UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

  

Form 10-Q

  

☒   Quarterly Report PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2018

 

or

 

☐   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 000-54485

 

IONIX TECHNOLOGY, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		45-0713638
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

 

4F, Tea Tree B Building, Guwu Sanwei Industrial Park, Xixiang Street, Baoan District, Shenzhen, Guangdong Province, China 518000

(Address of principal executive offices) (Zip Code)

 

+86-138 8954 0873

(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. Yes x No o.

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o 

 

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. (Check one)

 

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

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x.

 

As of November 14, 2018, there were 99,003,000 shares of common stock issued and outstanding, par value $0.0001 per share.

 

As of November 14, 2018, there were 5,000,000 shares of preferred stock issued and outstanding, par value $0.0001 per share.

 

  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Certain information included in this Quarterly Report on Form 10-Q and other filings of the Registrant under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as information communicated orally or in writing between the dates of such filings, contains or may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements in this Quarterly Report on Form 10-Q, including without limitation, statements related to our plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from expected results. Among these risks, trends and uncertainties are the availability of working capital to fund our operations, the competitive market in which we operate, the efficient and uninterrupted operation of our computer and communications systems, our ability to generate a profit and execute our business plan, the retention of key personnel, our ability to protect and defend our intellectual property, the effects of governmental regulation, and other risks identified in the Registrant’s filings with the Securities and Exchange Commission from time to time.

 

In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms or other comparable terminology. Although the Registrant believes that the expectations reflected in the forward-looking statements contained herein are reasonable, the Registrant cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither the Registrant, nor any other person, assumes responsibility for the accuracy and completeness of such statements. The Registrant is under no duty to update any of the forward-looking statements contained herein after the date of this Quarterly Report on Form 10-Q.

 

 

IONIX TECHNOLOGY, INC.

FORM 10-Q

SEPTEMBER 30, 2018

 

 

INDEX

 

		Page
Part I – Financial Information		F-1
Item 1.	Financial Statements (Unaudited)	F-1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	12
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	16
Item 4.	Controls and Procedures	17
Part II – Other Information		17
Item 1.	Legal Proceedings	17
Item 1A.	Risk Factors	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3.	Defaults Upon Senior Securities	18
Item 4.	Mine Safety Disclosures	18
Item 5.	Other Information	18
Item 6.	Exhibits	19
Signatures		20
Certifications

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

 

INDEX	F-1
Consolidated Balance Sheets as of September 30, 2018 and June 30, 2018 (Unaudited)	F-2
Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended September 30, 2018 and 2017 (Unaudited)	F-3
Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2018 and 2017 (Unaudited)	F-4
Notes to Consolidated Financial Statements (Unaudited)	F-5

 

 

IONIX TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

		September 30, 2018				June 30, 2018
ASSETS
Current Assets:
Cash		$	304,583			$	111,462
Accounts receivable - non-related parties			464,553				636,413
- related parties			-				119,543
Inventory			507,440				226,839
Advances to suppliers - non-related parties			2,257				3,164
- related parties			268,388				206,194
Prepaid expenses and other current assets			29,981				20,592
Total Current Assets			1,577,202				1,324,207
Total Assets		$	1,577,202			$	1,324,207
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable - non-related parties		$	110,275			$	264,171
- related parties			399,522				248,543
Advance from customers			34,117				59,546
Due to related parties			349,829				212,557
Accrued expenses and other current liabilities			105,265				125,733
Total Current Liabilities			999,008				910,550
Deferred tax liability			10,548				15,242
Total Liabilities			1,009,556				925,792
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, 99,003,000 shares issued and outstanding			9,900				9,900
Additional paid in capital			237,246				237,246
Retained earnings			319,972				142,819
Accumulated other comprehensive income			28				7,950
Total Stockholders’ Equity			567,646				398,415
Total Liabilities and Stockholders’ Equity		$	1,577,202			$	1,324,207

 

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

 

  

IONIX TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

 

 

		For the Three Months Ended
		September 30,
		2018				2017
Revenues - Non-related parties		$	2,475,050			$	381,541
Revenues - Related parties			93,838				-
Total Revenues			2,568,888				381,541
Cost of revenues - Non-related parties			499,912				48,932
- Related parties			1,779,811				271,651
Total Cost of Revenues			2,279,723				320,583
Gross profit			289,165				60,958
Operating expenses
Selling, general and administrative expense			62,989				69,553
Total operating expenses			62,989				69,553
Income (loss) from operations			226,176				(8,595	)
Other income			1,403				-
Income (loss) before income tax			227,579				(8,595	)
Income tax			50,426				1,609
Net income (loss)			177,153				(10,204	)
Other comprehensive income (loss)
Foreign currency translation adjustment			(7,922	)			3,688
Comprehensive income (loss)		$	169,231			$	(6,516	)
Income (Loss) Per Share - Basic and Diluted		$	0.00			$	(0.00	)
Weighted average number of common shares outstanding - Basic and Diluted			99,003,000				99,003,000

