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YBCC, Inc. SEC Filing Form 10-Q Quartely report 3/2017, submited: 2017-08-22

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Form 10-Q

The SEC form 10-Q is a comprehensive report of a company's performance that must be submitted quarterly by all public companies to the Securities and Exchange Commission. In the 10-Q, firms are required to disclose relevant information regarding their financial position. The form must be submitted on time, and the information should be available to all interested parties.

The 10-Q is due 35 days (it used to be 45 days) after each of the first three fiscal quarters. There is no filing after the fourth quarter because that is when the 10-K is filed.

10-Q 1 ybcc_10q-063017.htm FORM 10-Q

 

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended June 30, 2017 or

 

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

 

For the transition period from _____________ to _____________

 

Commission file number 0-21384

 

YBCC, INC.

(Exact Name of Registrant as Specified in its Charter)

 

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

 

17800 Castleton Street, Suite 386, City of Industry, California

(Address of Principal Executive Offices)

 

91748

(Zip Code)

 

(626) 213-3945

(Registrant’s Telephone Number, Including Area Code)

 

___________________________________________

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

 

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

x Yes          o No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 Exchange Act Rule 12b-2 of the Exchange Act).

o Yes       x No

 

The number of shares outstanding of the Issuer’s common stock as of August 21, 2017 was 9,894,214.

 

 

 

 

   

 

 

YBCC, Inc.

and Subsidiaries

  

FORM 10-Q for the Quarter Ended June 30, 2017

 

INDEX

 

    Page  
PART I - FINANCIAL INFORMATION
             
Item 1.   Financial Statements     3  
             
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations     17  
             
Item 3.   Quantitative and Qualitative Disclosures About Market Risk     21  
             
Item 4.   Controls and Procedures     21  
             
PART II - OTHER INFORMATION
             
Item 1.   Legal Proceedings     22  
             
Item 1A.   Risk Factors        
             
Item 2.   Unregistered Sale of Equity Securities and Use of Proceeds     22  
             
Item 3.     Defaults Upon Senior Securities     22  
             
Item 4.   Mine Safety Disclosures     22  
             
Item 5.   Other Information     22  
             
Item 6.   Exhibits     23  
             
Signatures     24  

 

 2 
 

 

PART I - FINANCIAL INFORMATION

 

YBCC, INC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

   June 30, 2017
(unaudited)
   December 31, 2016
(restated)
 
Assets        
Current assets          
Cash  $27,768   $339,147 
Accounts receivable - net   145,769    149,765 
Other receivable   92,379    102,122 
Advance to suppliers   135,563    94,799 
Prepaid expenses   34,021    40,858 
Inventory,net   212,360    149,844 
Total current assets   647,860    876,535 
           
Property, plant, and equipment - net   2,502,590    2,518,243 
           
Intangible assets - net   704,350    695,109 
           
Other assets          
Deferred cost       14,792 
Deposits   11,988    11,635 
Total other assets   11,988    26,427 
           
Total assets  $3,866,788   $4,116,314 
           
           
Liabilities and Equity          
           
Current liabilities          
Accounts payable  $91,231   $69,606 
Accounts payable -related party   72,242     
Accrued expenses   67,979    71,395 
Customer deposits   37,839    22,401 
Customer deposits-related party       34,378 
Taxes payable   77,063    60,963 
Other payable   345,569    399,052 
Loan Payable-unrelated party   188,840    87,858 
Other payable-related party   2,469,364    2,559,476 
Total current liabilities   3,350,127    3,305,129 
Total liabilities   3,350,127    3,305,129 
           
Equity          
Convertible preferred shares: $0.0001 par value, 50,000,000 shares authorized, 974,370 series A issued and outstanding as of June 30, 2017 and December 31, 2016, respectively  $98   $98 
Common stock: $0.001 par value, 900,000,000 shares authorized, 9,894,214 and 6,894,000 shares issued and outstanding of June 30, 2017 and December 31, 2016, respectively   9,894    6,894 
Additional paid in capital   1,162,328    865,328 
Subscription received in advance       300,000 
Accumulated foreign currency exchange loss   (49,694)   (56,689)
Accumulated deficit   (868,074)   (608,739)
Total YBCC, Inc. stockholders' equity   254,552    506,892 
Non-controlling interest   262,109    304,293 
Total equity   516,661    811,185 
Total liabilities and equity  $3,866,788   $4,116,314 

 

 

 

 

 

 

 3 
 

 

 

YBCC, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE THREE MONTH AND SIX MONTH PERIOD ENDED JUNE 30, 2017 AND 2016

(UNAUDITED)

 

   For the Three Months Ended
June 30,
   For the Six Months Ended
June 30,
 
   2017   2016   2017   2016 
Sales revenue  $606,693   $159,541   $886,534   $321,292 
                     
Cost of goods sold   562,699    134,306    840,716    283,407 
                     
Gross profit   43,994    25,235    45,818    37,885 
                     
Operating expenses                    
Selling expenses   5,120    3,357    13,122    8,689 
General & administrative expenses   162,604    125,379    344,001    214,072 
Total operating expenses   167,724    128,736    357,123    222,761 
                     
Loss from operation   (123,730)   (103,501)   (311,305)   (184,876)
                     
Other income (expenses)                    
Other income (expenses)   (6)   3,254    2,964    15,320 
Interest income (expense)   67    (23,656)   102    (50,391)
Total other income (expenses)   61    (20,402)   3,066    (35,071)
                     
Loss before income taxes   (123,669)   (123,903)   (308,239)   (219,947)
Provision for income taxes                
                     
Net Loss   (123,669)   (123,903)   (308,239)   (219,947)
                     
Less: net loss attributable to non-controlling interest   (13,077)   (60,713)   (48,905)   (107,774)
Net loss attributable to the Company  $(110,593)  $(63,191)  $(259,335)  $(112,174)
                     
Net loss  $(123,669)  $(123,903)  $(308,239)  $(219,947)
Other comprehensive loss                    
Foreign currency translation gain (loss)   8,315    (23,853)   13,716    (20,305)
Comprehensive loss   (115,354)   (147,756)   (294,523)   (240,252)
                     
Less: comprehensive gain (loss) attributable to non-controlling interest   4,074    (11,688)   6,721    (9,949)
Net comprehensive loss to the Company  $(119,428)  $(136,068)  $(301,244)  $(230,303)
                     
                     
Loss per weighted average share of common stock - basic and diluted  $(0.01)  $(0.03)  $(0.03)  $(0.05)
                     
