UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended March 31, 2015 or

 

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from _____________ to _____________

 

Commission file number 0-21384

 

INTERNATIONAL PACKAGING AND LOGISTICS GROUP, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Nevada		13-3367421
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

 

7700 Irvine Center Drive, Suite 870

Irvine, California

(Address of Principal Executive Offices)

 

92608

(Zip Code)

 

(949) 861-3560

(Registrant’s Telephone Number, Including Area Code)

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes       o No

 

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

 

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act).

o Yes      x No

 

The number of shares outstanding of the Issuer’s common stock as of June 30, 2015 was 4,504,214

 

 

 

 

International Packaging and Logistics Group, Inc.,

and Subsidiaries

 

Condensed Consolidated Financial Statements

for the Three Months Ended

March 31, 2015 and 2014

 

 

C O N T E N T S

 

Condensed Consolidated Balance Sheets	1
Condensed Consolidated Statements of Operations and Comprehensive Income	2
Condensed Consolidated Statements of Cash Flows	4
Notes to Condensed Consolidated Financial Statements	5 – 14

 

 

 

 

 

 

 

 

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Condensed Consolidated Balance Sheets

As of March 31, 2015 and December 31, 2014

 

		March 31, 2015 (unaudited)				December 31, 2014
Current Assets
Cash		$	960,202			$	661,510
Accounts receivable, net			8,156,023				8,083,254
Inventory			323,081				936,900
Other current assets			(2,423	)			(2,423	)
Total Current Assets			9,436,883				9,679,241
Property, Plant and Equipment, net			–				–
Other Assets
Prepaids			520				520
Deposits			12,433				12,433
Deferred tax assets			224,778				224,779
Total Other Assets			237,731				237,732
Assets Held for Sale - Discontinued Operations			–				2,374,789
Total Assets		$	9,674,614			$	12,291,762
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses		$	8,209,778			$	8,434,854
Notes payable - related party			80,000				80,000
Total Current Liabilities			8,289,778				8,514,854
Liabilities - discontinued Operations			–				581,971
Commitments and contingencies			–				–
Total Liabilities			8,289,778				9,096,825
Stockholders' Equity
Convertible preferred shares: $0.0001 par value, 50,000,000 shares authorized, 974,730 Series A issued and outstanding			98				98
0 and 400,000 Series B issued and outstanding, respectively			–				40
Common stock: $0.001 par value, 900,000,000 shares authorized, 4,504,214 and 4,961,357 issued and outstanding, respectively			4,504				4,961
Additional paid-in capital			1,275,570				2,202,877
Retained earnings (deficit)			104,664				106,719
Total International and Logistics Group Inc. Stockholder Equity			1,384,836				2,314,695
Non-controlling interest			–				880,242
Total Equity			1,384,836				3,194,937
Total Liabilities and Equity		$	9,674,614			$	12,291,762

 

 

See accompanying notes to these unaudited condensed consolidated financial statements

 

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income

For the Three Months Ended March 31, 2015 and 2014

(Unaudited)

 

		March 31, 2015				March 31, 2014
Revenues
Packaging		$	8,871,824			$	7,958,031
Total Revenues			8,871,824				7,958,031
Cost of Goods Sold
Packaging			8,519,555				7,680,836
Total Cost of Goods Sold			8,519,555				7,680,836
Gross Profit			352,269				277,195
Operating Expenses
Administrative expenses			216,914				229,657
Rent			14,357				8,929
Salaries and wages			155,171				132,219
Total Operating Expenses			386,442				370,805
Loss from Operations			(34,173	)			(93,610	)
Other income (loss)
Other income (expense)			16,194				(299	)
Total Other Income (Loss)			16,194				(299	)
Net loss Continuing Operations before Income Taxes			(17,979	)			(93,909	)
Income tax benefit (expense)			–				(1,600	)
Net Loss from Continuing Operations			(17,979	)			(95,509	)
Discontinued operations:
Gain (Loss) from operations, including portion attributable to non-controlling interest of discontinued Logistics component			15,924				(36,599	)
Income tax benefit			–				10,244
Gain (Loss) on discontinued operations			15,924				(26,355	)
Net Loss			(2,055	)			(121,864	)
Foreign currency translation			–				8,029
Comprehensive Loss		$	(2,055	)		$	(113,835	)
Loss per weighted average share of common stock - basic		$	(0.00	)		$	(0.02	)
Loss per weighted average share of common stock -diluted		$	(0.00	)		$	(0.02	)
Weighted average shares outstanding - basic			4,504,214				4,961,357
Weighted average shares outstanding - diluted			4,504,214				4,961,357

