|
discontinue or restrict the operations of any related-party transactions between Fangguan Photoelectric
and Fangguan Electronics;
|
|
·
|
limit the Company’s business expansion in China by way of entering into contractual arrangements;
|
|
·
|
impose fines or other requirements with which Fangguan Photoelectric and Fangguan Electronics may
not be able to comply;
|
|
·
|
require the Company or Fangguan Photoelectric and Fangguan Electronics to restructure the relevant
ownership structure or operations; orrestrict or prohibit the Company’s use of the proceeds from the public offering to finance
the Company’s business and operations in China.
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The Company’s ability to conduct
its business through its VIE structure may be negatively affected if the PRC government were to carry out any of the aforementioned
actions. In such event, the Company may not be able to consolidate Fangguan Photoelectric and Fangguan Electronics in its consolidated
financial statement as it may lose the ability to receive economic benefits from its VIE structure.
You may face difficulties in protecting
your interests, and your ability to protect your rights through the U.S. federal courts may be limited, because we conduct substantially
all of our operations in the PRC and the majority of our officers reside outside the United States.
We conduct substantially all of our operations
in the PRC through our wholly owned and majority owned subsidiaries there. Most of our officers reside outside the United States
and some or all of the assets of those persons are located outside of the United States. As a result, it may be difficult if not
impossible for you to bring an action against us or against these individuals in the PRC in the event that you believe that your
rights have been infringed under the securities laws or otherwise. Even if you are successful in bringing an action of this kind
in the PRC, the laws of the PRC or United States may render you unable to effect service of process upon, or to enforce a judgment
against our assets or the assets of our directors and officers. A judgment of a court of another jurisdiction may be reciprocally
recognized or enforced if the jurisdiction has a treaty with the PRC or if judgments of the Chinese courts have been recognized
before in that jurisdiction, subject to the satisfaction of other requirements. For more information regarding the relevant laws
of the PRC, see “Enforceability of Civil Liabilities.”
As a result of all of the above, our public
shareholders may have more difficulty in protecting their interests through actions against our management, directors or major
shareholders than would shareholders of a corporation operating and having its substantial assets in a jurisdiction in the United
States.
Risks Related to Pandemic
The COVID-19 coronavirus could adversely
impact our business.
In December 2019, a novel strain of coronavirus, COVID-19, was
reported to have surfaced in Wuhan, China. Since then, the COVID-19 coronavirus has spread to multiple countries, including the
United States, and has caused significant disruptions around the world. We may experience disruptions as a result of the COVID-19
pandemic that could severely impact our business including:
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interruption of key development activities due to limitations on work and travel imposed or recommended
by federal or state governments, employers and others;
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interruption of key business activities due to illness and/or quarantine of key individuals and
delays associated with recruiting, hiring and training new temporary or permanent replacements for such key individuals, both internally
and at our third party service providers;
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difficulties in raising additional capital needed to pursue the development of our platform due
to the slowing of our economy and near term and/or long term negative effects of the pandemic on the financial, banking and capital
markets;
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changes in local regulations as part of a response to the COVID-19 coronavirus outbreak that
may require us to change the ways in which research, including development, is conducted, which may result in unexpected costs;
and
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delays in necessary interactions with regulators and other important
agencies and contractors due to limitations in employee resources, travel restrictions or forced furlough of government employees.
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The global outbreak of the COVID-19 coronavirus continues to
rapidly evolve. The extent to which the COVID-19 coronavirus may impact our business will depend on future developments,
which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the
duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures
or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the
virus.
Risks Relating to Our Stock
The price of our common stock is
volatile, which may cause investment losses for our stockholders.
The market price of our common stock has
been and is likely in the future to be volatile. Our common stock price may fluctuate in response to factors such as:
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Announcements by us regarding liquidity, significant acquisitions, equity investments and divestitures,
strategic relationships, addition or loss of significant customers and contracts, capital expenditure commitments and litigation;
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Issuance of convertible or equity securities and related warrants for general or merger and acquisition
purposes;
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Issuance or repayment of debt, accounts payable or convertible debt for general or merger and acquisition
purposes;
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Sale of a significant number of shares of our common stock by stockholders;
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General market and economic conditions;
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Quarterly variations in our operating results;
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Investor and public relation activities;
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Announcements of technological innovations;
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New product introductions by us or our competitors;
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Competitive activities; and
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Additions or departures of key personnel.
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These broad market and industry factors
may have a material adverse effect on the market price of our common stock, regardless of our actual operating performance. These
factors could have a material adverse effect on our business, financial condition and results of operations.
Transfers of our securities may be
restricted by virtue of state securities “blue sky” laws, which prohibit trading absent compliance with individual
state laws. These restrictions may make it difficult or impossible to sell shares in those states.
Transfers of our common stock may be restricted
under the securities or securities regulations laws promulgated by various states and foreign jurisdictions, commonly referred
to as "blue sky" laws. Absent compliance with such individual state laws, our common stock may not be traded in such
jurisdictions. Because the securities held by many of our stockholders have not been registered for resale under the blue sky laws
of any state, the holders of such shares and persons who desire to purchase them should be aware that there may be significant
state blue sky law restrictions upon the ability of investors to sell the securities and of purchasers to purchase the securities.
These restrictions may prohibit the secondary trading of our common stock. Investors should consider the secondary market for our
securities to be a limited one.
The sale of a significant number
of our shares of common stock could depress the price of our common stock.
Sales or issuances of a large number
of shares of common stock in the public market or the perception that sales may occur could cause the market price of our common
stock to decline. As of December 31, 2020, the approximate number of registered holders of our common stock was 212 and there
were 155,582,058 shares of common stock issued and outstanding and there were 5,000,000 shares of preferred stock issued and outstanding.
As of March 12, 2021 there were 162,582,058 shares of common stock issued and outstanding and there were 5,000,000 shares of preferred
stock issued and outstanding. As of December 31, 2020 and March 12, 2021, there were 68,750 shares of common stock subject to
outstanding warrants, and there were no shares of common stock subject to outstanding stock options. Each share of common stock
entitles its holder to one vote on each matter submitted to the stockholders for a vote, and no cumulative voting for directors
is permitted. Stockholders do not have any preemptive rights to acquire additional securities issued by us.
Significant shares of common stock are
held by our principal stockholders, other company insiders and other large stockholders. As “affiliates” of Company,
as defined under Securities and Exchange Commission Rule 144 under the Securities Act of 1933, our principal stockholders, other
of our insiders and other large stockholders may only sell their shares of common stock in the public market pursuant to an effective
registration statement or in compliance with Rule 144. Issuance of additional securities, or exercise or conversion of existing
securities could result in further dilution to common stockholders and may affect the market price of the common stock.
On December 31, 2020, there was one promissory
note outstanding as follows:
On December 21, 2020, the Company issued
a self-amortization promissory note to Labrys Fund, L.P in the aggregate principal amount of $300,000. The promissory note is due
on or before December 21, 2021 and bears an interest rate of five percent (5%) per annum. The note is not convertible unless in
default, as defined in the agreement. The Company agreed to reserve 7,052,239 shares of its common stock for issuance if any debt
is converted. The Company executed and closed the transaction on December 31, 2020 and received $253,500 in cash after deducting
an OID in the amount of $30,000, legal fees of $3,000 and other costs of $13,500. The self-amortization promissory note has an
amortization schedule of $35,000 payment at each month end beginning April 23, 2021 through December 21, 2021.
In connection with the issuance of promissory
note, on December 31, 2020, the Company issued 447,762 shares of common stock (the “First Commitment Shares”) and 1,119,402
shares of common stock (the “Second Commitment Shares”) related to the promissory note as a commitment fee. The Second
Commitment Shares must be returned to the Company’s treasury if the promissory note is fully repaid and satisfied on or prior
to the maturity date. The Company recorded the First Commitment Shares as debt discount valued at $68,060 based on the quoted market
price at issue date and amortized over the term of the promissory note. The Company recorded the Second Commitment Shares at par
for the six months ended December 31, 2020.
Future capital raises may dilute
our existing stockholders’ ownership and/or have other adverse effects on our operations.
If we raise additional capital by issuing
equity securities, our existing stockholders’ percentage ownership will be reduced and these stockholders may experience
substantial dilution. We may also issue equity securities that provide for rights, preferences and privileges senior to those of
our common stock. If we raise additional funds by issuing debt securities, these debt securities would have rights senior to those
of our common stock and the terms of the debt securities issued could impose significant restrictions on our operations, including
liens on our assets. If we raise additional funds through collaborations and licensing arrangements, we may be required to relinquish
some rights to our technologies or products, or to grant licenses on terms that are not favorable to us.
We do not anticipate paying any cash
dividends on our capital stock in the foreseeable future.
We have never declared or paid cash dividends
on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of
our business, and we do not anticipate paying any cash dividends on our capital stock in the foreseeable future. In addition, the
terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common
stock will be your sole source of gain for the foreseeable future.
Anti-takeover provisions may limit
the ability of another party to acquire our company, which could cause our stock price to decline.
Our certificate of incorporation, as amended,
our bylaws and Nevada law contain provisions that could discourage, delay or prevent a third party from acquiring our company,
even if doing so may be beneficial to our stockholders. In addition, these provisions could limit the price investors would be
willing to pay in the future for shares of our common stock.
The price of our Common Stock price
has been, and may continue to be, volatile.
The market price of our Common Stock has
historically been volatile and could be subject to significant fluctuations in the future. Some of the factors that may cause the
market price of our Common Stock to fluctuate include:
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relatively low trading volume, which can result in significant volatility in the market price of
our Common Stock based on a relatively smaller number of trades and dollar amount of transactions;
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the timing and results of our current and any future products;
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the entry into or termination of key agreements, including, among others, key collaboration and
license agreements;
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the initiation of, material developments in, or conclusion of, litigation to enforce or defend
any of our intellectual property rights;
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failure of any of our product candidates, if approved, to achieve commercial success;
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general and industry-specific economic conditions that may affect our research and development
expenditures;
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issues in manufacturing our products;
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the introduction of technological innovations or new commercial products by our competitors;
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changes in estimates or recommendations by securities analysts, if any, who cover our Common Stock;
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future sales of our Common Stock;
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period-to-period fluctuations in our financial results;
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publicity or announcements regarding regulatory developments relating to our products;
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period-to-period fluctuations in our financial results, including our cash and cash equivalents
balance, operating expenses, cash burn rate or revenue levels;
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Common Stock sales in the public market by one or more of our larger stockholders, officers or
directors;
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our filing for protection under federal bankruptcy laws; or
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a negative outcome in any litigation or potential legal proceeding.
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The stock markets in general have experienced
substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations
may also adversely affect the trading price of our Common Stock. In the past, following periods of volatility in the market price
of a company’s securities, stockholders have often instituted class action securities litigation against those companies.
Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could
significantly harm our profitability and reputation.
Our Common Stock is currently traded
in the OTCQB Marketplace. Broker-dealers may experience difficulty in completing customer transactions and trading activity in
our securities may be adversely affected.
Our Common Stock currently trades in the
OTCQB Marketplace. The OTCQB is viewed by most investors as a less desirable, and less liquid, marketplace. As a result, an investor
may find it more difficult to purchase, dispose of or obtain accurate quotations as to the value of our Common Stock. Because our
Common Stock is not listed on any national securities exchange, such shares will also be subject to the regulations regarding trading
in “penny stocks,” which are those securities trading for less than $5.00 per share, and that are not otherwise exempted
from the definition of a penny stock under other exemptions provided for in the applicable regulations. The following is a list
of the general restrictions on the sale of penny stocks:
Before the sale of penny stock by a broker-dealer
to a new purchaser, the broker-dealer must determine whether the purchaser is suitable to invest in penny stocks. To make that
determination, a broker-dealer must obtain, from a prospective investor, information regarding the purchaser’s financial
condition and investment experience and objectives. Subsequently, the broker-dealer must deliver to the purchaser a written statement
setting forth the basis of the suitability finding and obtain the purchaser’s signature on such statement.
A broker-dealer must obtain from the purchaser
an agreement to purchase the securities. This agreement must be obtained for every purchase until the purchaser becomes an “established
customer.” The Securities Exchange Act of 1934 (the “Exchange
Act”), requires that before effecting any transaction in any penny stock, a broker-dealer must provide the purchaser with
a “risk disclosure document” that contains, among other
things, a description of the penny stock market and how it functions, and the risks associated with such investment. These disclosure
rules are applicable to both purchases and sales by investors.
A dealer that sells penny stock must send
to the purchaser, within 10 days after the end of each calendar month, a written account statement including prescribed information
relating to the security.
These requirements can severely limit the
liquidity of securities in the secondary market because fewer brokers or dealers are likely to be willing to undertake these compliance
activities. As a result of our Common Stock not being listed on a national securities exchange and the rules and restrictions regarding
penny stock transactions, an investor’s ability to sell to a third party and our ability to raise additional capital may
be limited. We make no guarantee that market-makers will make a market in our Common Stock, or that any market for our Common Stock
will continue.
Our Common Stock is highly illiquid
and the public market for the Common Stock may be minimal.
There is currently very little public trading
for our Common Stock, and trading may not significantly increase in the foreseeable future. In particular, the shares of Common
Stock are being offered and sold in this Offering in reliance upon exemptions from the registration requirements of applicable
federal and state securities laws. Those exemptions require that the Common Stock be purchased for investment purposes only, and
not with a current view toward their distribution or resale. Unless the Common Stock is subsequently registered with the Commission
and any required state securities authorities, or appropriate exemptions from registration are available, you may be unable to
liquidate your investment in us – even if your financial condition makes such liquidation necessary.
In addition, none of our securities will
likely be readily acceptable as collateral for loans. Accordingly, prospective investors who require liquidity in their investments
should not invest in the Common Stock. An investment in Common Stock should only be made by those who can afford the loss of their
entire investment.
Additionally, an investment in our Company
will require a long-term commitment, with no certainty of return. There is no public market for our Common Stock or any other security
in our Company, and even if we become a traded on a national exchange, of which no assurances can be given, we cannot predict whether
an active market for our stock will ever develop in the future. In the absence of an active trading market:
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investors may have difficulty buying and selling or obtaining market quotations;
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market visibility for shares of our stock may be limited; and
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a lack of visibility for shares of our stock may have a depressive effect on the market price for
shares of our Common Stock.
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The lack of an active market impairs your
ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active
market may also reduce the fair market value of your shares. An inactive market may also impair our ability to raise capital to
continue to fund operations by selling shares and may impair our ability to acquire additional intellectual property assets by
using our shares as consideration.
Our charter documents and Nevada law
could make it more difficult for a third party to acquire us and discourage a takeover.
Our Certificate of Incorporation, Bylaws,
and Nevada law contain certain provisions that may have the effect of deterring or discouraging, among other things, a non-negotiated
tender or exchange offer for shares of Common Stock, a proxy contest for control of our company, the assumption of control of our
company by a holder of a large block of Common Stock, and the removal of the management of our company. Such provisions also may
have the effect of deterring or discouraging a transaction which might otherwise be beneficial to stockholders. Our certificate
of incorporation also may authorize our board of directors, without stockholder approval, to issue one or more series of preferred
stock, which could have voting and conversion rights that adversely affect or dilute the voting power of the holders of Common
Stock. Nevada law also imposes conditions on certain business combination transactions with “interested stockholders.”
Our certificate of incorporation authorizes our Board of Directors to fill vacancies or newly created directorships. A majority
of the directors then in office may elect a successor to fill any vacancies or newly created directorships. Such provisions cold
limit the price that investors might be willing to pay in the future for shares of our Common Stock and impede the ability of the
stockholders to replace management.
The elimination of monetary liability against
our directors, officers, and employees under Nevada law and the existence of indemnification rights to our directors, officers,
and employees may result in substantial expenditures by us and may discourage lawsuits against our directors, officers, and employees.
We also may have entered into contractual indemnification obligations under employment agreements with our executive officers.
The foregoing indemnification obligations could result in our incurring substantial expenditures to cover the cost of settlement
or damage awards against directors and officers, which we may be unable to recoup. These provisions and resultant costs may also
discourage us from bringing a lawsuit against our directors and officers for breaches of their fiduciary duties and may similarly
discourage the filing of derivative litigation by our stockholders against our directors and officers even though such actions,
if successful, might otherwise benefit our company and our stockholders.
Our results of operations could be impacted
by unanticipated changes in tax provisions or exposure to additional income tax liabilities.
Our business operates in many locations
under government jurisdictions that impose income taxes. Changes in domestic or foreign income tax laws and regulations, or their
interpretation, could result in higher or lower income tax rates assessed or changes in the taxability of certain revenues or the
deductibility of certain expenses, and higher excise taxes thereby affecting our income tax expense and profitability. In addition,
audits by income tax authorities could result in unanticipated increases in our income tax expense.
Limited or No Public Market for our
securities.
There has been a limited public market
for our Common Stock and no public market for our outstanding stock options and warrants. Our Common Stock is currently quoted
on the OTCQB Market. The daily trading volume of our Common Stock has been limited.
We cannot predict the extent to which investor
interest in our company will lead to the development of an active trading market or how liquid that market might become. The lack
of an active market may reduce the value of shares of our Common Stock and impair the ability of our stockholders to sell their
shares at the time or price at which they wish to sell them. An inactive market may also impair our ability to raise capital by
selling our Common Stock and may impair our ability to acquire or invest in other companies, products, or technologies by using
our Common Stock as consideration.
We may be unable to list our stock on
a national exchange, such as NASDAQ.
There has been a limited public market
for our Common Stock. Although it is our intention to qualify for the trading of our Common Stock on a national exchange, we may
not meet or maintain certain qualifying requirements. If we are unable to meet these requirements, we may be limited to trading
conducted on the OTCQB Market.
The market price of our Common Stock
may be volatile and could decline.
The market price of our Common Stock has
fluctuated substantially in the past and is likely to continue to be highly volatile and subject to wide fluctuations in the future.
A number of factors could cause the market price of our Common Stock to decline, many of which we cannot control, including the
following:
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our ability to execute our business plan;
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actual or anticipated changed in our operating results;
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variations in our quarterly results;
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changes in expectations relating to our products, plans, and strategic position or those of our
competitors or customers;
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announcements or introduction of technological innovations or new products by us or our competitors;
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market conditions within our market;
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the sale of even small blocks of Common Stock by stockholders;
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price and volume fluctuations in the overall stock market from time to time;
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significant volatility in the market price and trading volume of public companies in general and
small emerging companies in particular;
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changes in investor perceptions;
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the level and quality of any research analyst coverage of our Common Stock, changes in earnings
estimates or investment recommendations by securities analysis, or our failure to meet such estimates;
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any financial guidance we may provide to the public, any changes in such guidance, or our failure
to meet such guidance;
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various market factors or perceived market factors, including rumors, whether or not correct, involving
us, our customers, or our competitors;
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future sales of our Common Stock;
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Introductions of new products or new pricing policies by us or by our competitors;
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regulatory or environmental laws that restrict the sale of ammunition containing lead;
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acquisitions or strategic alliances by us or by our competitors;
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litigation involving us, our competitors, or our industry;
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regulatory, legislative, political, and other developments that may affect us, our customers, and
the purchasers of our products;
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the gain or loss of significant customers;
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the volume and timing of customers’ orders;
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recruitment or departure of key personnel;
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developments with respect to intellectual property rights;
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our international acceptance;
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market conditions in our industry, the business success of our customers, and economy as a whole;
and
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general global economic and political instability.
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In addition, the market prices of small
emerging companies have experienced significant price and volume fluctuations that often have been unrelated or disproportionate
to their operating performance. In the past, companies that have experienced volatility in the market price of their securities
have been the subject of securities class action litigation. If we were the object of a securities class action litigation, it
could result in substantial losses and divert management’s attention and resources form other matters.
Sales of large numbers of shares could
adversely affect the price of our Common Stock
Most of our Common Stock shares currently
outstanding are restricted securities as that term is defined in Rule 144 under the Securities Act of 1933, as amended, or the
Securities Act. All outstanding shares of Common Stock are or will be eligible for resale in the public markets at various times
within the next six months with respect to affiliates, subject to compliance with the volume and manner of sale requirements of
Rule 144 under the Securities Act of 1933, as amended, and with respect to all restricted securities held by affiliates.
In general, under Rule 144 as currently
in effect, any person (or persons whose shares are aggregated for purposes of Rule 144) who beneficially owns restricted securities
with respect to which at least six months has elapsed since the later of the date the shares were acquired from us, or from an
affiliate of ours, is entitled to sell within any three-month period a number of shares that does not exceed the greater of 1%
of the then outstanding shares of our Common Stock or the average weekly trading volume in our Common Stock during the four calendar
weeks preceding such sale. Sales under Rule 144 also are subject to certain manner-of-sale provisions and notice requirements and
to the availability of current public information about us. A person who is not an affiliate, who has not been an affiliate within
three months prior to sale, and who beneficially owns restricted securities with respect to which at least six months has elapsed
since the later of the date the shares were acquired from us, or from an affiliate of ours, is entitled to sell such shares under
Rule 144 without regard to any of the volume limitations or other requirements described above. Sales of substantial amounts of
Common Stock in the public market could adversely affect prevailing market prices.