Weighted average share outstanding - basic & diluted   9,894,214    4,504,214    9,861,065    4,504,214 

 

 

 

 

 

 

 4 
 

 

 

YBCC, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS PERIOD ENDED JUNE 30, 2017 and 2016

(UNAUDITED)

 

   For the Six Months Ended June 30, 
   2017   2016 
         
Cash flows from operating activities:          
Net Loss   (308,239)   (219,947)
           
Adjustment to reconcile net loss to net cash provided by operating activities:          
Depreciation   98,708    102,547 
Amortization   7,443    7,826 
           
Changes in operating assets and liabilities:          
Accounts receivable   7,510    (3,568)
Other receivable   12,044    (66,637)
Advance to suppliers   (37,957)   (35,250)
Prepaid expenses   6,882    1,723 
Inventory   (58,107)   (58,802)
Deposits   (146)    
Accounts payable   3,194    334,812 
Accounts payable -related party   71,272     
Accrued expenses   12,773    10,775 
Customer deposit   14,697    (40,282)
Customer deposit-related party   (34,736)    
Tax payable   14,431    18,020 
Other payable   (62,270)   66,186 
Cash provided by (used in) operating activities   (252,501)   117,403 
           
Cash flows from investing activities:          
Deferred cost   14,946    160,371 
Purchase of property and equipment   (23,387)   (488,122)
Net cash used in investing activities   (8,441)   (327,751)
           
Cash flows from financing activities:          
Advance from (repayment to) related party   (148,426)   1,308,571 
Loan from unrelated party   97,532     
Repayment of loan       (1,071,126)
Cash provided by (used in) financing activities   (50,894)   237,445 
           
Effects of currency translation on cash   460    (1,001)
           
Net increase (decrease) in cash   (311,379)   26,095 
Cash at beginning of period   339,147    21,747 
Cash at end of period  $27,768   $47,842 
           
Supplementary Disclosures of Cash Flow          
Cash paid during the year for:          
Income taxes  $   $ 
Interest  $   $50,391 
           
Non-cash investing and financing activities:          
Issuance of common stock for subscription received previously  $300,000   $ 

 

 

 

 5 

 

 

 

ybcc, Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

 

NOTE 1 - ORGANIZATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization and Operations – YBCC, Inc., (The “Company” or “YBAO”), formerly known as International Packaging and Logistic Group, Inc., a Nevada corporation, was originally incorporated on June 2, 1986, in the state of Delaware. On April 17, 2008, the Company redomiciled form the State of Delaware to the State of Nevada.

 

On July 2, 2007, the Company through its wholly-owned subsidiary, YesRx.com (“YesRx”) acquired all the outstanding shares of H&H Glass, Inc. (“H&H Glass”), in exchange for 3,915,000 shares of its common stock in a reverse triangular merger.

 

On May 15, 2016, the Company and Xiuhua Song (the “Purchaser”) entered into a Stock Purchase Agreement (the “Purchase Agreement”), pursuant to which IPLO (the “Seller”) would sell to the Purchaser, and the Purchaser will purchase from the Seller, an aggregate of 3,915,000 newly issued shares of IPLO Common Stock (the “Shares”), which Shares represented 87% of the issued and outstanding shares of common stock. On July 1, 2016, this transaction was completed.

 

On July 1, 2016, Standard Resources Ltd. (“Standard”), previously IPLO’s majority stockholder, and IPLO entered into a share purchase agreement (“H&H Vend Out”) whereby Standard would cancel 3,915,000 shares of IPLO common stock held by it in exchange for all of the outstanding shares of H&H Glass. The H&H Glass Vend Out was completed on August 31, 2016.

 

On July 1, 2016, the Company executed a Share Exchange Agreement (“Exchange Agreement”) by and among Yibaoccyb Limited, a British Virgin Islands limited liability company (“Yibaoccyb”), and the stockholders of 51% of Yibaoccyb’s common stock (the “Yibaoccyb Shareholders”), on the one hand, and the Company, on the other hand. Yibaoccyb owns 100% of YibaoConfucian Co., Ltd. (“YibaoHK”), a Hong Kong company. YibaoHK will own 100% of Shenzhen Confucian Biologics Co. Ltd. (yet to be formed, “Yibao”), which will be a wholly foreign-owned enterprise (“WFOE”) under the laws of the Peoples’ Republic of China (“PRC” or “China”). On August 31, 2016, YibaoHK entered into a series of contractual arrangements with Shandong Confucian Biologics Co., Ltd. (“Confucian”) which is a limited liability company headquartered in, and organized under the laws of, the PRC. The contractual arrangements are discussed below.

 

The Exchange Agreement was completed on August 31, 2016 concurrent with the H&H Vend Out. The Company issued 2,040,000 shares of the Company’s common stock (the “IPLO Shares”) to the Yibaoccyb Shareholders in exchange for 51% of the common stock of Yibaoccyb.

 

On December 22, 2016, the Company amended its Certificate of Incorporation (the “Amendment”). As a result of the Amendment, the Company’s corporate name was changed from International Packaging and Logistics Group, Inc. to YBCC, Inc.

 

Yibaoccyb is a limited liability company incorporated under the laws of the British Virgin Islands on May 30, 2016. Other than all the issued and outstanding shares of YibaoHK, Yibaoccyb has no other assets or operations.

 

YibaoHK is a limited liability company incorporated under the laws of the Hong Kong on June 15, 2016, which was formed by Yibaoccyb.

 

Confucian was founded on October 31, 2012. Confucian is in the Food Industrial Park inside the economic development Zone of JinXiang County, Jining City in the province of Shandong in China.

 

Confucian possesses manufacturing permits for food product, hygienic products, sanitary products, and health products. The Company's main business includes research and development of chondroitin and garlic oil; trading, cold storage, and pretreating of garlic, fruit, and vegetables products; trading of chemical products (excluding hazardous chemicals); import and export of goods and technology (excluding those restricted by China government); and, the manufacturing and sale of health products including powder, granules, tablets, hard capsule, soft capsule products.

 

 

 

 6 

 

 

Details of the Company’s structure as of June 30, 2017 is as follows:

 

 

Reverse Merger Accounting – Since YBCC and Yibaoccyb were entities under Mrs. Song’s common control prior to the share exchange, the transaction was accounted for as a restructuring transaction in accordance with generally accepted accounting principles in the United States ("GAAP"). YBCC has recast prior period unaudited consolidated financial statements to reflect the conveyance of Yibaoccyb’s common shares as if the restructuring transaction had occurred as of the earliest date of the unaudited consolidated financial statements.

