UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For the quarterly period ended
or
For the Transition Period from to .
Commission File Number
(Exact Name of Registrant as Specified in Its Charter)
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer o | Accelerated filer o | |
| Smaller reporting company | ||
| Emerging growth company |
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
Securities registered pursuant to Section 12(b) of the Act: None
| Title of each class | Trading Symbol(s) | Name of the principal U.S. market |
| OTCQB marketplace of OTC Markets, Inc. |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of May 23, 2022, there were shares of common 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.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
IONIX TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31, 2022 | June 30, 2021 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Notes receivable | ||||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Advances to suppliers - non-related parties | ||||||||
| - related parties | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Long-term prepaid expenses | ||||||||
| Deferred tax assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Short-term bank loan | $ | $ | ||||||
| Accounts payable | ||||||||
| Advance from customers | ||||||||
| Promissory notes payable, net of debt discount and loan cost | ||||||||
| Due to related parties | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| COMMITMENT AND CONTINGENCIES | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, $ par value, shares authorized, shares issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized， and shares issued and outstanding as of March 31, 2022 and June 30, 2021 respectively | ||||||||
| Additional paid in capital | ||||||||
| Retained earnings (accumulated deficit) | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income (loss) | ||||||||
| Total Stockholders' Equity attributable to the Company | ||||||||
| Noncontrolling interest | ||||||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ |
The accompanying notes are an integral part of these consolidated financial statements.
| F-1 |
IONIX TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| March 31, | March 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues (See Note 2 and Note 10 for related party amounts) | $ | $ | $ | $ | ||||||||||||
| Cost of Revenues (See Note 10 for related party amounts) | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general and administrative expense | ||||||||||||||||
| Research and development expense | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense, net of interest income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Subsidy income | ||||||||||||||||
| Change in fair value of derivative liability | ( | ) | ||||||||||||||
| Gain (loss) on extinguishment of debt | ||||||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ||||||||||
| Income (loss) before income tax expense (benefit) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense (benefit) | ( | ) | ||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other comprehensive income (loss) | ||||||||||||||||
| Foreign currency translation adjustment | ( | ) | ||||||||||||||
| Comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Less: Comprehensive income attributable to noncontrolling interest | ||||||||||||||||
| Comprehensive loss attributable to common stockholders of the Company | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Earnings (Loss) Per Share - Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares outstanding - Basic | ||||||||||||||||
| Earnings (Loss) Per Share - Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares outstanding - Diluted | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-2 |
IONIX TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
| Preferred Stock | Common Stock | Additional | Retained
| Accumulated Other | ||||||||||||||||||||||||||||||||
| Number of Shares | Amount | Number of Shares | Amount | Paid-in Capital | (Accumulated Deficit) | Comprehensive Income (loss) | Non-controlling interest | Total | ||||||||||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Issuance of common stock as commitment shares for promissory note | - | - | - | |||||||||||||||||||||||||||||||||
| Net income ( loss) | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance at September 30, 2021 | ( | ) | ||||||||||||||||||||||||||||||||||
| Issuance of common stock as commitment shares for promissory note | - | - | - | |||||||||||||||||||||||||||||||||
| Issuance of common stock for private placement | - | - | - | |||||||||||||||||||||||||||||||||
| Return of common stocks by the holder of promissory note | - | ( | ) | ( | ) | - | - | - | ||||||||||||||||||||||||||||
| Net income ( loss) | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | ||||||||||||||||||||||||||||||||
| Registered Capital Increase of Fangguan Electronics | - | - | - | - | ||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | ( | ) | ||||||||||||||||||||||||||||||||||
| Issuance of common stock as commitment shares for promissory note | - | - | - | |||||||||||||||||||||||||||||||||
| Return of common stocks by the holder of promissory note | - | ( | ) | ( | ) | - | - | - | ||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | ||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| F-3 |
IONIX TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (continued)
(Unaudited)
| Preferred Stock | Common Stock | Additional | Accumulated Other | |||||||||||||||||||||||||||||||||
| Number of Shares | Amount | Number of Shares | Amount | Paid-in Capital | Retained Earnings | Comprehensive Income (loss) | Non-controlling interest | Total | ||||||||||||||||||||||||||||
| Balance at June 30, 2020 | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||
| Stock warrants issued with convertible notes | - | - | - | |||||||||||||||||||||||||||||||||