As a former shell company, resales of
shares of our restricted common stock in reliance on Rule 144 of the Securities Act are subject to the requirements of Rule 144(i).
We previously were a “shell company”
and, as such, sales of our securities pursuant to Rule 144 under the Securities Act, cannot be made unless, among other things,
at the time of a proposed sale, we are subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, or the Exchange Act, and have filed all reports and other materials required to be filed by Section 13
or 15(d) of the Exchange Act, as applicable, during the preceding 12 months, other than Form 8-K reports. Because, as a former
shell company, the reporting requirements of Rule 144(i) will apply regardless of holding period, restrictive legends on certificates
for shares of our common stock cannot be removed except in connection with an actual sale that is subject to an effective registration
statement under, or an applicable exemption from the registration requirements of, the Securities Act. Because our unregistered
securities cannot be sold pursuant to Rule 144 unless we continue to meet such requirements, any unregistered securities we issue
will have limited liquidity unless we continue to comply with such requirements.
Exercise of warrants, and issuance of
incentive stock grants may have a dilutive effective on our stock, and negatively impact the price of our Common Stock.
As of December 31, 2020, we had warrants
outstanding. Each warrant provides the holder the right to purchase up to one share of our Common Stock at a predetermined exercise
price. The outstanding warrants consist of warrants to purchase an aggregate of 68,750 shares of Common Stock at an average price
of $2.8 per share until January 10, 2025.
Failure to achieve and maintain effective
internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our ability
to produce accurate financial statements and on our stock price.
Under SEC regulations adopted pursuant
to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to furnish a report by our management on our internal control
over financial reporting with our Form 10-K. The internal control report must contain (1) a statement of management’s responsibility
for establishing and maintaining adequate internal control over financial reporting, (2) a statement identifying the framework
used by management to conduct the required evaluation of the effectiveness of our internal control over financial reporting, and
(3) management’s assessment of the effectiveness of our internal control over financial reporting as of the end of our most
recent fiscal year, including a statement as to whether or not internal control over financial reporting is effective.
To achieve compliance with the applicable
SEC regulations within the prescribed future period, we would be required to engage in a process to document and evaluate our internal
control over financial reporting, which is both costly and challenging. Despite our efforts, we can provide no assurance as to
our conclusions with respect to the effectiveness of our internal control over financial reporting. There is a risk that we will
be able to conclude that our internal controls over financial reporting are effective, as has been the case with a significant
number of companies attempting to comply with these regulations for the first time. This could result in an adverse reaction in
the financial markets resulting from a loss of confidence in the reliability of our financial statements.
If we fail to comply in a timely manner
with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 regarding internal control over financial reporting or to
remedy any material weaknesses in our internal controls that we may identify, such failure could result in material misstatements
in our financial statements, cause investors to lose confidence in our reported financial information, limit our ability to raise
needed capital, and have a negative effect on the trading price of our Common Stock.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus contains
forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify
these statements by the fact that they do not relate strictly to historical or current facts. Forward-looking statements involve
risks and uncertainties and include statements regarding, among other things, our projected revenue growth and profitability, our
growth strategies and opportunity, anticipated trends in our market and our anticipated needs for working capital. They are generally
identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,”
“plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,”
“management believes,” “we believe,” “we intend” or the negative of these words or other variations
on these words or comparable terminology. These statements may be found under the sections entitled “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and “Business,” as well as in this prospectus
generally. In particular, these include statements relating to future actions, prospective products, market acceptance, future
performance or results of current and anticipated products, sales efforts, expenses, and the outcome of contingencies such as legal
proceedings and financial results.
Examples of forward-looking
statements in this prospectus include, but are not limited to, our expectations regarding our business strategy, business prospects,
operating results, operating expenses, working capital, liquidity and capital expenditure requirements. Important assumptions relating
to the forward-looking statements include, among others, assumptions regarding demand for our products, the cost, terms and availability
of components, pricing levels, the timing and cost of capital expenditures, competitive conditions and general economic conditions.
These statements are based on our management’s expectations, beliefs and assumptions concerning future events affecting us,
which in turn are based on currently available information. These assumptions could prove inaccurate. Although we believe that
the estimates and projections reflected in the forward-looking statements are reasonable, our expectations may prove to be incorrect.
Important factors that
could cause actual results to differ materially from the results and events anticipated or implied by such forward-looking statements
include, but are not limited to:
|
●
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changes in the market acceptance of our products;
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●
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increased levels of competition;
|
|
●
|
changes in political, economic or regulatory conditions generally and in the markets in which we
operate;
|
|
●
|
our relationships with our key customers;
|
|
●
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our ability to retain and attract senior management and other key employees;
|
|
●
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our ability to quickly and effectively respond to new technological developments;
|
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●
|
our ability to protect our trade secrets or other proprietary rights, operate without infringing
upon the proprietary rights of others and prevent others from infringing on the proprietary rights of the Company; and
|
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●
|
other risks, including those described in the “Risk Factors” discussion of this prospectus.
|
We operate in a very
competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all of those
risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause actual results
to differ materially from those contained in any forward-looking statement. The forward-looking statements in this prospectus are
based on assumptions management believes are reasonable. However, due to the uncertainties associated with forward-looking statements,
you should not place undue reliance on any forward-looking statements. Further, forward-looking statements speak only as of the
date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to publicly update any of them
in light of new information, future events, or otherwise.
SELLING SHAREHOLDERS
The 35,869,999 shares of the Common Stock
may be sold from time to time pursuant to this registration statement by the Selling Shareholders identified herein.
All expenses incurred with respect to the
registration of the Common Stock will be borne by us, but we will not be obligated to pay any underwriting fees, discounts, commission
or other expenses incurred by the Selling Shareholders in connection with the sale of such shares.
Except as indicated below, neither the
Selling Shareholders nor any of their associates or affiliates has held any position, office, or other material relationship with
us in the past three years.
The following table sets forth the names
of the Selling Shareholders, the number of shares of Common Stock beneficially owned by the Selling Shareholders as of the date
hereof and the number of shares of Common Stock being offered by the Selling Shareholders. The shares being offered hereby are
being registered to permit public secondary trading, and the Selling Shareholders may offer all or part of the shares for resale
from time to time. However, the Selling Shareholders are under no obligation to sell all or any portion of such shares. All information
with respect to share ownership has been furnished by the Selling Shareholders. The “Number of Shares Beneficially Owned
After the Offering” column assumes the sale of all shares offered.
We are registering the shares of common
stock in order to permit the Selling Shareholders to offer these shares for resale from time to time.
The table below lists the Selling Shareholders
and other information regarding the beneficial ownership of the shares of common stock by each of the Selling Shareholders. The
second column lists the number of shares of common stock beneficially owned by each Selling Shareholder, based on its ownership
of the shares of common stock, as of the date hereof The third column lists the shares of common stock being offered by this prospectus
by the Selling Shareholders.
This prospectus generally covers the resale
of the sum of the number of shares of common stock underlying the Common Stock beneficially held by the Selling Shareholders.
Name of Selling
Shareholder
|
Position, Office or Other
Material Relationship
|
Shares
Beneficially
Owned Prior to
the Offering
|
Shares to be
Offered(1)
|
Shares
Beneficially
Owned After
the
Offering (1)(2)
|
Percentage
Beneficially
Owned after
the
Offering (3)
|
Xu Hongxia
|
|
5,490,000
|
5,490,000
|
5,490,000
|
3.37%
|
Huang Yaofeng
|
|
3,720,000
|
3,720,000
|
3,720,000
|
2.29%
|
Huang Yaoxian
|
|
3,720,000
|
3,720,000
|
3,720,000
|
2.29%
|
Li Yufen
|
|
3,720,000
|
3,720,000
|
3,720,000
|
2.29%
|
Zheng Hui
|
|
3,720,000
|
3,720,000
|
3,720,000
|
2.29%
|
Huang Daoxing
|
|
2,333,333
|
2,333,333
|
2,333,333
|
1.44%
|
Huang Yaoli
|
|
2,333,333
|
2,333,333
|
2,333,333
|
1.44%
|
Zhang Zuoxiang
|
|
833,333
|
833,333
|
833,333
|
0.51%
|
Qin Hongyan
|
|
3,000,000
|
3,000,000
|
3,000,000
|
1.85%
|
Wang Xi
|
|
7,000,000
|
7,000,000
|
7,000,000
|
4.31%
|
|
|
|
|
|
|
TOTALS
|
|
35,869,999
|
35,869,999
|
35,869,999
|
22.06%
|
(1) Beneficial ownership
is determined in accordance with Rule 13d-3 under the Securities Act and includes any shares as to which the Selling Shareholder
has sole or shared voting power or investment power, and also any shares which the Selling Shareholder has the right to acquire
within 60 days of the date hereof, whether through the exercise or conversion of any stock option, convertible security, warrant
or other right. The indication herein that shares are beneficially owned is not an admission on the part of the stockholder that
it is a direct or indirect beneficial owner of those shares. Except as indicated in the footnotes to the table above, each Selling
Shareholder has voting and investment power with respect to the shares set forth opposite such Selling Shareholder’s name.
(2) This table assumes
that each Selling Shareholder will sell all shares offered for sale by it under this registration statement.
(3) Percentages
are based upon 162,582,058 shares of our Common Stock issued and outstanding as of March 12, 2021.
USE OF PROCEEDS
We will not receive
any proceeds from the sale of common stock by the Selling Shareholders. All of the net proceeds from the sale of our common stock
will go to the Selling Shareholders as described above in the section entitled “Selling Shareholders” and below entitled
“Plan of Distribution”. We have agreed to bear the expenses relating to the registration of the common stock for the
Selling Shareholders.
PLAN OF DISTRIBUTION
The Selling Shareholders
may, from time to time, sell, transfer, or otherwise dispose of any or all of their shares of common stock on any stock exchange,
market, or trading facility on which the shares are traded or in private transactions. These dispositions may be at fixed prices,
at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined
at the time of sale, or at negotiated prices. The Selling Shareholders may use any one or more of the following methods when disposing
of shares:
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●
|
on any national securities exchange or quotation service on which the shares may be listed or quoted
at the time of sale;
|
|
●
|
in the over-the-counter market;
|
|
●
|
in transactions otherwise than on these exchanges or systems or in the over-the-counter market;
|
|
●
|
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
|
|
●
|
block trades in which the broker-dealer will attempt to sell the shares as agent, but may position
and resell a portion of the block as principal to facilitate the transaction;
|
|
●
|
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
|
|
●
|
an exchange distribution in accordance with the rules of the applicable exchange;
|
|
●
|
privately negotiated transactions;
|
|
●
|
through the listing or settlement of options or other hedging transactions, whether such options
are listed on an options exchange or otherwise;
|
|
●
|
broker-dealers may agree with the Selling Shareholders to sell a specified number of such shares
at a stipulated price per share;
|
|
●
|
a combination of any such methods of sale; and
|
|
●
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any other method permitted pursuant to applicable law.
|
The Selling Shareholders
may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.
If the Selling Shareholders
effect such transactions by selling shares of Common Stock to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts, concessions, or commissions from the Seller Shareholders
or commissions from purchasers of the shares of Common Stock for whom they may act as agent or to whom they may sell as principal
(which discounts, concessions, or commissions as to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales of the shares of Common Stock or otherwise, the Selling
Shareholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of
Common Stock in the course of hedging in positions they assume. The Selling Shareholders may also sell shares of Common Stock short
and deliver shares of Common Stock covered by this prospectus to close out short positions and to return borrowed shares in connection
with such short sales. The Selling Shareholders may also loan or pledge shares of Common Stock to broker-dealers that in turn may
sell such shares.
The Selling Shareholders
may from time to time pledge or grant a security interest in some or all of the shares of Common Stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of Common
Stock from time to time under this prospectus after we have filed a supplement to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act supplementing or amending the list of Selling Shareholders to include the pledgee, transferee
or other successors in interest as Selling Shareholders under this prospectus. The Selling Shareholders also may transfer or donate
the shares of Common Stock in other circumstances, in which case the transferees, donees, pledgees, or other successors in interest
will be the selling beneficial owners for purposes of this prospectus.
Under the securities
laws of some states, the shares of Common Stock may be sold in such states only through registered or licensed brokers or dealers.
In addition, in some states the shares of Common Stock may not be sold unless such shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is available and is complied with.
There can be no assurance
that any Selling Stockholder will sell any or all of the shares of Common Stock registered pursuant to the registration statement
of which this prospectus forms a part.
The Selling Shareholders
and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder, including, without limitation, the anti-manipulation rules of Regulation
M of the Exchange Act, which may limit the timing of purchases and sales of any of the Common Stock by the Selling Shareholders
and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the
shares of Common Stock to engage in market-making activities with respect to the shares of common stock.
In addition, to the
extent applicable we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to
the Selling Shareholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The Seller Stockholders
may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.
We are required to
pay all expenses of the registration of the shares of Common Stock, including SEC filing fees and expenses of compliance with state
securities or “blue sky” laws; provided, however, that the Selling Shareholders will pay all underwriting discounts
and selling commissions, if any, and all fees and expenses of their respective legal counsel. We have agreed to indemnify the Selling
Shareholders against liabilities, including liabilities under the Securities Act and state securities laws, relating to the registration
of the shares offered by this prospectus. We may be indemnified by the Selling Shareholders against liabilities, including liabilities
under the Securities Act, and state security laws, that may arise from any written information furnished to us by the Selling Shareholders
specifically for use in this prospectus.
Once effective, our
company has agreed to use its commercially reasonable efforts to keep such registration, and any qualifications, exemption or compliance
under state securities laws which our company determines to obtain, continuously effective, and to keep the registration statement
of which this prospectus forms a part free of any material misstatements or omissions, until the earlier of the following:(1) the
date of which the Selling Shareholders cease to hold any shares of Common Stock registered hereunder, or (2) the date all shares
of Common Stock held by the Selling Shareholders may be sold without restriction under Rule 144, including without limitation,
any volume and manner of sale restrictions which may be applicable to affiliates under Rule 144.
Once sold under the
registration statement of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of
persons other than our affiliates.
Market
for Registrant’s Common 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
|
|
|
|
|
|
|
|
|
|
|
First Quarter (Jul. 1, 2020– Sept. 30, 2020)
|
|
$
|
0.98
|
|
|
$
|
0.05
|
|
Second Quarter (Oct. 1, 2020– Dec. 31, 2020)
|
|
$
|
0.15
|
|
|
$
|
0.02
|
|
Third Quarter (Jan. 1, 2021 – Mar. 1, 2021)*
|
|
$
|
0.31
|
|
|
$
|
0.11
|
|
*partial period
Record Holders
As of March 12, 2021, the approximate
number of registered holders of our common stock was 213. As of March 12, 2021, there were 162,582,058 shares of common stock issued
and outstanding and there were 5,000,000 shares of preferred stock issued and outstanding. There were 68,750 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.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis
of our financial condition and results of operations should be read together with our consolidated financial statements and accompanying
notes appearing elsewhere in this prospectus. This discussion contains forward-looking statements, based upon our current expectations
and related to future events and our future financial performance, that involve risks and uncertainties. Our actual results may
differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set
forth under “Risk Factors,” “Forward-Looking Statements,” and elsewhere in this prospectus.
Results of Operation for the Three
and Six Months Ended December 31, 2020 and 2019
Calendar year 2020 was challenging and
disruptive for the world, with the COVID-19 pandemic adding to the headwind of an already challenging global economy.
Almost no industry was unaffected by the
pandemic. The unprecedentedly adverse global operating environment had a major impact on our business and reversed the Company's
continuous growth.
The rebound in coronavirus cases during
the second half of calendar year 2020 had delayed the anticipated recovery in the economy of PRC. The negative impact of COVID-19
remains until early 2021. The Company is paying close attention to the evolving development of, and the disruption to business
and economic activities caused by the COVID-19 outbreak and evaluates its impact on the financial position, cash flows and operating
results of the Company. Given the dynamic nature of
the COVID-19 outbreak, it is not practicable
to provide a reasonable estimate of its impacts on the Company’s financial position, cash flows and operating results at
the present.
The operations of the Company experienced
some minor delays and were adversely affected by the COVID-19 travel restrictions and lockdowns implemented nationwide. Decreases
in revenue and operating profits were a result of the unprecedented adverse market condition caused by the outbreak of COVID-19
pandemic since January 2020.
During the three and six months ended December
31, 2020, the significant decrease in sales revenue is mainly attributable to the adverse impact of COVID-19 in various ways, from
the continuous weakening demand in the PRC consumer market and continuous competition from other brands against the goods which
the Company has been trading coupled with the unfavorable and ongoing adverse trading environment and the disruptions caused by
COVID-19, limitation of marketing efforts, disruptions of product delivery to the Company’s customers due to certain customers
's reducing their budgets or delaying their procurement plans, leading to a decrease in the new orders placed with the Company.
The Company believes that such effect is temporary and will not have major impact on the long-term performance of the Company.
During the three and six months ended December
31, 2020, the gross profit decreases were mainly attributable to: (1) the drop in production volume of the Company as a result
of the adverse impact of the COVID-19; (2) in certain areas in Northeast of China, the PRC government, as a preventive measure
in response to the COVID-19, had implemented the movement control order which involved prohibition of movement of people which
adversely affected the Company’s supply chain in raw materials. And the poor market sentiment has led to the significant
drop in demand and selling prices of the Company’s products, while the prices of glass, which is the raw material for the
Company's production, have increased substantially due to tightened supply of glass from the supply chain reform in the PRC; and
(3) in addition to the economic contraction caused by prolonged outbreak of COVID-19, the fact that Changchun City where Fangguan
Electronics was located had endured dozens of blizzards in November and December 2020, also led to the slow-down of the businesses
of the Company.
The significant decrease in net income
is primarily attributed to: (1) a decrease in the Company’s revenue by approximately 60% resulting from the disruption of
the Company’s business operations caused by the COVID-19; (2) a decrease in the Company's gross profit margin from 17% for
the six months ended December 31, 2019 to approximately 11% for the six months ended December 31, 2020 resulting from the drop
in sales price and increase in raw material price, mainly as a result of the reduction in operation efficiency during the outbreak
of COVID-19; (3) a significant increase in non-recurring other expenses such as change in fair value of derivative liability; and
offset by (4) a decrease in the Company’s operating expenses by approximately 33% resulting from cost saving measures including
but not limited to reduction in salary, rent and R&D expenditures. Excluding the aforementioned non-recurring change in fair
value of derivative liability, the reduction in net profit for the six months ended December 31, 2020 as compared with the corresponding
period of last year would be narrowed down from approximately $1.7 million to approximately $1 million instead.
Nevertheless the Company survived and thrived
against all odds: besides carrying out a more stringent cost control through the Company’s persistent effort in cost reduction,
the Company implemented the workplace safety measures as per government guidelines, including work from home arrangements whenever
appropriate, and protected the client relationships by maintaining communication and working with them to deal with the delaying
or canceling orders. Notwithstanding the forgoing, and the gradual stabilization of the domestic photoelectric display industry,
the Company would anticipate a narrowed decline in the sales of LCM and LCD.
Based on the Company’s well-established
reputation in the market, management of the Company believes that the demand for the Company's products would increase during the
economic rebounding and the overall financial and business positions of the Company would remain sound, and the Company is well
positioned to take advantage of any upturn in the market.
Considering that such effects of COVID-19
is temporary and will not have major impact on the long-term performance of the Company, the Company believes in the expected increase
in turnover and gross profit margin of the Company as caused by the gradual recovery of the economy of PRC in near future. As such,
the Company remains cautiously optimistic about its sustainable development.
Revenues
During the three and six months ended December
31, 2020, COVID-19 continued to affect the operational and financial performance of the Company.
During the three months ended December
31, 2020 and 2019, total revenues were $2,982,883 and $7,332,968 respectively. The total revenues decreased by $4,350,085 or 59%
from the three months ended December 31, 2019 to the three months ended December 31, 2020.
During the six months ended December 31,
2020 and 2019, total revenues were $5,941,348 and $14,833,298, respectively. The total revenues decreased by $8,891,950 or 60%
from the six months ended December 31, 2019 to the six months ended December 31, 2020.
Among the significant decrease of $4,350,085
and $8,891,950 in total revenues for the three and six months ended December 31, 2020, $2,811,211 and $6,023,777 decreases were
due to the revenue decrease from Fangguan Electronics which was acquired on December 27, 2018. The decrease can be directly attributed
to the fact that the continuous outbreak of COVID-19 induced the numerous shutdowns and suspensions of commercial activities in
certain cities and provinces which have caused the significantly adverse effects on the business of the Company.
The decrease in total revenues was partially
attributed to the significant decreases of $1,137,282 for the three months ended December 31, 2020 and $2,156,249 for the six months
ended December 31, 2020 in service contract and smart energy segments as compared with the three and six months ended December
31, 2019. The decrease in smart energy revenue was due to the fact that the global economy is on track to contract in 2020 as a
result of the COVID-19 pandemic and the overseas enterprises ceased placing orders from our major customers in smart energy segment.
Then our business was hit by the chain reaction. As for the service contract business, mainly due to COVID-19, all old contracts
were completed while new contracts have not been signed.
Cost of Revenue
Cost of revenues included the cost of raw
materials, labor, depreciation, overhead and finished products purchased.