 

Basis of Accounting and Presentation - The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

 

Principles of Consolidation - The accompanying unaudited consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America. Confucian’s functional currency is Chinese Yuan (CNY), however, the accompanying unaudited consolidated financial statements have been re-measured and presented in United States Dollars ($).

 

The unaudited consolidated financial statements include the accounts of YBCC and its subsidiaries. The Company’s subsidiaries include 51% of Yibaoccyb, YibaoHK and Confucian, of which 49% of Yibaoccyb’s consolidated operating results was shown in non-controlling interest on the consolidated balance sheets.

 

Intercompany accounts and transactions have been eliminated upon consolidation.

 

 

 

 7 

 

 

Use of Estimates - The preparation of unaudited consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimate and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The most significant estimates reflected in the consolidated financial statements include allowance for doubtful accounts, allowance for inventory, depreciation, useful lives of property and equipment, deferred income taxes, useful life of intangible assets, and contingencies. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the unaudited consolidated financial statements in the period they are determined to be necessary.

 

Cash and Cash Equivalents – For purpose of the unaudited consolidated statements of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of 90 days or less to be cash equivalents.

 

Accounts Receivable - The Company extends credit to its customers. Accounts receivable was recorded at the contract amount after deduction of trade discounts and, allowances, if any, and do not bear interest. The allowance for doubtful accounts, when necessary, is the Company’s best estimate of the amount of probable credit losses from accounts receivable. The Company determines the allowance based on historical write-off experience, customer specific facts and economic conditions.

 

As of June 30, 2017 and December 31, 2016, accounts receivable were $145,769 and $149,765, respectively. The Company believes that its accounts receivables are fully collectable and determined that an allowance for doubtful accounts was not necessary.

 

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.

 

Inventories - Inventory is valued at the lower of cost or market. Cost is determined using first-in, first-out method.

 

Inventory, comprised principally of finished goods, raw material and packaging material, are valued at the lower of cost or market.

 

   June 30,
2017
   December 31,
2016
 
Finished goods  $70,730   $7,098 
Work in progress       106,934 
Raw materials   101,642    20,457 
Packaging material   38,033    15,088 
Supplies   1,955    267 
Total  $212,360   $149,844 

  

The Company periodically estimates an inventory allowance for estimated unmarketable inventories. Inventory amounts are reported net of such allowances, if any. There were no allowances for inventory as of June 30, 2017 and December 31, 2016.

 

Property, Plant and Equipment – Property, plant, and equipment are stated at cost less accumulated depreciation. The costs of a constructed asset are accumulated in the account Construction-in-Progress until the asset is placed into service. When the asset is completed and placed into service, the account Construction-in-Progress will be credited for the accumulated costs of the asset and will be debited to the appropriate Property, Plant and Equipment account. Depreciation begins after the asset has been placed into service.

 

Expenditures for maintenance and repairs are charged to operations; major expenditures for renewals and betterments are capitalized. Assets that are still kept in service after reaching the end of their estimated useful lives are depreciated over the estimated useful life of their residual value. Gain or loss on disposal of property, plant, and equipment is recognized as non-operating income or expenses.

 

 

 

 8 

 

 

Depreciation is computed by applying the following methods and estimated lives:

 

Category  Estimated Life   Method
Manufacturing equipment   10   Straight Line
Office equipment   5   Straight Line
Buildings   20   Straight Line

 

Intangible Assets - Land use rights represent the exclusive right to occupy and use a piece of land in the PRC during the contractual term of the land use right. Land use rights are carried at cost and charged to expense on a straight-line basis over the respective periods of the rights of 50 years or the remaining period of the rights upon acquisition.

 

Non-Controlling Interest – The Company accounted for its non-controlling interest of 49% in Yibaoccyb as a separate component of equity. In addition, net loss, and components of other comprehensive income are attributed to both the Company and non-controlling interest.

 

Revenue Recognition - The Company recognizes product revenue in accordance with ASC 605. ASC 605 requires that four basic criteria must be met before revenue can be recognized: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price paid by the customer is fixed or determinable and (iv) collection of the resulting account receivable is reasonably assured. The Company recognizes revenue for product sales upon transfer of title to the customer. Customer purchase orders and/or contracts are generally used to determine the existence of an arrangement. Shipping documents and terms and the completion of any customer acceptance requirements, when applicable, are used to verify product delivery. The Company assesses whether a price is fixed or determinable based upon the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. The Company has no product returns or sales discounts and allowances because goods delivered and accepted by customers are normally not returnable.

 

Cost of goods sold- Cost of goods sold includes cost of inventory sold during the period, net of discounts and inventory allowances, freight and shipping costs, warranty and rework costs, and sales tax.

 

Impairment of Long-Lived Assets – The Company applies FASB ASC 360, “Property, Plant and Equipment,” which addresses the financial accounting and reporting for the recognition and measurement of impairment losses for long-lived assets. In accordance with ASC 360, long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company will recognize the impairment of long-lived assets in the event the net book value of such assets exceeds the future undiscounted cash flows attributable to those assets. There is no impairment of our long-lived assets for the six months ended June 30, 2017 and 2016.

 

Income Taxes – The Company adopts FASB ASC Topic 740, "Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

In accordance with ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB ASC Topic 740”, which requires income tax positions to meet a more-likely-than-not recognition threshold to be recognized in the financial statements. Tax positions that previously failed to meet the more-likely-than-not threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. As of June 30, 2017, and December 31, 2016, management considered that the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.

 

 

 

 9 

 

 

The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations themselves are subject to change because of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings. Therefore, the actual liability may be materially different from our estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities or deferred tax asset valuation allowance.

 

The Company has made a comprehensive review of its portfolio of tax positions in accordance with recognition standards established by ASC 740-10 and has not recognized any material uncertain tax positions.

 

In addition, companies in the PRC are required to pay an Enterprise Income Tax at 25%.

 

Foreign Currency Translation - The Company's functional currency is the Chinese Renminbi (RMB). The reporting currency is that of the US Dollar. Assets, liabilities and owners’ contribution are translated at the exchange rates as of the balance sheet date. Income and expenditures are translated at the average exchange rate of the year. The RMB is not freely convertible into foreign currency and all foreign currency exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US dollar at the rates used in translation.