| Issuance of common stock for advisory services | - | - | - | |||||||||||||||||||||||||||||||||
| Issuance of common stock for conversion of convertible notes | - | |||||||||||||||||||||||||||||||||||
| Net income ( loss) | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ||||||||||||||||||||||||||||||||||
| Balance at September 30, 2020 | ( | ) | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for conversion of convertible notes | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for exercise of warrants | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for commitment shares for promissory note | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for commitment shares for private placement | - | |||||||||||||||||||||||||||||||||||
| Settlement of warrants in relation to extinguishment of debt | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Net income ( loss) | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ||||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | ( | ) | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for commitment shares for promissory note | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for commitment shares for private placement | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance at March 31, 2021 | ( | ) | ||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
IONIX TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Nine Months Ended | ||||||||
| March 31, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments required to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Deferred taxes | ( | ) | ||||||
| Change in fair value of derivative liability | ||||||||
| Loss (gain) on extinguishment of debt | ( | ) | ||||||
| Non-cash interest | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable - non-related parties | ||||||||
| Inventory | ( | ) | ||||||
| Advances to suppliers - non-related parties | ( | ) | ||||||
| Advances to suppliers - related parties | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ( | ) | ||||
| Advance from customers | ||||||||
| Accrued expenses and other current liabilities | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Acquisition of property, plant and equipment | ( | ) | ( | ) | ||||
| Acquisition of intangible assets | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Notes receivable | ( | ) | ||||||
| Proceeds from bank loans | ||||||||
| Repayment of bank loans | ( | ) | ( | ) | ||||
| Proceeds from issuance of promissory notes | ||||||||
| Repayment of promissory notes | ( | ) | ||||||
| Repayment of convertible notes payable | ( | ) | ||||||
| Proceeds from issuance of common stock for private placement | ||||||||
| Proceeds from (repayment of) loans from related parties | ( | ) | ||||||
| Proceeds from the Registered Capital Increase of Fangguan Electronics | ||||||||
| Net cash provided by (used in) financing activities | ||||||||
| Effect of exchange rate changes on cash | ||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for income tax | $ | $ | ||||||
| Cash paid for interests | $ | $ | ||||||
| Non-cash investing and financing activities | ||||||||
| Issuance of shares of common stock for conversion of convertible notes | $ | $ | ||||||
| Issuance of shares of common stock as commitment shares for promissory note | $ | $ | ||||||
| Issuance of shares of common stock for exercise of warrants | $ | $ | ||||||
| Issuance of shares of common stock as commitment shares for promissory note | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
IONIX TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31,2022
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS
Ionix Technology, Inc. (the “Company” or “Ionix”), formerly known as Cambridge Projects Inc., is a Nevada corporation that was formed on March 11, 2011. The Company,together with its wholly owned subsidiaries and an entity controlled through VIE agreements in China ( collectively referred to as the " Group") are principally engaged in the business of the high-end intelligent electronic equipment, which includes the furnace used in firing for lithium battery , the lithium battery packs,the portable power banks for electronic devices, LCM and LCD screens ,and in the provision of IT and solution-oriented services in China.
New subsidiaries
On February 7, 2021, the Board of Directors of the Company approved and ratified the incorporation of Shijirun (Yixing) Technology Co., Ltd. (“Shijirun”), a limited liability company formed under the laws of the Peoples Republic of China (PRC) on February 7, 2021. Well Best International Investment Limited, a limited liability company formed under the laws of Hong Kong Special Administrative Region (“Well Best”), and a wholly owned subsidiary of the Company, is the sole shareholder of Shijirun. As a result, Shijirun is an indirect, wholly-owned subsidiary of the Company. Shijirun will head up the Company’s advance into the new energy industry focusing on developing and producing high-end intelligent new energy equipment from Yixing City, Jiangsu Province, China.
On March 30, 2021, the Board of Directors of the Company approved and ratified the incorporation of Huixiang Energy Technology (Suzhou) Co., Ltd. (“Huixiang Energy”), a limited liability company formed under the laws of the Peoples Republic of China (PRC) on March 18, 2021. Well Best is the sole shareholder of Huixiang Energy. As a result, Huixiang Energy is an indirect, wholly-owned subsidiary of the Company. Huixiang Energy conducts research and development of next generation advanced battery technologies, manufacture and sales of relevant battery products, including the solid-state rechargeable lithium ion battery for next generation energy storage systems. Huixiang Energy also on the operation of battery packs, battery systems and electric vehicles sharing business with its own internet sharing platform relating to the electric vehicles (online EV hailing services) and its relevant batteries and battery systems. Huixiang Energy will operate in Suzhou City, Jiangsu Province, China.
