See accompanying notes to these unaudited
condensed consolidated financial statements
See accompanying notes to these unaudited
condensed consolidated financial statements
See accompanying notes to these unaudited
condensed consolidated financial statements
NOTE 1 -
ORGANIZATIONS AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Operations
– YBCC, Inc., (The “Company” or “YBAO”), formerly known as International Packaging and Logistic Group,
Inc., a Nevada corporation, was originally incorporated on June 2, 1986, in the state of Delaware. On April 17, 2008, the Company
redomiciled form the State of Delaware to the State of Nevada.
On July 2, 2007, the Company through its
wholly-owned subsidiary, YesRx.com (“YesRx”) acquired all the outstanding shares of H&H Glass, Inc. (“H&H
Glass”), in exchange for 3,915,000 shares of its common stock in a reverse triangular merger.
On May 15, 2016, the Company and Xiuhua
Song (the “Purchaser”) entered into a Stock Purchase Agreement (the “Purchase Agreement”), pursuant to
which IPLO (the “Seller”) would sell to the Purchaser, and the Purchaser will purchase from the Seller, an aggregate
of 3,915,000 newly issued shares of IPLO Common Stock (the “Shares”), which Shares represented 87% of the issued and
outstanding shares of common stock. On July 1, 2016, this transaction was completed.
On July 1, 2016, Standard Resources Ltd.
(“Standard”), previously IPLO’s majority stockholder, and IPLO entered into a share purchase agreement (“H&H
Vend Out”) whereby Standard would cancel 3,915,000 shares of IPLO common stock held by it in exchange for all of the outstanding
shares of H&H Glass. The H&H Glass Vend Out was completed on August 31, 2016.
On July 1, 2016, the Company executed a
Share Exchange Agreement (“
Exchange Agreement
”) by and among Yibaoccyb Limited, a British Virgin Islands limited
liability company (“
Yibaoccyb
”), and the stockholders of 51% of Yibaoccyb’s common stock (the “
Yibaoccyb
Shareholders
”), on the one hand, and the Company, on the other hand. Yibaoccyb owns 100% of YibaoConfucian Co., Ltd.
(“
YibaoHK
”), a Hong Kong company. YibaoHK will own 100% of Shenzhen Confucian Biologics Co. Ltd. (yet to be
formed, “
Yibao
”), which will be a wholly foreign-owned enterprise (“WFOE”) under the laws of the
Peoples’ Republic of China (“
PRC
” or “
China
”). On August 31, 2016, YibaoHK entered
into a series of contractual arrangements with Shandong Confucian Biologics Co., Ltd. (“
Confucian
”) which is
a limited liability company headquartered in, and organized under the laws of, the PRC. The contractual arrangements are discussed
below.
The Exchange Agreement was completed on
August 31, 2016 concurrent with the H&H Vend Out. The Company issued 2,040,000 shares of the Company’s common stock (the
“
IPLO Shares
”) to the Yibaoccyb Shareholders in exchange for 51% of the common stock of Yibaoccyb.
On December 22, 2016, the Company amended
its Certificate of Incorporation (the “Amendment”). As a result of the Amendment, the Company’s corporate name
was changed from International Packaging and Logistics Group, Inc. to YBCC, Inc.
Yibaoccyb is a limited liability company
incorporated under the laws of the British Virgin Islands on May 30, 2016. Other than all the issued and outstanding shares of
YibaoHK, Yibaoccyb has no other assets or operations.
YibaoHK is a limited liability company
incorporated under the laws of the Hong Kong on June 15, 2016, which was formed by Yibaoccyb.
Confucian was founded on October 31, 2012.
Confucian is in the Food Industrial Park inside the economic development Zone of JinXiang County, Jining City in the province of
Shandong in China.
Confucian possesses manufacturing permits
for food product, hygienic products, sanitary products, and health products. The Company's main business includes research and
development of chondroitin and garlic oil; trading, cold storage, and pretreating of garlic, fruit, and vegetables products; trading
of chemical products (excluding hazardous chemicals); import and export of goods and technology (excluding those restricted by
China government); and, the manufacturing and sale of health products including powder, granules, tablets, hard capsule, soft capsule
products.