The exchange rates used to translate amounts in RMB into USD for the purposes of preparing the financial statements were as follows:

 

Balance sheet  
Balance sheet as of June 30, 2017 RMB 6.78 to US $1.00
Balance sheet as of December 31, 2016 RMB 6.94 to US $1.00
   
Statement of operation and other comprehensive income  
Statement of operation and other comprehensive income for three months ended June 30, 2017 RMB 6.86 to US $1.00
Statement of operation and other comprehensive income for three months ended June 30, 2016 RMB 6.53 to US $1.00
Statement of operation and other comprehensive income for the six months ended June 30, 2017 RMB 6.87 to US $1.00
Statement of operation and other comprehensive income for six months ended June 30, 2016 RMB 6.54 to US $1.00

 

Fair Value of Financial Instruments – FASB ASC 820, “Fair Value Measurement” specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs). In accordance with ASC 820, the following summarizes the fair value hierarchy:

 

Level 1 Inputs— Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.

 

Level 2 Inputs— Inputs other than the quoted prices in active markets that are observable either directly or indirectly.

 

Level 3 Inputs— Inputs based on valuation techniques that are both unobservable and significant to the overall fair value measurements.

 

ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure, fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

 

The Company did not identify any assets or liabilities that are required to be presented at fair value on a recurring basis. Carrying values of non-derivative financial instruments, including cash and cash equivalents, accounts receivable, inventories, prepaid expenses, advances from customers, accounts payable, taxes payable, accrued liabilities and other payables, and loan from bank, approximated their fair values due to the short maturity of these financial instruments. There were no changes in methods or assumptions during the periods presented.

 

 

 

 10 

 

 

Net Earnings (Loss) Per Share – Earnings/(loss) per common share is computed on the weighted average number of common shares outstanding during each year. Basic earnings per share is computed as net loss applicable to common stockholders divided by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur from common shares issuable through convertible preferred shares, stock options, warrants and other convertible securities when the effect would be dilutive. In this case, the Preferred Shares would not be dilutive since the conversion price is $3.00 and the quoted price is significantly lower than the conversion price. Therefore, there were no dilutive securities for the six months ended June 30, 2017 and 2016, respectively.

 

Reclassifications – Certain classifications have been made to the prior year consolidated financial statements to conform to the current year presentation. The reclassification had no impact on previously reported net loss or accumulated deficit.

 

NOte 2 - going concern

 

The Company sustained net losses of $123,669 and $123,903 during the three months ended June 30, 2017 and 2016, respectively. The Company sustained net losses of $308,239 and $219,947 during the six months ended June 30, 2017 and 2016, respectively. The Company has accumulated deficit of $868,074 and $608,739 as of June 30, 2017 and December 31, 2016, respectively. The Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations and/or obtain additional financing, as may be required.

 

The accompanying unaudited consolidated financial statements have been prepared assuming the Company will continue as a going concern; however, the above condition raises substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

 

Management’s Plan to Continue as a Going Concern

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) obtaining capital from the sale of its equity securities, (2) sales of the Company’s products, (3) short-term and long-term borrowings from banks, and (4) short-term borrowings from stockholders or other related party(ies) when needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually to secure other sources of financing and attain profitable operations.

 

NOte 3 - concentration of credit risk

 

We maintain our cash balance in several banks in China and United States. The consolidated cash balances as of June 30, 2017 and December 31, 2016 were $27,768 and $339,147, respectively. The cash balances in China as of June 30, 2017 and December 31, 2016 were $11,764 and $29,156, respectively. The accounts in China were not insured which we believe were exposed to credit risks on cash. As of June 30, 2017, the balance of our US account was $16,004 which did not exceed the federal insured limit of $250,000. As of December 31, 2016, the balance was $309,991 which was in excess of federal insured limit of $250,000 by $59,991.

 

NOTe 4 - other receivable

 

Total other receivable consists of balances of VAT receivable of $92,379 and $102,122 as of June 30, 2017 and December 31, 2016, respectively.

 

 

 

 11 

 

 

NOTe 5 - prepaid expenses

 

Prepaid expenses were comprised of the following:

 

   June 30,
2017
   December 31,
2016
 
Prepaid operating expenses  $4,417   $2,497 
Professional fees   29,604    38,361 
Total  $34,021   $40,858 

 

Note 6 - property, plant and equipment

 

Property, plant and equipment as of June 30, 2017 and December 31, 2016 are summarized as following:

 

   June 30,
2017
   December 31,
2016
 
Buildings  $1,784,127   $1,739,780 
Vehicles   11,432    11,162 
Manufacturing equipment   1,024,654    982,511 
Office equipment   89,942    85,061 
Property, plant, and equipment - total   2,910,155    2,818,514 
Less: accumulated depreciation   (407,565)   (300,271)
Fixed assets, net  $2,502,590   $2,518,243 

 

For the three months ended June 30, 2017 and 2016, depreciation expenses were $49,794 and $51,917, respectively. For the six months ended June 30, 2017 and 2016, depreciation expenses were $98,708 and $102,547, respectively.

 

note 7 - intangible assets -net

 

All land in the PRC is owned by the government and cannot be sold to any individual or entity. Instead, the government grants landholders a "land use right" after a purchase price for such "land use right" is paid to the government. The "land use right" allows the holder to use the land for 50 years and enjoys all the incidents of ownership of the land. As of June 30, 2017, and December 31, 2016, the land use rights net of accumulated amortization was $704,350 and $695,109, respectively. The use term was 50 years.

 

The summary of land use rights as of June 30, 2017 and December 31, 2016 are summarized as following:

 

The land use right term  June 30,
2017
   December 31,
2016
 
May, 2013 - Apr. 2063  $531,048   $518,528 
Dec. 2015 - Sept. 2065   199,136    194,440 
Dec. 2015 – Sept. 2065   24,236    23,664 
Intangible assets- total   754,420    736,632 
Less: accumulated amortization   (50,070)   (41,523)
Intangible assets, net  $704,350   $695,109 

 

For the three months ended June 30, 2017 and 2016, amortization expenses were $3,729 and $3,916, respectively. For the six months ended June 30, 2017 and 2016, amortization expenses were $7,443 and $7,826, respectively.

 

 

 

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NOTE 8 - DEFERRED COSTS

 

As of June 30, 2017 and December 31, 2016, the Company had paid $0 and $14,792 as advances to vendors for equipment purchases, respectively. The Company recorded the advance payments for equipment as deferred costs as of June 30, 2017 and December 31, 2016.