 

See accompanying notes to these unaudited condensed consolidated financial statements

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income

For the Three Months Ended March 31, 2015 and 2014

(Unaudited)

 

		March 31, 2015				March 31, 2014
AMOUNTS ATTRIBUTABLE TO THE COMMON STOCKHOLDERS:
Loss from continuing operations, net of tax		$	(17,979	)		$	(95,509	)
Gain (loss) from discontinued operations, net of tax			15,924	)			(26,355	)
Net loss		$	(2,055	)		$	(121,864	)
BASIC EARNINGS PER SHARE:
Loss from continuing operations attributable to common stockholders, net of tax		$	(0.00	)		$	(0.02	)
Loss from discontinued operations attributable common stockholders, net of tax			(0.00	)			(0.00	)
NET LOSS ATTRIBUTABLE TO THE COMMON STOCKHOLDERS		$	(0.00	)		$	(0.02	)
DILUTED EARNINGS PER SHARE:
Loss from continuing operations attributable to common stockholders, net of tax		$	(0.00	)		$	(0.01	)
Loss from discontinued operations attributable to common stockholders, net of tax			(0.00	)			(0.01	)
NET LOSS ATTRIBUTABLE COMMON STOCKHOLDERS		$	(0.00	)		$	(0.02	)
Comprehensive Loss		$	(2,055	)		$	(113,835	)

 

 

 

See accompanying notes to these unaudited condensed consolidated financial statements

 

 

 

 

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2015 and 2014

(Unaudited)

 

		March 31, 2015				March 31, 2014
Cash flows from operating activities:
Net loss from continuing operations		$	(17,979	)		$	(95,509	)
Net income (loss) from discontinued operations			15,924				(26,355	)
Other			(24,112	)			(25,321	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation expense			–				1,762
Changes in operating assets and liabilities:
Increase in accounts receivable			(72,769	)			(274,005	)
Decrease in inventory			613,819				–
Decrease in current assets			697				3,943
Assets - discontinued operations			(37,011	)			–
Increase (decrease) in accounts payable and accrued expenses			(235,576	)			122,051
Increase in other current liabilities			10,500				–
Liabilities - discontinued operations			39,813				(61,883	)
Net cash provided by (used in) operating activities			293,306				(355,317	)
Cash flow from investing activities:
Purchase of property and equipment			–				(42,273	)
Net cash used in investing activities			–				(42,273	)
Cash flow from financing activities:
Proceeds from short-term borrowing			–				–
Net cash provided by financing activities			–				–
Effect of currency translation - discontinued			5,386				(4,837	)
Net increase/(decrease) in cash and cash equivalents			298,692				(402,427	)
Cash and cash equivalents at beginning of period			661,510				1,192,443
Cash and cash equivalents at end of period		$	960,202			$	790,016
Supplementary Disclosures of Cash Flow
Cash paid during the year for:
Interest		$	–			$	–
Taxes (refund)		$	–			$	–

 

 

 

See accompanying notes to these unaudited condensed consolidated financial statements

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2015

 

1. Summary of Significant Accounting Policies

 

Basis of Presentation

 

These interim condensed consolidated financial statements represent the financial activity of International Packaging and Logistics Group, Inc., (“IPL Group” or “the Company”) a publicly traded company listed and traded on the NASDAQ Over the Counter Bulletin Board (“OTCBB”). The interim condensed consolidated financial statements for the three months ended March 31, 2015 and 2014 have been prepared in accordance with accounting principles generally accepted in the United States. The interim condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions have been eliminated. The Company’s fiscal year end is on December 31.

 

The foregoing unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, these condensed consolidated financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included on Form 10-K for the period ended December 31, 2014. In the opinion of management, the unaudited interim condensed consolidated financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.

 

The preparation of interim condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the condensed consolidated financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumption are inherent in the preparation of the Company’s condensed consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions that could have a material effect on the reported amounts of the Company’s financial position and results of operations.

 

Operating results for the three month periods ended March 31, 2015, are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.

 

Nature of Operations

 

On July 2, 2007, International Packaging and Logistics Group, Inc., through its wholly-owned subsidiary, YesRx.com (“YesRx”) acquired all the outstanding shares of H&H Glass, Inc. (“H&H Glass” or “H&H”), in exchange for 3,915,000 shares of its common stock in a reverse triangular merger (the “Merger”). H&H Glass is a glass importer that supplies custom products such as perfume bottles and food condiment bottles, plus provides complementary services such as container design and mold making. H&H Glass imports glass containers from Asia and distributes to North America. H&H Glass acquires its products mainly from one supplier in China and Taiwan and sells its products through several distributors in the United States and Canada who service small to medium sized customers. H&H imports in excess of 1,000 shipping containers of glass a year. Depending on the size of the product, a container can contain anywhere from 3,000 to 300,000 pieces.