Details of the Company’s
structure as of June 30, 2018 is as follow:
Reverse
Merger Accounting
– Since YBCC and Yibaoccyb were entities under Ms. Song’s common control prior to the
share exchange, the transaction was accounted for as a restructuring transaction in accordance with generally accepted accounting
principles in the United States ("GAAP"). YBCC has recast prior period unaudited consolidated financial statements to
reflect the conveyance of Yibaoccyb’s common shares as if the restructuring transaction had occurred as of the earliest date
of the unaudited consolidated financial statements.
Basis
of Presentation
- The accompanying condensed consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America for interim financial information and in accordance with
the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and note
disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete audited financial
statements. The accompanying unaudited financial information should be read in conjunction with the audited consolidated financial
statements, including the notes thereto, as of and for the year ended December 31, 2017, included in our 2017 Annual Report on
Form 10-K filed with the SEC. The information furnished in this report reflects all adjustments (consisting of normal recurring
adjustments), which are, in the opinion of management, necessary for a fair presentation of our financial position, results of
operations and cash flows for each period presented. The results of operations for the six months ended June 30, 2018 are not necessarily
indicative of the results for the year ending December 31, 2018 or for any future period.
Principles of Consolidation
-
The unaudited condensed consolidated financial statements include the accounts of YBCC and its subsidiaries. The
Company’s subsidiaries include 51% of Yibaoccyb, YibaoHK and Confucian, of which 49% of Yibaoccyb’s consolidated
operating results was shown in non-controlling interest on the consolidated balance sheets.
Intercompany accounts and transactions
have been eliminated upon consolidation.
Use of Estimates
- The preparation of unaudited condensed consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimate and assumptions that affect certain reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those
estimates. The most significant estimates reflected in the condensed consolidated financial statements include allowance for
doubtful accounts, allowance for inventory, depreciation, useful lives of property and equipment, deferred income taxes,
useful life of intangible assets, and contingencies. Estimates and assumptions are periodically reviewed and the effects of
revisions are reflected in the unaudited condensed consolidated financial statements in the period they are determined to be
necessary.
Inventories
- Inventory
is valued at the lower of cost or market. Cost is determined using first-in, first-out method.
Inventory, comprised
principally of finished goods, raw material and packaging material, are valued at the lower of cost or market.
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
Finished goods
|
|
$
|
14,502
|
|
|
$
|
7,106
|
|
Work in progress
|
|
|
96,512
|
|
|
|
47,292
|
|
Raw materials
|
|
|
225,671
|
|
|
|
46,902
|
|
Packaging material
|
|
|
37,175
|
|
|
|
26,035
|
|
Total
|
|
$
|
373,860
|
|
|
$
|
127,335
|
|
The Company periodically estimates an
inventory allowance for estimated unmarketable inventories. Inventory amounts are reported net of such allowances, if any. There
were no allowances for inventory as of June 30, 2018 and December 31, 2017.
Revenue Recognition
- The Company recognizes product revenue in accordance with ASC 606. The core principle of ASC 606 is that an entity
should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services. To achieve the core principle of ASC 606,
an entity should take the following actions: Step 1: Identify the contract with a customer; Step 2: Identify the performance obligations
in the contract; Step 3: Determine the transaction price; Step 4: Allocate the transaction price; Step 5: Recognize revenue when
or as the entity satisfies a performance obligation. The Company complies with ASC 606 revenue recognition and follows the five-step
revenue recognition model along with other guidance impacted by this standard.
Impairment
of Long-Live Assets
– The Company applies FASB ASC 360, “Property, Plant and Equipment,” which addresses
the financial accounting and reporting for the recognition and measurement of impairment losses for long-lived assets. In accordance
with ASC 360, long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The Company will recognize the impairment of long-lived assets in the event the net
book value of such assets exceeds the future undiscounted cash flows attributable to those assets. There is no impairment of our
long-lived assets for the six months ended June 30, 2018 and 2017.
Foreign Currency Translation
- The Company's functional currency is the Chinese Renminbi (RMB). The reporting currency is that of the US Dollar. Assets, liabilities
and owners’ contribution are translated at the exchange rates as of the balance sheet date. Income and expenditures are translated
at the average exchange rate of the year. The RMB is not freely convertible into foreign currency and all foreign currency exchange
transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or
could be, converted into US dollar at the rates used in translation.