 

NOTE 9 - COMMITMENTS AND CONTINGENCIES

 

The Company entered a lease for new office space in City of Industry, California. The lease period started October 1, 2016 and expired on September 1, 2018. On October 1, 2016, the Company started this lease at $2,802 per month from October 1, 2016 to September 1, 2017. From September 2, 2017 to August 31, 2018, the monthly lease will be $2,923, resulting in the following future commitments:

 

   Amount 
2017 calendar year  $17,296 
2018 calendar year   23,384 
Total  $40,680 

 

NOTE 10 - INCOME TAX

 

At June 30, 2017 and December 31, 2016, based on the weight of available evidence, management determined that it was unlikely that the Company's deferred tax assets would be realized and have provided for a full valuation allowance associated with the net deferred tax assets.

 

The Company periodically analyzes its tax positions taken and expected to be taken and has determined that since inception there has been no need to record a liability for uncertain tax positions. The Company classifies income tax penalties and interest, if any, as part of selling, general and administrative expenses in the accompanying statements of operations. There was no accrued interest or penalties as of June 30, 2017 and December 31, 2016.

 

The Company is neither under examination by any taxing authority, nor has it been notified of any impending examination.

 

Under the Law of People’s Republic of China on Enterprise Income Tax (“EIT Law”), which was effective from January 1, 2008, domestically-owned enterprises and foreign-invested enterprises are subject to a uniform tax rate of 25%. As of June 30, 2017, the Company had net operating losses carry forward of $859,348 that begin expiring in 2018. The potential benefit of the Company’s net operating losses has not been recognized in these financial statements because it is more likely-than-not the Company will not utilize the net operating losses carried forward as it does not expect to generate sufficient taxable income in future or the amount involved is not significant.

 

   June 30,
2017
   December 31,
2016
 
Deferred Tax Assets and Liabilities:          
Net operating loss carry forwards  $868,074   $608,739 
Valuation allowance   (868,074)   (608,739)
Net deferred tax assets  $   $ 

 

A reconciliation between the income tax computed at the U.S. statutory rate and the Company’s provision for income tax in the PRC is as follows:

 

   June 30,
2017
   December 31,
2016
 
Tax expense at statutory rate-US   34%    34% 
Foreign income not recognized in the US   (34)%    (34)% 
PRC enterprise income tax rate   25%    25% 
Loss not subject to income tax   (25)%    (25)% 
Effective income tax rates        

 

 

 

 13 

 

 

note 11 - equity

 

Common Stock:

 

On July 1, 2016, the Company issued 3,915,000 shares of common stock to Ms. Song in connection with the change of control.

 

On August 31, 2016, the Company cancelled 3,915,000 shares of outstanding shares belonging to Standard.

 

On August 31, 2016, the Company issued 2,040,000 shares to Yibaoccyb Shareholders in exchange for 51% of the common stock of Yibaoccyb to complete the share exchange and restructuring of entities under common control.

 

On December 22, 2016, the Company issued 350,000 shares for legal counsel services valued at $35,000.

 

On December 23, 2016, the Company received cash payment of $300,000 in advance for issuance of 3,000,000 shares of common stock, or $0.10 per share. On January 3, 2017, 3,000,000 shares were issued to seven investors, none of which is a related-party to the Company.

 

Series A Preferred Shares:

 

The Series A Preferred shares are convertible into common shares on a 1:1 ratio at a fixed rate of $3 per share. Preferred shares have no voting rights, have no redemption rights and earn no dividends. Holders of Series A Convertible Preferred Stock are not permitted to convert their stock into common shares until the Company’s market capital reaches $15,000,000. Upon dissolution, liquidation or winding up of the Company, whether voluntary or involuntary, the holders of the then outstanding shares of Series A Convertible Preferred Stock shall be entitled to receive out of the assets of the Company the sum of $0.0001 per share (the “Liquidation Rate”) before any payment or distribution shall be made on any other class of capital stock of the Company ranking junior to the Series A Convertible Preferred Stock.

 

ASC Topic 480, “Distinguishing Liabilities from Equity,” establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.

 

A mandatorily redeemable financial instrument shall be classified as a liability unless the redemption is required to occur only upon the liquidation or termination of the reporting entity. A financial instrument issued in the form of shares is mandatorily redeemable if it embodies an unconditional obligation requiring the issuer to redeem the instrument by transferring its assets at a specified or determinable date (or dates) or upon an event certain to occur. A financial instrument that embodies a conditional obligation to redeem the instrument by transferring assets upon an event not certain to occur becomes mandatorily redeemable—and, therefore becomes a liability—if that event occurs, the condition is resolved, or the event becomes certain to occur.

 

The Company determined that the preferred shares are not mandatorily or conditionally redeemable and are properly classified as permanent equity in the accompanying unaudited consolidated financial statements.

 

Series B Preferred Shares

 

During the year ended December 31, 2015, the Company received the 400,000 shares of Series B Preferred Shares being returned to the Company. As a result, there were no shares of Series B Preferred Shares issued and outstanding as of June 30, 2017 and December 31, 2016.

 

NOTE 12 - NON-CONTROLLING INTEREST

 

On July 1, 2016, the Company executed the Exchange Agreement with Yibaoccyb and the Yibaoccyb Shareholders. From and after the Closing Date, Yibaoccyb became a 51% owned subsidiary of the Company. Yibaoccyb owns 100% of YibaoHK. YibaoHK will own 100% of Shenzhen Confucian Biologics Co. Ltd. (yet to be formed, “Yibao WFOE”), which will be wholly foreign-owned enterprise (“WFOE”) under the laws of the Peoples’ Republic of China (“PRC” or “China”). On August 31, 2016, YibaoHK entered into a series of contractual arrangements with Confucian and currently is 100% owner of Confucian.