During the three months ended December
31, 2020 and 2019, the total cost of revenues was $2,588,055 and $6,270,572 respectively. The total cost of revenues decreased
by $3,682,517 or 59% from the three months ended December 31, 2019 to the three months ended December 31, 2020.
During the six months ended December 31,
2020 and 2019, the total cost of revenues was $5,269,444 and $12,343,676, respectively. The total cost of revenues decreased by
$7,074,232 or 57% from the six months ended December 31, 2019 to the six months ended December 31, 2020.
Among the significant decrease of $3,682,517
and $7,074,232 in total cost of revenues for the three and six months ended December 31, 2020, $2,309,720 and $4,781,553 decreases
were due to the decrease of the cost of revenues from Fangguan Electronics which was acquired on December 27, 2018.
The decrease in cost of revenues can be
directly attributed to the decrease of revenues.
Gross Profit
During the three months ended December
31, 2020 and 2019, the gross profit was $394,828 and $1,062,396, respectively.
The gross profit decreased by 63% from
the three months ended December 31, 2019 to the three months ended December 31, 2020.
Our gross profit margin maintained at 13%
during the three months ended December 31, 2020 as compared to 14% for the three months ended December 31, 2019.
During the six months ended December 31,
2020 and 2019, the gross profit was $671,904 and $2,489,622, respectively.
The gross profit decreased by 73% from
the six months ended December 31, 2019 to the six months ended December 31, 2020.
Our gross profit margin maintained at 11%
during the six months ended December 31, 2020 as compared to 17% for the six months ended December 31, 2019.
The decrease in the Company's gross profit
margin is attributed to the drop in sales price and increase in raw material price, mainly as a result of the reduction in operation
efficiency during the outbreak of COVID-19.
Selling, General and Administrative
Expenses
Our selling, general and administrative
expenses mainly comprised of payroll expenses, transportation, office expense, professional fees, freight and shipping costs, rent,
and other miscellaneous expenses.
During the three months ended December
31, 2020 and 2019, selling, general and administrative expenses were $349,398 and $497,197, respectively.
During the six months ended December 31,
2020, and 2019, selling, general and administrative expenses were $657,901 and $878,625, respectively.
The decrease in selling, general and administrative
expenses can be attributed to the stricter cost control during the three and six months ended December 31, 2020.
Research and Development Expenses
Our research and development expenses are
mainly comprised of payroll expenses of research staff, costs of materials used for research and other miscellaneous expenses.
During the three months ended December
31, 2020 and 2019, research and development expenses were $131,055 and $284,028, respectively. During the six months ended December
31, 2020 and 2019, research and development expenses were $277,240 and $506,851 respectively. All research and development expenses
were incurred by Fangguan Electronics (a variable interest entity of the Company since December 27, 2018).
The decrease in research and development
expenses can be attributed to the decrease of materials expenditures during the three and six months ended December 31, 2020.
Other Incomes (Expenses)
Other expenses consisted of interest expense,
net of interest income. Other incomes consisted primarily of subsidy income and gain on extinguishment of debt, net of loss on
extinguishment of debt. Change in fair value of derivative liability was an expense for the three and six months ended December
31, 2020 and an income for the three and six months ended December 31, 2019.
During the three months ended December
31, 2020 and 2019, other incomes (expenses) were $(279,738) and $(77,576) respectively. The other income (expense) fluctuated by
$202,162 or 261% from the three months ended December 31, 2019 to the three months ended December 31, 2020.
During the six months ended December 31,
2020 and 2019, other incomes (expenses) were $(650,691) and $(75,763) respectively. The other income (expense) fluctuated by $574,928
or 759% from the six months ended December 31, 2019 to the six months ended December 31, 2020.
The difference of interest expense was
mainly due to the decrease of debt discount as the convertible notes either approached the maturity date or were settled during
the three and six months ended December 31, 2020 as compared with the same period of 2019.
The subsidy income was from Fangguan Electronics
and Baileqi Electronic which received government subsidies during the three and six months ended December 31, 2020 and 2019.
The change in fair value of derivative
liability can be attributed to the fact that stock price of the Company were more volatile during the three and six months ended
December 31, 2020 as compared with same period of 2019.
The gain on extinguishment of debt of $202,588
during the six months ended December 31, 2020 can be primarily attributed to the gain of $459,227 from settlement of four convertible
notes (including warrants and all accrued and unpaid interests), offset by loss of $256,639 from the conversion of convertible
notes to 9,470,630 common shares in the principal amount of $273,200 for the six months ended December 31, 2020. No convertible
notes were converted during the same period of 2019.
The gain on extinguishment of debt of $351,819
during the three months ended December 31, 2020 can be primarily attributed to the gain of $443,881 from settlement of three convertible
notes (including warrants and all accrued and unpaid interests), offset by loss of $92,062 from the conversion of convertible notes
to 7,143,978 common shares in the principal amount of $97,701 for the three months ended December 31, 2020. No convertible notes
were converted during the same period of 2019.
Net Income (Loss)
During the three months ended December
31, 2020 and 2019, our net income (loss) was $(356,118) and $135,658, respectively. The total net income (loss) fluctuated by $491,776
or 363% from the three months ended December 31, 2019 to the three months ended December 31, 2020.
During the six months ended December 31,
2020 and 2019, our net income (loss) was $(888,424) and $846,934, respectively. The total net income (loss) fluctuated by $1,735,358
or 205% from the six months ended December 31, 2019 to the six months ended December 31, 2020.
The significant decrease in net income
is primarily attributed to: (1) a decrease in the Company’s revenue by approximately 60% resulting from the disruption of
the Company’s business operations caused by the COVID-19; (2) a decrease in the Company's gross profit margin from 17% for
the six months ended December 31, 2019 to approximately 11% for the six months ended December 31, 2020 resulting from the drop
in sales price and increase in raw material price, mainly as a result of the reduction in operation efficiency during the outbreak
of COVID-19; (3) a significant increase in non-recurring other expenses such as change in fair value of derivative liability; and
offset by (4) a decrease in the Company’s operating expenses by approximately 33% resulting from cost saving measures including
but not limited to reduction in salary, rent and R&D expenditures. Excluding the aforementioned non-recurring change in fair
value of derivative liability, the reduction in net profit for the six months ended December 31, 2020 as compared with the corresponding
period of last year would be narrowed down from approximately $1.7 million to approximately $1 million instead.
Liquidity and Capital Resource
Cash Flow from Operating Activities
During the six months ended December 31,
2020, net cash used in operating activities was $473,941 compared to the cash provided by operating activities of $588,568 for
the six months ended December 31, 2019. The change was mainly due to a decrease of $1,735,358 in net income, offset by a decrease
of $255,230 in cash outflow from changes in operating assets and liabilities in the six months ended December 31, 2020 compared
to the same period in 2019.
Cash Flow from Investing Activities
During the six months ended December 31,
2020, net cash used in investing activities was $192,962 compared to net cash used in investing activities of $190,675 for the
same period in 2019. The change was primarily due to the increase in the acquisition of the intangible assets by $2,339 during
the six months ended December 31, 2020 compared to the same period in 2019.
Cash Flow from Financing Activities
During the six months ended December 31,
2020, cash provided by financing activities was $407,705 compared to net cash provided by financing activities of $683,561 for
the same period in 2019. The change was primarily due to the repayment of bank loans of $1,908,985, repayment of convertible notes
payables of $555,747, and decrease in proceeds from issuance of convertible notes payables of $585,190, offset by the proceeds
from new bank loans of $1,408,992, proceeds from issuance of promissory note of $253,500, proceeds from issuance of common stock
for private placement of $433,000, and proceeds from loans from related parties of $679,438 during the six months ended December
31, 2020 compared to same period of 2019.
As of December 31, 2020, we have a working
capital of $2,407,726.
Our total current liabilities as of December
31, 2020 were $7,122,062 and mainly consisted of $1,681,906 for short-term bank loans, $2,455,750 in accounts payable, the amount
due to related parties of $2,535,927, advance from customers of $206,666 and the self-amortized promissory note of $186,714. 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.
Going Concern
The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. The Company had an accumulated deficit
of $626,226 as of December 31, 2020. The Company incurred loss from operation and did not generate sufficient cash flow from its
operating activities for the six months ended December 31, 2020. These factors, among others, raise substantial doubt about the
Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
The Company plans to rely on the proceeds
from loans from both unrelated and related parties to provide the resources necessary to fund the development of the business plan
and operations. The Company is also pursuing other revenue streams which could include strategic acquisitions or possible joint
ventures of other business segments. However, no assurance can be given that the Company will be successful in raising additional
capital.
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.
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.
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.
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.
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:
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·
|
identify the contract with a customer;
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|
·
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identify the performance obligations in the contract;
|
|
·
|
determine the transaction price;
|
|
·
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allocate the transaction price to performance obligations in the contract; and
|
|
·
|
recognize revenue as the performance obligation is satisfied.
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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.
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:
|
|
2019
|
|
|
2020
|
|
Balance sheet items, except for equity accounts
|
|
|
6.8747
|
|
|
|
7.0795
|
|
Items in statements of comprehensive income (loss) and cash flows
|
|
|
6.7457
|
|
|
|
7.0307
|
|
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.
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 17, 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.
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.”
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.
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.
The LCD screens are 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 Company also provides service and IT
solution for new energy industry, such as operating the business of the electric vehicle charging pile.
1. Fanguguan Electronic
Products of Fanguguan Electronic
|
Product Model: FG814B-
001034B
Resolution: Segment LCD
LCD Active Area: 44*67
Outline Dimensions:
50.0*81.0*5.9
Display Colors: Black and
White
View Direction: 6 O’clock
|
|
Product Model: FG12832B-
002161A
Resolution: 128*32
LCD Active Area:
42.22*11.50
Outline
Dimensions:47.85*21.0*3.3
Display Colors: Black and
White
View Direction: 12 O’clock
|
|
Product Model: FG160100J-
000039P
Resolution: 160*100
LCD Active Area:
39.98*28.96
Outline Dimensions:
50.0*44.0*4.5
Display Colors: Black and
White
View Direction: 6 O’clock
|
|
2. Fangguan Photoelectric
Products of Fangguan Photoelectric
|
Product Model:
FG240160N-000666M
Resolution: 240*160
LCD Active Area:
77.58*51.6
Outline Dimensions:
85.00*62.80*4.5
Display Colors: Black and
White
Viewing Direction: 6
O’clock
|
|
Product Model:
FG12864D-001002X
Resolution: 128*64
LCD Active Area: 66*38
Outline Dimensions:
69*46*2.95
Display Colors: Black and
White
View Direction: 6 O’clock
|
|
Product Model:
FG12864E8-003744K
Resolution: 128*64
LCD Active Area:
26.58*14.86
Outline Dimensions:
28.47*19.48*4.45
Display Colors: Black and
White
View Direction: 6 O’clock
|
|
3. Lisite Science
Products of Lisite Science
|
Product Model: W200
Color(s): WhiteBlack
Fire Rating: V0
Battery Type: 18650-2500mAh*8
Battery Capacity: 20000mAh /
3.7V
Rated Energy: 74Wh (TYP)
Rated Output: 5V / 2.1A (Max)
Input: Micro-USB、Lightning
Output: USB-A
Input Parameter: MAX10W
Micro-USB : DC5V A
Output Parameter: MAX10.5W
USB -A-1 : DC5V/1A
USB -A-1 : DC5V/2.1A Shared
2.1A
Size: 165.2*78*23MM
Weight: 437g
|
|
Product Model: T3
Color(s): white-greywhite-red
Fire Rating: V0
Battery Type: Polymer 805573*2
Battery Capacity:
10000mAh/3.8V
Rated Energy: 37W (TYP)
Rated Output: 5V/2.1A (Max)
Input: Micro-USB
Output: USB-A*2
Input Parameter: MAX10W
Micro-USB : DC5V / 2A
TYPE-C(USB-C): DC5V/2A
Output Parameter: MAX10.5W
USB-A-1 : DC5V/2.1A
USB-A-1:DC5V/1A
USB-A-2: DC5V/2.1A Shared
2.1A
Size: 100*62*22.5MM
Weight: 300g
|
|
Product Model: AG06
Color(s): WhiteBlack
Fire Rating: V0
Battery Type: 18650-2000mAh*5
Battery Capacity:
10000mAh/3.7V
Rated Energy: 37Wh (TYP)
Rated Output: 5V / 2.1A (Max)
Input: Micro-USB/TYPE- C
(USB-C)
Output: USB-A
Input Parameter: MAX10W
Micro-USB : DC5V/2A
TYPE-C (USB-C): DC5V/2A
Output Parameter : MAX10.5W
USB-A:DC5V/2.1A
Size: 147*63*23.3MM
Weight: 437g
|
|
Product Model: T100CC
Color(s): White
Fire Rating: V0
Battery Type: 18650-
2000mAh*5
Battery Capacity:
10000mAh/3.7V
Rated Energy: 37Wh (TYP)
Rated Output: 5V / 2.1A (Max)
Input: Micro-USB
Output: USB-A*2
Input Parameter: MAX10W
Micro-USB : DC5V/2A
Output Parameter : MAX10.5W
USB-A-1 : DC5V/2.1AUSB-A-
1:DC5V/1A
USB-A-2 : DC5V/2.1A Shared
2.1A
Size: 142.6*63*22MM
Weight: 265g
|
|
Product Model: T100CY
Color(s): White
Fire Rating: V0
Battery Type: 18650-
2000mAh*5
Battery Capacity:
10000mAh/3.7V
Rated Energy: 37Wh (TYP)
Rated Output: 5V / 2.1A (Max)
Input: Micro-USB
Output: USB-A*2
Input Parameter: MAX10W
Micro-USB : DC5V/2A
Output Parameter : MAX10.5W
USB-A-1 : DC5V/2.1
USB-A-2 : DC5V/2.1A Shared
2.1A
Size: 141.4*61.6*23.5MM
Weight: 274.8g
|
|
Product Model: TD19
Color(s): White
Fire Rating: V0
Battery Type: 18650-
2000mAh*5
Battery Capacity:
10000mAh/3.7V
Rated Energy: 37Wh (TYP)
Rated Output: 5V / 2.1A (Max)
Input: Micro-USB
Output: USB-A*2
Input Parameter: MAX10W
Micro-USB : DC5V/2A
Output Parameter : MAX10.5W
USB-A-1 : DC5V/2.1
USB-A-2 : DC5V/2.1A Shared
2.1A
Size: 145*65*23MM
Weight: 285g
|
|
Product Model: T200CF
Color(s): Ivory, Dreamy Pink,
Serene Blue
Fire Rating: V0
Battery Type: 18650-
2500mAh*8
Battery Capacity:
20000mAh/3.7V
Rated Energy: 74Wh (TYP)
Rated Output: 5V / 2.1A (Max)
Input: Micro-USB/Lightning
Output: USB-A*2
Input Parameter: MAX10W
Micro-USB : DC5V/2A
LightningDC5V/1.2A
Output Parameter : MAX10.5W
USB-A-1 : DC5V/2.1
USB-A-2 : DC5V/2.1A Shared
2.1A
Size: 160.3*80*23.7MM
Weight: 437g
|
|
Product Model: T100UF
Color(s): Ivory, Dreamy Pink,
Serene Blue
Fire Rating: V0
Battery Type: Polymer
1160110-10000mAh
Battery Capacity:
10000mAh/3.7V
Rated Energy: 37Wh( TYP)
Rated Output: 5V / 2.1A (Max)
Input: Micro-USB/Lightning
Output: USB-A*2
Input Parameter: MAX10W
Micro-USB : DC5V/2A
LightningDC5V/1.2A
Output Parameter : MAX10.5W
USB-A-1 : DC5V/2.1
USB-A-2 : DC5V/2.1A Shared
2.1A
Size: 142*69*15.5MM
Weight: 205g
|
|
Product Model: T200CG
Color(s): White
Fire Rating: V0
Battery Type: 18650-
2500mAh*8
Battery Capacity:
20000mAh/3.7V
Rated Energy: 74Wh (TYP)
Rated Output: 5V / 2.1A (Max)
Input: Micro-USB/Lightning
Output: USB-A*2
Input Parameter: MAX10W
Micro-USB : DC5V/2A
LightningDC5V/1.2A
Output Parameter : MAX10.5W
USB-A-1 : DC5V/2.1
USB-A-2 : DC5V/2.1A Shared
2.1A
Size: 165*78.47*22.1MM
Weight: 451g
|
|
4. Baileqi Electronic:
Products of Baileqi Electronic
|
Module No.: Y50029N00T
Size:5.0 inch
Resolution:800(H)*3(RGB)*480(V)TFT LCD
Active Area:108.00*64.80mm
Outline
Dimensions:120.70(H)x75.80(V)x4.25(T)
Interface Type:24BITRGBInterface
Display Colors:16.7M
Brightness:300cd/mm
View Direction:12O’clock
|
|
Module No.:Y43001N04N
Size:4.3 inch
Resolution:480RGB×272
LCD Active Area:95.04(H)×53.86(V)
Outline Dimensions:
105.4(H)×67.10(V)×2.95(D)
Interface Type: RGB 24 BIT
Display Colors:16.7M
Brightness:480cd/mm(7S)
View Direction:12O’clock
|
|
Module No.:Y10108M00N Size:10.1 inch
Resolution:1280RGB×800
LCD Active Area:216.96(H)×135.60(V)
Outline Dimensions: 229.46(H)×
149.10(V)×3.00(D)
Interface Type: LVDS (Low Voltage
Differential Signal)
Display Colors:16.7M
Brightness:300cd/mm(3S-13P)
View Direction:6O’clock
|
|
Industry Overview
Development trend of photoelectric display products:
IINX is active in promoting the worldwide
application of green energy solutions. We are always pursuing more optimized green energy solutions together with our customers.
Recently,we confront the rapid growth of the new energy industry, however, high and new technology and its relevant accessories
still play pivotal roles in the existing industrial chain. In the meantime, we have also chosen a more extensive applied terminal
product in new energy industry- the Liquid Crystal Displays (LCD), as an important composition part of our business.
LCD-From Global Perspective
The global demand of LCD panels is continually
increasing. The output area of global LCD panels achieved 181 million square meters in 2017, this figure was tripled compared to
2007, and the average annual growth is approximately 13 million square meters. According to the prediction, the global demand of
LCD panels will be 215 million square meters in 2021.From 2017 to 2021, the compound average growth rate (CAGR) of such demand
will be about 4.37%, though the growth seems to slow down compared with the CAGR of 5% for the most recent 3 years, however, without
considering base effect, the demand will maintain an average increase of approximately 8.5 million square meters per annum.
The demand of twisted nematic (TN) and
supper twisted nematic (STN) liquid crystal materials remains generally stable. Due to their characteristics such as low cost,
wide range of applications, the low-end TN and STN liquid crystal materials will still take a certain portion of market for terminal
products which require a relatively low level of display. Basically, since 2004, the market demand of TN and STN liquid crystal
materials has been stable, with the annual quantity demand maintaining at approximately between 60 and 70 tons, to compute based
on the average price of about 5000 Yuan/kg for TN and STN liquid crystal materials, the predicted market scale for TN and STN liquid
crystal materials would be approximately 300 million to 350 million Yuan.
There is a strong demand of thin film transistor
(TFT) liquid crystal materials in the global market as well. TFT liquid crystal materials account for over 80% of total output
value in the global liquid crystal materials market. With the rapid development of LCD television, laptop, desktop display and
mobile communication, the demand of TFT liquid crystal panel keeps increasing. To measure and calculate on the basis of 80% of
effective display area, a liquid crystal material usage of 4.5kg per square meter area of panel and an average price of 15,000
Yuan per kilogram for mixed liquid crystal materials, the quantity demand of global TFT mixed liquid crystals in 2016 was about
617 tons and market scale was around 9.3 billion Yuan. The global quantity of TFT mixed liquid crystals is estimated to be about
666 tons and the market scale will be about 10 billion Yuan in 2021.
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.
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
|
|
·
|
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 December 31, 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, 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.
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
|
66
|
Chief Executive Officer, Director, and Chairman of the Board
|
April 25, 2019
|
Yue Kou
|
46
|
Chief Financial Officer
|
May 27, 2016
|
Yang Yan
|
41
|
President and Treasurer
|
March 16, 2020
|
Yubao Liu
|
47
|
Director
|
May 16, 2018
|
Jialin Liang
|
54
|
Director
|
January 22, 2019
|
Xuemei Jiang
|
46
|
Director
|
January 22, 2019
|
Yongping Wang
|
53
|
Independent Director
|
May 25, 2020
|
Zhenyu Wang
|
46
|
Independent Director
|
July 31, 2019
|
Yongsheng Fu
|
66
|
Independent Director
|
July 31, 2019
|
Long Xie
|
45
|
Secretary of the Company
|
January 7, 2020
|
Xiaolin Wei
|
31
|
Independent Director
|
October 27, 2020
|
Liyan Wang
|
50
|
Independent Director
|
October 27, 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 March 12, 2021.
Name
|
Age
|
Position
|
Date of Appointment
|
Xin Sui
|
40
|
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 March 12, 2021.
Name
|
Age
|
Position
|
Date of Appointment
|
Qingchun Yang
|
57
|
President and Director
|
February 17, 2016
|
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 March 12, 2021.
