UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of Report (Date of earliest event reported): November 14, 2017
IMAGE
CHAIN GROUP LIMITED, INC.
(Exact
name of registrant as specified in its charter)
Nevada
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000-55326
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46-4333787
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(State
or other jurisdiction of
Incorporation or organization)
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(Commission
File
Number)
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(I.R.S.
Employer
Identification
Number)
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Room
503, 5/F, New East Ocean Centre
9
Science Museum Road
Kowloon,
Hong Kong, S.A.R.
(Address
of principal executive offices and zip code)
(852)
3188-2700
(Registrant’s
telephone number, including area code)
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2. below):
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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[ ]
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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TABLE
OF CONTENTS
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This
Current Report on
Form 8-K,
or this Report, contains forward-looking statements, including,
without limitation, in the sections captioned “Description of Business,” “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” and elsewhere. Any and all statements contained in this Report
that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,”
“would,” “should,” “could,” “project,” “estimate,” “pro-forma,”
“predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,”
“plan,” “help,” “believe,” “continue,” “intend,” “expect,”
“future” and terms of similar import (including the negative of any of the foregoing) may be intended to identify
forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms.
Forward-looking
statements in this Report may include, without limitation, statements regarding (i) the plans and objectives of management for
future operations, including plans or objectives relating to the growth of tea polyphenol sales and development of our tea polyphenol-based
products, (ii) the plans or objectives relating to our future business acquisitions, if any, (iii) a projection of income (including
income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial
items, (iv) our future financial performance, including any such statement contained in a discussion and analysis of financial
condition by management or in the results of operations included pursuant to the rules and regulations of the Securities and Exchange
Commission, or the SEC, and (v) the assumptions underlying or relating to any statement described in points (i), (ii), (iii) or
(iv) above.
The
forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may
not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions
and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results
and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements
as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking
statements or cause actual results to differ materially from expected or desired results may include, without limitation:
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market
acceptance of our tea polyphenol products;
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our
ability to successfully sell and market tea polyphenol products in our existing and expanded geographies;
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competition
from existing producers or products or new products and technologies that may emerge in the markets for our tea polyphenol
products;
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the
implementation of our business model and strategic plans for our tea polyphenol products and proposed tea polyphenol-based
product businesses, and other businesses which we may develop or acquire;
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our
ability to obtain regulatory approval in targeted markets for our tea polyphenol products and proposed tea polyphenol-based
products;
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volatility
or decline of our stock price;
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potential
fluctuation of quarterly results;
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continued
failure to earn revenues or profits;
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inadequate
capital to continue or expand our business, and inability to raise additional capital or financing to implement our business
plans;
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decline
in demand for our products and services;
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rapid
adverse changes in markets;
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litigation
with or legal claims and allegations by outside parties against us;
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insufficient
revenues to cover operating costs;
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estimates
of our future revenue, expenses, capital requirements and our need for additional financing; and
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developments
relating to our competitors and the tea polyphenol, tea polyphenol-based products and wider health products industry.
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Readers
are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to such
statements. We disclaim any obligation to update the forward-looking statements contained in this Report to reflect any new information
or future events or circumstances or otherwise, except as required by law.
Readers
should read this Report in conjunction with our financial statements and the related notes thereto in this Report, and other documents
which we may file from time to time with the SEC.
EXPLANATORY
NOTE
Image
Chain Group Limited, Inc.
Image
Chain Group Limited, Inc. (formerly Have Gun Will Travel Entertainment, Inc.) was incorporated under the laws of Nevada on December
18, 2013, and initially sought to create reality television programming. References in this Report to “ICGL”, “Image
Chain”, the “Company”, the “Registrant”, “we”, “our” or “us”
are to Image Chain Group Limited, Inc.
On
May 5, 2015, ICGL entered into a share exchange agreement (the “FDHG Exchange Agreement”) with Fortune Delight Holdings
Group Ltd (“FDHG”) and Wu Jun Rui, on behalf of himself and certain other individuals who were to receive shares of
ICGL pursuant to the FDHG Exchange Agreement (the “FDGH Shareholders”). On the terms and subject to the conditions
set forth in the FDHG Exchange Agreement, on May 5, 2015, Wu Jun Rui transferred all 50,000 shares of FDHG common stock, consisting
of all of the issued and outstanding shares of FDHG, to ICGL in exchange for the issuance to the stockholders of FDHG of 59,620,000
shares of the Company’s common stock, par value $.001 per share (“Common Stock”) and 5,000,000 shares of the
Company’s preferred stock, par value $.001 per share (“Preferred Stock”).