 

 

 

 14 

 

 

Non-controlling interest consisted of the following:

  

   June 30,   December 31, 
   2017   2016 
Beginning balance  $304,293   $464,323 
Net loss attributed to non-controlling interest   (48,905)   (132,253)
Foreign currency translation gain (loss) attributable to non-controlling interest   6,721    (27,777)
Ending balance  $262,109   $304,293 

 

note 13 - related party transactions

 

 The related parties of the Company with whom transactions are reported in these financial statements are as follows:

 

Name of Entity or Individual   Relationship with the Company and subsidiaries
Shandong Yibao Biologics Co, Ltd   Affiliated company with common shareholders
Shandong Yibao Import & Export Trading Co, Ltd Affiliated company with common shareholders
Ms. Xiuhua Song   Director and controlling beneficiary shareholder of the Company
Mr. Hengchun Zhang   Owner of Shandong Confucian Biologics
Mr. Qingbao Kong   Ms. Xiuhua Song's spouse

 

Transactions:

   For the Six Months Ended June 30, 
   2017   2016 
Sales to Shandong Yibao Biologics Co. Ltd  $105,476   $ 
Sales to Shandong Yibao Import & Export Trading Co. Ltd   45,399     
Total  $150,875   $ 

 

   For the Six Months Ended June 30, 
   2017   2016 
Purchase from Shandong Yibao Biologics Co. Ltd  $113,771   $ 
Total  $113,771   $ 

 

Due from related party

  

June 30,

2017

  

December 31,

2016

 
Customer deposit from Shandong Yibao Biologics Co. Ltd  $   $34,677 
Total  $   $34,677 

 

In June 2016, Shandong Yibao Biologics Co., Ltd. advanced funds of $1,064,073 to the Company to pay off the bank short-term loan.

 

Compensation to related party

 

Effective December 1, 2016, the Company entered into an Employment Agreement (the Employment Agreement) with Xiuhua Song, the Company’s CEO. Under the Employment Agreement, Ms. Song will receive a base salary of $120,000 per year and a guaranteed bonus of $20,000 per year. The term of the contract is from December 1, 2016 to December 31, 2019.  For the six months ended June 30, 2017 and 2016, the Company paid Xiuhua Song $60,000 and $0 salary compensation, and accrued bonus $10,000 and $0, respectively

 

Due to related parties

  

June 30,

2017

   December 31,
2016
 
To Shandong Yibao Boologics Co. Ltd  $72,242   $ 
To Xiuhua Song   2,196,897    2,293,434 
To Hengchun Zhang   266,452    260,169 
To Quingbao Kong   6,015    5,873 
Total  $2,541,606   $2,559,476 

  

 

 15 

 

 

NOTE 14 - MAJOR SUPPLIERS AND CUSTOMERS

 

The Company purchases majority of its inventory and packaging supplies from three suppliers which accounted for 31.16%, 23.83% and 15.43% of the total purchases for the six months ended June 30, 2017.

 

The Company had four major customers for the six months ended June 30, 2017: Ping Xiang Import and Export Company accounted for 22.65% of revenue, Jiangshan Huacheng Import and Export Company accounted for 20.01% of revenue, Nanjing Hejian Biologics accounted for 15.98%, and Shandong Yibao Biologics for 11.90% of revenue for the six months ended June 30, 2017.

 

The Company purchases majority of its inventory and packaging supplies from four suppliers which accounted for 22.51%, 12.90%, 12.49% and 10.58% of the total purchases for the six months ended June 30, 2016.

 

The Company had one major customer six months ended June 30, 2016: Ping Xiang Import and Export Company accounted for 86.56% of revenue for the six months ended June 30, 2016.

 

NOTE 15 - SUBSEQUENT EVENTS

 

Management has evaluated subsequent events through August 21, 2017, the date which the consolidated financial statements were available to be issued. All subsequent events requiring recognition as of June 30, 2017 have been incorporated into these consolidated financial statements and there are no subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events.”

 

 

 

 

 16 

 

 

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

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

The information contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year ended December 31, 2016 and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q.

 

The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Annual Report on Form 10-K for the year ended December 31, 2016 in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited consolidated Financial Statements and notes thereto that appear elsewhere in this report.

 

Overview

 

The Company is a manufacture and research based bio-science company. It has large capacity in manufacturing tablets, granule, oral liquid, powders, soft gels and capsules products. The Company distributes its products through its own network and white label products. It also has access to a member-based distribution system owned by its affiliated company.

 

The Company possesses manufacturing permits for food product, hygienic products, sanitary products, and health products. The Company's main business scope include technology study and transfer of Chondroitin and Garlic Oil; trading, cold storage, and pretreating of Garlic, fruit, and vegetables products; trading of Chemical products (excluding hazardous chemicals); Import and export of goods and technology (excluding those restricted by government); the manufacturing and sale of health products including powder, granules, tablets, hard capsule, soft capsule products.

 

Product Overview

 

The Company’s main products can be divided into two groups, one is health food products and the other is hygienic products.

 

Health Food Products

 

  · Phytocholesterol tabletting candy,

 

Phytosterol has strong anti-inflammatory effects to the human body, which can inhibit the absorption of cholesterol for human and biochemical synthesis of cholesterol. Promote the degradation and metabolism of cholesterol. Phytosterol can be used for prevention & therapy of coronary atherosclerosis heart disease. In treating ulcers, skin squamous carcinoma and cervical cancer has obvious curative effect. Can promote wound healing, make muscle proliferation, enhance capillary circulation; also can be used as blocking agent of formation of gallstones.

 

  · Polydextrose tabletting candy,

 

Regulating blood lipid, reduce fat accumulation preventing the fat.

 

  · Dunaliella salina haematococcus pluvialis tabletting candy,

 

Replenishing the body's astaxanthin, Natural carotene and variety of minerals, have a great effect of antioxidant activity, protect skin, protect vision and improve immunity.

 

 

 

 17 

 

 

  · Dunaliella salina Gum Base candy,

   

Dunaliella salina is rich in antioxidant needed by the human body health, resistance to radiation and enhance human immunity of natural carotenoids and 70 kinds of minerals and trace elements.

 

  · Haematococcus pluvialis Gum candy,

 

The main components of Haematococcus Pluvialis is astaxanthin. It has six anti-aging effect: can be Anti-aging and protect the skin; Protect the eye health; helps to support the cardiovascular system, maintain a healthy joints and connective tissue; increases strength and endurance.

 

  · Fish Oil Gum candy,

 

Adjusting blood liquid, prevent blood clots, cerebral thrombosis, cerebral hemorrhage and stroke; prevent arthritis and alzheimer's disease, improve the memory and vision, control presbyopia.

 

  · Earthworm Protein tabletting candy,

 

Improve blood circulation, inhibiting platelet aggregation, reduce glucose concentrations, prevent blood clots, has the very good control efficiency for coronary heart disease, arteriosclerosis, and other hematologic disorders.

 

  · Collagen Protein tabletting candy,

 

It is rich in glycine, proline hydroxyproline and other amino acid needed for human body. Have a good health care effect for skin, hair, bones and muscles.