 

 

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2015

 

1. Summary of Significant Accounting Policies (continued)

 

Organization and Line of Business

 

International Packaging and Logistics Group, Inc., a Nevada corporation, was originally incorporated as Interactive Medical Technologies, Ltd., on June 2, 1986, in the state of Delaware. On April 17, 2008, IPL Group converted from a Delaware corporation to a Nevada Corporation.

 

EZ Link Holdings Ltd.

 

On January 1, 2010, International Packaging and Logistics Group, Inc., (“IPL Group Inc.”), acquired a majority interest in EZ Link Holdings, Ltd., company organized under the laws of the British Virgin Islands which contractually controls EZ Link Corporation (“EZ Link”), a logistics company headquartered in Taiwan. EZ Link was established in July 2003 under the laws of Taiwan, Republic of China (“PRC”) EZ LINK is a full service international freight forwarder, who has current networks to locations in China, Hong Kong, South East Asia, North East Asia, North America, Latin America and Europe.

 

EZ Link Holdings Ltd. was incorporated in 2009, under the laws of the British Virgin Islands. The Company has no substantive operations of its own.

 

EZ Link Corp., a Taiwan company established in July 2003 with initial registered capital of NTD 13,500,000, is a freight forwarder with current networks of locations in China, Hong Kong, South East Asia, North East Asia, North America, Latin America and Europe, and holds the licenses and approvals necessary to operate its business in China.

 

Taiwan law currently has limits on foreign ownership of companies. To comply with these foreign ownership restrictions, on December 31, 2009, EZ Link Holdings, Ltd. entered into following exclusive agreements with EZ Link Corp. and its owners (collectively the “Contractual Arrangements”):

 

(1) Consulting Services Agreement, through which EZ Link Holdings, Ltd. has the right to advise, consult, manage and operate EZ Link Corp. and collect and own all of its net profits;

 

(2) Operating Agreement, through which EZ Link Holdings, Ltd. has the right to recommend director candidates and appoint the senior executives of EZ Link Corp, approve any transactions that may materially affect the assets, liabilities, rights or operations of EZ Link Corp, and guarantee the contractual performance by EZ Link Corp. of any agreements with third parties, in exchange for a pledge by EZ Link Corp. of its accounts receivable and assets.

 

Divestiture of EZ Link

 

Effective February 28, 2015, EZ Link was acquired back IPL Group Inc.’s share position in EZ Link in exchange for their share position in IPL Group Inc.

 

International Packaging and Logistics Group, Inc. (“IPL Group Inc.”) (Seller), entered into an agreement with its majority owned subsidiary, EZ Link Corporation (“EZ Link”) (Buyer) which is a logistics company headquartered in Taiwan. EZ Link was established in July 2003 under the Company Law of Republic of China. Under this agreement EZ Link is acquiring back IPL Group Inc.’s share position in EZ Link in exchange for their share position in IPL Group Inc. This transaction is effective was of February 28, 2015.

 

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2015

 

1. Summary of Significant Accounting Policies (continued)

 

The terms are as follows:

 

IPL Group Inc. will exchange its position in EZ Link or 688,500 shares in the aggregate, to the original EZ Link shareholders, and such EZ Link shareholders will exchange the following to IPLO:

 

(a) The 457,143 shares of common stock held by EZ Link shareholders.

(b) The 400,000 Series B Convertible preferred shares held by EZ LINK shareholders.

 

There was a $25,394 gain as a result of the divestiture of EZ Link, which was the net the assets less liabilities sold back.

 

Principles of Consolidation

 

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America. EZ Link Corp’s functional currency is New Taiwan Dollars (NTD), however, the accompanying consolidated financial statements have been re-measured and presented in United States Dollars ($).

 

The consolidated financial statements include the accounts of IPL Group and its subsidiaries (collectively the “Company”). The Company’s subsidiaries include H&H Glass and 51% of EZ Link Holdings, Ltd. which is now shown in discontinued operations. EZ LINK’s operating activity for the period January 1, 2015 through February 28, 2015 are shown as discontinued operations in the statement of operations.

 

Intercompany accounts and transactions have been eliminated upon consolidation.

 

Reclassifications

 

Certain amounts in the prior year have been reclassified to conform to the current year presentation.