 

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

 

 

IONIX TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

		For the three months Ended
		September 30,
		2018				2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		$	177,153			$	(10,204	)
Adjustments required to reconcile net income (loss) to net cash provided by (used in) operating activities:
Deferred taxes			(4,555	)			-
Changes in operating assets and liabilities:
Accounts receivable - non related parties			165,960				293,992
Accounts receivable - related parties			118,902				-
Inventory			(284,534	)			(221,917	)
Advances to suppliers - non-related parties			878				117,348
Advances to suppliers - related parties			(64,737	)			(88,375	)
Prepaid expenses			(9,530	)			(7,501	)
Accounts payable - non-related parties			(151,889	)			12,137
Accounts payable - related parties			154,452				(155,528	)
Advance from customers			(24,927	)			(5,029	)
Accrued expenses and other current liabilities			(19,564	)			(60,514	)
Net cash provided by (used in) operating activities			57,609				(125,591	)
CASH FLOWS FROM INVESTING ACTIVITIES
Other receivables			-				148,947
Net cash provided by investing activities			-				148,947
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (repayment of) loans from related parties			137,292				(136,600	)
Net cash provided by (used in) financing activities			137,292				(136,600	)
Effect of exchange rate changes on cash			(1,780	)			1,961
Net increase (decrease) in cash			193,121				(111,283	)
Cash, beginning of period			111,462				186,767
Cash, end of period		$	304,583			$	75,484
Supplemental disclosure of cash flow information:
Cash paid for income tax		$	70,558			$	1,951
Cash paid for interests		$	-			$	-

 

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

 

 

IONIX TECHNOLOGY, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

(UNAUDITED)

 

 

NOTE 1 - NATURE OF OPERATIONS

 

Ionix Technology, Inc. (the “Company” or “Ionix”) is a Nevada corporation that was formed on March 11, 2011. By and through its wholly owned subsidiaries in China, the Company sells the high-end intelligent electronic equipment, which includes portable power banks for electronic devices and LCD screens in China.

 

NOTE 2 - GOING CONCERN

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has not generated sufficient cash flow from its operating activities for the past three years and did not have enough cash to support future operating plans. These circumstances, 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 may need to raise additional capital from external sources or obtain loans from officers and shareholders in order to continue the long-term efforts contemplated under its business plan. The Company is pursuing other revenue streams which could include strategic acquisitions or possible joint ventures of other business segments.

 

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 financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of September 30, 2018 and the results of operations and cash flows for the periods ended September 30, 2018 and 2017. 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 months ended September 30, 2018 are not necessarily indicative of the results to be expected for any subsequent periods or for the entire year ending June 30, 2019. The balance sheet at June 30, 2018 has been derived from the audited 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 financial statements should be read in conjunction with our audited financial statements and notes thereto for the year ended June 30, 2018 as included in our Annual Report on Form 10-K as filed with the SEC on October 11, 2018.

 

Basis of consolidation

 

The consolidated financial statements include the accounts of Ionix Technology Inc. and its subsidiaries: Well Best International Investment Limited (“Well Best”), Welly Surplus International Limited (“Welly Surplus”), Lisite Science Technology (Shenzhen) Co., Ltd (“Lisite Science”), Shenzhen Baileqi Electronic Technology Co., Ltd. (“Baileqi Electronic”), Changchun Fangguan Photoelectric Display Technology Co. Ltd. (“Fangguan Photoelectric”) and Dalian Shizhe New Energy Technology Co., Ltd (“Shizhe New Energy”). All significant inter-company balances and transactions have been eliminated upon consolidation.

 

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 will not result in an adjustment to the retained earnings as of June 30, 2018. The comparative information will not be restated and will continue to be reported under the accounting standards in effect for those periods. The adoption of the new revenue standard will have no impact on either reported sales to customers or net earnings. The Company will continue to recognize revenue from product sales as goods are shipped or delivered to the customer, as control of goods occurs at the same time.

 

 

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 statements of comprehensive income (loss).

 

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.