Name
|
Age
|
Position
|
Date of Appointment
|
Yun Yang
|
38
|
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 March 12, 2021.
Name
|
Age
|
Position
|
Date of Appointment
|
Baozhu Deng
|
34
|
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 March 12, 2021.
Name
|
Age
|
Position
|
Date of Appointment
|
Biao Shang
|
42
|
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 March 12, 2021.
Name
|
Age
|
Position
|
Date of Appointment
|
Shikui Zhang
|
46
|
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.
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.
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.
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.
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.
Xiaolin Wei - Wei is originally from Dalian,
Liaoning Province, China. Ms. Wei received a Bachelor degree in Advertising and Marketing in 2014 from the British Columbia Institute
of Technology (BCIT) in Canada. From 2015 to present, Ms. Wei has acted as the General Manager of Shenzhen Hongbo Fund Management,
where she has participated in angel round investments and subsequent stage financing of domestic projects. Ms. Wei has valuable
practical experience in the capital market.
Liyan Wang - Wang graduated from Dongbei
University of Finance and Economics majoring in accounting, and has been a senior accountant and senior economic analyst. From
October 2012 to present, Wang has worked as Financial Director, Audit Manager, and Manager of audit and supervision department,
of the Dalian Branch of China Ping An Life Insurance Co., Ltd. From November 1993 to September 1995, Wang worked at Jiamusi Plastic
No. 8 Factory as a cashier. From October 1995 to August 1999, she worked at Jiamusi Great Wall Company as a cost accountant. From
April 2000 to October 2012, Wang worked at Shanghai Jiaji Express Co., Ltd. as a financial manager.
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;
|
|
(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.
|
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 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.
On October 27, 2020, Mr. Saviano resigned
as member of the Board and Ms. Yanli Wang was appointed to serve as a member of the Board of Directors of the Company and as a
member of the Audit Committee of the Company.
The members of the Audit Committee are
currently: Yongping Wang, as Chairman, Yongsheng Fu and Yanli Wang. 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 Xiaolin Wei. 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 Xiaolin Wei. 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.
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. Mr. Shi resigned October
27, 2020.
(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.
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
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
All Other
Compensation
($)
|
Total
($)
|
Cheng Li(1)
|
2019
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Chief Executive Officer, Director and Chairman
|
2020
|
$2,174
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$2,174
|
Yue Kou(2)
|
2019
|
$8,900
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$8,900
|
Chief Financial Officer
|
2020
|
$8,900
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$8,900
|
Yang Yan(3)
|
2019
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Treasurer and President
|
2020
|
$1,258
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$1,258
|
Yubao Liu(4)
|
2019
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Director and Former CEO, Secretary,
Treasurer
|
2020
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Xin Sui (5)
|
2019
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
President and
Director of Welly
Surplus
|
2020
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Qingchun Yang(6)
|
2019
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
President and
Director of Well Best
|
2020
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Yun Yang (7)
|
2019
|
$6,100
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$6,100
|
President and
Director of Lisite
Science
|
2020
|
$310
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$310
|
Shuyu Li(8)
|
2019
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Former President Treasurer, Director of Overseas
Business
|
2020
|
$1,258
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$1,258
|
Biao Shang(9)
|
2019
|
$13,342
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$13,342
|
Director of
Fangguan Photoelectric
|
2020
|
$8,300
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
8,300
|
Baozhu Deng(10)
|
2019
|
$8,300
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$8,300
|
President and
Director of Baileqi
Electronics
|
2020
|
$5,382
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$5,382
|
Shikui Zhang (11)
|
2019
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
President and
Director of Shizhe New
Energy
|
2020
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Long Xie (12)
|
2019
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Secretary of the Company
|
2020
|
1,258
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$1,258
|
Jialin Liang (13)
|
2019
|
7,000
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$7,000
|
Director of the Board of
the Company
|
2020
|
17,143
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$17,143
|
Xuemei Jiang (14)
|
2019
|
$5,700
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$5,700
|
Director of the Board of
the Company
|
2020
|
$15,714
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$15,714
|
Bailiang Yang (15)
|
2019
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Former Chairman of the
Board of the Company;
former Director of the
Company
|
2020
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Chunde Song (16)
|
2019
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Former Director
|
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
(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 $0. On July 31, 2019, Mr. Song resigned
as a member of the Board of Directors.
Narrative Disclosure to Summary Compensation
Table
As of June 30, 2020 and 2019, none of Ionix
Technology, Welly Surplus, and Well Best or its subsidiaries, had any compensatory plans or arrangements, including payments to
be received from Ionix, Welly Surplus, Well Best or its subsidiaries with respect to any executive officer, that would result in
payments to such person because of his or her resignation, retirement or other termination of employment with the Company, Well
Best, or its subsidiaries, any change in control, or a change in the person’s responsibilities following a change in control
of the Company, Well Best, or its subsidiaries.
Independent Directors Compensation Table
Name of Independent Director
|
Year
Ended
June
30,
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-
Equity
Incentive
Plan
Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
All Other
Compensation
($)
|
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
|
Xiaolin Wei (7)
|
2020
|
-
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
-
|
Yanli Wang (8)
|
2020
|
-
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
-
|
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. Mr. Saviano resigned October 27, 2020.
(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. Mr. Shi resigned October 27, 2020
(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.
(7) On October 27, 2020, our Board appointed
Xiaolin Wei, age 30, as a director of the Board.
(8) On October 27, 2020, our Board appointed
Liyan Wang, age 30, as a director of the Board.
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.
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 March
12, 2021, 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
|
17.90%
|
Jialin Liang (6)
|
9,500,000
|
5.84%
|
Xuemei Jiang (7)
|
5,500,000
|
3.38%
|
Anthony Saviano (8)
|
174,668
|
0.11%
|
Yongsheng Fu(9)
|
0
|
0%
|
Zhenyu Wang(10)
|
0
|
0%
|
Qinghua Shi(11)
|
0
|
0%
|
Yongping Wang(12)
|
500,000
|
0.31%
|
Xin Sui (13)
|
0
|
0%
|
Qingchun Yang (14)
|
0
|
0%
|
Yun Yang (15)
|
0
|
0%
|
Biao Shang (16)
|
1,560,000
|
0.96%
|
Baozhu Deng (17)
|
0
|
0%
|
Shikui Zhang (18)
|
60,000
|
0.04%
|
Long Xie (19)
|
100,000
|
0.06%
|
Xiaolin Wei (20)
|
0
|
0%
|
Liyan Wang (21)
|
0
|
0%
|
All executive officers and directors as a group (19 people)
|
46,503,668
|
28.60%
|
|
|
|
Beneficial Shareholders of Common Stock greater than 5%
|
|
|
Kan Yang (22)
|
7,600,000
|
4.67%
|
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 162,582,058 shares of common stock outstanding on March 12, 2021 and 5,000,000 shares of Preferred Stock issued and
outstanding on March 12, 2021. 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 March 12, 2021, 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 March 12, 2021, 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.
(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 a former Director
of the Company; he resigned October 27, 2020. 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 a former Director of
the Company; he resigned October 27, 2020. 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.
(20) Xiaolin Wei is an independent board
member of Ionix Technology as of October 27, 2020. Her beneficial ownership includes 0 shares of common stock of the Company and
0 shares issuable upon the exercise of stock options.
(21) LiyanWang is an independent board
member of Ionix Technology as of October 27, 2020. Her beneficial ownership includes 0 shares of common stock of the Company and
0 shares issuable upon the exercise of stock options.
(22) Mr. Kan Yang’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.
Certain
Relationships and Related Transactions and Director Independence
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.
|
|
|
|
|
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. 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;
|
|
·
|
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.
DESCRIPTION OF CAPITAL STOCK
Common Stock
Our Articles of Incorporation authorize
us to issue one-hundred ninety-five million (195,000,000) shares of common stock, par value $0.0001.
The following statements relating to the
capital stock set forth the material terms of the securities of the Company. Reference is also made to the more detailed provisions
of the certificate of incorporation and the by-laws, copies of which are filed as exhibits to this registration statement.
Voting Rights
Except as otherwise required by law or
as may be provided by the resolutions of the board of directors authorizing the issuance of Common Stock, all rights to vote and
all voting power shall be vested in the holders of Common Stock. Each share of Common Stock shall entitle the holder thereof
to one vote.
No Cumulative Voting
Except as may be provided by the resolutions
of the board of directors authorizing the issuance of Common Stock, cumulative voting by any shareholder is expressly denied.
No Preemptive Rights
Preemptive rights shall not exist with
respect to shares of Common Stock or securities convertible into shares of Common Stock of the Company.
Dividends
We have not paid any cash dividends on
our Common Stock since inception and presently anticipate that all earnings, if any, will be retained for development of our business
and that no dividends on our Common Stock will be declared in the foreseeable future. Any future dividends will be subject to the
discretion of our Board of Directors and will depend upon, among other things, future earnings, operating and financial condition,
capital requirements, general business conditions and other pertinent facts. Therefore, there can be no assurance that any dividends
on our Common Stock will be paid in the future.
Rights upon Liquidation, Dissolution
or Winding-Up of the Company
Upon any liquidation, dissolution or winding-up
of the Company, whether voluntary or involuntary, the remaining net assets of the Company shall be distributed pro rata to the
holders of the Common Stock.
Preferred Stock
The Company has 5,000,000 shares of
preferred stock authorized, and there were 5,000,000 shares of preferred stock issued and outstanding at March 12, 2021. Each
share of Preferred Stock entitles the holder to vote 100 shares of common stock; the Preferred Stock is not convertible into common
stock.
Warrants and Options
The Company has not issued any options.
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.
Holders
As of March 12, 2021 we have 162,582,058
issued and outstanding shares of Common Stock, which are held by 213 shareholders of record.
Securities Authorized for Issuance
Under Equity Compensation Plans
None
Transfer Agent and Registrar
Ionix Technology, Inc. has appointed VStock Transfer, LLC as
its transfer agent. Signature’s address is 18 Lafayette Pl, Woodmere, NY 11598. The transfer agent is responsible for all
record-keeping and administrative functions in connection with the common shares.
Additional Information
We refer you to our Articles of Incorporation,
Bylaws, and the applicable provisions of the Nevada Revised Statues for a more complete description of the rights and liabilities
of holders of our securities.
INTERESTS OF NAMED EXPERTS AND COUNSEL
No expert or counsel
named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity
of the securities being registered or upon other legal matters in connection with the registration or offering of the Common Stock
was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest, direct
or indirect, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with the registrant or
any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee.
The consolidated balance
sheet as of years ended June 30, 2020 and 2019, and six months ended December 31, 2020 and the related consolidated statements
of comprehensive income (loss), stockholders’ equity, and cash flows for the years ended June 30, 2020 and 2019, and six
months ended December 31, 2020, are incorporated by reference in this prospectus and in the registration statement have been so
included in reliance on the reports of Prager Metis CPAs, LLC, an independent registered public accounting firm, incorporated
herein by reference, given on the authority of said firm as experts in accounting and auditing.
The validity of the
securities offered hereby has been passed upon for us by Lockett + Horwitz, a Professional Law Corporation.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly,
and current reports, proxy statements, and other information with the SEC. You may read and copy any document we file with the
SEC at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330
for further information on the public reference room. Our SEC filings are also available to the public from the SEC’s website
at www.sec.gov. The SEC’s website contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC.
This prospectus is
part of a registration statement on Form S-1 that we filed with the SEC to register the securities offered hereby under the Securities
Act. This prospectus does not contain all of the information included in the registration statement, including certain exhibits
and schedules. For further information with respect to our company and the securities offered by this prospectus, as well as the
exhibits and schedules to the registration statement, we refer you to the registration statement, those exhibits and schedules,
and to the information incorporated by reference in this prospectus. You may obtain the registration statement and exhibits to
the registration statement from the SEC at the address listed above or from the SEC’s website.
IONIX TECHNOLOGY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Financial Statements
|
|
Page
|
Consolidated Balance Sheets as of December 31, 2020 (unaudited) and June 30, 2020 (audited)
|
|
F-2
|
Consolidated Statements of Comprehensive Income for the three and six months ended December 31, 2020
and 2019 (unaudited)
|
|
F-3
|
Consolidated Statements of Stockholders’ Equity for the three and six months ended December 31, 2020 and
2019 (unaudited)
|
|
F-4
|
Consolidated Statements of Cash Flows for the six months ended December 31, 2020 and 2019 (unaudited)
|
|
F-6
|
Notes to Consolidated Financial Statements (unaudited)
|
|
F-7
|
IONIX TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
December 31, 2020
|
|
|
June 30, 2020
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,121,104
|
|
|
$
|
1,285,373
|
|
Notes receivable
|
|
|
35,320
|
|
|
|
125,798
|
|
Accounts receivable
|
|
|
3,350,910
|
|
|
|
3,273,141
|
|
Inventory
|
|
|
3,565,448
|
|
|
|
3,263,850
|
|
Advances to suppliers - non-related parties
|
|
|
657,592
|
|
|
|
540,259
|
|
- related parties
|
|
|
429,264
|
|
|
|
357,577
|
|
Prepaid expenses and other current assets
|
|
|
370,150
|
|
|
|
320,296
|
|
Total Current Assets
|
|
|
9,529,788
|
|
|
|
9,166,294
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
7,001,152
|
|
|
|
6,573,937
|
|
Intangible assets, net
|
|
|
1,508,762
|
|
|
|
1,424,404
|
|
Deferred tax assets
|
|
|
47,778
|
|
|
|
20,743
|
|
Total Assets
|
|
$
|
18,087,480
|
|
|
$
|
17,185,378
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Short-term bank loan
|
|
$
|
1,681,906
|
|
|
$
|
2,034,735
|
|
Accounts payable
|
|
|
2,455,750
|
|
|
|
2,637,792
|
|
Advance from customers
|
|
|
206,666
|
|
|
|
43,077
|
|
Promissory notes payable, net of debt discount and loan cost
|
|
|
186,714
|
|
|
|
-
|
|
Convertible notes payable, net of debt discount and loan cost
|
|
|
-
|
|
|
|
514,390
|
|
Derivative liability
|
|
|
-
|
|
|
|
276,266
|
|
Due to related parties
|
|
|
2,535,927
|
|
|
|
1,716,919
|
|
Accrued expenses and other current liabilities
|
|
|
55,099
|
|
|
|
359,577
|
|
Total Current Liabilities
|
|
|
7,122,062
|
|
|
|
7,582,756
|
|
Total Liabilities
|
|
|
7,122,062
|
|
|
|
7,582,756
|
|
|
|
|
|
|
|
|
|
|
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,
155,582,058 and 114,174,265 shares issued and outstanding as of December 31,
2020 and June 30, 2020 respectively
|
|
|
15,558
|
|
|
|
11,417
|
|
Additional paid in capital
|
|
|
10,595,485
|
|
|
|
9,243,557
|
|
Retained earnings (accumulated deficit)
|
|
|
(626,226
|
)
|
|
|
262,198
|
|
Accumulated other comprehensive income (loss)
|
|
|
538,140
|
|
|
|
(357,011
|
)
|
Total Stockholders' Equity attributable to the Company
|
|
|
10,523,457
|
|
|
|
9,160,661
|
|
Noncontrolling interest
|
|
|
441,961
|
|
|
|
441,961
|
|
Total Stockholders’ Equity
|
|
|
10,965,418
|
|
|
|
9,602,622
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
18,087,480
|
|
|
$
|
17,185,378
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
IONIX TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues (See Note 3 and Note 11 for related party amounts)
|
|
$
|
2,982,883
|
|
|
$
|
7,332,968
|
|
|
$
|
5,941,348
|
|
|
$
|
14,833,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenues (See Note 11 for related party amounts)
|
|
|
2,588,055
|
|
|
|
6,270,572
|
|
|
|
5,269,444
|
|
|
|
12,343,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
394,828
|
|
|
|
1,062,396
|
|
|
|
671,904
|
|
|
|
2,489,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expense
|
|
|
349,398
|
|
|
|
497,197
|
|
|
|
657,901
|
|
|
|
878,625
|
|
Research and development expense
|
|
|
131,055
|
|
|
|
284,028
|
|
|
|
277,240
|
|
|
|
506,851
|
|
Total operating expenses
|
|
|
480,453
|
|
|
|
781,225
|
|
|
|
935,141
|
|
|
|
1,385,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(85,625
|
)
|
|
|
281,171
|
|
|
|
(263,237
|
)
|
|
|
1,104,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net of interest income
|
|
|
(45,499
|
)
|
|
|
(200,370
|
)
|
|
|
(219,733
|
)
|
|
|
(257,233
|
)
|
Subsidy income
|
|
|
922
|
|
|
|
7,231
|
|
|
|
14,086
|
|
|
|
50,018
|
|
Change in fair value of derivative liability
|
|
|
(586,980
|
)
|
|
|
115,563
|
|
|
|
(647,632
|
)
|
|
|
131,452
|
|
Gain on extinguishment of debt
|
|
|
351,819
|
|
|
|
-
|
|
|
|
202,588
|
|
|
|
-
|
|
Total other expense
|
|
|
(279,738
|
)
|
|
|
(77,576
|
)
|
|
|
(650,691
|
)
|
|
|
(75,763
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax provision (benefit)
|
|
|
(365,363
|
)
|
|
|
203,595
|
|
|
|
(913,928
|
)
|
|
|
1,028,383
|
|
Income tax provision (benefit)
|
|
|
(9,245
|
)
|
|
|
67,937
|
|
|
|
(25,504
|
)
|
|
|
181,449
|
|
Net income (loss)
|
|
|
(356,118
|
)
|
|
|
135,658
|
|
|
|
(888,424
|
)
|
|
|
846,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
464,870
|
|
|
|
255,703
|
|
|
|
895,151
|
|
|
|
(161,082
|
)
|
Comprehensive income
|
|
$
|
108,752
|
|
|
$
|
391,361
|
|
|
$
|
6,727
|
|
|
$
|
685,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) Per Share - Basic and Diluted
|
|
$
|
(0.00
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.01
|
|
Weighted average number of common shares outstanding - Basic and Diluted
|
|
|
128,017,085
|
|
|
|
114,003,000
|
|
|
|
121,402,466
|
|
|
|
114,003,000
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
IONIX TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS
OF STOCKHOLDERS' EQUITY
(Unaudited)
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Additional
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other
|
|
|
|
|
|
|
|
|
|
Number
of
Shares
|
|
|
Amount
|
|
|
Number
of
Shares
|
|
|
Amount
|
|
|
Paid-in
Capital
|
|
|
(Accumulated
Deficit)
|
|
|
Comprehensive
Income (loss)
|
|
|
Non-controlling
interest
|
|
|
Total
|
|
Balance at June 30, 2020
|
|
|
5,000,000
|
|
|
$
|
500
|
|
|
|
114,174,265
|
|
|
$
|
11,417
|
|
|
$
|
9,243,557
|
|
|
$
|
262,198
|
|
|
$
|
(357,011
|
)
|
|
$
|
441,961
|
|
|
$
|
9,602,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for conversion of
convertible notes
|
|
|
-
|
|
|
|
-
|
|
|
|
2,326,652
|
|
|
|
233
|
|
|
|
390,768
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
391,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(532,306
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(532,306
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
430,281
|
|
|
|
-
|
|
|
|
430,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2020
|
|
|
5,000,000
|
|
|
|
500
|
|
|
|
116,500,917
|
|
|
|
11,650
|
|
|
|
9,634,325
|
|
|
|
(270,108
|
)
|
|
|
73,270
|
|
|
|
441,961
|
|
|
|
9,891,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for conversion of
convertible notes
|
|
|
-
|
|
|
|
-
|
|
|
|
7,143,978
|
|
|
|
714
|
|
|
|
455,429
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
456,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for exercise of
warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
1,500,000
|
|
|
|
150
|
|
|
|
66,878
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
67,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock as commitment
shares for promissory note
|
|
|
-
|
|
|
|
-
|
|
|
|
1,567,164
|
|
|
|
157
|
|
|
|
67,903
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
68,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for private
placement
|
|
|
-
|
|
|
|
-
|
|
|
|
28,869,999
|
|
|
|
2,887
|
|
|
|
430,113
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
433,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement of warrants in relation to
extinguishment of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(59,163
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(59,163
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(356,118
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(356,118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
464,870
|
|
|
|
-
|
|
|
|
464,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December
31, 2020
|
|
|
5,000,000
|
|
|
$
|
500
|
|
|
|
155,582,058
|
|
|
$
|
15,558
|
|
|
$
|
10,595,485
|
|
|
$
|
(626,226
|
)
|
|
$
|
538,140
|
|
|
$
|
441,961
|
|
|
$
|
10,965,418
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
IONIX TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS
OF STOCKHOLDERS' EQUITY (continued)
(Unaudited)
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Additional
|
|
|
|
|
|
Accumulated
Other
|
|
|
|
|
|
|
|
|
|
Number
of
Shares
|
|
|
Amount
|
|
|
Number
of
Shares
|
|
|
Amount
|
|
|
Paid-in
Capital
|
|
|
Retained
Earnings
|
|
|
Comprehensive
Income (loss)
|
|
|
Non-controlling
interest
|
|
|
Total
|
|
Balance at June 30, 2019
|
|
|
5,000,000
|
|
|
$
|
500
|
|
|
|
114,003,000
|
|
|
$
|
11,400
|
|
|
$
|
8,829,487
|
|
|
$
|
539,866
|
|
|
$
|
(45,840
|
)
|
|
$
|
441,961
|
|
|
$
|
9,777,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock warrants issued with convertible notes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,022
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
711,276
|
|
|
|
-
|
|
|
|
-
|
|
|
|
711,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(416,785
|
)
|
|
|
-
|
|
|
|
(416,785
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2019
|
|
|
5,000,000
|
|
|
|
500
|
|
|
|
114,003,000
|
|
|
|
11,400
|
|
|
|
8,849,509
|
|
|
|
1,251,142
|
|
|
|
(462,625
|
)
|
|
|
441,961
|
|
|
|
10,091,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock warrants issued with convertible notes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
84,613
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
84,613
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
135,658
|
|
|
|
-
|
|
|
|
-
|
|
|
|
135,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
255,703
|
|
|
|
-
|
|
|
|
255,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December
31, 2019
|
|
|
5,000,000
|
|
|
$
|
500
|
|
|
|
114,003,000
|
|
|
$
|
11,400
|
|
|
$
|
8,934,122
|
|
|
$
|
1,386,800
|
|
|
$
|
(206,922
|
)
|
|
$
|
441,961
|
|
|
$
|
10,567,861
|
|
The accompanying notes are
an integral part of these consolidated financial statements.