Authorized share increase
On May 6, 2021, the Board of Directors
of the Company and the holders of the majority of issued and outstanding voting securities of the Company approved an amendment (the “Amendment”)
to the Articles of Incorporation of the Company to increase the authorized number of shares of
Acquisition
On December 27, 2018, the Company
entered into a Share Purchase Agreement (the “Purchase Agreement”) with Jialin Liang and Xuemei Jiang, each of whom are shareholders
of Changchun Fangguan Electronics Technology Co., Ltd. (“Fangguan Electronics”or the "VIE"). Pursuant to the terms
of the Purchase Agreement, the Shareholders of the VIE, who together own
| F-6 |
On December 24, 2021,
the Board of Directors of Fangguan Electronics and the holders of the majority of issued and outstanding voting securities of Fangguan
Electronics approved an amendment (the “Amendment”) to the Articles of Incorporation of Fangguan Electronics to increase the
registered capital (the “Registered Capital Increase”)of the
Accordingly,Jialin Liang, Xuemei
Jiang and Lingguan are deemed to be parties acting in concert and collectively own
| F-7 |
NOTE 2– BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Group’s audited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Basis of consolidation
The consolidated financial statements include
the accounts of Ionix, its wholly owned subsidiaries and an entity which the Company controls
The subsidiaries of ionix are as follows:
Well Best International Investment Limited (the wholly-owned subsidiary)
Welly Surplus International Limited (the wholly-owned subsidiary)
Shijirun (Yixing) Technology Co., Ltd (the wholly-owned subsidiary)
Huixiang Energy Technology (Suzhou) Co., Ltd (the wholly-owned subsidiary)
Changchun Fangguan Photoelectric Display Technology Co. Ltd (the wholly-owned subsidiary)
Dalian Shizhe New Energy Technology Co., Ltd (the wholly-owned subsidiary)
Shenzhen Baileqi Electronic Technology Co., Ltd (the wholly-owned subsidiary)
Lisite Science Technology (Shenzhen) Co., Ltd (the wholly-owned subsidiary)
Changchun Fangguan Electronics Technology Co., Ltd ( the VIE)
Noncontrolling Interests
The Group follows FASB ASC Topic 810, “Consolidation,” governing the accounting for and reporting of noncontrolling interests (“NCIs”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs (previously referred to as minority interests) be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially-owned consolidated subsidiary be allocated to NCIs even when such allocation might result in a deficit balance.
The net income (loss) attributed to NCIs was separately designated in the accompanying statements of comprehensive income (loss). Losses attributable to NCIs in a subsidiary may exceed an NCI’s interests in the subsidiary’s equity. The excess attributable to NCIs is attributed to those interests. NCIs shall continue to be attributed their share of losses even if that attribution results in a deficit NCI balance. The primary beneficiary receives 100% of the income and losses of the VIE as disclosed in Note 3, therefore no income or loss is allocated to NCI.
Use of Estimates
The Group’s consolidated financial statements have been prepared in accordance with US GAAP and this requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting period. The significant areas requiring the use of management estimates include, but are not limited to, the allowance for doubtful accounts receivable and advance to suppliers, the valuation of inventory, provision for staff benefit, the useful lives of property and equipment and intangible assets, the impairment of long-lived assets, recognition and measurement of deferred income taxes and valuation allowance for deferred tax assets. Although these estimates are based on management’s knowledge of current events and actions management may undertake in the future, actual results may ultimately differ from those estimates and such differences may be material to our consolidated financial statements.
Cash and cash equivalents
Cash consists of cash on hand and cash in bank. Cash equivalents represent investment securities that are short-term, have high credit quality and are highly liquid. Cash equivalents are carried at fair market value and consist primarily of money market funds.
| F-8 |
Accounts Receivable
Accounts receivable are recorded at the invoiced
amount and do not bear interest, which are due within contractual payment terms, generally 90 to 180 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 Group 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 Group will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to
make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions may
be taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against
the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Group does not
have any off-balance-sheet credit exposure related to its customers. As of March 31,2022 and June 30, 2021, the Company has accounts receivable
balance from non-related party of $
Inventories
Inventories consist of raw materials, working-in-process and finished goods. Inventories are valued at the lower of cost or net realizable value. The Group does determine cost on the basis of the weighted average method. The Group periodically reviews inventories for obsolescence and any inventories identified as obsolete are written down or written off. Although the Group does believe that the assumptions the Group uses to estimate inventory write-downs are reasonable, future changes in these assumptions could provide a significantly different result.
Advances to suppliers
Advances to suppliers represent prepayments for merchandise, which were purchased but had not been received. The balance of the advances to suppliers is reduced and reclassified to inventories when the raw materials are received and pass quality inspection.
Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated depreciation and any impairment. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use. Repairs and maintenance costs are normally expensed as incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalized as an additional cost of the asset.
When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in the statement of comprehensive income (loss) in the reporting period of disposition.
Depreciation is calculated on a straight-line basis over the estimated useful life of the assets after taking into account their respective estimated residual value. The estimated useful life of the assets is as follows:
| Buildings | – years |
| Machinery and equipment | – years |
| Office equipment | – years |
| Automobiles | years |
Intangible assets
Land use right is recorded as cost less accumulated amortization. Land use rights represent the prepayments for the use of the parcels of land in the PRC where the Group’s production facilities are located, and are charged to expense over their respective lease periods of years. According to the laws of the PRC, the government owns all of the land in the PRC. Enterprises or individuals are authorized to use the land only through land use rights granted by the PRC government for a certain period (usually 50 years).
| F-9 |
Purchased intangible assets are recognized and measured at fair value upon acquisition. Intangible assets acquired separately and with finite useful lives are carried at costs less accumulated amortization and any accumulated impairment losses. Amortization for intangible assets with finite useful lives is provided on a straight-line basis over their estimated useful lives. Alternatively, intangible assets with indefinite useful lives are carried at cost less any subsequent accumulated impairment losses. The estimated useful lives of the intangible assets are as follows:
| Land use right | years |
| Computer software | years |
Gains or losses arising from derecognition of the intangible asset are measured at the difference between the net disposal proceeds and the carrying amount of the assets and are recognized in the statement of comprehensive income (loss) when the asset is disposed.