 

Estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosures of contingent assets and liabilities at the date of the consolidated financial statements. Significant estimates include an allowance for doubtful accounts deferred tax assets and liabilities, depreciation of property, plant and equipment.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash equivalents include amounts invested in a money market account with a financial institution. Cash equivalents are carried at cost, which approximates fair value.

 

Revenue Recognition

 

The Company recognizes product revenue provided that (1) persuasive evidence of an arrangement exists, (2) delivery to the customer has occurred, (3) the selling price is fixed or determinable and (4) collection is reasonably assured.  Delivery is considered to have occurred when title and risk of loss have transferred to the customer. The price is considered fixed or determinable when it is not subject to refund or adjustments. Outbound shipping and handling charges are included in net sales and cost of goods sold.

 

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2015

 

1. Summary of Significant Accounting Policies (continued)

 

Inventories

 

Inventories are stated at the lower of cost (first-in, first-out basis) or market (net realizable value). All inventories consists of finished goods.

 

Foreign Currency Translation

 

The accounts of the EZ Link were maintained, and its consolidated financial statements were expressed, in NTD. Such consolidated financial statements were translated into USD with NTD as the functional currency. All assets and liabilities were translated at the exchange rate on the consolidated balance sheet dates, stockholders’ equity are translated at the historical rates and the statements of income items were translated at the weighted average exchange rate for the year. In 2014 and 2015, the EZ Link operations have been reclassified as discontinued operations. Accordingly, the other comprehensive income previously accumulated has been recognized as of March 31, 2015, and consequently the foreign currency translation adjustments are eliminated as of March 31, 2015.

 

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. Such amounts were not material during each of the quarters ended March 31, 2015 and 2014.

 

Cash flow from the Company's operations included in the statement of cash flows is calculated based upon the functional currency using the average translation rate. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with arithmetical changes in the corresponding balances on the consolidated balance sheet. No presentation is made that the NTD amounts could have been, or could be, converted into USD at the rates used in translation.

 

Concentration of Credit Risk

 

The Company maintains balances in a Money Market Fund that is not federally insured. Balances in this fund were $824,973 and $393,907 at March 31, 2015 and March 31, 2014, respectively.

 

Accounts receivable are typically unsecured. The Company performs ongoing credit evaluations of its customers’ financial condition. It generally requires no collateral and maintains reserves for potential credit losses on customer accounts, when necessary. As of March 31, 2015, 88.8% of H&H Glass’s Accounts Receivable were attributable to three customers. As of December 31, 2014, 86.7% of H&H Glass’s Accounts Receivable were attributable to three customers.

 

At March 31, 2015 and 2014 H&H Glass had allowance for doubtful reserves of $0 and $16,194 respectively.

 

In general the Company will reserve a receivable based one of the following reasons; if the receivable is over 90 days old the company will reserve 50% and if over 12 months old the Company will reserve 100% of the amount.

 

 

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2015

 

1. Summary of Significant Accounting Policies (continued)

 

H&H Glass purchased 100% of its glass from one vendor in the three- month periods ending March 31, 2015 and 2014.  During the three-month period ending March 31, 2015 and 2014, H&H Glass purchased $7,907,289 and $7,029,586 of products from this vendor, respectively. This concentration is due to the relatively small size of H&H Glass’s orders.  H&H Glass’s specialized short-run custom orders generally are not attractive to larger glass manufacturers.  As customer orders have been growing in size, H&H Glass has begun to seek additional suppliers.

 

Non-controlling Interest

 

IPLO sold its interest in EZ Link as of February 28, 2015.

 

The Company accounted for its non-controlling interest of 49% in EZ Link Holdings, Ltd. in the consolidated financial statements classified as a separate component of equity. In addition, net earnings, and components of other comprehensive income are attributed to both the Company and non-controlling interest.

 

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. There were no dilutive securities for the three months ending March 31, 2015 and 2014 due to the Company incurring a net loss of each period.

 

Income Taxes

 

The Company accounts for its income taxes using the Financial Accounting Standards Board ASC 740, “Income Taxes,” which requires the establishment of a deferred tax asset or liability for the recognition of future deductible or taxable amounts and operating loss and tax credit carryforwards. Deferred tax expense or benefit is recognized as a result of timing differences between the recognition of assets and liabilities for book and tax purposes during the year.

 

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are recognized for deductible temporary differences and operating loss, and tax credit carryforwards. A valuation allowance is established to reduce the deferred tax asset if it is “more likely than not” that the related tax benefits will not be realized.