IONIX TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
|
|
For the Six
Months Ended
|
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(888,424
|
)
|
|
$
|
846,934
|
|
Adjustments required to reconcile net income
(loss) to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
335,067
|
|
|
|
399,080
|
|
Deferred taxes
|
|
|
(24,322
|
)
|
|
|
28,879
|
|
Change in fair value of
derivative liability
|
|
|
647,632
|
|
|
|
(131,452
|
)
|
Gain on extinguishment of
debt
|
|
|
(202,588
|
)
|
|
|
-
|
|
Non-cash interest
|
|
|
139,673
|
|
|
|
181,336
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable - non-related
parties
|
|
|
184,522
|
|
|
|
(1,606,240
|
)
|
Accounts receivable - related
parties
|
|
|
-
|
|
|
|
(11,500
|
)
|
Inventory
|
|
|
(31,178
|
)
|
|
|
323,148
|
|
Advances to suppliers -
non-related parties
|
|
|
(69,901
|
)
|
|
|
37,082
|
|
Advances to suppliers -
related parties
|
|
|
(40,530
|
)
|
|
|
120,295
|
|
Prepaid expenses and other
current assets
|
|
|
(22,753
|
)
|
|
|
(161,718
|
)
|
Accounts payable
|
|
|
(383,729
|
)
|
|
|
729,495
|
|
Advance from customers
|
|
|
153,698
|
|
|
|
(8,120
|
)
|
Accrued
expenses and other current liabilities
|
|
|
(271,108
|
)
|
|
|
(158,651
|
)
|
Net
cash provided by (used in) operating activities
|
|
|
(473,941
|
)
|
|
|
588,568
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
Acquisition of property,
plant and equipment
|
|
|
(190,623
|
)
|
|
|
(190,675
|
)
|
Acquisition
of intangible assets
|
|
|
(2,339
|
)
|
|
|
-
|
|
Net
cash used in investing activities
|
|
|
(192,962
|
)
|
|
|
(190,675
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
Notes receivable
|
|
|
96,857
|
|
|
|
95,582
|
|
Proceeds from bank loans
|
|
|
1,408,992
|
|
|
|
-
|
|
Repayment of bank loans
|
|
|
(1,908,985
|
)
|
|
|
-
|
|
Proceeds from issuance of
convertible notes payable
|
|
|
-
|
|
|
|
585,190
|
|
Proceeds from issuance of
promissory note
|
|
|
253,500
|
|
|
|
-
|
|
Proceeds from issuance of
common stock for private placement
|
|
|
433,000
|
|
|
|
-
|
|
Repayment of convertible
notes payable
|
|
|
(555,747
|
)
|
|
|
-
|
|
Proceeds
from loans from related parties
|
|
|
679,438
|
|
|
|
2,789
|
|
Net
cash provided by financing activities
|
|
|
407,055
|
|
|
|
683,561
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash
|
|
|
95,579
|
|
|
|
(13,367
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(164,269
|
)
|
|
|
1,068,087
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
1,285,373
|
|
|
|
509,615
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents,
end of period
|
|
$
|
1,121,104
|
|
|
$
|
1,577,702
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure
of cash flow information
|
|
|
|
|
|
|
|
|
Cash paid for income tax
|
|
$
|
10,776
|
|
|
$
|
102,167
|
|
Cash paid for interests
|
|
$
|
66,972
|
|
|
$
|
68,967
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing
activities
|
|
|
|
|
|
|
|
|
Issuance of 9,470,630 shares
of common stock for conversion of convertible notes
|
|
$
|
847,144
|
|
|
$
|
-
|
|
Issuance of 1,500,000 shares of common stock
for exercise of warrants
|
|
$
|
67,028
|
|
|
$
|
-
|
|
Issuance of 1,567,164 shares
of common stock as commitment shares for promissory note
|
|
$
|
68,060
|
|
|
$
|
-
|
|
The accompanying notes are
an integral part of these consolidated financial statements.
IONIX TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS
Ionix Technology,
Inc. (the “Company” or “Ionix”), formerly known as Cambridge Projects Inc., is a Nevada corporation that
was formed on March 11, 2011. By and through its wholly owned subsidiaries and an entity controlled through VIE agreements
in China, the Company sells the high-end intelligent electronic equipment, which includes the portable power banks for electronic
devices, LCM and LCD screens and provides IT and solution-oriented services in China.
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 4).
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 - GOING CONCERN
The accompanying consolidated financial statements have
been prepared assuming that the Company will continue as a going concern. The Company had an accumulated deficit of $626,226 as
of December 31, 2020. The Company incurred loss from operation and did not generate sufficient cash flow from its operating activities
for the six months ended December 31, 2020. These factors, among others, raise substantial doubt about the Company’s ability
to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
The Company plans to rely on the proceeds from loans
from both unrelated and related parties to provide the resources necessary to fund the development of the business plan and operations. The
Company is also pursuing other revenue streams which could include strategic acquisitions or possible joint ventures of other business
segments. However, no assurance can be given that the Company will be successful in raising additional capital.
NOTE 3 – BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The unaudited consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the United States for interim financial information
and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited consolidated
financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all adjustments,
which include only normal recurring adjustments, necessary to present fairly the financial position as of December 31, 2020 and
the results of operations and cash flows for the periods ended December 31, 2020 and 2019. The financial data and other information
disclosed in these notes to the interim financial statements related to these periods are unaudited. The results for the three
and six months ended December 31, 2020 are not necessarily indicative of the results to be expected for the entire year ending
June 30, 2021 or for any subsequent periods. The balance sheet at June 30, 2020 has been derived from the audited consolidated
financial statements at that date.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting principles generally accepted in the United States have
been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations. These unaudited consolidated
financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the
year ended June 30, 2020 as included in our Annual Report on Form 10-K as filed with the SEC on September 28, 2020.
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.
Noncontrolling Interests
The Company follows FASB ASC Topic 810,
“Consolidation,” governing the accounting for and reporting of noncontrolling interests (“NCIs”) in partially
owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other
things, that NCIs (previously referred to as minority interests) be treated as a separate component of equity, not as a liability,
that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions
rather than as step acquisitions or dilution gains or losses, and that losses of a partially-owned consolidated subsidiary be allocated
to NCIs even when such allocation might result in a deficit balance.
The net income (loss) attributed to NCIs
was separately designated in the accompanying statements of comprehensive income (loss). Losses attributable to NCIs in a subsidiary
may exceed an NCI’s interests in the subsidiary’s equity. The excess attributable to NCIs is attributed to those interests.
NCIs shall continue to be attributed their share of losses even if that attribution results in a deficit NCI balance. The Primary
beneficiary receives 100% of the income and losses of the VIE as disclosed in Note 4, therefore no income or loss is allocated
to NCI.
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.
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 December 31, 2020 and June 30, 2020, the Company has accounts receivable balance from non-related party of $3,350,910
and $3,273,141, net of allowance for doubtful accounts of $151,121 and $139,609, respectively. No bad debt expense was recorded
during the three and six months ended December 31, 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:
Buildings
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10 – 20 years
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Machinery and equipment
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5 – 10 years
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Office equipment
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3 – 5 years
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Automobiles
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5 years
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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).
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:
Land use right
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50 years
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Computer software
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2-5 years
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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:
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·
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identify the contract with a customer;
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·
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identify the performance obligations in the contract;
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·
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determine the transaction price;
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·
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allocate the transaction price to performance obligations in the contract; and
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·
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recognize revenue as the performance obligation is satisfied.
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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.
The control of the products is transferred to the customer upon receipt of goods by the customer. For service revenue, the Company
recognizes revenue when services are performed and accepted by customers.
The following tables disaggregate our revenue by major
source for the three and six months ended December 31, 2020 and 2019, respectively:
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For the Six Months Ended December 31,
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|
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2020
|
|
|
2019
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|
Sales of LCM and LCD screens - Non-related parties
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$
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5,939,602
|
|
|
$
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12,030,911
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Sales of LCM and LCD screens - Related parties
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|
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-
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|
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644,392
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|
Sales of portable power banks
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|
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-
|
|
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1,538,094
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Service contracts
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1,746
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|
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619,901
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Total
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$
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5,941,348
|
|
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$
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14,833,298
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|
|
|
For the Three Months Ended December 31,
|
|
|
|
2020
|
|
|
2019
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|
Sales of LCM and LCD screens - Non-related parties
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$
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2,982,577
|
|
|
$
|
5,864,945
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Sales of LCM and LCD screens - Related parties
|
|
|
-
|
|
|
|
330,435
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|
Sales of portable power banks
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|
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-
|
|
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910,391
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Service contracts
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|
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306
|
|
|
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227,197
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|
Total
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$
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2,982,883
|
|
|
$
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7,332,968
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All the operating entities of the Company are domiciled
in the PRC. All the Company’s revenues are derived in the PRC during the three and six months ended December 31, 2020 and
2019.
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 December 31, 2020 and June 30, 2020, 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 December 31, 2020 (See Note 6).
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.
During the six months ended December 31, 2020 and 2019,
the Company had outstanding convertible notes and warrants which represent 1,096,705 and 720,382 shares of commons stock respectively.
These shares of common stock were excluded from the computation of diluted earnings per share since their effect would have been
antidilutive.
During the three months ended December 31, 2020 and 2019,
the Company had outstanding convertible notes and warrants which represent 11,675,729 and 720,382 shares of commons stock respectively.
These shares of common stock 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:
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December 31, 2020
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June 30, 2020
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|
|
|
|
|
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Balance sheet items, except for equity accounts
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|
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6.5402
|
|
|
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7.0795
|
|
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|
Six Months Ended December 31,
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|
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2020
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2019
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|
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Items in statements of comprehensive income (loss) and cash flows
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6.8099
|
|
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6.9255
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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.
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 14).
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.
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 Calendar years beginning after December 15, 2019
and for interim periods within those Calendar 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 guidance is effective for public entities for Calendar years beginning
after December 15, 2020 and interim periods within those Calendar years and all other entities for Calendar years beginning after
December 15, 2021 and interim periods within those Calendar years, with early adoption permitted. 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 six months
ended December 31, 2020. The Company has been keeping continuous attention on the situation of the COVID-19, assessing and reacting
actively to its impacts on the financial position and operating results of the Company as below:
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·
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During PRC national economic shutdown that was imposed to limit the spread of COVID-19 from early
February to mid-March of 2020, our financial condition and results of operations were adversely affected. Since the restarting
of our operation near the end of March 2020, our financial performances had been recovering slowly but continuously. However, COVID-19
resurgence which occurred in October 2020 had caused one and off traffic restrictions and lockdowns and prolonged the economic
contraction nationwide and disrupted our business operation.
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·
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During the outbreak of COVID-19 in China, 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.
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·
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Since we restored our operation near the end of March 2020, even COVID-19 resurgence occurred in
October 2020, we are of the view that COVID-19 would be under control in near future. 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 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.
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·
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During PRC national economic shutdown that was imposed to limit the spread of COVID-19 from early
February to mid-March of 2020, 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 March 2020, 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.
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·
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During
PRC national economic shutdown that was imposed to limit the spread of COVID-19 from early February to mid-March of 2020, the
demands for our products or services were severely affected. Since the restarting of our operation near the end of March 2020,
the demands had been rebounding slowly but continuously. However, COVID-19 resurgence which occurred in October 2020 had caused
one and off traffic restrictions and lockdowns and put numerous business negotiations and sales contracts signing on hold. Notwithstanding
the difficulty at the present, we are capable to take the blows on the product demands and 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 early February to mid-March of 2020, 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 March 2020, all of our supply
chains or the methods had returned to normal gradually. However, COVID-19 resurgence which occurred in October 2020 had
caused one and off traffic restrictions and lockdowns then inevitably made the adverse impacts on our supply chains. And
COVID-19 highlights the need to transform our current supply chain models. We shall take the actions to respond to business
disruption and supply chain challenges from the global spread of COVID-19 and looks ahead to the longer-term solution of
digital supply networks.
|
NOTE 4 - VARIABLE INTEREST ENTITY
The VIE contractual arrangements
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).
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.
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 Calendar 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.
Assets of Fangguan Electronics that are collateralized
or pledged are not restricted to settle its own obligations. The creditors of Fangguan Electronics do not have recourse to the
primary beneficiary’s general credit.
Risks associated with the VIE structure
The Company believes that the contractual arrangements
with its VIE and respective shareholders are in compliance with PRC laws and regulations and are legally enforceable. However,
uncertainties in the PRC legal system could limit the Company’s ability to enforce the contractual arrangements. If the legal
structure and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government could:
|
·
|
revoke the business and operating licenses of the Company’s PRC subsidiary and its VIE;
|
|
·
|
discontinue or restrict the operations of any related-party transactions between the Company’s
PRC subsidiary and its VIE;
|
|
·
|
limit the Company’s business expansion in China by way of entering into contractual arrangements;
|
|
·
|
impose fines or other requirements with which the Company’s PRC subsidiary and its VIE may
not be able to comply;
|
|
·
|
require the Company or the Company’s PRC subsidiary and its VIE to restructure the relevant
ownership structure or operations; or
|
|
·
|
restrict or prohibit the Company’s use of the proceeds from public offering to finance the
Company’s business and operations in China.
|
The Company’s ability to conduct its business through
its VIE may be negatively affected if the PRC government were to carry out of any of the aforementioned actions. As a result, the
Company may not be able to consolidate its VIE in its consolidated financial statements as it may lose the ability to exert effective
control over its VIE and its respective shareholders and it may lose the ability to receive economic benefits from its VIE. The
Company, however, does not believe such actions would result in the liquidation or dissolution of the Company, its PRC subsidiary
and its VIE. There has been no change in facts and circumstances to consolidate the 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
December 31,
2020
|
|
|
Balance as of
June 30, 2020
|
|
Cash and cash equivalents
|
|
$
|
855,616
|
|
|
$
|
1,266,426
|
|
Notes receivable
|
|
|
35,320
|
|
|
|
125,798
|
|
Accounts receivable - non-related parties
|
|
|
3,189,072
|
|
|
|
3,069,629
|
|
Inventory
|
|
|
3,017,700
|
|
|
|
2,639,839
|
|
Advances to suppliers - non-related parties
|
|
|
625,484
|
|
|
|
530,670
|
|
Prepaid expenses and other current assets
|
|
|
81,424
|
|
|
|
58,103
|
|
Total Current Assets
|
|
|
7,804,616
|
|
|
|
7,690,465
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
6,996,421
|
|
|
|
6,568,874
|
|
Intangible assets, net
|
|
|
1,508,762
|
|
|
|
1,424,404
|
|
Deferred tax assets
|
|
|
47,778
|
|
|
|
20,743
|
|
Total Assets
|
|
$
|
16,357,577
|
|
|
$
|
15,704,486
|
|
|
|
|
|
|
|
|
|
|
Short-term bank loan
|
|
$
|
1,681,906
|
|
|
$
|
2,034,735
|
|
Accounts payable
|
|
|
2,455,750
|
|
|
|
2,637,792
|
|
Advance from customers
|
|
|
30,967
|
|
|
|
27,501
|
|
Due to related parties
|
|
|
1,981,879
|
|
|
|
1,407,145
|
|
Accrued expenses and other current liabilities
|
|
|
4,923
|
|
|
|
61,856
|
|
Total Current Liabilities
|
|
|
6,155,425
|
|
|
|
6,169,029
|
|
Total Liabilities
|
|
$
|
6,155,425
|
|
|
$
|
6,169,029
|
|
NOTE 5 - INVENTORIES
Inventories are stated at the lower of cost (determined
using the weighted average cost) or net realizable value. Inventories consist of the following:
|
|
December 31, 2020
|
|
|
June 30, 2020
|
|
Raw materials
|
|
$
|
633,073
|
|
|
$
|
666,981
|
|
Work-in-process
|
|
|
960,245
|
|
|
|
500,331
|
|
Finished goods
|
|
|
1,972,130
|
|
|
|
2,096,538
|
|
Total Inventories
|
|
$
|
3,565,448
|
|
|
$
|
3,263,850
|
|
The Company recorded no inventory markdown for the three
and six months ended December 31, 2020 and 2019.
NOTE 6 - OPERATING LEASE
For the six months ended December 31, 2020, the Company
had two real estate operating leases for office, warehouses and manufacturing facilities under the terms of one year.
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 11).
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 11).
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.
NOTE 7 – PROPERTY, PLANT AND EQUIPMENT, NET
The components of property, plant and equipment were
as follows:
|
|
December 31, 2020
|
|
|
June 30, 2020
|
|
|
|
|
|
|
|
|
Buildings
|
|
$
|
5,011,200
|
|
|
$
|
4,601,685
|
|
Machinery and equipment
|
|
|
3,222,821
|
|
|
|
2,822,686
|
|
Office equipment
|
|
|
73,665
|
|
|
|
67,091
|
|
Automobiles
|
|
|
106,999
|
|
|
|
98,848
|
|
Subtotal
|
|
|
8,414,685
|
|
|
|
7,590,310
|
|
Less: Accumulated depreciation
|
|
|
(1,413,533
|
)
|
|
|
(1,016,373
|
)
|
Property, plant and equipment, net
|
|
$
|
7,001,152
|
|
|
$
|
6,573,937
|
|
Depreciation expense related to property, plant and equipment
was $300,941 and $384,408 for the six months ended December 31, 2020 and 2019, respectively.
Depreciation expense related to property, plant and equipment
was $135,731 and $183,340 for the three months ended December 31, 2020 and 2019, respectively.
As of December 31, 2020 and June 30, 2020, buildings
were pledged as collateral for bank loans (See Note 9).
NOTE 8 – INTANGIBLE ASSETS, NET
Intangible assets consist of the following:
|
|
December 31, 2020
|
|
|
June 30, 2020
|
|
|
|
|
|
|
|
|
Land use right
|
|
$
|
1,561,400
|
|
|
$
|
1,442,456
|
|
Computer software
|
|
|
29,539
|
|
|
|
25,039
|
|
Subtotal
|
|
|
1,590,939
|
|
|
|
1,467,495
|
|
Less: Accumulated amortization
|
|
|
(82,177
|
)
|
|
|
(43,091
|
)
|
Intangible assets, net
|
|
$
|
1,508,762
|
|
|
$
|
1,424,404
|
|
Amortization expense related to intangible assets was
$34,126 and $14,672 for the six months ended December 31, 2020 and 2019, respectively.
Amortization expense related to intangible assets was
$26,810 and $7,426 for the three months ended December 31, 2020 and 2019, respectively.
Fangguan Electronics acquired the land use right from
the local government in August 2012 which expires on August 15, 2062. As of December 31, 2020 and June 30, 2020, land use right
was pledged as collateral for bank loans (See Note 9).