The exchange rates used to translate amounts
in RMB into USD for the purposes of preparing the financial statements were as follows:
Balance sheet
|
|
Balance sheet as of June 30, 2018
|
RMB 6.62 to US $1.00
|
Balance sheet as of December 31, 2017
|
RMB 6.51 to US $1.00
|
|
|
Statement of operation and other comprehensive income
|
|
Statement of operation and other comprehensive income for three months ended June 30, 2018
|
RMB 6.38 to US $1.00
|
Statement of operation and other comprehensive income for three months ended June 30, 2017
|
RMB 6.86 to US $1.00
|
Statement of operation and other comprehensive
income for six months ended June 30, 2018
|
RMB 6.37 to US $1.00
|
Statement of operation and other comprehensive income for six months ended June 30, 2017
|
RMB 6.87 to US $1.00
|
Fair Value of Financial Instruments
– FASB ASC 820, “Fair Value Measurement” specifies a hierarchy of valuation techniques based upon whether the
inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from
independent sources (observable inputs). In accordance with ASC 820, the following summarizes the fair value hierarchy:
Level 1 Inputs— Unadjusted quoted
market prices for identical assets and liabilities in an active market that the Company has the ability to access.
Level 2 Inputs— Inputs other
than the quoted prices in active markets that are observable either directly or indirectly.
Level 3 Inputs— Inputs based
on valuation techniques that are both unobservable and significant to the overall fair value measurements
ASC 820 requires the use of observable
market data, when available, in making fair value measurements. When inputs used to measure, fair value fall within different levels
of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant
to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of
unobservable inputs.
The Company did not identify any assets
or liabilities that are required to be presented at fair value on a recurring basis. Carrying values of non-derivative financial
instruments, including cash and cash equivalents, accounts receivable, inventories, prepaid expenses, advances from customers,
accounts payable, taxes payable, accrued liabilities and other payables, and loan from bank, approximated their fair values due
to the short maturity of these financial instruments. There were no changes in methods or assumptions during the periods presented.
Net Earnings (Loss) Per Share
– Earnings/(loss) per common share is computed on the weighted average number of common shares outstanding during each year.
Basic earnings per share is computed as net loss applicable to common stockholders divided by the weighted average number of common
shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur from common shares
issuable through convertible preferred shares, stock options, warrants and other convertible securities when the effect would be
dilutive. In this case, the Preferred Shares would not be dilutive since the conversion price is $3.00 and the quoted price is
significantly lower than the conversion price. Therefore, there were no dilutive securities for the six months ended June 30, 2018
and 2017, respectively.
Reclassifications
– Certain classifications have been made to the prior year consolidated financial statements to conform to the current year
presentation. The reclassification had no impact on previously reported net loss or accumulated deficit.
Recent
Accounting Pronouncements
In May 2014, the
FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606),”
(“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in ASC 605 - Revenue Recognition (“ASC
605”) and most industry-specific guidance throughout ASC 605. The FASB has issued numerous updates that provide clarification
on a number of specific issues as well as requiring additional disclosures. The core principle of ASC 606 requires that an entity
recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve
this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition
process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount
of variable consideration to include in the transaction price and allocating the transaction price to each separate performance
obligation. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and
cash flows arising from an entity’s contracts with customers. The guidance may be adopted through either retrospective application
to all periods presented in the financial statements (full retrospective approach) or through a cumulative effect adjustment to
retained earnings at the effective date (modified retrospective approach). The Company had evaluated the effected that will result
from adopting the guidance in this standard and concluded that the new revenue standards are not expected to have a material impact
on the amount and timing of revenue recognized in the Company’s consolidated financial statements.
In November 2016,
the FASB issued ASU 2016-18, “Statement
of Cash Flows (Topic 230): Restricted Cash”.
These amendments require
that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally
described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted
cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total
amounts shown on the statement of cash flows. The amendments do not provide a definition of restricted cash or restricted cash
equivalents. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15,
2017, and interim periods within those fiscal years. Early adoption is permitted. The amendments should be applied using a retrospective
transition method to each period presented. The Company has evaluated the impact of adopting ASU 2016-18 noting it will only impact
the Company to the extent it has restricted cash in the future.