 

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:

 

		September 30, 2018				June 30, 2018
Balance sheet items, except for equity accounts			6.6879				6.6166
			Three Months Ended September 30,
			2018				2017
Items in statements of comprehensive income (loss) and cash flows			6.6523				6.7138

 

Recent accounting pronouncements

 

From time to time, new accounting pronouncements are issues by the Financial Accounting Standards Board or other standard bodies that may have an impact on the Company’s accounting and reporting. The Company believes that any recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations, and cash flows when implemented.

 

NOTE 4 - INVENTORIES

 

Inventories are stated at the lower of cost (determined using the weighted average cost method) or net realizable value.

 

		September 30, 2018				June 30, 2018
Raw materials		$	109,926			$	105,879
Finished goods			397,514				120,960
Total inventories		$	507,440			$	226,839

Inventories consist of the following:

 

 

NOTE 5 - RELATED PARTY TRANSACTIONS AND BALANCES

 

Manufacture – related party

 

On September 1, 2016, Baileqi Electronic entered into a manufacturing agreement with Shenzhen Baileqi Science and Technology Co., Ltd. (“Shenzhen Baileqi S&T”) to manufacture products for Baileqi Electronic. The owner of Shenzhen Baileqi S&T is also a stockholder of the Company who owns approximately 1.5% of the Company’s outstanding common stock as of September 30, 2018.  The manufacturing costs incurred with Shenzhen Baileqi S&T was $0 and $192,103 for the three months ended September 30, 2018 and 2017, respectively, and the amount of $0 and $44,167 respectively were included in cost of revenue.

 

Purchase from related party

 

During the three months ended September 30, 2018, the Company purchased $676,379 and $450,505 from Keenest and Shenzhen Baileqi S&T which were owned by the Company’s stockholders who own approximately 2% and 1.5% respectively of the Company’s outstanding common stock as of September 30, 2018. The amount of $676,379 and $340,026 were included in the cost of revenue. 

 

During the three months ended September 30, 2017, the Company purchased $63,645 and $174,465 from Keenest and Shenzhen Baileqi S&T which were owned by the Company’s stockholders who own approximately 2% and 1.5% respectively of the Company’s outstanding common stock. The amount of $63,645 and $163,839 were included in the cost of revenue.

 

During the three months ended September 30, 2018, the Company purchased $792,282 from Fangguan Electronic Science and Technology Co., Ltd. (“Fangguan S&T”). The president of Fangguan S&T 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 amount of $763,406 was included in the cost of revenue.

 

Advances to suppliers - related parties

 

The Company made advances of $268,388 and $206,194 to Keenest for future purchases as of September 30, 2018 and June 30, 2018, respectively. 

 

Accounts payable - related parties

 

The trade balance payable to Fangguan S&T was $367,779 and $248,543 as of September 30, 2018 and June 30, 2018, respectively. The trade balance payable to Shenzhen Baileqi S&T were $31,743 and $0 as of September 30, 2018 and June 30, 2018, respectively.

 

Sales to related party

 

During the three months ended September 30, 2018, Baileqi Electronic sold materials of $93,838 to Shenzhen Baileqi S&T.

 

Accounts receivable - related parties

 

The sales-related balance receivable from Shenzhen Baileqi S&T were zero and $119,543 as of September 30, 2018 and June 30, 2018, respectively.

 

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.

 

 

Due to related parties consists of the following:

 

		September 30, 2018				June 30, 2018
Ben Wong                       (1)		$	143,792			$	143,792
Yubao Liu                       (2)			196,839				70,458
Xin Sui                            (3)			1,992				1,992
Baozhen Deng                (4)			4,216				(3,685	)
Baozhu Deng                  (5)			2,990				-
		$	349,829			$	212,557

  

 

(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 1.5% of the Company’s outstanding common stock, and the owner of Shenzhen Baileqi S&T.

 

(5) Baozhu Deng is a relative of Baozhen Deng, a stockholder of the Company.

 

During the three months ended September 30, 2018, Yubao Liu advanced $126,381 to Well Best. Baileqi Electronic borrowed $2,990 from Baozhu Deng. In addition, Baozhen Deng refunded $7,903 to Baileqi Electronic.

 

During the three months ended September 30, 2017, Welly Surplus refunded $5,000 to Xin Sui. Baileqi Electronic refunded $7,671 to Shenzhen Baileqi S&T. Lisite Science refunded $122,820 to Changyong Yang.