NOTE 9 – SHORT-TERM BANK LOAN
The Company’s short-term bank loans consist of
the following:
|
|
|
|
December 31, 2020
|
|
|
June 30, 2020
|
|
Loan payable to Industrial Bank, due November 2020
|
|
(1)
|
|
$
|
-
|
|
|
$
|
1,836,288
|
|
Loan payable to Industrial Bank, due May 2021
|
|
(2)
|
|
|
167,080
|
|
|
|
154,353
|
|
Loan payable to Industrial Bank, due June 2021
|
|
(2)
|
|
|
47,730
|
|
|
|
44,094
|
|
Loan payable to Industrial Bank, due August 2021
|
|
(3)
|
|
|
549,692
|
|
|
|
-
|
|
Loan payable to Industrial Bank, due March 2021
|
|
(3)
|
|
|
458,702
|
|
|
|
-
|
|
Loan payable to Industrial Bank, due June 2021
|
|
(4)
|
|
|
458,702
|
|
|
|
-
|
|
Total
|
|
|
|
$
|
1,681,906
|
|
|
$
|
2,034,735
|
|
|
(1)
|
On November 19, 2019, Fangguan Electronics entered into a short-term loan agreement with Industrial
Bank to borrow approximately US$2.6 million (RMB 18 million) for a year until November 18, 2020 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. On May 20,
2020, Fangguan Electronics partially repaid this bank loan of approximately US$706,000 (RMB5,000,000). On August 28, 2020 and September
21, 2020, Fangguan Electronics further partially repaid this bank loan of approximately US$441,000 (RMB3,000,000) and US$734,000
(RMB5,000,000) respectively. On November 18, 2020, Fangguan Electronics repaid the remaining balance in full of this bank loan
of approximately US$764,500 (RMB5,000,000).
|
|
(2)
|
During May and Jun 2020, Fangguan Electronics issued two one-year commercial acceptance bills with
amounts of approximately US$167,000 (RMB1,092,743) and US$48,000 (RMB312,161) and maturity dates at May 21, 2021 and June 11, 2021
respectively. 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.
|
|
(3)
|
During August 2020, Fangguan Electronics issued a one-year commercial acceptance bill with amount
of approximately US$550,000 (RMB3,595,096) and maturity date at August 6, 2021. During September 2020, Fangguan Electronics issued
a six-month commercial acceptance bill with amount of approximately US$459,000 (RMB3,000,000) and maturity date at March 9, 2021.
On August 11, 2020 and September 10, 2020, the two commercial acceptance bills were discounted with Industrial Bank at an interest
rate of 3.80% 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.
|
|
(4)
|
During December 2020, Fangguan Electronics issued a six-month commercial acceptance bill with amount of approximately US$459,000
(RMB3,000,000) and maturity date at June 4, 2021. On December 7, 2020, the commercial acceptance bill was discounted with Industrial
Bank at an interest rate of 3.85% and the balance of the commercial acceptance bill converted to bank loan 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 10 - STOCKHOLDERS' EQUITY
Stock Issued for Conversion of Convertible Debt
During the six months ended December 31, 2020, the
Company issued a total of 9,470,630 shares of common stock for the conversion of debt in the principal amount of $273,200
together with all accrued and unpaid interest, according to the conditions of the convertible notes. All these conversions
resulted in a total loss on extinguishment of debt of $256,639 for the six months ended December 31, 2020. The remaining
principal balance due under convertible notes after these conversions and other debt settlements (See Note 14) is zero.
Stock Issued for Exercise of Warrants
On December 21, 2020, the Company issued a total of 1,500,000
shares of common stock to FirstFire Global Opportunities Fund, LLC for the exercise of warrants in full, according to the conditions
of the convertible note dated as September 11, 2019. The exercise of warrants resulted in a loss of $67,028 for the six months
ended December 31, 2020. (See Note 14)
Stock Issued for Private Placement
In December 2020, the Company issued a total of 28,869,999
shares of common stock to nine individual subscribers for an aggregate purchase price of $433,000 at $0.015 per share, according
to the conditions of the subscription agreements signed between the Company and subscribers.
Stock Issued as Commitment Shares for Promissory Note
On December 21, 2020, the Company issued a self-amortization
promissory note to Labrys Fund, L.P in the aggregate principal amount of $300,000. The promissory note is due on or before December
21, 2021 and bears an interest rate of five percent (5%) per annum. The note is not convertible unless in default, as defined in
the agreement. The Company agreed to reserve 7,052,239 shares of its common stock for issuance if any debt is converted.
On December 31, 2020, the Company issued 447,762 shares
of common stock (the “First Commitment Shares”) and 1,119,402 shares of common stock (the “Second Commitment
Shares”) related to the promissory note as a commitment fee. The Second Commitment Shares must be returned to the Company’s
treasury if the promissory note is fully repaid and satisfied on or prior to the maturity date. The Company recorded the First
Commitment Shares as debt discount valued at $68,060 based on the quoted market price at issue date and amortized over the term
of the promissory note. The Company recorded the Second Commitment Shares at par for the six months ended December 31, 2020. (See
Note 15)
NOTE 11 - RELATED PARTY TRANSACTIONS AND BALANCES
Purchase from related party
During the six months ended December 31, 2019, the Company
purchased $1,464,537 and $37,495 from Keenest and Shenzhen Baileqi S&T which were owned by the Company’s stockholders
who own approximately 1.4% and 0.8% respectively of the Company’s outstanding common stock. The amount of $1,464,537 and
$37,495 were included in the cost of revenue for the six months ended December 31, 2019.
During the three months ended December 31, 2019, the
Company purchased $880,773 and $0 from Keenest and Shenzhen Baileqi S&T which were owned by the Company’s stockholders
who own approximately 1.4% and 0.8% respectively of the Company’s outstanding common stock. The amounts of $880,773 and $0
were included in the cost of revenue for the three months ended December 31, 2019.
Advances to suppliers - related parties
Lisite Science made advances of $429,264 and $357,577
to Keenest for future purchases as of December 31, 2020 and June 30, 2020, respectively.
Sales to related party
During the six months ended December 31, 2020 and 2019,
Baileqi Electronic sold materials of $0 and $644,392 respectively to Shenzhen Baileqi S&T.
During the three months ended December 31, 2020 and 2019,
Baileqi Electronic sold materials of $0 and $330,435 respectively to Shenzhen Baileqi S&T.
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 6).
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 6).
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.
|
|
|
|
December 31, 2020
|
|
|
June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
Ben Wong
|
|
(1)
|
|
$
|
143,792
|
|
|
$
|
143,792
|
|
Yubao Liu
|
|
(2)
|
|
|
333,628
|
|
|
|
102,938
|
|
Xin Sui
|
|
(3)
|
|
|
2,016
|
|
|
|
2,016
|
|
Baozhen Deng
|
|
(4)
|
|
|
(488
|
)
|
|
|
9,437
|
|
Jialin Liang
|
|
(5)(10)
|
|
|
1,434,495
|
|
|
|
901,460
|
|
Xuemei Jiang
|
|
(6)(9)
|
|
|
547,384
|
|
|
|
505,685
|
|
Shikui Zhang
|
|
(7)
|
|
|
45,854
|
|
|
|
28,528
|
|
Changyong Yang
|
|
(8)
|
|
|
29,246
|
|
|
|
23,063
|
|
|
|
|
|
$
|
2,535,927
|
|
|
$
|
1,716,919
|
|
(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 0.8% of the Company’s outstanding common stock, and the owner of Shenzhen Baileqi S&T.
(5) Jialin Liang is a stockholder of the Company and
the president, CEO, and director of Fangguan Electronics.
(6) Xuemei Jiang is a stockholder of the Company and
the vice president and director of Fangguan Electronics.
(7) Shikui Zhang is a stockholder of the Company and
serves as the legal representative and general manager of Shizhe New Energy since May 2019.
(8) Changyong Yang is a stockholder of the Company, who
owns approximately 1.4% of the Company’s outstanding common stock, and the owner of Keenest.
(9) The liability was assumed from the acquisition of
Fangguan Electronics.
(10) 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 six months ended December 31, 2020, Yubao
Liu advanced $503,475 to Well Best after netting off the refund paid to him. In addition, Yubao Liu agreed to decrease his advances
to Well Best of $272,785 (RMB1,784,069) to pay off the loan receivables due from Shenzhen Baileqi S&T to Baileqi Electronic
on behalf of Shenzhen Baileqi S&T.
During the six months ended December 31, 2020, Baileqi
Electronic refunded $9,925 to Baozhen Deng. Shikui Zhang advanced approximately $14,000 to Shizhe New Energy. Changyong Yang, a
stockholder of the Company, advanced approximately $4,000 to Lisite Science.
On September 23, 2020, Jialin Liang entered into a short-term
loan agreement with Bank of Communications to borrow an individual loan of approximately US$441,000 (RMB 3 million) for one year
with annual interest rate of 3.85%. The borrowing was guaranteed by Fangguan Electronics. Pursuant to the loan agreement, the proceed
from the bank loan could only be used in the operation of Fangguan Electronics. On September 23, 2020, Jialin Liang advanced all
of the proceeds from this bank loan to Fangguan Electronics.
During the six months ended December 31, 2019, Yubao
Liu was refunded of $9,028 by Welly Surplus after netting off his advances to Well Best. Baileqi Electronic refunded $5,303 to
Baozhu Deng, a relative of the stockholder Baozhen Deng, and Baozhen Deng advanced $2,810 to Baileqi Electronic. Shizhe New Energy
refunded $625 and $1,869 to Liang Zhang and Zijian Yang respectively, who were the officers of Shizhe New Energy at the time. Shikui
Zhang advanced $16,548 to Shizhe New Energy.
NOTE 12 – CONCENTRATION
Major customers
Customers who accounted for 10% or more of the Company’s
revenues (goods sold and services) and its outstanding balance of accounts receivable are presented as follows:
|
|
For the Six Months Ended
December 31, 2020
|
|
|
As of December 31, 2020
|
|
|
|
Revenue
|
|
|
Percentage of
total revenue
|
|
|
Accounts
receivable
|
|
|
Percentage of
total accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
$
|
1,053,587
|
|
|
|
18
|
%
|
|
$
|
276,004
|
|
|
|
8
|
%
|
Customer B
|
|
|
867,393
|
|
|
|
15
|
%
|
|
|
29,501
|
|
|
|
1
|
%
|
Total
|
|
$
|
1,920,980
|
|
|
|
33
|
%
|
|
$
|
305,505
|
|
|
|
9
|
%
|
|
|
For the Six Months Ended
December 31, 2019
|
|
|
As of December 31, 2019
|
|
|
|
Revenue
|
|
|
Percentage of
total revenue
|
|
|
Accounts
receivable
|
|
|
Percentage of
total accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
$
|
1,732,012
|
|
|
|
12
|
%
|
|
$
|
-
|
|
|
|
-
|
%
|
Total
|
|
$
|
1,732,012
|
|
|
|
12
|
%
|
|
$
|
-
|
|
|
|
-
|
%
|
|
|
For the Three Months Ended
December 31, 2020
|
|
|
As of December 31, 2020
|
|
|
|
Revenue
|
|
|
Percentage of
total revenue
|
|
|
Accounts
receivable
|
|
|
Percentage of
total accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
$
|
419,600
|
|
|
|
14
|
%
|
|
$
|
276,004
|
|
|
|
8
|
%
|
Customer B
|
|
|
580,436
|
|
|
|
19
|
%
|
|
|
29,501
|
|
|
|
1
|
%
|
Customer C
|
|
|
312,594
|
|
|
|
10
|
%
|
|
|
144,581
|
|
|
|
4
|
%
|
Total
|
|
$
|
1,312,630
|
|
|
|
43
|
%
|
|
$
|
450,086
|
|
|
|
13
|
%
|
|
|
For the Three Months Ended
December 31, 2019
|
|
|
As of December 31, 2019
|
|
|
|
Revenue
|
|
|
Percentage of
total revenue
|
|
|
Accounts
receivable
|
|
|
Percentage of
total accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
$
|
871,138
|
|
|
|
12
|
%
|
|
$
|
-
|
|
|
|
-
|
%
|
Customer B
|
|
|
773,138
|
|
|
|
11
|
%
|
|
|
-
|
|
|
|
-
|
%
|
Customer C
|
|
|
851,841
|
|
|
|
12
|
%
|
|
|
-
|
|
|
|
-
|
%
|
Total
|
|
$
|
2,496,117
|
|
|
|
35
|
%
|
|
$
|
-
|
|
|
|
-
|
%
|
Primarily all customers are located in the PRC.
Major suppliers
The suppliers who accounted for 10% or more of the Company’s
total purchases (materials and services) and its outstanding balance of accounts payable are presented as follows:
|
|
For the Six Months Ended
December 31, 2020
|
|
|
As of December 31, 2020
|
|
|
|
Purchase
|
|
|
Percentage of
total purchase
|
|
|
Accounts
payable
|
|
|
Percentage of
total accounts
payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplier A
|
|
$
|
743,919
|
|
|
|
15
|
%
|
|
$
|
-
|
|
|
|
-
|
%
|
Supplier B
|
|
|
524,926
|
|
|
|
10
|
%
|
|
|
293,821
|
|
|
|
12
|
%
|
Total
|
|
$
|
1,268,845
|
|
|
|
25
|
%
|
|
$
|
293,821
|
|
|
|
12
|
%
|
|
|
For the Six Months Ended
December 31, 2019
|
|
|
As of December 31, 2019
|
|
|
|
Purchase
|
|
|
Percentage of
total purchase
|
|
|
Accounts
payable
|
|
|
Percentage of
total accounts
payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplier A - related party
|
|
$
|
1,464,537
|
|
|
|
13
|
%
|
|
$
|
-
|
|
|
|
-
|
%
|
Supplier B
|
|
|
2,168,109
|
|
|
|
19
|
%
|
|
|
126,261
|
|
|
|
4
|
%
|
Total
|
|
$
|
3,632,646
|
|
|
|
32
|
%
|
|
$
|
126,261
|
|
|
|
4
|
%
|
|
|
For the Three Months Ended
December 31, 2020
|
|
|
As of December 31, 2020
|
|
|
|
Purchase
|
|
|
Percentage of
total purchase
|
|
|
Accounts
payable
|
|
|
Percentage of
total accounts
payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplier A
|
|
$
|
448,321
|
|
|
|
17
|
%
|
|
$
|
-
|
|
|
|
-
|
%
|
Total
|
|
$
|
448,321
|
|
|
|
17
|
%
|
|
$
|
-
|
|
|
|
-
|
%
|
|
|
For the Three Months Ended
December 31, 2019
|
|
|
As of December 31, 2019
|
|
|
|
Purchase
|
|
|
Percentage of
total purchase
|
|
|
Accounts
payable
|
|
|
Percentage of
total accounts
payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplier A - related party
|
|
$
|
880,773
|
|
|
|
15
|
%
|
|
$
|
-
|
|
|
|
-
|
%
|
Supplier B
|
|
|
1,056,219
|
|
|
|
17
|
%
|
|
|
126,261
|
|
|
|
4
|
%
|
Total
|
|
$
|
1,936,992
|
|
|
|
32
|
%
|
|
$
|
126,261
|
|
|
|
4
|
%
|
All suppliers of the Company are located in the PRC.
NOTE 13 - 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 three and six months ended December 31, 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 December 31, 2020.
Hong Kong
The Company’s subsidiaries, Well Best and Welly
Surplus, are registered in Hong Kong and subject to income tax rate of 16.5%. For the three and six months ended December 31, 2020
and 2019, there is no assessable income chargeable to profit tax in Hong Kong.
The PRC
The Company’s subsidiaries in China are subject
to a unified income tax rate of 25%. Fangguan Electronics was certified as high-tech enterprises for three calendar years from
2016 to 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 (benefit) at
the U.S. statutory rate of 21% to the Company's effective tax rate is as follows:
|
|
For the Six Months Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Tax (benefit) at U.S. statutory rate
|
|
$
|
(191,925
|
)
|
|
$
|
215,961
|
|
Tax rate difference between foreign operations and U.S.
|
|
|
19,747
|
|
|
|
(105,068
|
)
|
Change in valuation allowance
|
|
|
106,869
|
|
|
|
76,612
|
|
Permanent difference
|
|
|
39,805
|
|
|
|
(6,056
|
)
|
Effective tax (benefit)
|
|
$
|
(25,504
|
)
|
|
$
|
181,449
|
|
The provisions for income taxes (benefits) are summarized
as follows:
|
|
For the Six Months Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Current
|
|
$
|
(1,182
|
)
|
|
$
|
152,570
|
|
Deferred
|
|
|
(24,322
|
)
|
|
|
28,879
|
|
Total
|
|
$
|
(25,504
|
)
|
|
$
|
181,449
|
|
As of December 31, 2020, the Company has approximately
$3,044,000 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 December 31, 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 three and six months ended December 31, 2020 and 2019
due to net operating loss carryforwards available in the U.S. Therefore, there was no accrual of GILTI liability as of December
31, 2020 and June 30, 2020.
The extent of the Company’s operations involves
dealing with uncertainties and judgments in the application of complex tax regulations in a multitude of jurisdictions. The final
taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution
of disputes arising from federal, state and international tax audits. The Company recognizes potential liabilities and records
tax liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on its estimate of whether,
and the extent to which, additional taxes will be due.
NOTE 14 - CONVERTIBLE DEBT
Convertible notes
Convertible notes payable balance was zero as of December
31, 2020.
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 six months ended December 31, 2020,
Power Up Lending Group Ltd elected to convert $39,000 of the principal amount together with $4,916 of accrued and unpaid interest
of the convertible notes into 264,970 shares of the Company’s common stock. The conversion resulted in a loss on extinguishment
of debt of $32,778. (See Note 10)
The remaining principal balance due under
this convertible note after all conversions is zero as of December 31, 2020.
|
(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.
|
During the six months ended December 31, 2020, Firstfire Global Opportunities Fund LLC elected to convert $68,850 of the principal
amount of the convertible notes into 4,125,000 shares of the Company’s common stock. The conversion resulted in a loss on
extinguishment of debt of $67,512 (See Note 10).
After the foregoing conversions, on November
12, 2020, the Company paid Firstfire Global Opportunities Fund LLC, the holder of the Company’s convertible debt an aggregate
of $130,500 in order to terminate their convertible note dated September 11, 2019, including all accrued and unpaid interest. The
payment was made by Yubao Liu on behalf of the Company and the note holder confirmed this full settlement on November 13, 2020.
The debt settlement resulted in a gain on extinguishment of debt of $94,928.
The remaining principal balance due under
this convertible note after all conversions and settlement is zero as of December 31, 2020.
|
(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.
|
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, including all accrued and unpaid interest, after
the Company paid an aggregate of $75,000 on September 16, 2020. The debt settlement resulted in a gain on extinguishment of debt
of $15,346.
|
(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.
|
On October 16, 2020, the Company issued a
total of 500,000 shares of common stock to Crown Bridge Partners, LLC for the conversion of debt in the principal amount of $3,500
according to the conditions of the convertible note dated as November 12, 2019. The conversion resulted in a loss on extinguishment
of debt of $22,424. (See Note 10)
After the foregoing conversions, on December
7, 2020, the Company paid Crown Bridge Partners, LLC, the holder of the Company’s convertible debt an aggregate of $82,500
in order to terminate their convertible note dated November 12, 2019, including all accrued and unpaid interest. Among the total,
payment of $60,000 was made by Yubao Liu on behalf of the Company while the remaining payment of $22,500 was made directly by the
Company. The note holder confirmed this full settlement on December 10, 2020. The debt settlement resulted in a gain on extinguishment
of debt of $206,377.
The remaining principal balance due under
this convertible note after all conversions and settlement is zero as of December 31, 2020.
|
(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.
|
On September 24, 2020, Morningview Financial,
LLC elected to convert $15,000 of the principal amount of the convertible notes into 568,182 shares of the Company’s common
stock. The conversion resulted in a loss on extinguishment of debt of $5,907. (See Note 10)
After the foregoing conversions, on November
12, 2020, the Company paid Morningview Financial, LLC, the holder of the Company’s convertible debt an aggregate of $175,000
in order to terminate their convertible note dated November 20, 2019, including all accrued and unpaid interest. The payment was
made by Yubao Liu on behalf of the Company and the note holder confirmed this full settlement on November 14, 2020. The debt settlement
resulted in a gain on extinguishment of debt of $209,604.
The remaining principal balance due under
this convertible note after all conversions and settlement is zero as of December 31, 2020.
|
(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 $139,121 (including principal of $137,114 and
interest of $2,007). The repayment resulted in a loss on extinguishment of debt of $4,703, which was included in other income and
expense in the consolidated statement of comprehensive income (loss) for the year ended June 30, 2020.
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 4 installments of an aggregate
amount of $92,748 (including principal of $91,789 and interest of $959).
As of the date of this report, the Company
has made total six installments payment of an aggregate amount of $139,121 (including principal of $137,114 and interest of $2,007).
The note payable balance decreased to zero as of December 31, 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.
|
During the six months ended December 31, 2020,
Labrys Fund, LP elected to convert $146,850 of the principal amount together with all accrued and unpaid interest of the convertible
notes into 4,012,478 shares of the Company’s common stock. The conversion resulted in a loss on extinguishment of debt of
$128,018. The remaining principal balance due under this convertible note after all conversions is zero as of December 31, 2020.
(See Note 10)
All convertible notes aforementioned
For the six months ended December 31, 2020 and 2019,
the Company recorded the amortization of debt discount of $138,399 and 181,336 for the convertible notes issued, which were included
in other income and expense in the consolidated statement of comprehensive income (loss).
For the three months ended December 31, 2020 and 2019,
the Company recorded the amortization of debt discount of $24,185 and 160,023 for the convertible notes issued, which were included
in other income and expense 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:
Balance at July 1, 2020
|
|
$
|
276,266
|
|
Converted
|
|
|
(357,868
|
)
|
Debt settlement
|
|
|
(566,030
|
)
|
Change in fair value recognized in operations
|
|
|
647,632
|
|
Balance at December 31, 2020
|
|
$
|
-
|
|
The estimated fair value of the derivative instruments
was valued using the Black-Scholes option pricing model during the six months ended December 31, 2020, using the following assumptions:
Estimated dividends
|
|
None
|
Expected volatility
|
|
78.55% to 253.30%
|
Risk free interest rate
|
|
0.61% to 0.93%
|
Expected term
|
|
0 to 6 months
|
Warrants
In connection with the issuance of the $165,000 convertible
promissory note on September 11, 2019, FirstFire Global Opportunities Fund, LLC is entitled, upon the terms and subject to the
limitations on exercise and the conditions set forth in the agreement, at any time on or after the date of issuance hereof to purchase
from the Company up to 68,750 shares of common stock. Exercise price shall be $2.40, and the warrants can be exercised within 5
years which is before September 11, 2024.