In July 2017,
the FASB issued ASU 2017-11,
Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives
and Hedging (Topic 815):
(Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement
of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily
Redeemable Noncontrolling Interests with a Scope Exception. For public business entities, the amendments in Part I of this Update
are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other
entities, the amendments in Part I of this Update are effective for fiscal years beginning after December 15, 2019, and interim
periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption
in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of
the beginning of the fiscal year that includes that interim period. The amendments in Part II of this Update do not require any
transition guidance because those amendments do not have an accounting effect. The Company is currently in the process of evaluating
the impact of the adoption on its consolidated financial statements.
In February 2018,
the FASB issued ASU No. 2018-02
Income Statement—Reporting Comprehensive Income (Topic 220)—Reclassification of
Certain Tax Effects from Accumulated Other Comprehensive Income.
The amendments in this Update allow a reclassification from
accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of
2017. The amendments in this Update affect any entity that is required to apply the provisions of Topic 220, Income Statement-Reporting
Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive
income as required by GAAP. The Company is currently in the process of evaluating the impact of the adoption on its consolidated
financial statements.
The Company has
considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact
on results of operations, financial condition, or cash flows, based on current information.
NOte 2 -
going
concern
Net income and net losses for the
three months ended June 30, 2018 and 2017 were $79,624 and $123,669, respectively. The Company sustained net losses of $30,570
and $308,239 during the six months ended June 30, 2018 and 2017, respectively. The Company has accumulated deficit of $1,250,396
and $1,179,676 as of June 30, 2018 and December 31, 2017, respectively. The Company’s continuation as a going concern is
dependent on its ability to generate sufficient cash flows from operations to meet its obligations and/or obtain additional financing,
as may be required.
The accompanying unaudited condensed
consolidated financial statements have been prepared assuming the Company will continue as a going concern; however, the
above condition raises substantial doubt about the Company’s ability to do so. The financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and
classification of liabilities that may result should the Company be unable to continue as a going concern.
Management’s Plan to Continue
as a Going Concern
In order to continue as a going concern,
the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for
the Company include (1) obtaining capital from the sale of its equity securities, (2) sales of the Company’s products, (3)
short-term and long-term borrowings from banks, and (4) short-term borrowings from stockholders or other related party(ies) when
needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue
as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and
eventually to secure other sources of financing and attain profitable operations.
NOte
3 -
concentration of credit risk
We maintain our cash balance in several
banks in China and United States. The consolidated cash balances as of June 30, 2018 and December 31, 2017 were $91,329 and $369,607,
respectively. The cash balances in China as of June 30, 2018 and December 31, 2017 were $53,213 and $307,361, respectively. The
accounts in China were not insured which we believe were exposed to credit risks on cash. As of June 30, 2018, the balance of our
US account was $38,116 which is within federal insured limit of $250,000. As of December 31, 2017, the balance of our US account
was $62,246, which is within federal insured limit of $250,000.
NOTe
4 -
other receivable
Total other receivable consists of balances of VAT receivable of $17,353 and $33,251 as of June 30, 2018
and December 31, 2017, respectively and other temporary funding receivable from a third party of $69,636 and $0 as of June 30,
2018 and December 31, 2017, respectively. The temporary funding was transferred to the Company’s consulting firm, which makes
payments of operating expenses on behalf of the Company.
NOTe
5 -
prepaid expenses
Prepaid expenses were comprised of the
following:
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
Utilities
|
|
$
|
1,511
|
|
|
$
|
1,537
|
|
Professional fees
|
|
|
38,274
|
|
|
|
44,974
|
|
Other
|
|
|
–
|
|
|
|
4,242
|
|
Total
|
|
$
|
39,785
|
|
|
$
|
50,753
|
|
Note
6 -
property, plant and equipment
Property, plant and equipment as of June
30, 2018 and December 31, 2017 are summarized as following:
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
Buildings
|
|
$
|
1,825,466
|
|
|
$
|
1,858,989
|
|
Vehicles
|
|
|
11,712
|
|
|
|
11,912
|
|
Manufacturing equipment
|
|
|
1,132,377
|
|
|
|
1,133,045
|
|
Office equipment
|
|
|
92,474
|
|
|
|
93,961
|
|
Construction in process
|
|
|
77,956
|
|
|
|
–
|
|
Property, plant, and equipment - total
|
|
|
3,139,985
|
|
|
|
3,097,907
|
|
Less: accumulated depreciation
|
|
|
(660,738
|
)
|
|
|
(559,327
|
)
|
Fixed assets, net
|
|
$
|
2,479,247
|
|
|
$
|
2,538,580
|
|
For the three months ended June 30, 2018
and 2017, depreciation expenses were $57,623 and $49,794, respectively. For the six months ended June 30, 2018 and 2017, depreciation
expenses were $115,126 and $98,708, respectively.