 

NOTE 6 - CONCENTRATION

 

Major customers

 

Customers who accounted for 10% or more of the Company’s revenues for the three months ended September 30, 2018 and 2017 respectively and its outstanding balance of accounts receivable as of September 30, 2018 and 2017 respectively are presented as follows:

 

		For the three months ended September 30, 2018								As of  September 30, 2018
		Revenue				Percentage of revenue				Accounts receivable				Percentage of accounts receivable
Customer A		$	738,893				29	%		$	-				-	%
Customer B			1,028,423				40	%			272,761				59	%
Total		$	1,767,316				69	%		$	272,761				59	%

 

 

		For the three months ended September 30, 2017								As of  September 30, 2017
		Revenue				Percentage of revenue				Accounts receivable				Percentage of accounts receivable
Customer A		$	65,637				17	%		$	-				-	%
Customer B			91,692				24	%			-				-	%
Customer C			45,514				12	%			-				-	%
Total		$	202,843				53	%		$	-				-	%

 

 

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) for the three months ended September 30, 2018 and 2017 respectively and its outstanding balance of accounts payable as of September 30, 2018 and 2017 respectively are presented as follows:

 

		For the three months ended September 30, 2018								As of  September 30, 2018
		Total Purchase				Percentage of total purchase				Accounts payable				Percentage of accounts payable
Supplier A - related party		$	676,379				26	%		$	-				-	%
Supplier B - related party			450,505				18	%			31,743				6	%
Supplier C - related party			792,282				31	%			367,779				72	%
Supplier D			536,708				21	%			-				-	%
Total		$	2,455,874				96	%		$	399,522				78	%

  

		For the three months ended September 30, 2017								As of  September 30, 2017
		Total Purchase				Percentage of total purchase				Accounts payable				Percentage of accounts payable
Supplier A - related party		$	63,645				12	%		$	-				-	%
Supplier B - related party			366,568				68	%			5,828				5	%
Total		$	430,213				80	%		$	5,828				5	%

 

All suppliers of the Company are located in the PRC.

 

NOTE 7 - INCOME TAXES

 

The effective tax rate in the periods presented is the result of the mix of income earned and losses incurred in various tax jurisdictions that apply a broad range of income tax rate. The Company operates in various countries: United States of America, Hong Kong and the PRC that are subject to taxes in the jurisdictions in which they operate, as follows:

 

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.

 

The Company has shown losses since inception.  As a result, it has incurred no income tax. 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 year ended June 30, 2011 and after were still open to audit as of September 30, 2018.

 

The Company received a penalty assessment from the IRS in the amount of $10,000 for failure to provide information with respect to certain foreign owned US Corporations on Form 5472 - Information Return of a 25% Foreign Owned US Corporation for the tax period ended June 30, 2013. The Company disputed this claim and is working to reverse the penalty. The Company believes that the payment of this penalty is remote and did not accrue this liability as of September 30, 2018.

 

 

Hong Kong

 

The Well Best and Welly Surplus are registered in Hong Kong and subject to income tax rate of 16.5%. for the three months ended September 30, 2018 and 2017, there is no assessable income chargeable to profit tax in Hong Kong.

 

The PRC

 

Lisite Science, Fangguan Photoelectric, Baileqi Electronic and Shizhe New Energy are operating in the PRC and is subject to the Corporate Income Tax Law of the People’s Republic of China at a unified income tax rate of 25%.

 

The reconciliation of income tax expense at the U.S. statutory rates of 21% and 35% to the Company’s effective tax rate is as follows:

 

		For the three months ended September 30,
		2018				2017
		21%				35%
Tax at U.S. statutory rate		$	47,792			$	(3,008	)
Tax rate difference between foreign operation and U.S.			(1,408	)			1,125
Change in valuation allowance			2,424				3,492
Permanent difference			1,618				-
Effective tax		$	50,426			$	1,609

 

The provisions for income taxes are summarized as follows:

 

		For the three months ended September 30,
		2018				2017
Current		$	54,981			$	1,609
Deferred			(4,555)				-
Total		$	50,426			$	1,609

 

As of September 30, 2018, the Company has approximately $388,000 net operating loss carryforwards available in the U.S. and Hong Kong to reduce future taxable income which will begin to expire from 2035. It is more likely than not that the deferred tax assets cannot be utilized in the future because there will not be significant future earnings from the entity which generated the net operating loss. Therefore, the Company recorded a full valuation allowance on its deferred tax assets.