 

The Company accounts for income taxes in accordance ASC Topic 740. Realization of an uncertain income tax position must be estimated as “more likely than not” (i.e., greater than 50% likelihood of receiving a benefit) before it can be recognized in the financial statements. Further, the recognition of tax benefits is required to be recorded in the financial statements to be based on the amount most likely to be realized assuming a review by tax authorities having all relevant information. ASC 740 also clarifies the financial statement classification of tax-related penalties and interest and sets forth new disclosures regarding unrecognized tax benefits. As of March 31, 2015, the Company has not recognized any obligation for uncertain tax positions.

 

 

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2015

 

1. Summary of Significant Accounting Policies (continued)

 

EZ Link, Corporation is governed by the Taiwan’s Income Tax Law and local income tax laws. Pursuant to the Taiwan Income Tax Law, enterprises are subject to tax at a statutory rate of 17%. The local government has also provided companies with various incentives to encourage economic development in the region. Such incentives include reduced tax rates and other measures.

 

2. Preferred Stock Transactions

 

Series B Preferred Shares:

 

These shares have been repurchased and retired as a result of the sale of EZ Link as of February 28, 2015.

 

The Preferred Shares were convertible into common shares in two equal tranches, the first being upon completion and receipt of the year ending December 31, 2010, financials if all of the following performance targets are met by EZ Link:

 

(a) Maintain revenues and before tax earnings same as the prior 12 month period; and 

(b) Maintained a positive cash flow from operations over the prior 12 month period.

 

These criteria were not met, so there were no conversions as of February 28, 2015.  These certificates were returned to the Company pursuant to the sale of EZ Link back to its original shareholders.

 

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.

 

Series B Preferred Shares

 

As of January 1, 2010 pursuant to the purchase agreement for 51% ownership in EZ Link Holdings Ltd., approximately 47% of the purchase price amount $400,000 was paid in Series B convertible preferred shares of IPL Group, Inc. at a per share value of $1.00, or 400,000 shares. As a result of the divesture of EZ LINK, the Company received from EZ Link shareholders the 400,000 shares of Series B preferred stock. As of March 31, 2015, there are no shares of Series B preferred stock issued and outstanding.

 

Divestiture of EZ Link

 

Effective February 28, 2015, EZ Link acquiring back IPL Group Inc.’s share positions in EZ Link in exchange for their share position in IPL Group Inc.

 

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2015

 

3. Common and Preferred Stock Transactions

 

During the three months ending March 31, 2015 and 2014 no stock was issued.

 

Divestiture of EZ Link: EZ Link returned 457,143 common shares and 400,000 shares of Series B preferred shares of IPLO pursuant to the divestiture of EZ Link as of February 28, 2015.

 

4. Related Party Transactions

 

Allen Lin

 

The Company paid Mr. Allen Lin, President of H&H Glass and a member of the board of directors of the Company, salary of $69,000 and $66,950 for the three months ended March 31, 2015 and 2014, respectively.

 

There is currently an $80,000 payable to Allen Lin for funds contributed to the Company at the time EZ Link Holdings, Ltd. was acquired. This debt is due on demand.

 

Josephine Lin

 

Josephine Lin, Mr. Lin’s wife, is employed by the Company and was paid salary of $15,000 and $14,935 for the three months ended March 31, 2015 and 2014, respectively.

 

William Gresher

 

Mr. Gresher, a member of the Board of Directors, was paid $1,500 in cash for Director fees in the three months ended March 31, 2015 and 2014.

 

Owen Naccarato

 

For the three months ended March 31, 2015 and 2014 respectively, Mr. Naccarato, a member of the Board of Directors, was paid $9,000 in cash for legal fees and was paid $1,500 in cash for Directors fees.

 

Easy Global Company, Ltd.

 

The chairman of Easy Global Company, Ltd. is also a shareholder of EZ Link Corporation. EZ Link rents its offices from Easy Global Company, Ltd. During the two months ended February 28, 2015 and three months ending March 31, 2014, EZ Link paid $7,233 and $11,314, respectively to Easy Global Company for rent expense.

 

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2015

 

5. Property and Equipment

 

The Company’s property and equipment at March 31, 2015 and December 31, 2014, consisted of the following:

 

		March 31, 2015				December 31, 2014
Furniture and fixtures		$	14,552			$	14,552
Computers and equipment			23,452				23,452
			38,004				38,004
Less accumulated depreciation			(38,004	)			(38,004	)
Total		$	–			$	–

 

The Company recorded depreciation expense for the three months ended March 31, 2015 and 2014, of $nil and $1,762 respectively.