note
7 -
intangible assets -net
All land in the PRC is owned by the government
and cannot be sold to any individual or entity. Instead, the government grants landholders a "land use right" after a
purchase price for such "land use right" is paid to the government. The "land use right" allows the holder
to use the land for 50 years and enjoys all the incidents of ownership of the land. As of June 30, 2018 and December 31, 2017,
the land use rights net of accumulated amortization was $706,157 and $726,043, respectively. The use term was 50 years.
The summary of land use rights as of June
30, 2018 and December 31, 2017 are summarized as following:
The land use right term
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
May, 2013 - Apr. 2063
|
|
$
|
544,066
|
|
|
$
|
553,332
|
|
Dec. 2015 - Sept. 2065
|
|
|
204,017
|
|
|
|
207,491
|
|
Dec. 2015 – Sept. 2065
|
|
|
24,830
|
|
|
|
25,252
|
|
Intangible assets- total
|
|
|
772,913
|
|
|
|
786,075
|
|
Less: accumulated amortization
|
|
|
(66,756
|
)
|
|
|
(60,032
|
)
|
Intangible assets, net
|
|
$
|
706,157
|
|
|
$
|
726,043
|
|
For the three months ended June 30, 2018 and 2017, amortization
expenses were $4,010 and $3,729, respectively. For the six months ended June 30, 2018 and 2017, amortization expenses were $8,035
and $7,443, respectively.
NOTE 8 -
COMMITMENTS AND CONTINGENCIES
The Company’s current lease is in City of Industry, California.
The lease period started on October 1, 2016 and expires on September 1, 2018. On October 1, 2016, the Company started this lease
at $2,802 per month from October 1, 2016 to September 1, 2017. From September 2, 2017 to August 31, 2018, the monthly lease is
$3,063, resulting in the following future commitments:
|
|
Amount
|
|
2018 calendar year
|
|
$
|
6,126
|
|
Total
|
|
$
|
6,126
|
|
NOTE 9 -
INCOME TAX
At June 30, 2018
and December 31, 2017, based on the weight of available evidence, management determined that it was unlikely that the Company's
deferred tax assets would be realized and have provided for a full valuation allowance associated with the net deferred tax assets.
The Company periodically
analyzes its tax positions taken and expected to be taken and has determined that since inception there has been no need to record
a liability for uncertain tax positions. The Company classifies income tax penalties and interest, if any, as part of selling,
general and administrative expenses in the accompanying statements of operations. There was no accrued interest or penalties as
of June 30, 2018 and December 31, 2017.
The Company is
neither under examination by any taxing authority, nor has it been notified of any impending examination.
Under the Law
of People’s Republic of China on Enterprise Income Tax (“EIT Law”), which was effective from January 1, 2008,
domestically-owned enterprises and foreign-invested enterprises are subject to a uniform tax rate of 25%. The potential benefit
of the Company’s net operating losses has not been recognized in these financial statements because it is more likely-than-not
the Company will not utilize the net operating losses carried forward as it does not expect to generate sufficient taxable
income in future or the amount involved is not significant.