Impairment of long-lived assets
In accordance with the provisions of ASC Topic 360, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as property, plant and equipment held and used by the Group are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.
Revenue recognition
The Group adopted the new accounting standard, ASC 606, Revenue from Contracts with Customers, and all the related amendments (new revenue standard) to all contracts using the modified retrospective method beginning on July 1, 2018. The adoption did not result in an adjustment to the retained earnings as of June 30, 2018. The comparative information was not restated and continued to be reported under the accounting standards in effect for those periods. The adoption of the new revenue standard has no impact on either reported sales to customers or net earnings.
The Group estimates return based on historical results, taking into consideration the type of customers, the type of transactions and the specifics of each arrangement.
Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Group expects to receive in exchange for those goods or services. The Group applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
| · | identify the contract with a customer; |
| · | identify the performance obligations in the contract; |
| · | determine the transaction price; |
| · | allocate the transaction price to performance obligations in the contract; and |
| · | recognize revenue as the performance obligation is satisfied. |
Under these criteria, for revenues from sale of products, the Group generally recognizes revenue when its products are delivered to customers in accordance with the written sales terms. The control of the products is transferred to the customer upon receipt of goods by the customer. For service revenue, the Group recognizes revenue when services are performed and accepted by customers.
| F-10 |
The following tables disaggregate the Revenue of the Group by major source for the three and nine months ended March 31,2022 and 2021, respectively:
| For the nine months ended March 31, | ||
| 2022 | 2021 | |
| Sales of LCM and LCD screens - Non-related parties |
$ |
$ |
| Sales of LCM and LCD screens - Related parties |
||
|
Sales of Lithume battery-related |
||
| Service contracts | ||
| Total | $ |
$ |
| For the Three Months ended March 31, | ||
| 2022 | 2021 | |
| Sales of LCM and LCD screens - Non-related parties |
$ |
$ |
| Sales of LCM and LCD screens - Related parties |
||
|
Sales of Lithume battery-related |
||
| Service contracts | ||
| Total | $ |
$ |
All the operating entities of the Group are domiciled in the PRC. All the Group’s revenues are derived in the PRC during the three and nine months ended March 31,2022 and 2021
| F-11 |
Cost of revenues
Cost of revenues includes cost of raw materials purchased, inbound freight cost, cost of direct labor, depreciation expense and other overhead. Write-down of inventory for lower of cost or net realizable value adjustments is also recorded in cost of revenues.
Related parties and transactions
The Group identifies related parties, and accounts for, discloses related party transactions in accordance with ASC 850, "Related Party Disclosures" and other relevant ASC standards.
Parties, which can be a corporation or individual, are considered to be related if the Group has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Corporations are also considered to be related if they are subject to common control or common significant influence.
Transactions between related parties commonly occurring in the normal course of business are considered to be related party transactions. Transactions between related parties are also considered to be related party transactions even though they may not be given accounting recognition. While ASC does not provide accounting or measurement guidance for such transactions, it requires their disclosure nonetheless.
Income taxes
Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and discloses in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
As of March 31,2022 and June 30, 2021, the Group did not have any significant unrecognized uncertain tax positions.
Comprehensive income (loss)
Comprehensive income (loss) is defined as the change in equity of a corporation during a period from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. Comprehensive income (loss) for the periods presented includes net income (loss), change in unrealized gains (losses) on marketable securities classified as available-for-sale (net of tax), foreign currency translation adjustments, and share of change in other comprehensive income of equity investments one quarter in arrears.
Leases
In February 2016, the FASB established Topic 842, Leases, by issuing Accounting Standards Update (ASU) No. 2016-02, which requires lessees to recognize leases on balance sheet and disclose key information about the leasing arrangements. The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months.
The new standard is effective for us on July 1, 2019, with early adoption permitted. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. The Group adopted the new standard on July 1, 2019 and use the effective date as our date of initial application. Consequently, financial information is not provided for the dates and periods before July 1, 2019. The new standard provides a number of optional expedients in transition. The Group elected the package of practical expedients which permits us not to reassess under the new standard the Group's prior conclusions about lease identification, lease classification and initial direct costs.
The new standard has no material effect on the consolidated financial statements of the Group as the Group does not have a lease with a term longer than 12 months as of June 30, 2021 (See Note 5).
| F-12 |
Basic earnings (losses) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted earnings (losses) per share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of incremental shares issuable upon exercise of stock options and warrants and conversion of convertible debt. Such potentially dilutive shares are excluded when the effect would be to reduce a net loss per share or increase a net income per share.
During the nine months ended March 31,2022
and 2021,the Company had outstanding convertible notes and warrants which represent and
During the three months ended March 31,2022 and 2021, the Company had outstanding convertible notes and warrants which represent and shares of commons stock. These shares of common stock were excluded from the computation of diluted earnings per share since their effect would have been antidilutive.