 

6. Accounts Payable and Accrued Expenses

 

Accounts payable and accrued expenses at March 31, 2015 and December 31, 2014, consisted of the following:

 

		March 31, 2015				December 31, 2014
Accounts payable		$	8,126,603			$	8,362,179
Accrued professional and related fees			83,175				72,675
Total		$	8,209,778			$	8,434,854

 

7. Commitments and Contingencies

 

Leases

 

Operating leases

 

H&H Glass rents approximately 2,900 square feet of office space for its headquarters. The lease began on January 1, 2013 and expires on August 31, 2019. As of March 31, 2015, total monthly base rent is $6,409 per month.

 

Future minimum payments on this lease for fiscal years following March 31, 2015, are:

 

	Fiscal Year ended December 31,
	2015			$	79,344
	2016				81,780
	2017				84,216
	Thereafter				146,276
				$	391,616

 

8. Earnings per Share

 

Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period and adjusting for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. Potential participating securities that were deemed to be anti-dilutive are noted below for the three months ended March 31, 2015 and 2014:

 

	2015		2014
Effect of dilutive securities—	974,730		1,374,730

 

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2015

 

9. Discontinued Operations:

 

Discontinued Operations

 

Discontinued operations are accounted for in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Section 360-10-35 Property, Plant, and Equipment. In accordance with FASB ASC Section 360-10-35, the net assets of discontinued operations are recorded on our consolidated balance sheets at estimated fair value. The results of operations of discontinued operations are segregated from continuing operations and reported separately as discontinued operations in our consolidated statements of loss and comprehensive loss.

 

International Packaging and Logistics Group, Inc. (“IPL Group Inc.”) (Seller), entered into an agreement with its majority owned subsidiary, EZ Link Corporation (“EZ Link”) (Buyer) which is a logistics company headquartered in Taiwan. EZ Link was established in July 2003 under the Company Law of Republic of China. Under this agreement EZ Link is acquiring back IPL Group Inc.’s share position in EZ Link in exchange for their share position in IPL Group Inc. This transaction was effective as of February 28, 2015.

 

The terms are as follows:

 

IPL Group Inc. assigned its position in EZ Link or 688,500 shares in the aggregate, to EZ Link, such that, following such transaction, EZ Link will no longer be a subsidiary of IPL Group Inc.

 

IPL Group Inc. will exchange its position in EZ Link or 688,500 shares in the aggregate, to the original EZ Link shareholders, and such EZ Link shareholders will exchange the following to IPLO:

 

(a) The 457,143 shares of common stock held by EZ Link shareholders.

 

(b) The 400,000 Series B Convertible preferred shares held by EZ Link shareholders.

 

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2015

 

9. Discontinued Operations: - continued

 

Results of Discontinued Operations

 

Summary results of operations for our discontinued operations for the three months ended

 

		March 31, 2015				March 31, 2014
Discontinued operations:
Revenue			1,015,230				892,248
Gain (Loss) from operations, including portion attributable to non-controlling interest of discontinued Logistics component			15,924				(36,599	)
Income tax benefit			–				10,244
Gain (Loss) on discontinued operations			15,924				(26,355	)

 

Assets and Liabilities of Discontinued Operations

 

Assets and liabilities of discontinued operations on the Company consolidated balance sheets as of March 31, 2015 and December 31, 2014 include the following:

 

		March 31, 2015				December 31, 2014
Assets Discontinued subsidiary
Cash and cash equivalents		$	–			$	460,545
Notes receivable			–				62,209
Accounts receivable			–				489,286
Contract in place			–				1,295,726
Other assets			–				24,392
Property, Plant and Equipment, net			–				42,631
Assets Held for Sale - Discontinued Operations		$	–			$	2,374,789

 

		March 31, 2015				December 31, 2014
Liabilities Discontinued subsidiary
Notes payable		$	–			$	8,287
Accounts payable			–				566,838
Other current liabilities			–				6,846
Liabilities - discontinued Operations		$	–			$	581,971

 

 

 

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

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  In some cases, forward-looking statements are identified by terms such as “may”, “will”, “should”, “could”, “would”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “projects”, “predicts”, “potential”, and similar expressions intended to identify forward-looking statements.

 

These forward-looking statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this Report. Except as otherwise required by law, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained in this Report to reflect any change in our expectations or any change in events, conditions, or circumstances on which any of our forward-looking statements are based or to conform to actual results. We qualify all of our forward-looking statements by these cautionary statements.

 

Overview

 

We import glass containers from Asia and distribute to the North American market including Canada. This was a result of International Packaging and Logistic Group, Inc. (“IPL Group, Inc.”) acquiring H&H Glass in July of 2007. IPL Group, Inc. closed its pharmacy business in February 2007.