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
Current
|
|
|
|
|
|
|
|
|
USA
|
|
$
|
–
|
|
|
$
|
–
|
|
China
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
USA
|
|
|
|
|
|
|
|
|
Deferred tax assets for NOL carryforwards
|
|
|
23,626
|
|
|
|
37,893
|
|
Valuation allowance
|
|
|
(23,626
|
)
|
|
|
(37,893
|
)
|
Net changes in deferred income tax under non-current portion
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
China
|
|
|
|
|
|
|
|
|
NOL carryforwards
|
|
|
(20,484
|
)
|
|
|
18,256
|
|
Valuation allowance
|
|
|
20,484
|
|
|
|
(18,256
|
)
|
Net changes in deferred income tax under non-current portion
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Total provision for income tax
|
|
$
|
–
|
|
|
$
|
–
|
|
The tax effects
of temporary differences that gave rise to significant portions of deferred tax assets at June 30, 2018 and December 31, 2017 are
as follows:
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
330,451
|
|
|
$
|
327,310
|
|
Valuation allowance
|
|
|
(330,451
|
)
|
|
|
(327,310
|
)
|
Net deferred tax assets
|
|
$
|
–
|
|
|
$
|
–
|
|
A reconciliation
between the income tax computed at the U.S. statutory rate and the Company’s provision for income tax in the PRC is as follows:
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
Tax expense at statutory rate-US
|
|
|
21%
|
|
|
|
34%
|
|
Foreign income not recognized in the US
|
|
|
(21%
|
)
|
|
|
(34%
|
)
|
PRC enterprise income tax rate
|
|
|
25%
|
|
|
|
25%
|
|
Loss not subject to income tax
|
|
|
(25%
|
)
|
|
|
(25%
|
)
|
Effective income tax rates
|
|
|
–
|
|
|
|
–
|
|
On December 22,
2017, the Tax Cuts and Jobs Act (the Tax Act) was enacted, significantly altering U.S. corporate income tax law. The SEC issued
Staff Accounting Bulletin 118, which allows companies to record reasonable estimates of enactment impacts where all of the underlying
analysis and calculations are not yet complete. The provisional estimates must be finalized within a one-year measurement period.
The Company reduced its net domestic deferred tax asset balance by $88,781 due to the reduction in corporate tax rate from 34%
to 21%. These adjustments are fully offset by a change in the Company’s U.S. valuation allowance.
note
10 -
equity
Common Stock:
On July 1, 2016,
the Company issued 3,915,000 shares of common stock to Ms. Song in connection with the change of control.
On August 31,
2016, the Company cancelled 3,915,000 shares of outstanding shares belonging to Standard.
On August 31,
2016, the Company issued 2,040,000 shares to Yibaoccyb Shareholders in exchange for 51% of the common stock of Yibaoccyb to complete
the share exchange and restructuring of entities under common control.
On December 22,
2016, the Company issued 350,000 shares for legal counsel services valued at $35,000.
On December 23,
2016, the Company received cash payment of $300,000 in advance for issuance of 3,000,000 shares of common stock, or $0.10 per share.
On January 3, 2017, 3,000,000 shares were issued to seven investors, none of which is a related-party to the Company.
As a result of
all common stock issuances, the total issued and outstanding shares of common stock were 9,894,214 as of June 30, 2018 and
December 31, 2017, respectively.
Series A Preferred
Shares:
The Series A Preferred
shares are convertible into common shares on a 1:1 ratio at a fixed rate of $3 per share. Preferred shares have no voting rights,
have no redemption rights and earn no dividends. Holders of Series A Convertible Preferred Stock are not permitted to convert their
stock into common shares until the Company’s market capital reaches $15,000,000. Upon dissolution, liquidation or winding
up of the Company, whether voluntary or involuntary, the holders of the then outstanding shares of Series A Convertible Preferred
Stock shall be entitled to receive out of the assets of the Company the sum of $0.0001 per share (the “Liquidation Rate”)
before any payment or distribution shall be made on any other class of capital stock of the Company ranking junior to the Series
A Convertible Preferred Stock.
ASC Topic 480,
“Distinguishing Liabilities from Equity,” establishes standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity.
A mandatorily
redeemable financial instrument shall be classified as a liability unless the redemption is required to occur only upon the liquidation
or termination of the reporting entity. A financial instrument issued in the form of shares is mandatorily redeemable if it embodies
an unconditional obligation requiring the issuer to redeem the instrument by transferring its assets at a specified or determinable
date (or dates) or upon an event certain to occur. A financial instrument that embodies a conditional obligation to redeem the
instrument by transferring assets upon an event not certain to occur becomes mandatorily redeemable—and, therefore becomes
a liability—if that event occurs, the condition is resolved, or the event becomes certain to occur.
The Company determined
that the preferred shares are not mandatorily or conditionally redeemable and are properly classified as permanent equity in the
accompanying unaudited condensed consolidated financial statements.