 

The Company has not provided deferred taxes on unremitted earnings attributable to international companies that have been considered to be reinvested indefinitely. Because of the availability of U.S. foreign tax credits, it is not practicable to determine the income tax liability that would be payable if such earnings were not indefinitely reinvested. In accordance with ASC Topic 740, interest associated with unrecognized tax benefits is classified as income tax and penalties are classified in selling, general and administrative expenses in the statements of operations.

 

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.

 

The U.S. Tax Cuts and Jobs Act (Tax Act) was enacted on December 22, 2017 and introduces significant changes to U.S. income tax law. Effective in 2018, the Tax Act reduces the U.S. statutory tax rate from 35% to 21% and creates new taxes on certain foreign-sourced earnings and certain related-party payments, which are referred to as the global intangible low-taxed income tax and the base erosion tax, respectively. The Tax Act requires the Company to pay U.S. income taxes on accumulated foreign subsidiary earnings not previously subject to U.S. income tax at a rate of 15.5% to the extent of foreign cash and certain other net current assets and 8% on the remaining earnings. Since the Company’s foreign subsidiaries had not generated accumulated earnings as of December 31, 2017, the Company believes that Tax Act will not have significant impact on the Company’s consolidated financial statements.

 

 

NOTE 8 - SUBSEQUENT EVENTS

 

The Company has evaluated the existence of significant events subsequent to the balance sheet date through the date the financial statements were issued and has determined that there were no subsequent events or transactions which would require recognition or disclosure in the financial statements.

 

 

 

 

 

 

END NOTES TO FINANCIAL STATEMENTS

 

  

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

 

The following Management's Discussion and Analysis should be read in conjunction with Ionix Technology, Inc.’s. financial statements and the related notes thereto. The Management's Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Report on Form 10-Q. The Company’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Report on Form 10-Q.

 

The following discussion should be read in conjunction with our unaudited consolidated financial statements and related notes and other financial data included elsewhere in this report. See also the notes to our consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended June 30, 2018, filed with the Commission on October 11, 2018.

 

Results of Operations for the three months ended September 30, 2018 and 2017 

 

Revenue

During the three months ended September 30, 2018 and 2017, revenue was $2,568,888 and $381,541 respectively.

 

The total revenues increased by 573% from the three months ended September 30, 2017 to three months ended September 30, 2018.

 

The increase in revenue was attributed to our expanded operations in the fields of LCD screens in the PRC during the three months ended September 30, 2018.

 

 

 

Cost of Revenue

Cost of revenue included the cost of raw materials and finished products purchased and the sub- contracting processing fee paid to the processing factories which were owned by our shareholders, pursuant to the manufacturing agreement between the Company’s subsidiaries in PRC and processing factories.

 

During the three months ended September 30, 2018, cost of revenue was $499,912 for non-related parties and $1,779,811 for related parties. In comparison, during the three months ended September 30, 2017, cost of revenue was $48,932 for non-related parties and $271,651 for related parties. The total cost of revenues increased by 611% from the three months ended September 30, 2017 to three months ended September 30, 2018. 

 

The increase in cost of revenue was attributed to our expanded operations in the fields of LCD screens in the PRC during the three months ended September 30, 2018.

 

 

Gross Profit

During the three months ended September 30, 2018 and 2017, gross profit was $289,165 and $60,958, respectively. Our gross profit margin maintained at 11% during the three months ended September 30, 2018. Our gross profit margin maintained at 16% during the three months ended September 30, 2017, and decreased to 11% in October 2017 and has maintained at this level up to the present.

 

The decrease can be attributed to the sharp price increase of raw material (glass and quartz, etc.) that occurred at the end of September 2017.

 

 

Selling, General and Administrative Expenses

During the three months ended September 30, 2018 and 2017, selling, general and administrative expenses were $62,989, and $69,553, respectively. 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. The difference can be attributed to the stricter practices for cost control in operating expenses during the three months ended September 30, 2018.

 

 

Net Income (Loss)

During the three months ended September 30, 2018 and 2017, our net income ( loss ) was $177,153 and $(10,204), respectively. The difference can be attributed to the increase in gross profit and the strict cost control in operating expenses during the three months ended September 30, 2018.

 

 

 Liquidity and Capital Resources

 

Cash Flow from Operating Activities

During the three months ended September 30, 2018, the Company received cash of $57,609 in operating activities compared with cash used by operating activities of $125,591 in the same period in 2017. The change was mainly due to an increase in cash inflows of $182,802 from net income and non-cash items.

 

Cash Flow from Investing Activities

During the three months ended September 30, 2018 and 2017, net cash provided by investing activities was $NIL and $148,947, respectively.