Foreign currencies translation
The reporting currency of the Company is the United States Dollar (“US$”). The Company’s subsidiaries in the People’s Republic of China (“PRC”) maintain their books and records in their local currency, the Renminbi Yuan (“RMB”), which is the functional currency as being the primary currency of the economic environment in which these entities operate.
In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not the US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. Stockholders’ equity is translated at historical rates. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statements of stockholders’ equity.
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statements of comprehensive income (loss).
The exchange rates used to translate amounts in RMB into U.S. Dollars for the purposes of preparing the consolidated financial statements are as follows:
| March 31,2022 | June 30, 2021 | |||||||
| Balance sheet items, except for equity accounts | ||||||||
|
Nine months ended March 31, |
||||||||
| 2022 | 2021 | |||||||
| Items in statements of comprehensive income (loss) and cash flows | ||||||||
Fair Value of Financial Instruments
The carrying value of the Group’s financial instruments: cash and cash equivalents, accounts receivable, inventory, prepayments and other receivables, accounts payable, income tax payable, other payables and accrued liabilities approximate at their fair values because of the short-term nature of these financial instruments.
The Group also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
Level 1: Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets;
Level 2: Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques (e.g. Black-Scholes Option-Pricing model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs; and
| F-13 |
Level 3: Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models.
Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
The Group has the derivative liabilities measured at fair value on a recurring basis which are valued at level 3 measurement (See Note 13).
Convertible Instruments
The Group evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”.
Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
The Group accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Group records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.
The Group accounts for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities.
Common Stock Purchase Warrants
The Group classifies as equity any contracts that require physical settlement or net-share settlement or provide a choice of net-cash settlement or settlement in the Company’s own shares (physical settlement or net-share settlement) provided that such contracts are indexed to the Company's own stock as defined in ASC 815-40 ("Contracts in Entity's Own Equity"). The Group classifies as assets or liabilities any contracts that require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside our control) or give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).
Recent accounting pronouncements
The Group considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued.
Fair Value Measurement. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements. Under the guidance, public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The guidance is effective for all entities for Calendar years beginning after December 15, 2019 and for interim periods within those Calendar years, but entities are permitted to early adopt either the entire standard or only the provisions that eliminate or modify the requirements. The Group is currently in the process of evaluating the impact of the adoption of this guidance on its consolidated financial statements.
| F-14 |
COVID-19
The Group’s operations are affected by the recent and ongoing outbreak of the coronavirus disease 2019 (COVID-19) which in March 2020, was declared a pandemic by the World Health Organization. The COVID-19 outbreak is causing lockdowns, travel restrictions, and closures of businesses. The Group’s business has been negatively impacted by the COVID-19 coronavirus outbreak to certain extent.
NOTE 3 - VARIABLE INTEREST ENTITY
The VIE contractual arrangements
On December 27, 2018, the Company entered into
VIE agreements with two shareholders of Fangguan Electronics to control
The transaction was accounted for as a business combination using the acquisition method of accounting. The assets, liabilities and the operations of Fangguan Electronics subsequent to the acquisition date were included in the Group’s consolidated financial statements.
Through power of attorney, equity interest purchase agreement, and equity interest pledge agreement, 95.14% of the voting rights of Fangguan Electronics’ shareholders have been transferred to the Company so that the Company has effective control over Fangguan Electronics and has the power to direct the activities of Fangguan Electronics that most significantly impacts the Group's economic performance.
Through business operation agreement with the Shareholders of Fangguan Electronics, the Company shall direct the business operations of Fangguan Electronics, including, but not limited to, adopting corporate policy regarding daily operations, financial management, and employment, and appointment of directors and senior officers of Fangguan Electronics.
Through the exclusive technical support service agreement with the shareholders of Fangguan Electronics, the Company together with the relevant subsidiaries, shall provide Fangguan Electronics with necessary technical support and assistance as the exclusive provider. And at the request of the Company, Fangguan Electronics shall pay the performance fee, the depreciation and the service fee to the Company. The performance fee shall be equivalent to 5% of the total revenue of Fangguan Electronicsin any Calendar year. The depreciation amount on equipment shall be determined by accounting rules of China. The Company has the right to set and revise annually this service fee unilaterally with reference to the performance of Fangguan Electronics.
The service fee that the Company is entitled to earn shall be the total business incomes of the whole year minus performance fee and equipment depreciation. This agreement allows the Company to collect 100% of the net profits of Fangguan Electronics. Except for technical support, the Company and its subsidiaries did not provide, nor does it intend to provide, any financial or other support either explicitly or implicitly during the periods presented to its variable interest entity.
If facts and circumstances change such that the conclusion to consolidate the Fangguan Electronics has changed, the Group shall disclose the primary factors that caused the change and the effect on the Group’s financial statements in the periods when the change occurs.