NOTE 11 -
NON-CONTROLLING
INTEREST
On July 1, 2016,
the Company executed the Exchange Agreement with Yibaoccyb and the Yibaoccyb Shareholders. From and after the Closing Date, Yibaoccyb
became a 51% owned subsidiary of the Company. Yibaoccyb owns 100% of YibaoHK. YibaoHK will own 100% of Shenzhen Confucian Biologics
Co. Ltd. (yet to be formed, “Yibao WFOE”), which will be wholly foreign-owned enterprise (“WFOE”) under
the laws of the Peoples’ Republic of China (“PRC” or “China”). On August 31, 2016, YibaoHK entered
into a series of contractual arrangements with Confucian and currently is 100% owner of Confucian.
Non-controlling
interest consisted of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Beginning balance
|
|
$
|
292,072
|
|
|
$
|
304,291
|
|
Net income (loss) attributed to non-controlling interest
|
|
|
40,149
|
|
|
|
(31,538
|
)
|
Foreign currency translation gain (loss) attributable to non-controlling
interest
|
|
|
(6,444
|
)
|
|
|
19,319
|
|
Ending balance
|
|
$
|
325,777
|
|
|
$
|
292,072
|
|
note
12 -
related party transactions
The related parties of the Company with
whom transactions are reported in these financial statements are as follows:
Name of Entity or Individual
|
|
Relationship with the Company and subsidiaries
|
Shandong Yibao Biologics Co, Ltd
|
|
Affiliated company with common shareholders
|
Shandong Yibao Import & Export Trading Co, Ltd
|
Affiliated company with common shareholders
|
Ms. Xiuhua Song
|
|
Director and controlling beneficiary shareholder of the Company
|
Mr. Hengchun Zhang
|
|
Owner of Shandong Confucian Biologics
|
Mr. Qingbao Kong
|
|
Ms. Xiuhua Song’s spouse
|
Transactions:
|
|
For the Six Months Ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
Sales to Shandong Yibao Biologics Co. Ltd
|
|
$
|
589,651
|
|
|
$
|
105,476
|
|
Sales to Shandong Yibao Import & Export Trading Co. Ltd
|
|
|
–
|
|
|
$
|
45,399
|
|
Total
|
|
$
|
589,651
|
|
|
$
|
150,875
|
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
Purchase from Shandong Yibao Biologics Co. Ltd
|
|
$
|
–
|
|
|
$
|
113,771
|
|
Total
|
|
$
|
–
|
|
|
$
|
113,771
|
|
Accounts receivable from related party
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
Accounts receivable from Shandong Yibao Biologics Co. Ltd
|
|
$
|
182,365
|
|
|
$
|
–
|
|
Total
|
|
$
|
182,365
|
|
|
$
|
–
|
|
Due to related
parties
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
To Xiuhua Song
|
|
$
|
2,602,842
|
|
|
$
|
2,630,912
|
|
To Hengchun Zhang
|
|
|
265,479
|
|
|
|
270,000
|
|
Total
|
|
$
|
2,868,321
|
|
|
$
|
2,900,912
|
|
NOTE
13 -
MAJOR SUPPLIERS AND CUSTOMERS
The Company purchases majority of its inventory
and packaging supplies from one supplier which accounted for 22.96% of the total purchases for the six months ended June 30, 2018.
The Company had
three major customers for the six months ended June 30, 2018: Shandong Yibao Biologics, a related party, accounted for 54.12% of
revenue, Anhui Xiancheng Import and Export Company accounted for 26.30% of revenue, Ping Xiang Import and Export Company accounted
for 12.35% of revenue for the six months ended June 30, 2018.
The Company purchases
majority of its inventory and packaging supplies from three suppliers which accounted for 31.16%, 23.83% and 15.43% of the total
purchases for the six months ended June 30, 2017.
The Company had
four major customers for the six months ended June 30, 2017: Ping Xiang Import and Export Company accounted for 22.65% of revenue,
Jiangshan Huacheng Import and Export Company accounted for 20.01%, Nanjing Hejian Biologics accounted for 15.98%, and Shandong
Yibao Biologics for 11.90% of revenue for the six months ended June 30, 2017.
NOTE 14 -
SUBSEQUENT
EVENTS
Management has evaluated
subsequent events through August 14, 2018, the date which the condensed consolidated financial statements were available to
be issued. All subsequent events requiring recognition as of June 30, 2018 have been incorporated into these condensed
consolidated financial statements and there are no subsequent events that require disclosure in accordance with FASB ASC
Topic 855, “Subsequent Events.”