On December 21, 2020, the Company issued a total of 1,500,000
shares of common stock to FirstFire Global Opportunities Fund, LLC for the exercise of warrants in full. The exercise of warrants
resulted in a loss of $67,028 for the six months ended December 31, 2020. After this exercise, FirstFire Global Opportunities Fund,
LLC is not entitled to any warrant to purchase shares. (See Note 10)
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 December 2020, the Company paid a total of $82,500
to fully settle the convertible note dated November 12, 2019 with Crown Bridge Partners, LLC, including all accrued and unpaid
interest and unexercised warrants. After this settlement, Crown Bridge Partners, LLC is not entitled to any warrant to purchase
shares.
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 November 2020, the Company paid a total of $175,000
to fully settle the convertible note dated November 20, 2019 with Morningview Financial LLC, including all accrued and unpaid interest
and unexercised warrants. After this settlement, Morningview Financial LLC is not entitled to any warrant to purchase shares.
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:
Estimated dividends
|
|
None
|
Expected volatility
|
|
56.23% to 71.08%
|
Risk free interest rate
|
|
1.73% to 1.92%
|
Expected term
|
|
5 years
|
Since the warrants can be exercised at $2.4 or $2.8 and
are not liabilities, the face value of convertible notes was allocated between convertible note and warrant based on the fair values
of the conversion 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:
|
|
Number of
shares
|
|
|
Weighted Average
Exercise Price
|
|
|
Remaining
Contractual Term
(years)
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at July 1, 2020
|
|
|
229,166
|
|
|
$
|
2.68
|
|
|
|
4.2 to 4.53
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised or settled
|
|
|
(160,416
|
)
|
|
|
2.63
|
|
|
|
4.05 to 4.16
|
|
Cancelled or expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding at December 31, 2020
|
|
|
68,750
|
|
|
$
|
2.80
|
|
|
|
4.03
|
|
NOTE 15 – PROMISSORY NOTE
On December 21, 2020, the Company issued a self-amortization
promissory note to Labrys Fund, L.P in the aggregate principal amount of $300,000. The promissory note is due on or before December
21, 2021 and bears an interest rate of five percent (5%) per annum. The note is not convertible unless in default, as defined in
the agreement. The Company agreed to reserve 7,052,239 shares of its common stock for issuance if any debt is converted. The Company
executed and closed the transaction on December 31, 2020 and received $253,500 in cash after deducting an OID in the amount of
$30,000, legal fees of $3,000 and other costs of $13,500. The self-amortization promissory note has an amortization schedule of
$35,000 payment at each month end beginning April 23, 2021 through December 21, 2021.
In connection with the issuance of promissory note, on
December 31, 2020, the Company issued 447,762 shares of common stock (the “First Commitment Shares”) and 1,119,402
shares of common stock (the “Second Commitment Shares”) related to the promissory note as a commitment fee. The Second
Commitment Shares must be returned to the Company’s treasury if the promissory note is fully repaid and satisfied on or prior
to the maturity date. The Company recorded the First Commitment Shares as debt discount valued at $68,060 based on the quoted market
price at issue date and amortized over the term of the promissory note. The Company recorded the Second Commitment Shares at par
for the six months ended December 31, 2020. (See Note 10)
For the three and six months ended December 31, 2020,
the Company recorded the amortization of debt discount of $1,274 for the self-amortization promissory note issued, which was included
in other income and expense in the consolidated statement of comprehensive income (loss).
NOTE 16 – 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 3, “Summary of Significant Accounting Policies”.
The following tables provide the business segment information
for the three and six months ended December 31, 2020 and 2019.
|
|
For the Six Months Ended December 31, 2020
|
|
|
|
Smart
energy
|
|
|
Photoelectric
display
|
|
|
Service
contracts
|
|
|
Unallocated
items
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
5,939,602
|
|
|
$
|
1,746
|
|
|
$
|
-
|
|
|
$
|
5,941,348
|
|
Cost of Revenues
|
|
|
-
|
|
|
|
5,259,262
|
|
|
|
10,182
|
|
|
|
-
|
|
|
|
5,269,444
|
|
Gross profit (loss)
|
|
|
-
|
|
|
|
680,340
|
|
|
|
(8,436
|
)
|
|
|
-
|
|
|
|
671,904
|
|
Operating expenses
|
|
|
5,532
|
|
|
|
773,259
|
|
|
|
17,748
|
|
|
|
138,602
|
|
|
|
935,141
|
|
Loss from operations
|
|
|
(5,532
|
)
|
|
|
(92,919
|
)
|
|
|
(26,184
|
)
|
|
|
(138,602
|
)
|
|
|
(263,237
|
)
|
Net loss
|
|
$
|
(5,372
|
)
|
|
$
|
(120,254
|
)
|
|
$
|
(26,183
|
)
|
|
$
|
(736,615
|
)
|
|
$
|
(888,424
|
)
|
|
|
For the Six Months Ended December 31, 2019
|
|
|
|
Smart
energy
|
|
|
Photoelectric
display
|
|
|
Service
contracts
|
|
|
Unallocated
items
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,538,094
|
|
|
$
|
12,675,303
|
|
|
$
|
619,901
|
|
|
$
|
-
|
|
|
$
|
14,833,298
|
|
Cost of Revenues
|
|
|
1,464,537
|
|
|
|
10,529,594
|
|
|
|
349,545
|
|
|
|
-
|
|
|
|
12,343,676
|
|
Gross profit
|
|
|
73,557
|
|
|
|
2,145,709
|
|
|
|
270,356
|
|
|
|
-
|
|
|
|
2,489,622
|
|
Operating expenses
|
|
|
6,134
|
|
|
|
1,113,559
|
|
|
|
17,217
|
|
|
|
248,566
|
|
|
|
1,385,476
|
|
Income (loss) from operations
|
|
|
67,423
|
|
|
|
1,032,150
|
|
|
|
253,139
|
|
|
|
(248,566
|
)
|
|
|
1,104,146
|
|
Net income (loss)
|
|
$
|
59,568
|
|
|
$
|
863,135
|
|
|
$
|
230,065
|
|
|
$
|
(305,834
|
)
|
|
$
|
846,934
|
|
|
|
For the Three Months Ended December 31, 2020
|
|
|
|
Smart
energy
|
|
|
Photoelectric
display
|
|
|
Service
contracts
|
|
|
Unallocated
items
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
2,982,577
|
|
|
$
|
306
|
|
|
$
|
-
|
|
|
$
|
2,982,883
|
|
Cost of Revenues
|
|
|
-
|
|
|
|
2,587,857
|
|
|
|
198
|
|
|
|
-
|
|
|
|
2,588,055
|
|
Gross profit (loss)
|
|
|
-
|
|
|
|
394,720
|
|
|
|
108
|
|
|
|
-
|
|
|
|
394,828
|
|
Operating expenses
|
|
|
2,847
|
|
|
|
420,982
|
|
|
|
8,123
|
|
|
|
48,501
|
|
|
|
480,453
|
|
Loss from operations
|
|
|
(2,847
|
)
|
|
|
(26,262
|
)
|
|
|
(8,015
|
)
|
|
|
(48,501
|
)
|
|
|
(85,625
|
)
|
Net loss
|
|
$
|
(2,688
|
)
|
|
$
|
(31,770
|
)
|
|
$
|
(8,015
|
)
|
|
$
|
(313,645
|
)
|
|
$
|
(356,118
|
)
|
|
|
For the Three Months Ended December 31, 2019
|
|
|
|
Smart
energy
|
|
|
Photoelectric
display
|
|
|
Service
contracts
|
|
|
Unallocated
items
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
910,391
|
|
|
$
|
6,195,380
|
|
|
$
|
227,197
|
|
|
$
|
-
|
|
|
$
|
7,332,968
|
|
Cost of Revenues
|
|
|
880,773
|
|
|
|
5,172,690
|
|
|
|
217,109
|
|
|
|
-
|
|
|
|
6,270,572
|
|
Gross profit
|
|
|
29,618
|
|
|
|
1,022,690
|
|
|
|
10,088
|
|
|
|
-
|
|
|
|
1,062,396
|
|
Operating expenses
|
|
|
2,022
|
|
|
|
595,065
|
|
|
|
5,736
|
|
|
|
178,402
|
|
|
|
781,225
|
|
Income (loss) from operations
|
|
|
27,596
|
|
|
|
427,625
|
|
|
|
4,352
|
|
|
|
(178,402
|
)
|
|
|
281,171
|
|
Net income (loss)
|
|
$
|
21,727
|
|
|
$
|
338,659
|
|
|
$
|
3,958
|
|
|
$
|
(228,686
|
)
|
|
$
|
135,658
|
|
NOTE 17 - SUBSEQUENT EVENTS
Stock Issued for Private Placement
On January 13, 2021, the Company issued a total of 7,000,000
shares of common stock to one individual subscriber for purchase price of $105,000 at $0.015 per share, according to the conditions
of the subscription agreement signed by both parties.
New Consulting Agreement
On February 1, 2021, the Company entered into a consulting
agreement with Mr. George Adamson, a well-known lithium battery expert in the United States, and Mr. Steve Bellamy, a senior
financial advisor (collectively, the “Consultants”) for the purpose of improving the core competitiveness and brand
image of the Company. The Consultants have been engaged to assist the Company to establish a corporate head office in Las Vegas,
Nevada, which would function in manufacturing, assembly and R&D. The Consultants will each earn 96,000 restricted stock of
the Company with 48,000 on August 1, 2021 and 48,000 on February 1, 2022.
Establishment of A New Subsidiary
On February 7, 2021, the Board of Directors of the Company
approved and ratified the incorporation of Shijirun (Yixing) Technology, Ltd. (“Shijirun”), a limited liability company
formed under the laws of the Peoples Republic of China (PRC) on February 7, 2021. Well Best, a wholly owned subsidiary of the Company,
is the sole shareholder of Shijirun. As a result, Shijirun is an indirect, wholly-owned subsidiary of the Company. Shijirun will
head up the Company’s advance into the new energy industry focusing on developing and producing high-end intelligent new
energy equipment from Yixing City, Jiangsu Province, China.
END NOTES TO FINANCIAL STATEMENTS
IONIX TECHNOLOGY, INC.
Index to the Financial Statements
(Audited)
Financial Statements
|
|
Page
|
Reports of Independent Registered Public Accounting Firm
|
|
F-35
|
Consolidated Balance Sheets as of June 30, 2020 and 2019
|
|
F-36
|
Consolidated Statements of Comprehensive Income (Loss) for the years ended June 30, 2020 and 2019
|
|
F-37
|
Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2020 and 2019
|
|
F-38
|
Consolidated Statements of Cash Flows for the years ended June 30, 2020 and 2019
|
|
F-39
|
Notes to Consolidated Financial Statements
|
|
F-40
|
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
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
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.
IONIX TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME (LOSS)
|
|
For the Years Ended
|
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Revenues (See Note 2 and Note 10 for related party amounts)
|
|
$
|
20,599,228
|
|
|
$
|
12,348,492
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenues (See Note 10 for related party amounts)
|
|
|
17,506,433
|
|
|
|
10,153,217
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
3,092,795
|
|
|
|
2,195,275
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Selling, general and administrative expense
|
|
|
1,937,054
|
|
|
|
1,255,523
|
|
Research and development expense
|
|
|
805,570
|
|
|
|
323,309
|
|
Total operating expenses
|
|
|
2,742,624
|
|
|
|
1,578,832
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
350,171
|
|
|
|
616,443
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Interest expense, net of interest income
|
|
|
(666,976
|
)
|
|
|
(69,371
|
)
|
Subsidy income
|
|
|
105,995
|
|
|
|
-
|
|
Change in fair value of derivative liability
|
|
|
151,899
|
|
|
|
-
|
|
Loss on extinguishment of debt
|
|
|
(45,958
|
)
|
|
|
-
|
|
Total other expense
|
|
|
(455,040
|
)
|
|
|
(69,371
|
)
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax provision
|
|
|
(104,869
|
)
|
|
|
547,072
|
|
Income tax provision
|
|
|
172,799
|
|
|
|
150,025
|
|
Net income (loss)
|
|
|
(277,668
|
)
|
|
|
397,047
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
(311,171
|
)
|
|
|
(53,790
|
)
|
Comprehensive income (loss)
|
|
$
|
(588,839
|
)
|
|
$
|
343,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) Per Share - Basic
|
|
$
|
(0.00
|
)
|
|
$
|
0.00
|
|
Weighted average number of common shares outstanding - Basic
|
|
|
114,077,157
|
|
|
|
106,605,740
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) Per Share - Diluted
|
|
$
|
(0.00
|
)
|
|
$
|
0.00
|
|
Weighted average number of common shares outstanding - Diluted
|
|
|
113,928,477
|
|
|
|
106,605,740
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
IONIX TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Additional
|
|
|
|
|
|
Accumulated
Other
|
|
|
|
|
|
|
|
|
|
Number
of
Shares
|
|
|
Amount
|
|
|
Number
of
Shares
|
|
|
Amount
|
|
|
Paid-in
Capital
|
|
|
Retained
Earnings
|
|
|
Comprehensive
Income
(loss)
|
|
|
Non-controlling
interest
|
|
|
Total
|
|
Balance at June 30, 2018
|
|
|
5,000,000
|
|
|
$
|
500
|
|
|
|
99,003,000
|
|
|
$
|
9,900
|
|
|
$
|
237,246
|
|
|
$
|
142,819
|
|
|
$
|
7,950
|
|
|
$
|
-
|
|
|
$
|
398,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of 15,000,000 shares of common stock in exchange for
95.14%
ownership rights of a variable interest entity
|
|
|
-
|
|
|
|
-
|
|
|
|
15,000,000
|
|
|
|
1,500
|
|
|
|
8,650,396
|
|
|
|
-
|
|
|
|
-
|
|
|
|
441,961
|
|
|
|
9,093,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return of capital
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(58,155
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(58,155
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
397,047
|
|
|
|
-
|
|
|
|
-
|
|
|
|
397,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(53,790
|
)
|
|
|
-
|
|
|
|
(53,790
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2019
|
|
|
5,000,000
|
|
|
|
500
|
|
|
|
114,003,000
|
|
|
|
11,400
|
|
|
|
8,829,487
|
|
|
|
539,866
|
|
|
|
(45,840
|
)
|
|
|
441,961
|
|
|
|
9,777,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock warrants issued with convertible notes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
147,492
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
147,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for advisory services
|
|
|
-
|
|
|
|
-
|
|
|
|
75,000
|
|
|
|
7
|
|
|
|
131,243
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
131,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for conversion of convertible notes
|
|
|
-
|
|
|
|
-
|
|
|
|
96,265
|
|
|
|
10
|
|
|
|
135,335
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
135,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(277,668
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(277,668
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(311,171
|
)
|
|
|
-
|
|
|
|
(311,171
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2020
|
|
|
5,000,000
|
|
|
$
|
500
|
|
|
|
114,174,265
|
|
|
$
|
11,417
|
|
|
$
|
9,243,557
|
|
|
$
|
262,198
|
|
|
$
|
(357,011
|
)
|
|
$
|
441,961
|
|
|
$
|
9,602,622
|
|
The accompanying notes are an integral part of these consolidated financial statements.
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.
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.
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:
Buildings
|
|
10 – 20 years
|
Machinery and equipment
|
|
5 – 10 years
|
Office equipment
|
|
3 – 5 years
|
Automobiles
|
|
5 years
|
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).
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:
Land use right
|
|
50 years
|
Computer software
|
|
4-5 years
|
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.
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).
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:
|
|
For the Years Ended
June 30
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Basic weighted average common shares
|
|
|
114,077,157
|
|
|
|
106,605,740
|
|
Effect of potentially dilutive securities
|
|
|
|
|
|
|
|
|
- Warrants
|
|
|
(148,680
|
)
|
|
|
-
|
|
- Convertible notes
|
|
|
-
|
|
|
|
-
|
|
Diluted weighted average common shares
|
|
|
113,928,477
|
|
|
|
106,605,740
|
|
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:
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
|
|
|
|
|
|
|
Balance sheet items, except for equity accounts
|
|
|
7.0795
|
|
|
|
6.8747
|
|
|
|
Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Items in statements of comprehensive income (loss) and cash flows
|
|
|
7.0307
|
|
|
|
6.7457
|
|
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.
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.
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.
|
|
·
|
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.
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.
|
|
For the Year Ended June 30, 2019
|
|
|
|
Fangguan
Electronics
|
|
|
Ionix
Technology
|
|
|
Pro Forma
Adjustments
|
|
|
Pro Forma
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
7,628,845
|
|
|
$
|
12,348,492
|
|
|
$
|
(1,586,656
|
)
|
|
$
|
18,390,681
|
|
Cost of revenues
|
|
|
6,522,437
|
|
|
|
10,153,217
|
|
|
|
(1,158,933
|
)
|
|
|
15,516,721
|
|
Gross profit
|
|
|
1,106,408
|
|
|
|
2,195,275
|
|
|
|
(427,723
|
)
|
|
|
2,873,960
|
|
Operating expenses
|
|
|
914,791
|
|
|
|
1,578,832
|
|
|
|
-
|
|
|
|
2,493,623
|
|
Income (loss) from operations
|
|
|
191,617
|
|
|
|
616,443
|
|
|
|
(427,723
|
)
|
|
|
380,337
|
|
Other income (expense)
|
|
|
5,092
|
|
|
|
(69,371
|
)
|
|
|
-
|
|
|
|
(64,279
|
)
|
Income tax provision
|
|
|
29,609
|
|
|
|
150,025
|
|
|
|
-
|
|
|
|
179,634
|
|
Net income (loss)
|
|
$
|
167,100
|
|
|
$
|
397,047
|
|
|
$
|
(427,723
|
)
|
|
$
|
136,424
|
|
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.
|
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).
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).
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.
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).
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.
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:
|
|
For the Year Ended
June 30, 2020
|
|
|
As of June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
Percentage of
revenue
|
|
|
Accounts
receivable
|
|
|
Percentage of
accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
$
|
3,235,320
|
|
|
|
16
|
%
|
|
$
|
648,786
|
|
|
|
20
|
%
|
Customer B
|
|
|
2,168,387
|
|
|
|
11
|
%
|
|
|
-
|
|
|
|
-
|
%
|
Total
|
|
$
|
5,403,707
|
|
|
|
27
|
%
|
|
$
|
648,786
|
|
|
|
20
|
%
|
|
|
For the Year Ended
June 30, 2019
|
|
|
As of June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
Percentage of
total revenue
|
|
|
Accounts
receivable
|
|
|
Percentage of
total accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
$
|
1,796,854
|
|
|
|
15
|
%
|
|
$
|
107,414
|
|
|
|
3
|
%
|
Customer B
|
|
|
2,935,278
|
|
|
|
24
|
%
|
|
|
270,301
|
|
|
|
7
|
%
|
Total
|
|
$
|
4,732,132
|
|
|
|
39
|
%
|
|
$
|
377,715
|
|
|
|
10
|
%
|
Primarily all customers are located in
the PRC.
Major suppliers
The suppliers who accounted for 10% or
more of the Company’s total purchases (materials and services) and its outstanding balance of accounts payable are presented
as follows:
|
|
For the Year Ended
June 30, 2020
|
|
|
As of June 30, 2020
|
|
|
|
Total Purchase
|
|
|
Percentage of
total purchase
|
|
|
Accounts
payable
|
|
|
Percentage of
total accounts
payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplier A - related party
|
|
$
|
1,630,684
|
|
|
|
10
|
%
|
|
$
|
-
|
|
|
|
-
|
%
|
Supplier B
|
|
|
3,053,591
|
|
|
|
18
|
%
|
|
|
218,709
|
|
|
|
8
|
%
|
Total
|
|
$
|
4,684,275
|
|
|
|
28
|
%
|
|
$
|
218,709
|
|
|
|
8
|
%
|
|
|
For the Year Ended
June 30, 2019
|
|
|
As of June 30, 2019
|
|
|
|
Total Purchase
|
|
|
Percentage of
total purchase
|
|
|
Accounts
payable
|
|
|
Percentage of
total accounts
payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplier A - related party
|
|
$
|
1,993,512
|
|
|
|
20
|
%
|
|
$
|
-
|
|
|
|
-
|
%
|
Supplier B - related party
|
|
|
1,505,387
|
|
|
|
15
|
%
|
|
|
-
|
|
|
|
-
|
%
|
Supplier C
|
|
|
1,731,235
|
|
|
|
17
|
%
|
|
|
-
|
|
|
|
-
|
%
|
Total
|
|
$
|
5,230,134
|
|
|
|
52
|
%
|
|
$
|
-
|
|
|
|
-
|
%
|
All suppliers of the Company are located
in the PRC.