There are no restrictions on the consolidated Fangguan Electronics’s assets and on the settlement of its liabilities and all carrying amounts of Fangguan Electronics’s assets and liabilities are consolidated with the the financial statements of the Company and its subsidiaries. In addition, the net income of Fangguan Electronics after it became the VIE of the Company is free of restrictions for payment of dividends to the shareholders of the Company.
| F-15 |
On December 24, 2021, the Board of Directors of Fangguan Electronics and the holders of the majority of issued and outstanding voting securities of Fangguan Electronics approved an amendment (the “Amendment”) to the Articles of Incorporation of Fangguan Electronics to increase the registered capital (the “Registered Capital Increase”)of the VIE from RMB50 million (approximately $7.2 million) to RMB55 million(approximately $8.0 million). Fangguan Electronics's new institutional shareholder , namely Changchun Lingguan Investment Partnership ("Lingguan"), whose ultimate beneficial owners and controlling shareholders are Jialin Liang and Xuemei Jiang as both of whom own 63% of the ownership rights of Lingguan ( while all of the other sharehders are employee of the VIE), made cash contribution of RMB 6.0 million (approximately $0.78 million) and RMB 1.0 million (approximately $0.16 million ) to the registered capital and the additional paid in capital respectively of Fangguan Electronics on December 28,2021. Lingguan is limited partnership by structure and private equity fund by nature. And Lingguan was established for the sole purpose of the Registered Capital Increase of Fangguan Electronics.Xuemei Jiang,has acted as the the executive partner of Lingguan to represent Lingguan and has been in charge with the daily operation of Lingguan.She is the internal decision-maker of Lingguan and has the right to decide all the investment and divestment of the relevant investment of Lingguan.
Accordingly,Jialin Liang, Xuemei Jiang and Lingguan are deemed to be parties acting in concert and collectively own 94.55% of the ownership rights in Fangguan Electronics ( prior to the Registered Capital Increase, Jialin Liang ever transferred his ownship right at the amount of RMB 2.5 million (approximately $0.4 million)) of Fangguan Electronics to a third party individual ). Therefore all of the Board of Directors of the Company , Jialin Liang and Xuemei Jiang have concluded that all of the VIE Agreements remain valid.
| F-16 |
Assets of Fangguan Electronics that are collateralized or pledged are not restricted to settle Fangguan Electronics' own obligations. The creditors of Fangguan Electronics do not have recourse to the general credit of the Company and its subsidiaries.
Risks associated with the VIE structure
The Company believes that the contractual arrangements with the VIE and the Shareholders of VIE are in compliance with PRC laws and regulations and are legally enforceable. However, uncertainties in the PRC legal system could limit the Company’s ability to enforce the contractual arrangements. If the legal structure and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government could:
| · | discontinue or restrict the operations of any related-party transactions between the Company’s PRC subsidiary and its VIE; |
| · | limit the Group’s business expansion in China by way of entering into contractual arrangements. |
| · | impose fines or other requirements with which the Company’s PRC subsidiary and its VIE may not be able to comply. |
| · | require the Company or the Company’s PRC subsidiary and its VIE to restructure the relevant ownership structure or operations; or |
| · | restrict or prohibit the Group’s use of the proceeds from public offering to finance the Group’s business and operations in China. |
The Group’s ability to conduct its business through its VIE may be negatively affected if the PRC government were to carry out any of the aforementioned actions. As a result, the Company may not be able to consolidate its VIE in its consolidated financial statements as it may lose the ability to exert effective control over its VIE and its respective shareholders and it may lose the ability to receive economic benefits from its VIE. The Company, however, does not believe such actions would result in the liquidation or dissolution of the Company, its PRC subsidiaries and its VIE. There has been no change in facts and circumstances to consolidate the VIE. The following financial statement amounts and balances of its VIE were included in the accompanying consolidated financial statements after elimination of intercompany transactions and balances:
| Balance as of March 31,2022 | Balance as of June 30, 2021 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Notes receivable | ||||||||
| Accounts receivable - non-related parties | ||||||||
| Inventory | ||||||||
| Advances to suppliers - non-related parties | - | |||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Deferred tax assets | ||||||||
| Total Assets | $ | $ | ||||||
| Short-term bank loan | $ | $ | ||||||
| Accounts payable | ||||||||
| Advance from customers | ||||||||
| Due to related parties | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | $ | $ | ||||||
| F-17 |
Schedule of condensed income statement and cash flow statement of its VIE are as follows:
| For the nine months ended March 31 , | ||
| 2022 | 2021 | |
| Revenue (*) | $ |
$ |
| Net (loss) income | （ |
( |
| Net cash provided by (used in) operating activities |
( |
( |
| Net cash used in investing activities |
( |
( |
| Net cash provided by financing activities |
（ | |
| (*) |
During the three and nine months ended March 31,2022 and 2021, the VIE did not have any material related party transactions with other subsidiaries of the Company.
Under the contractual arrangements with the VIE, the Company has the power to direct activities of the VIE and can have assets transferred out of the VIE under its control. Therefore, the Company considers that there is no asset in any of the VIE that can be used only to settle obligations of the VIE, except for registered capital and PRC statutory reserves. As all VIE are incorporated as limited liability companies under the Company Law of the PRC, creditors of the VIE do not have recourse to the general credit of the Company or its subsidiaries for any of the liabilities of the VIE.
| F-18 |
Currently, there is no contractual arrangement which requires the Company or its subsidiaries to provide additional financial support to the VIE.