 

  · Krill Oil Gum candy,

 

It is rich in EPA and DHA. Enhancing health effects, including cardiovascular, nerve, bones, joints, vision, skin care, etc.

 

  · Phosphatidylserine tabletting candy,

 

Improve the function of brain; help to repair the injure of brain; promote the recovery of brainfag; protect central nervous system. Used for auxiliary treatment dementia and agedness memory loss.

 

  · Milk Powder tabletting candy.

 

Milk tablet is kind of leisure food. Supplement of the nutrition of human needed in specific environment.

 

Hygienic Products

 

The hygienic product line includes the following products:

 

  · Gel for women,

 

Anti-bacteria product. Auxiliary treatment bacterial, mould sex vaginitis.

 

  · Skin comfortable liquid

 

Anti-bacteria product. Used for sterilization, antibacterial of skin. Inhibit the bromhidrosis and relief beriberi itch.

 

 

 

 

 18 

 

 

Confucian owns 100,000 stage purification workshops, advanced production lines and manufacturing equipment. The Company has a higher capacity for OEM processing of tablets, hard capsules, soft capsules, oral liquid, granules, and powders.

  

Plan of Operations

 

By following the Company motto of "being passionate for health industry, bringing together the world's resources, focusing on consumer demand, creating a “win-win situation", the Company is eager to develop businesses in the international health and pharmaceutical market.

 

The Company’s near term goal is to reach breakeven within a 6 month period time. In order to reach such goal, the Company is increasing its sales and production volume through arrangements and networking with its existing customers and its affiliated companies. Additionally, it plans to increase the size of its sales department to develop new customers.

 

The Company’s ultimate goal is to make the business profitable and competitive in the international health and pharmaceutical market. To achieve such goal, the Company needs to cooperate with other businesses having capital, market, technology, or products, recruit sufficient workforce and various talents to serve the company, and actively develop new technology and new product through research and development.

 

Results of Operations

 

Three and Six Months Ending June 30, 2017 Compared to June 30, 2016

 

Revenue:

 

For the three months ending June 30, 2017 and 2016, revenues were $606,693 and $159,541 respectively, for an increase of $447,152 over the same period in 2016. For the six months ended June 30, 2017 and 2016, revenues were $886,534 and $321,292 respectively with an increase of $565,242 over the same period in 2016. The increase is mainly due to the expanded customer base as well as the increase in demands from consumers for healthy products.

 

Cost of Goods Sold:

 

Cost of goods sold for the three months ending June 30, 2017 and 2016 were $562,699 and $134,306 respectively, for an increase of $428,393 over the same period in 2016. Cost of goods sold for the six months ended June 30, 2017 and 2016 were $840,716 and $283,407 respectively, for an increase of $557,309 over the same period in 2016. This increase is mainly due to increased labor in production line.

 

Gross Profit:

 

Gross profit was $43,994 and $25,235 for the three months ending June 30, 2017 and 2016, an increase of $18,759 over the same period in 2016. The gross profit margin as a percent of sales for the three months ending June 30, 2017 and 2016 was 7% and 16% respectively.

 

Gross profits were $45,818 and $37,885 for the six months ended June 30, 2017 and 2016, an increase of $7,933 over the same period in 2016. The gross profit margin as a percent of sales for the six months ending June 30, 2017 and 2016 was 5% and 12% respectively with a decrease of 7% mainly due to the increase in labor costs and in depreciation costs of newly added manufacturing related fixed assets for expanded production. The lower gross profit margin for the six months ending June 30, 2017 was also caused by reproduction costs of defective products for a sales order, which was identified by management as an isolated one-time event.

 

Operating Expenses:

 

Operating expenses for the three-month period ended June 30, 2017 and 2016 were $167,724 and $128,736 respectively for an increase of $38,988 (30%) from the same period of prior year. The major expenses for the three-month period ended June 30, 2017 and 2016 consist of payroll, professional fees and depreciation. The increase of 38,988 was mainly due to the increase in payroll of $41,320 for increased of number of newly recruited employees and increased of officers’ salaries, partially offset by decreased of interest expense of $23,665.

 

 

 

 19 

 

 

Operating expenses for the six months ended June 30, 2017 and 2016 were $357,123 and $222,761 respectively for an increase of $134,362 or 60%. The major expenses for the six months ended June 30, 2017 and 2016 consist of payroll expenses, property taxes and professional fees. The increase of $134,362 was mainly due to the increase in payroll of $83,554 for increased numbers of newly recruited employees, increase in rent expense of $17,452 and the increase of $7,987 of property tax.

 

Other Income (Expense):

 

Other income (expense) consists of interest income and expenses and other non-operation related income and expenses. Other income (expense) for the three months ended June 30, 2017 and 2016 was $61 and ($20,402) respectively for an increase of $20,463 over the same period in 2016. The change was mainly due to $67 interest income for the three months ended June 30 compared to $23,656 interest expense for the same period in 2016 for a short term loan which has been fully repaid by the Company in June 2016.

 

For the six months ended June 30, 2017 and 2016, the net other income (expenses) were $3,066 and $(35,071), respectively. The change was mainly due to $102 interest income for the six months ended June 30 compared to $50,391 interest expense for the same period in 2016 for a short term loan which has been fully repaid by the Company in June 2016.

 

Liquidity and Capital Resources

 

The Company suffered recurring losses from operations and has an accumulated deficit of $868,074 at June 30, 2017. The Company has a cash balance of $27,768 and negative working capital of $2,702,267 as of June 30, 2017. The Company has incurred losses of $123,669 and $123,903 for the three months ended June 30, 2017 and 2016, respectively. The Company has incurred losses of $308,239 and $219,947 for the six months ended June 30, 2017 and 2016, respectively. The Company has not continually generated significant revenues. Unless our operations continue to generate significant revenues and cash flows from operating activities, our continued operations will depend on whether we are able to raise additional funds through various sources, such as equity and debt financing, other collaborative agreements and strategic alliances. Our management is actively engaged in seeking additional capital to fund our operations in the short to medium term. Such additional funds may not become available on acceptable terms and there can be no assurance that any additional funding that we do obtain will be sufficient to meet our needs in the long term.

 

Net cash used in operating activities for the six months ended June 30, 2017 amounted to $252,501, compared to $117,403 provided by operating activities for the six months ended June 30, 2016. The increase of $369,904 in the net cash used in our operating activities was primarily due to the increase in net loss of $88,292 from operations, increase in change of advance to suppliers at $2,707, increase in the change of customer deposit-related party of $34,736, increase in the change of account payable of $331,618 and increase in the change of other payable of $128,456; partially offset by the increase in the change of account receivable of $11,078, increase in the change of other receivable of $78,681, increase in the change of accounts payable to related party of $71,272 and increase in the change of customer deposits of $54,979.