 

H&H Glass is a glass importer that supplies custom products such as perfume bottles and food condiment bottles, plus provides complementary services such as product design and the making of product molds. H&H Glass acquires its products from 3 to 5 suppliers in China and Taiwan and sells its products through several distributors in the United States and Canada who service small- to medium-sized customers. H&H imports in excess of 1,000 containers of glass a year. Depending on the size of the product, a container can contain anywhere from 3,000 to 300,000 pieces.

 

In 2010, International Packaging and Logistics Group, Inc., acquired a majority interest in EZ Link Holdings, Ltd., a company organized under the laws of the British Virgin Islands on December 18, 2009, which controls EZ Link Corporation, a logistics company headquartered in Taiwan. EZ Link was established in July 2003 under the laws of Taiwan, Republic of China. EZ Link Holdings, Ltd. consolidates EZ Link under ASC Topic 810 as it controls EZ Link through a management contract. EZ Link is a full service international freight forwarder, who has current networks to locations in China, Hong Kong, South East Asia, North East Asia, North America, Latin America and Europe.

 

Vend-out of EZ Link Corporation

 

As of February 28, 2015, IPLO’s majority interest in EZ Link Corp., was sold back to EZ Link Corp. for the following terms: In exchange for the fifty-one percent (51%) of the EZ Link Corporation Shares, or 688,500 EZ Link Corporate Shares in the aggregate acquired by IPL, EZ Link Corp. will return

 

(a) an aggregate of 457,143 shares of IPL common shares issued on June 26, 2009 to the shareholders of EZ Link Corp as consideration of acquiring 51% of EZ Link Corporation; and

 

(b) an aggregate of 400,000 Series B preferred shares issued on January 1, 2010 to the shareholders or assigns of EZ Link Corp as consideration of acquiring 51% of EZ Link Corporation.

 

 

 

Plan of Operation

 

Our general operating plan is as follows:

 

Short Term

 

·

Continue growing revenue and profits through the existing business;

·

Expand the supply network for our products;

·

Expand our current business model to include other areas that fall within our distribution expertise such as packaging using plastic and acrylic materials.

·

Integrate our new logistics business into our overall plan

 

Long Term

 

·

Expand our service into other areas such as Europe and Australia through the same supplier channel. Our existing business model copies to other markets naturally.

·

Expand the client base and areas of service of our logistics business.

 

Results of Operations

 

Three months ending March 31, 2015 Compared to March 31, 2014

 

Revenue:

 

For the three months ending March 31, 2015 and 2014, revenues were $8,871,824 and $7,958,031 respectively, for an increase of $913,793 or 11.5% over the same period in 2014. The increase in revenue is a mainly due to an improved US economy which resulted in increased volume.

 

Cost of Goods Sold:

 

Cost of goods sold for the three months ending March 31, 2015 and 2014 were $8,519,555 and $7,680,836 respectively, for an increase of $838,719 or 10.9% over the same period in 2014. This increase is mainly due to the increase in business. This increase in cost of goods sold is consistent with the increase in sales.

 

Gross Profit:

 

Gross profit was $352,269 and $277,195 for the three months ending March 31, 2015 and 2014, an increase of $75,074 or 27.1% over the same period in 2014.   The gross profit margin as a percent of sales for the years ending March 31, 2015 and 2014 was 4.0% and 3.5 % respectively for an increase of 0.5%.

 

Operating Expenses:

 

Operating expenses were $386,442 and $370,805 for the three months ending March 31, 2015 and 2014, an increase of $15,637 (4.2%) over the same period in 2014. The increase in operating expenses was mostly attributable to the following:

 

 

 

 

Three months ending:		3/31/2015				3/31/2014				$ VAR				% VAR
Salaries & Related Expense		$	155,171			$	132,219			$	22,952				17.4%			The change in salaries was mainly due to salary increases.
Rent			14,357				8,929				5,428				60.8%			A negotiated rent credit ended in April 2015
Insurance			55,507				34,442				21,065				61.2%			Increase is a result of the increase in business
Legal			9,000				9,000				0				0.0%			No change.
Accounting			36,795				78,750				(41,955	)			-53.3%			Year 2014 included accrued audit expenses
Travel Expense			83,058				84,103				(1,045	)			-1.2%			H&H Glass travel was flat year to year
Miscellaneous			32,554				23,362				9,192				38.9%			Miscellaneous items
Total Expenses		$	386,342			$	370,805			$	15,637				4.2%

 

Other Income (Expense):

 

Other income (expense) for the three months ended March 31, 2015 and 2014 was $16,194 and ($299) respectively for an increase of $16,493 (5,516.1%) over the same period in 2014.