NOTE 4 - INVENTORIES
Inventories are stated at the lower of cost (determined using the weighted average cost) or net realizable value. Inventories consist of the following:
Balance as of March 31,2022 | Balance as of June 30, 2021 | |||||||
| Raw materials | $ | $ | ||||||
| Work-in-process | ||||||||
| Finished goods | ||||||||
| Total Inventories | $ | $ | ||||||
The Group recorded no inventory markdown for the nine months ended March 31,2022 and 2021.
NOTE 5- OPERATING LEASE
For the nine months ended March 31,2022, the Group had one real estate operating leases for office and warehouse under the terms of one year.
Lisite Science Technology (Shenzhen) Co., Ltd
("Lisite Science") leases office and warehouse space from Shenzhen Keenest Technology Co., Ltd. (“Keenest”), a related
party, with annual rent of approximately $
The Group made an accounting policy election not to recognize lease assets and liabilities for the leases listed above as all lease terms are 12 months or shorter.
NOTE 6 – PROPERTY, PLANT AND EQUIPMENT, NET
The components of property, plant and equipment were as follows:
| March 31,2022 | June 30, 2021 | |||||||
| Buildings | $ | $ | ||||||
| Machinery and equipment | ||||||||
| Office equipment | ||||||||
| Automobiles | ||||||||
| Subtotal | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | $ | $ | ||||||
Depreciation expenses related to property, plant
and equipment were $
Depreciation expenses related to property, plant
and equipment were $
As of March 31,2022 and June 30, 2021, buildings were pledged as collateral for bank loans (See Note 8).
| F-19 |
NOTE 7– INTANGIBLE ASSETS, NET
Intangible assets consist of the following:
| March 31,2022 | June 30, 2021 | |||||||
| Land use right | $ | $ | ||||||
| Computer software | ||||||||
| Subtotal | ||||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
Amortization expenses related to intangible assets
were $
Amortization expenses related to intangible assets
were $
Fangguan Electronics acquired the land use right from the local government in August 2012 which expires on August 15, 2062. As of March 31,2022 and June 30, 2021, land use right was pledged as collateral for bank loans (See Note 8).
NOTE 8 – SHORT-TERM BANK LOAN
The Company’s short-term bank loans consist of the following:
| March 31,2022 | June 30, 2021 | |||||||||||
| Loan payable to Industrial Bank, due October 2021 | (2 | ) | $ | | $ | |||||||
| Loan payable to Industrial Bank, due July 2022 | (3 | ) | | |||||||||
| Loan payable to Industrial Bank, due July 2022 | (4 | ) | - | |||||||||
| Loan payable to Industrial Bank, due August 2021 | (1 | ) | | |||||||||
| oan payable to Industrial Bank, due October 2022 | (5 | ) | | |||||||||
| Total | $ | $ | ||||||||||
| (1) | During August 2020, Fangguan Electronics issued a one-year commercial acceptance bill with amount of approximately US$556,508 (RMB3,595,096) and maturity date at August 6, 2021. |
During September 2020, Fangguan Electronics
issued a six-month commercial acceptance bill with amount of approximately US$
| (2) | During April 2021, Fangguan Electronics issued a six-month commercial acceptance bill with amount of approximately
US$ |
| (3) | On July 28, 2021, Fangguan Electronics entered into a short-term loan agreement with Industrial Bank to
borrow approximately US$ |
| F-20 |
| (4) | On July 28, 2021, Fangguan Electronics entered into a short-term loan agreement with Industrial Bank to borrow approximately US$654,468(RMB4,154,692) for a year until July 27, 2022 with annual interest rate of 3.85%. The borrowing was collateralized by the Fangguan Electronics’s buildings and land use right. In addition, the borrowing was guaranteed by the Company’s shareholder and CEO of Fangguan Electronics, Mr. Jialin Liang, and his wife Ms. Dongjiao Su. |
| (5) | On October 21, 2021, Fangguan Electronics entered into a short-term loan agreement with Industrial Bank
to borrow approximately US$ |
| F-21 |
NOTE 9 - STOCKHOLDERS' EQUITY
Stock Issued as Commitment Shares for Promissory Note
On July 5, 2021, the Company issued a self-amortization
promissory note to FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC in the aggregate principal amount of $
On December 29, 2021, the Company issued
a self-amortization promissory note to Talos Victory Fund, LLC,in the aggregate principal amount of $
On January 3, 2022, the Company issued a self-amortization
promissory note to Mast Hill Fund, L.P.,in the aggregate principal amount of $
On February 17, 2022, the Company issued a self-amortization promissory
note to Blue Lake Partners, LLC in the aggregate principal amount of $
| F-22 |
Commitment Shares returned to the Company
On December 21 2021,the total of 1,119,402 shares of common stock which were previously recorded at par as the Second Commitment Shares related to the promissory note issued to Labrys Fund, L.P on December 21, 2020, were returned to the Company’s treasury because this promissory note was already fully repaid and satisfied prior to the maturity date.(See Note 14)
On January 10, 2022, a total of 1,042,000 shares of common stock which were previously recorded at par as the Second Commitment Shares related to the promissory note issued to Labrys Fund, L.P on March 10, 2021, were returned to the Company’s treasury because this promissory note was already fully repaid and satisfied prior to the maturity date.(See Note 14)
Stock Issued for Private Placement
On October 4, 2021, the Company issued a total
of restricted shares of common stock to 12 individual subscribers for an aggregate purchase price of $
On November 13, 2021, the Company and individual subscribers agreed to a voluntary unwinding of the forementioned transaction related to the subscription and purchase of an aggregate 29,106,000 shares. The Company entered into cancellation agreements with each individual pursuant to which all funds were returned to the investors and all shares were returned to our transfer agent for cancellation. Immediately prior to the decision, the Registration Statement related to the shares was voluntarily withdrawn by the Company.