 

Net cash used in investing activities for the six months ended June 30, 2017 amounted to $8,441 compared to net cash used in investing activities of $327,751 in the six months ended June 30, 2016, resulting in a decrease of $319,310. The decrease was mainly due to reduction in fixed assets purchases during six months ended June 30, 2017 by $464,735; partially offset by decrease of deferred cost of equipment at $145,425.

 

Net cash used in financing activities for the six months ended June 30, 2017 amounted to $50,894, compared to net cash provided by financing activities of $237,445 in the six months ended June 30, 2016, resulting in a net decrease of $288,339. The decrease in net cash provided by financing activities was mainly due to the repayment of payable to related party.

 

Going Concern

 

The accompanying unaudited consolidated financial statements have been prepared assuming the Company will continue as a going concern; however, the above condition raises substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

 

 

 

 20 

 

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) obtaining capital from the sale of its equity securities, (2) sales of the Company’s products, (3) short-term and long-term borrowings from banks, and (4) short-term borrowings from stockholders or other related party(ies) when needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually to secure other sources of financing and attain profitable operations.

 

Capital Resources

 

Over the next twelve months, management believes there will not be sufficient working capital obtained from operations due to the Company in its early development stage.

  

Off-Balance Sheet Arrangements

 

As of June 30, 2017, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

 

ITEM 3. Quantitative and Qualitative Disclosures about Mark Risk

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item

 

ITEM 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures:

 

As of June 30, 2017, we conducted an evaluation under the supervision and with the participation of the Company's Chief Executive Officer and the Chief Financial Officer, management has evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation and because of the material weaknesses in our internal control over financial reporting described below, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2017.

 

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

 

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

 

Similarly, the Shandong Confucian Biologic Co., Ltd. operation also has a material weakness due to lack of segregation of duties. Its size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties within our internal control system. We have retained an outside professional firm to assist in the separation of duties on an ongoing basis. The use of the outside firm has proven successful in assisting in the separation of duties.

 

Limitations on the Effectiveness of Internal Controls

 

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

 

Changes in Internal Control over Financial Reporting

 

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

 

 

 

 21 

 

 

PART II. OTHER INFORMATION

 

ITEM 1. Legal Proceedings

 

None

 

ITEM 1A. Risk Factors

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.

 

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

On December 23, 2016, the Company received cash payment of $300,000 in advance for issuance of 3,000,000 shares of common stock, or $0.10 per share. On January 3, 2017, 3,000,000 shares were issued to seven investors, none of which is a related-party to the Company.

 

ITEM 3. Defaults Upon Senior Securities

 

Not Applicable

 

ITEM 4. Mine Safety Disclosures

 

None

 

ITEM 5. Other Information

 

None

 

 

 

 22 

 

 

ITEM 6. Exhibits

 

a) Exhibits

 

  2.1 Share Exchange Agreement among IPLO, Yibaoccyb and Xiuhua Song dated July 1, 2016 (Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 11, 2016.)
  10.1 Stock Purchase Agreement between IPLO and Xiuhua Song dated May 15, 2016. (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 11, 2016.)
  10.2 Stock Purchase Agreement among IPLO, Standard Resources Ltd., and H&H Glass Inc. dated July 1, 2016.  (Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 11, 2016.)
  10.3 Consulting Services Agreement between YibaoHK and Shandong Confucian Biologics Co. Ltd dated August 31, 2016 (Incorporated by reference to Exhibit 99.6 to the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on September 6, 2016.)
  10.4 Equity Pledge Agreement between YibaoHK, Shandong Confucian Biologics Co. Ltd and the owners of Shandong Confucian Biologics Co. Ltd dated August 31, 2016 (Incorporated by reference to Exhibit 99.7 to the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on September 6, 2016.)
  10.5 Operating Agreement between YibaoHK, Shandong Confucian Biologics Co. Ltd and the owners of Shandong Confucian Biologics Co. Ltd dated August 31, 2016 (Incorporated by reference to Exhibit 99.8 to the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on September 6, 2016.)
  10.6 Voting Rights and Proxy Agreement between YibaoHK, Shandong Confucian Biologics Co. Ltd and the owners of Shandong Confucian Biologics Co. Ltd dated August 31, 2016 (Incorporated by reference to Exhibit 99.9 to the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on September 6, 2016.)
  10.7 Option Agreement between YibaoHK, Shandong Confucian Biologics Co. Ltd and the owners of Shandong Confucian Biologics Co. Ltd dated August 31, 2016 (Incorporated by reference to Exhibit 99.10 to the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on September 6, 2016.)
  31.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) (Section 302 of the Sarbanes-Oxley Act of 2002)
  31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) (Section 302 of the Sarbanes-Oxley Act of 2002)
  32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C.ss.1350 (Section 906 of the Sarbanes-Oxley Act of 2002)
  32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C.ss.1350 (Section 906 of the Sarbanes-Oxley Act of 2002)
  101.INS XBRL Instance Document
  101.SCH XBRL Schema Document
  101.CAL XBRL Calculation Linkbase Document
  101.DEF XBRL Definition Linkbase Document*
  101.LAB XBRL Label Linkbase Document
  101.PRE XBRL Presentation Linkbase Document

 

 

 

 

 23 

 

 

 

SIGNATURES

 

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

 

    YBCC, INC.
    (Registrant)
     
     
Dated: August 21, 2017 By: /s/ Xiuhua song
    Xiuhua Song
    Chief Executive Officer
    Principal Financial Officer and Director
       

 

 

 

 

 

 

 

 

 

 

 24 

YBCC, Inc. Latest filings

Filing dateCompanyFormQuarterYear
2017-11-14YBCC, Inc.10-Q42017view
2017-08-22YBCC, Inc.10-Q32017view
2017-08-14YBCC, Inc.NT 10-Q32017view
2017-06-16YBCC, Inc.10-Q22017view
2017-05-15YBCC, Inc.NT 10-Q22017view
2017-04-26YBCC, Inc.10-K22017view
2017-03-31YBCC, Inc.NT 10-K12017view
2016-12-22YBCC, Inc.8-K42016view
2016-12-08YBCC, Inc.8-K42016view
2016-12-02YBCC, Inc.DEF 14C42016view