 

Cash Flow from Financing Activities

During the three months ended September 30, 2018, the Company received $137,292 in cash for financing activities, which was all due to proceeds from related party loans. In comparison, during the three months ended September 30, 2017, the Company used $136,600 in cash from financing activities, all of which was attributable to repayment of the related party loans.

 

As of September 30, 2018, we have a working capital of $578,194.

 

Our total current liabilities as of September 30, 2018 was $999,008 and consists primarily of accounts payables for related and non-related parties of $399,522 and $110,275 respectively, advances from customers of $34,117, amount due to related parties of $349,829, and accrued expenses and other current liabilities of $105,265. Our Company’s President is committed to providing for our minimum working capital needs for the next 12 months, and we do not expect previous loan amounts to 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 will not consider taking on any long-term or short-term debt from financial institutions in the immediate future.  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.

 

 

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

 

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 will not result in an adjustment to the retained earnings as of June 30, 2018. The comparative information will not be restated and will continue to be reported under the accounting standards in effect for those periods. The adoption of the new revenue standard will have no impact on either reported sales to customers or net earnings. The Company will continue to recognize revenue from product sales as goods are shipped or delivered to the customer, as control of goods occurs at the same time.

 

 

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. Based on the evaluation, the Company has determined that no allowance for doubtful accounts is required as of September 30, 2018 and June 30, 2018, respectively.

 

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 statements of comprehensive income (loss).

 

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.

 

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:

 

		September 30, 2018				June 30, 2018
Balance sheet items, except for equity accounts			6.6879				6.6166

 

		Three Months Ended September 30,
		2018				2017
Items in statements of comprehensive income (loss) and cash flows			6.6523				6.7138

  

 

Recently Issued Accounting Pronouncements

 

 

There were no recent accounting pronouncements that have or will have a material effect on the Company’s financial position or results of operations.

 

 

Contractual Obligations

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

 

ITEM 4.

CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act"). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of September 30, 2018.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting subsequent to the fiscal year ended June 30, 2018, which were identified in connection with our management’s evaluation required by paragraph (d) of rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting.

 

Limitations of the Effectiveness of Disclosure Controls and Internal Controls

 

Our management, including our Principal Executive Officer and Principal Financial Officer, does not expect that our disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.

 

The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

 

PART II - OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS

 

From time to time, the Company may become subject to various legal proceedings that are incidental to the ordinary conduct of its business. Although the Company cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters, it makes provision for potential liabilities when it deems them probable and reasonably estimable. These provisions are based on current information and legal advice and may be adjusted from time to time according to developments.

 

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest. 

 

 

ITEM 1A.

RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

 None.

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4.

MINE SAFETY DISCLOSURES

 

N/A.

 

ITEM 5.

OTHER INFORMATION

 

None.

 

 

ITEM 6.

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
10.01	Stock Purchase Agreement between Locksley Samuels and Shining Glory Investments Limited, dated November 20, 2015		Filed with the SEC on November 23, 2015 as part of our Current Report on Form 8-K
10.02	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
10.03	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
21.1	List of Subsidiaries		Filed with the SEC on  May 14, 2018 as part of our Quarterly Report on Form 10-Q
31.01	Certification of Principal Executive Officer Pursuant to Rule 13a-14		Filed herewith.
31.02	Certification of Principal Financial Officer Pursuant to Rule 13a-14		Filed herewith.
32.01	CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act		Filed herewith.
32.02	CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act		Filed herewith.
101.INS*	XBRL Instance Document		Filed herewith.
101.SCH*	XBRL Taxonomy Extension Schema Document		Filed herewith.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document		Filed herewith.
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document		Filed herewith.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document		Filed herewith.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document		Filed herewith.

 

 

*Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	Ionix Technology, Inc.
Date: November 14, 2018	By:	/s/ Yubao Liu
	Name:  Doris Zhou Title:    Chief Executive Officer and Director (Principal Executive Officer)

 

Date: November 14, 2018	By:	/s/ Yue Kou
	Name:  Yue Kou Title:    Chief Financial Officer (Principal Financial Officer)

 

 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Date: November 14, 2018	By:	/s/ Yubao Liu
	Name:  Yubao Liu Title:    Chief (Principal) Executive Officer, Secretary, Treasurer and Director

 

Date: November 14, 2018	By:	/s/ Yue Kou
	Name:  Yue Kou Title:    Chief (Principal) Financial Officer

 

Date: November 14, 2018,	By:	/s/ Chunde Song
	Name:  Chunde Song Title:    Director

 

 

20