On December 15, 2021, the Company issued a total
of restricted shares of common stock to a Chinese citizen subscriber for an aggregate purchase price of $
| F-23 |
NOTE 10 - RELATED PARTY TRANSACTIONS AND BALANCES
Purchase from related party
During the three and nine months ended March 31,2022 and 2021, the Group did not purchase from any related party.
Advances to suppliers - related parties
Lisite Science made advances of $
Sales to related party
During the three and nine months ended March 31,2022 and 2021, the Group did not sell to any related party.
| F-24 |
Lease from related party
Lisite Science leases office and warehouse space
from Keenest, a related party, with annual rent of approximately $
Baileqi Electronic leases office and warehouse
space from Shenzhen Baileqi S&T, a related party, with monthly rent of approximately $
Due to related parties
Due to related parties represents the certain advances to the Group by related parties. The amounts are non-interest bearing, unsecured and due on demand.
| March 31,2022 | June 30, 2021 | ||||||||||||
| Ben Wong | (1 | ) | $ | $ | |||||||||
| Yubao Liu | (2 | ) | |||||||||||
| Xin Sui | (3 | ) | |||||||||||
| Baozhen Deng | (4 | ) | |||||||||||
| Yunqiang Xie | (13) | - | |||||||||||
| Jialin Liang | (6 | )(11) | |||||||||||
| Xuemei Jiang | (7 | )(10) | |||||||||||
| Kou Yue | (12) | - | |||||||||||
| Shikui Zhang | (8 | ) | |||||||||||
| Biao Shang | (5 | ) | |||||||||||
| Changyong Yang | (9 | ) | |||||||||||
| $ | $ | ||||||||||||
| (1) |
| (2) |
| (3) |
| (4) |
| (5) |
| (6) |
| (7) |
| (8) |
| (9) |
| (10) |
| F-25 |
| (11) |
| (12) |
| (13) |
| F-26 |
During the nine months ended March 31,2022, the refund to Mr. Jialin
Liang by Fangguan Electronics was $
During the nine months ended March 31,2022, setting
off the further advance to the Company by Mr Liu, the net refund by the Company to Mr Liu was approximately $
During the nine months ended March 31,2022,
Baozhen Deng advanced approximately $
During the nine months ended March 31, 2021,
Yubao Liu advanced $
During the nine months ended March 31, 2021,
Baileqi Electronic refunded $
On September 23, 2020, Jialin Liang entered into
a short-term loan agreement with Bank of Communications to borrow an individual loan of approximately US$
NOTE 11– CONCENTRATION
Major customers
Customers who accounted for 10% or more of the Group’s revenues (goods sold and services) and its outstanding balance of accounts receivable are presented as follows:
| For the nine months ended March 31,2022 | As of March 31,2022 | |||||||||||||||
| Revenue | Percentage of total revenue | Accounts receivable | Percentage of total accounts receivable | |||||||||||||
| Customer A | $ | % | $ | % | ||||||||||||
| Customer B | % | % | ||||||||||||||
| Total | $ | % | $ | % | ||||||||||||
| For the nine months ended March 31,2021 | As of March 31,2021 | |||||||||||||||
| Revenue | Percentage of revenue | Accounts receivable | Percentage of accounts receivable | |||||||||||||
| Customer A | $ | % | $ | % | ||||||||||||
| Customer B | % | | - | % | ||||||||||||
| Customer C | % | % | ||||||||||||||
| Total | $ | % | $ | % | ||||||||||||
| F-27 |
| For the three months ended March 31,2022 | As of March 31,2022 | |||||||||||||||
| Revenue | Percentage of total revenue | Accounts receivable | Percentage of total accounts receivable | |||||||||||||
| Customer A | $ | % | $ | % | ||||||||||||
| Total | $ | % | $ | % | ||||||||||||
| For the three months ended March 31,2021 | As of March 31,2021 | |||||||||||||||
| Revenue | Percentage of revenue | Accounts receivable | Percentage of accounts receivable | |||||||||||||
| Customer A | $ | % | $ | % | ||||||||||||
| Customer B | % | | - | % | ||||||||||||
| Customer C | ||||||||||||||||