 

Liquidity and Capital Resources

 

Net cash provided by operating activities for the three months ended March 31, 2015 amounted to $293,306, which mainly consisted of the following: depreciation expense of $1,282, a decrease in inventory of $613,819, a decrease in other current assets of $697, an increase in other current liabilities of $10,500 and liabilities/discontinued operations of $39,813, offset by the net loss for the three month period of $2,055, an increase in accounts receivable of $72,769, assets for sale/discontinued operation of $37,011, and an increase in accounts payable and accrued expenses of $235,576. Net cash used in investing activities amounted to $25,394 in proceeds from divestiture of a subsidiary.

 

On March 31, 2015 the Company had total assets of $9,674,614 compared to $12,291,762 on December 31, 2014, a decrease of $2,617,148 or 21.3%.  The Company had total stockholders’ equity of $1,384,836 on March 31, 2015, compared to total stockholders’ equity of $3,194,937 on December 31, 2014, a decrease of $1,810,101 (56.7%).  As of March 31, 2015 the Company's working capital position decreased by $17,282 (1.5%) from working capital of $1,164,387 at December 31, 2014 to working capital of $1,147,105 at March 31, 2015.  

 

Capital Resources

 

Over the next twelve months, management is of the opinion that sufficient working capital will be obtained from operations.

 

Federal Income Tax

 

The Company deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.

 

EZ Link Corporation is governed by Taiwan’s Income Tax Law and local income tax laws. Pursuant to the Taiwan Income Tax Law, enterprises are subject to tax at a statutory rate of 17%. The local government has also provided companies with various incentives to encourage economic development in the region. Such incentives include reduced tax rates and other measures.

 

 

 

ITEM 4. Controls and Procedures.

 

Disclosure Controls and Procedures

 

As of March 31, 2015, under the supervision and with the participation of the Company's Chief Executive Officer and the Chief Financial Officer, management has evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation and because of the material weaknesses in our internal control over financial reporting described below, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company's disclosure controls and procedures were not effective as of March 31, 2015.

 

Management identified the following control deficiencies that constitute material weaknesses that are not fully remediated as of the filing date of this report:

 

Our size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties within our internal control system. There is mainly one person involved in processing of transactions. Therefore, it is difficult to effectively segregate accounting duties. We have hired an additional administrative person and retained an outside professional firm to assist in mitigating the separation of duties issues on an ongoing basis. The use of the outside firm has proven successful in assisting in the separation of duties. However, additional people are not needed to do the administrative work therefore segregation of duties will continue to be an ongoing weakness.

 

Similarly, the EZ Link operation also had a material weakness due to lack of segregation of duties. Its size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties within our internal control system. We had retained an outside professional firm to assist in the separation of duties on an ongoing basis. The use of the outside firm had proven successful in assisting in the mitigating of separation of duties, however, it did no fully mitigate the segregation of duties issue at EZ Link prior to the divestiture of EZ Link as of February 28, 2015.

 

Limitations on the Effectiveness of Internal Controls

 

Disclosure controls and procedures, no matter how well designed and implemented, can provide only reasonable assurance of achieving an entity's disclosure objectives. The likelihood of achieving such objectives is affected by limitations inherent in disclosure controls and procedures. These include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures such as simple errors or mistakes or intentional circumvention of the established process.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in internal control over financial reporting that occurred during the current quarter covered by this report that have materially affected, or are reasonably likely to affect, the Company's internal control over financial reporting.

 

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

None

 

 

 

 

ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds

 

ITEM 3. Defaults Upon Senior Securities

 

Not Applicable

 

ITEM 4. Mine Safety Disclosures

 

None

 

ITEM 5. Other Information

 

None

 

 

 

 

 

ITEM 6. Exhibits

 

a) Exhibits

 

31.1

Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) (Section 302 of the Sarbanes-Oxley Act of 2002)

 

31.2

Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) (Section 302 of the Sarbanes-Oxley Act of 2002)

 

32.1

Certification of the Chief Executive Officer pursuant to 18 U.S.C.ss.1350 (Section 906 of the Sarbanes-Oxley Act of 2002)

 

32.2

Certification of the Chief Financial Officer pursuant to 18 U.S.C.ss.1350 (Section 906 of the Sarbanes-Oxley Act of 2002)

 

 

 

 

 

SIGNATURES

 

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

International Packaging and Logistics Group, Inc.

(Registrant)

 

 

Dated:  July 6, 2015	By: /s/ Owen Naccarato
	Owen Naccarato
	Chief Executive Officer
	Principal Financial Officer and Director

 

	By: /s/ Allen Lin
	Allen Lin, Director
	President H&H Glass
	By: /s/ William Gresher
	William Gresher, Director