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:
|
|
For the Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Tax at U.S. statutory rate
|
|
$
|
(22,023
|
)
|
|
$
|
114,885
|
|
Tax rate difference between foreign operations and U.S.
|
|
|
(73,374
|
)
|
|
|
(25,627
|
)
|
Change in valuation allowance
|
|
|
287,447
|
|
|
|
82,139
|
|
Permanent difference
|
|
|
(19,251
|
)
|
|
|
(21,372
|
)
|
Effective tax
|
|
$
|
172,799
|
|
|
$
|
150,025
|
|
The provisions for income taxes are summarized
as follows:
|
|
For the Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Current
|
|
$
|
140,531
|
|
|
$
|
164,792
|
|
Deferred
|
|
|
32,268
|
|
|
|
(14,767
|
)
|
Total
|
|
$
|
172,799
|
|
|
$
|
150,025
|
|
The tax effects of temporary differences
that give rise to the Company’s net deferred tax assets are as follows:
|
|
As of June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
439,831
|
|
|
$
|
152,476
|
|
Allowance for doubtful accounts
|
|
|
44,900
|
|
|
|
46,237
|
|
Others
|
|
|
9,087
|
|
|
|
16,058
|
|
|
|
|
493,818
|
|
|
|
214,771
|
|
Less valuation allowance
|
|
|
(439,831
|
)
|
|
|
(152,476
|
)
|
Total Deferred tax assets
|
|
$
|
53,987
|
|
|
$
|
62,295
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liability:
|
|
|
|
|
|
|
|
|
Revenue cutoff
|
|
$
|
33,244
|
|
|
$
|
7,934
|
|
Total Deferred tax liability
|
|
$
|
33,244
|
|
|
$
|
7,934
|
|
|
|
|
|
|
|
|
|
|
Net Deferred tax assets
|
|
$
|
20,743
|
|
|
$
|
54,361
|
|
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.
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.
|
|
(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:
Estimated dividends
|
|
|
None
|
|
Expected volatility
|
|
|
55.87% to 78.46%
|
|
Risk free interest rate
|
|
|
0.66% to 2.08%
|
|
Expected term
|
|
|
0 to 12 months
|
|
Warrants
In connection with the issuance of the
$165,000 convertible promissory note on September 11, 2019, FirstFire Global Opportunities Fund, LLC is entitled, upon the terms
and subject to the limitations on exercise and the conditions set forth in the agreement, at any time on or after the date of issuance
hereof to purchase from the Company up to 68,750 shares of common stock. Exercise price shall be $2.40, and the warrants can be
exercised within 5 years which is before September 11, 2024.
In connection with the issuance of the
$55,000 convertible promissory note on November 12, 2019, Crown Bridge Partners, LLC is entitled, upon the terms and subject to
the limitations on exercise and the conditions set forth in the agreement, at any time on or after the date of issuance hereof
to purchase from the Company up to 22,916 shares of common stock. Exercise price shall be $2.80, and the warrants can be exercised
within 5 years which is before November 12, 2024.
In connection with the issuance of the
$165,000 convertible promissory note on November 20, 2019, Morningview Financial LLC is entitled, upon the terms and subject to
the limitations on exercise and the conditions set forth in the agreement, at any time on or after the date of issuance hereof
to purchase from the Company up to 68,750 shares of common stock. Exercise price shall be $2.80, and the warrants can be exercised
within 5 years which is before November 20, 2024.
In connection with the issuance of the
$146,850 convertible promissory note on January 10, 2020, Labrys Fund, LP is entitled, upon the terms and subject to the limitations
on exercise and the conditions set forth in the agreement, at any time on or after the date of issuance hereof to purchase from
the Company up to 68,750 shares of common stock. Exercise price shall be $2.80, and the warrants can be exercised within 5 years
which is before January 10, 2025.
The estimated fair value of the warrants
was valued using the Black-Scholes option pricing model at grant date, using the following assumptions:
Estimated dividends
|
|
|
None
|
|
Expected volatility
|
|
|
56.23% to 71.08%
|
|
Risk free interest rate
|
|
|
1.73% to 1.92%
|
|
Expected term
|
|
|
5 years
|
|
Since the warrants can be exercised at
$2.4 or $2.8 and are not liabilities, the face value of convertible notes was allocated between convertible note and warrant based
on the fair values of the conversion 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:
|
|
Number of
shares
|
|
|
Weighted Average
Exercise Price
|
|
|
Remaining
Contractual Term
(years)
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at July 1, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Granted
|
|
|
229,166
|
|
|
|
2.68
|
|
|
|
5
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cancelled or expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding at June 30, 2020
|
|
|
229,166
|
|
|
$
|
2.68
|
|
|
|
4.2 to 4.53
|
|
NOTE 14 – SEGMENT INFORMATION
The Company’s business is classified
by management into three reportable business segments (smart energy, photoelectric display and service contracts) supported by
a corporate group which conducts activities that are non-segment specific. The smart energy reportable segment derives revenue
from the sales of portable power banks that is intended to be utilized as a power source for electronic devices such as the iphone,
ipad, mp3/mp4 players, PSP gaming systems, and cameras. The photoelectric display reportable segment derives revenue from the sales
of LCM and LCD screens manufactured for small devices such as video capable baby monitors, electronic devices such as tablets and
cell phones, and for use in televisions or computer monitors. The service contracts reportable segment derives revenue from providing
IT and solution-oriented services. Unallocated items comprise mainly corporate expenses and corporate assets.
Although all of the Company’s revenue
is generated from Mainland China, the Company is organizationally structured along business segments. The accounting policies of
each operating segments are same and are described in Note 2, “Summary of Significant Accounting Policies”.
The following tables provide the business
segment information for the years ended June 30, 2020 and 2019.
|
|
For the Year Ended June 30, 2020
|
|
|
|
Smart
energy
|
|
|
Photoelectric
display
|
|
|
Service
contracts
|
|
|
Unallocated
items
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,709,799
|
|
|
$
|
18,183,974
|
|
|
$
|
705,455
|
|
|
$
|
-
|
|
|
$
|
20,599,228
|
|
Cost of Revenues
|
|
|
1,630,684
|
|
|
|
15,431,065
|
|
|
|
444,684
|
|
|
|
-
|
|
|
|
17,506,433
|
|
Gross profit
|
|
|
79,115
|
|
|
|
2,752,909
|
|
|
|
260,771
|
|
|
|
-
|
|
|
|
3,092,795
|
|
Operating expenses
|
|
|
12,708
|
|
|
|
1,743,219
|
|
|
|
33,191
|
|
|
|
953,506
|
|
|
|
2,742,624
|
|
Income (loss) from operations
|
|
|
66,407
|
|
|
|
1,009,690
|
|
|
|
227,580
|
|
|
|
(953,506
|
)
|
|
|
350,171
|
|
Net income (loss)
|
|
$
|
58,151
|
|
|
$
|
834,284
|
|
|
$
|
204,848
|
|
|
$
|
(1,374,951
|
)
|
|
$
|
277,668
|
|
|
|
For the Year Ended June 30, 2019
|
|
|
|
Smart
energy
|
|
|
Photoelectric
display
|
|
|
Service
contracts
|
|
|
Unallocated
items
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
2,238,503
|
|
|
$
|
9,515,457
|
|
|
$
|
594,532
|
|
|
$
|
-
|
|
|
$
|
12,348,492
|
|
Cost of Revenues
|
|
|
2,016,279
|
|
|
|
7,798,474
|
|
|
|
338,464
|
|
|
|
-
|
|
|
|
10,153,217
|
|
Gross profit
|
|
|
222,224
|
|
|
|
1,716,983
|
|
|
|
256,068
|
|
|
|
-
|
|
|
|
2,195,275
|
|
Operating expenses
|
|
|
13,482
|
|
|
|
1,049,744
|
|
|
|
46,270
|
|
|
|
469,336
|
|
|
|
1,578,832
|
|
Income (loss) from operations
|
|
|
208,742
|
|
|
|
667,239
|
|
|
|
209,798
|
|
|
|
(469,336
|
)
|
|
|
616,443
|
|
Net income (loss)
|
|
$
|
159,520
|
|
|
$
|
510,643
|
|
|
$
|
196,241
|
|
|
$
|
(469,357
|
)
|
|
$
|
397,047
|
|
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.
|
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).
IONIX TECHNOLOGY, INC.
35,869,999 Shares of Common Stock
March 15, 2021
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance
and Distribution.
The following table
sets forth the fees and expenses payable by us in connection with the offering described in the registration statement. All of
the amounts shown are estimates, except for the SEC registration fee:
|
|
Amount to be Paid
|
|
SEC Registration Fee
|
|
$
|
978.35
|
|
Legal Fees and Expenses
|
|
|
20,000
|
|
Accounting Fees and Expenses
|
|
|
9,000
|
|
Transfer Agent, Edgar Agent, and Miscellaneous Fees
|
|
|
2,000
|
|
Total
|
|
$
|
31,978.35
|
|
Item 14. Indemnification of Directors
and Officers.
Nevada Revised Statutes, or NRS, Sections 78.7502
and 78.751 provide us with the power to indemnify any of our directors and officers. The director or officer must have conducted
himself/herself in good faith and reasonably believe that his/her conduct was in, or not opposed to, our best interests. In a criminal
action, the director, officer, employee or agent must not have had reasonable cause to believe his/her conduct was unlawful.
Under NRS Section 78.751, advances
for expenses may be made by agreement if the director or officer affirms in writing that he/she believes he/she has met the standards
and will personally repay the expenses if it is determined such officer or director did not meet the standards.
Our articles of incorporation include an
indemnification provision under which we have the power to indemnify our directors, officers, employees and other agents of the
company to the fullest extent permitted by applicable law.
We have a directors’ and officers’
liability insurance policy in place pursuant to which its directors and officers are insured against certain liabilities, including
certain liabilities under the Securities Act of 1933, as amended and the Securities and Exchange Act of 1934, as amended.
The underwriting agreement we will enter
into in connection with the offering of common stock and warrants being registered hereby provides that the underwriters will indemnify,
under certain conditions, our directors and officers (as well as certain other persons) against certain liabilities arising in
connection with such offering.
Item 15. Recent Sales of Unregistered
Securities
In the three years preceding the filing
of this Registration Statement, we have issued the following securities that were not registered under the Securities Act.
All of the offerings and sales described
below were deemed to be exempt under Rule 506 of Regulation D and/or Section 4(a)(2) of the Securities Act. No advertising or general
solicitation was employed in offering the securities, the offerings and sales were made to a limited number of persons, all of
whom were accredited investors and transfer was restricted by the company in accordance with the requirements of Regulation D and
the Securities Act. All issuances to accredited and non-accredited investors were structured to comply with the requirements of
the safe harbor afforded by Rule 506 of Regulation D, including limiting the number of non-accredited investors to no more than
35 investors who have sufficient knowledge and experience in financial and business matters to make them capable of evaluating
the merits and risks of an investment in our securities. We have not employed any underwriters in connection with any of the below
transactions, and the individuals and entities to whom we issued securities are not affiliated with us. Except as noted below,
none of the holders of the securities have any contractual rights to have such securities registered with the Securities and Exchange
Commission.
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.
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.
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.
On September 24, 2020, the Company issued a total of 400,000
shares of common stock to Labrys Fund, LP for the conversion of debt in the principal amount of $6,065.11 according to the conditions
of the convertible note dated as January 10, 2020.
On October 12, 2020, the Company issued a total of 650,000 shares
of common stock to Labrys Fund, LP for the conversion of debt in the principal amount of $14,844.39 according to the conditions
of the convertible note dated as January 10, 2020.
On October 16, 2020, the Company issued
a total of 181,500 shares of common stock to Labrys Fund, LP for the conversion of debt in the principal amount of $2,722.5 according
to the conditions of the convertible note dated as January 10, 2020.
On October 16, 2020, the Company issued
a total of 1,200,000 shares of common stock to Firstfire Global Opportunities Fund LLC for the conversion of debt in the principal
amount of $14,100 according to the conditions of the convertible note dated as September 11, 2019.
On October 16, 2020, the Company issued
a total of 500,000 shares of common stock to Crown Bridge Partners, LLC for the conversion of debt in the principal amount of $3,500
according to the conditions of the convertible note dated as November 12, 2019.
On October 19, 2020, the Company issued
a total of 2,112,478 shares of common stock to Labrys Fund, LP for the conversion of debt in the principal amount of $31,674.16
according to the conditions of the convertible note dated as January 10, 2020.
On October 29, 2020, the Company issued
a total of 2,500,000 shares of common stock to Firstfire Global Opportunities Fund LLC for the conversion of debt in the principal
amount of $31,000 according to the conditions of the convertible note dated as September 11, 2019.
On December 21,2020, the Company issued
a total of 1,500,000 shares of common stock to FirstFire Global Opportunities Fund, LLC for the full exercise of the warrants,
according to the conditions of the convertible note dated as September 11, 2019.
On December 5, 2020, the Company issued
a total of 20,370,000 shares of common stock to five Chinese citizen subscribers for an aggregate purchase price of $305,500 at
$0.015 per share, according to the conditions of the five subscription agreements dated as November 20, 2020 signed by the aforementioned
five subscribers.
On December 29, 2020, the Company issued
a total of 8,499,999 shares of common stock to four Chinese citizen subscribers for an aggregate purchase price of $127,500 at
$0.015 per share, according to the conditions of the four subscription agreements dated as December 9, 2020 and December 28, 2020
signed by the aforementioned four subscribers.
On December 31, 2020, the Company issued
a total of 447,762 shares of common stock (the “First Commitment Shares”) and 1,119,402 shares of common stock (the
“Second Commitment Shares”) to Labrys Fund, LLP related to the promissory note as a commitment fee. The Second Commitment
Shares must be returned to the Company’s treasury if the promissory note is fully repaid and satisfied on or prior to the
maturity date.
On January 13, 2021, the Company issued
a total of 7,000,000 shares of common stock to a Chinese citizen subscriber for an aggregate purchase price of $105,000 at $0.015
per share, according to the conditions of the subscription agreement dated as January 13, 2021.
Item 16. Exhibits.
Exhibit
|
|
|
|
Number
|
Description of Exhibit
|
|
|
3.01a
|
Articles of Incorporation, dated March 11, 2011
|
|
Filed with the SEC on October 13, 2017 as part of our Annual Report on Form 10-K
|
3.01b
|
Certificate of Amendment to Articles of Incorporation, dated August 7, 2014
|
|
Filed with the SEC on September 3, 2014 as part of our Current Report on Form 8-K
|
3.01c
|
Certificate of Amendment to Articles of Incorporation, dated December 3, 2015
|
|
Filed with the SEC on December 10, 2015 as part of our Current Report on Form 8-K
|
3.02a
|
Bylaws
|
|
Filed with the SEC on August 23, 2011 as an exhibit to our Registration Statement on Form 10.
|
3.02b
|
Amended Bylaws, dated August 7, 2014
|
|
Filed with the SEC on September 3, 2014 as part of our Current Report on Form 8-K
|
5.1
|
Opinion of Lockett + Horwitz, regarding the legality of the securities being registered
|
|
Filed herewith.
|
10.01
|
Manufacturing Agreement, dated as of August 19, 2016, by and between Jiangxi Huanming Technology Limited Company and XinyuIonix Technology Company Limited.
|
|
Filed with the SEC on August 24, 2016 as part of our Current Report on Form 8-K
|
10.02
|
Share Transfer Agreement, dated as of August 19, 2016, by and between GuoEn Li and Well Best International Investment Limited
|
|
Filed with the SEC on August 24, 2016 as part of our Current Report on Form 8-K
|
10.03
|
Share Purchase Agreement dated December 27, 2018 by and between Ionix Technology, Inc., Changchun Fangguan Electronics Technology Co., Ltd. and the shareholders of Changchun Fangguan Electronics Technology Co., Ltd.
|
|
Filed with the SEC on December 27, 2018 as part of our Current Report on Form 8-K
|
10.04
|
Business Operation Agreement dated December 27, 2018 by and between Changchun Fangguan Photoelectric Display Technology Co., Ltd., Changchun Fangguan Electronics Technology Co., Ltd., Jialin Liang and Xuemei Jiang.
|
|
Filed with the SEC on December 27, 2018 as part of our Current Report on Form 8-K
|
10.05
|
Exclusive Technical Support Service Agreement dated December 27, 2018 by and between Changchun Fangguan Photoelectric Display Technology Co., Ltd. and Changchun Fangguan Electronics Technology Co., Ltd.
|
|
Filed with the SEC on December 27, 2018 as part of our Current Report on Form 8-K
|
10.06
|
Equity Interest Purchase Agreement dated December 27, 2018 by and between Changchun Fangguan Photoelectric Display Technology Co., Ltd., Changchun Fangguan Electronics Technology Co., Ltd., Jialin Liang and Xuemei Jiang.
|
|
Filed with the SEC on December 27, 2018 as part of our Current Report on Form 8-K
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10.07
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Equity
Interest Pledge Agreement dated December 27, 2018 by and between Changchun Fangguan Photoelectric Display Technology Co., Jialin
Liang and Xuemei Jiang
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Filed with the SEC on December 27, 2018 as part of our Current Report on Form 8-K
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10.08
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Compilation
of Labrys Securities Purchase Agreement, Self-Amortization Promissory Note and Other Agreements (Filed herewith)
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File with SEC on January 5, 2021 as part of our Current Report on Form 8-K
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21.1
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List of Subsidiaries
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Filed with the SEC on September 30, 2020 as part of our Annual Report on Form 10-K
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23.1
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Auditor Consent
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Filed herewith.
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23.2
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Consent of Lockett + Horwitz (included in Exhibit 5.1)
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Filed herewith.
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Item 17. Undertakings.
(a) The undersigned
registrant hereby undertakes:
(1) To file, during any
period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any
prospectus required by section 10(a)(3) of the Securities Act;
(ii) To reflect in
the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the
“Calculation of Registration Fee” table in the effective registration statement; and
(iii) To include any
material information with respect to the plan of distribution not previously disclosed in the registration statement or any material
change to such information in the registration statement; provided, however , that paragraphs (a)(1)(i), (a)(1)(ii), and
(a)(1)(iii) of this section do not apply if the information required to be included in a post-effective amendment by those paragraphs
is contained in reports filed with or furnished to the SEC by the registrant pursuant to section 13 or section 15(d) of the Exchange
Act that are incorporated by reference into the registration statement, or is contained in a form of prospectus filed pursuant
to Rule 424(b) that is part of the registration statement.
(2) That, for the purpose
of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration
by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose
of determining liability under the Securities Act to any purchaser:
(i) Each prospectus
filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the
filed prospectus was deemed part of and included in the registration statement; and
(ii) Each prospectus
required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B
relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required
by section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier
of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in
the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is
at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the
securities in the registration statement to which that prospectus related, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof. Provided, however , that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with
a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement
or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.
(b) The undersigned
registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant’s
annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit
plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the
requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-1 and has duly caused this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Dalian, China , on March 15, 2021.
|
IONIX TECHNOLOGY, INC.
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By:
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/s/ Cheng Li
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Name:
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Cheng Li
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Chief Executive Officer
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KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitute and appoint Cheng Li and Yue Kou, and each one of them, as his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign
any and all amendments (including post-effective amendments) to this registration statement, and to sign any registration statement
for the same offering covered by this registration statement that is to be effective upon filing pursuant to Rule 462(b) under
the Securities Act, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following
persons in the capacities and on the dates indicated.
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Date: March 15, 2021
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By:
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/s/ Cheng Li
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Name:
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Cheng Li
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Title:
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Chief Executive Officer, Director
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(Principal Executive Officer)
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Date: March 15, 2021
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By:
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/s/ Yue Kou
|
|
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Name:
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Yue Kou
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|
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Title:
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Chief Financial Officer (Principal
|
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Financial and Principal Accounting Officer)
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Date: March 15, 2021
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By:
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/s/ Yang Yan
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Name:
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Yang Yan
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|
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Title:
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President and Treasurer
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Date: March 15, 2021
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By:
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/s/ Yubao Liu
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Name:
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Yubao Liu
|
|
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Title:
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Director
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Date: March 15, 2021
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By:
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/s/ Jialin Liang
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|
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Name:
|
Jialin Liang
|
|
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Title:
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Director
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Date: March 15, 2021
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By:
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/s/ Xuemei Jiang
|
|
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Name:
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Xuemei Jiang
|
|
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Title:
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Director
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Date: March 15, 2021
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By:
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/s/ Yongping Wang
|
|
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Name:
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Yongping Wang
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|
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Title:
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Independent Director
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Date: March 15, 2021
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By:
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/s/ Yongsheng Fu
|
|
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Name:
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Yongsheng Fu
|
|
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Title:
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Director
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Date: March 15, 2021
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By:
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/s/ Zhenyu Wang
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|
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Name:
|
Zhenyu Wang
|
|
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Title:
|
Independent Director
|
Date: March 15, 2021
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By:
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/s/ Xiaolin Wei
|
|
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Name:
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Xiaolin Wei
|
|
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Title:
|
Independent Director
|
Date: March 15, 2021
|
By:
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/s/ Liyan Wang
|
|
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Name:
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LiyanWang
|
|
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Title:
|
Independent Director
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II-8
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