As
a result of the closing of the FDHG Exchange Agreement, FDHG became the Company’s wholly owned subsidiary. FDHG, through
its subsidiaries, manufactured and sold “Image Tea”-branded tea products from its tea garden in Yunnan Province.
On
June 11, 2015, the Company amended its Articles of Incorporation in order to change its name to Image Chain Group Limited, Inc.
and to increase the authorized shares of Common Stock from 70,000,000 to 400,000,000. The name change was undertaken in order
to more closely align with the operations of the Company’s wholly-owned subsidiary, The increase in authorized Common Stock
was undertaken to allow the Company to utilize the newly available shares to raise capital.
On
or about November 15, 2016, FDHG disposed of its ownership of all operating assets, and as a result ICGL became a shell company,
as defined by Rule 12b-2 under the Exchange Act (the “Disposition Event”). The Disposition Event is evidenced by a
bought and sold note stamped by the Inland Revenue Department of Hong Kong, which we believe is a legally binding document.
On
February 13, 2017, the Company filed with the Secretary of State of the State of Nevada a Certificate of Correction (the “Certificate
of Correction”) to correct a mistake made in the Company’s original Articles of Incorporation with regard to the preferred
stock issued in connection with the FDHG Exchange Agreement. As a result, ICGL had 395,000,000 shares of common stock and 5,000,000
shares of preferred stock issued and outstanding. The Company subsequently entered into an agreement pursuant to which the holder
of the preferred stock agreed to retire the preferred stock in exchange for receiving an equal number of shares of common stock
of the Company
.
As of the date of this Report, that exchange of preferred stock for common stock has not yet occurred.
On
May 1, 2017, upon recommendation of the Board of Directors, a majority of Image Chain’s common stockholders consented in
writing to amendment of Image Chain’s Articles of Incorporation to (i) effect a reverse stock split on a 1 for 100 stock
split basis from 400,000,000 authorized shares with a par value of $0.001 per share to 4,000,000 authorized shares with a par
value of $0.001, and (ii) after the reverse stock split, to increase the authorized shares of Common Stock from 3,950,000 to 2,000,000,000
shares with a par value of $0.001 per share, and to decrease the authorized shares of Preferred Stock from 50,000 to zero (0).
As of the date of this Report, the reverse stock split and increase in authorized shares have been completed, and the decrease
in shares of Preferred Stock is still in process.
Image
P2P Trading Group Limited
Image
P2P was incorporated in the British Virgin Islands on April 21, 2015. Asia Grand Will (“AGW”) was incorporated
on March 18, 2017 in the Hong Kong SAR. AGW wholly owns Fuzhi Yuan (Shenzhen) Holdings Limited (“FYSZ”) which was
established on June 20, 2017 in the PRC. FYSZ is a wholly owned foreign entity under PRC law. FYSZ wholly owns Jiangxi
Fuzhiyuan Biotechnology Limited (“Fuzhiyuan Biotechnology”), which was established on January 5, 2013 in the PRC.
FYSZ acquired Fuzhiyuan Biotechnology on July 14, 2017. AGW and FYSZ are intermediary holding companies. Image P2P conducts
its operations through Fuzhiyuan Biotechnology. Image P2P acquired AGW on Jul 28, 2017.
The
reorganization of Image P2P and its subsidiaries via the acquisitions detailed above, by and amongst Image P2P and AGW, FYSZ,
and Fuzhiyuan Biotechnology, have been accounted for under US GAAP as business combinations under common control.
The
Share Exchange
On
November 14, 2017, Image Chain entered into a share exchange agreement (the “Exchange Agreement”) with Image
P2P Trading Group Limited, a company organized under the laws of the British Virgin Islands (“Image P2P”) and the
shareholders of Image P2P (the “Sellers”). Pursuant to the Exchange Agreement, the Sellers transferred all
50,000 shares of Image P2P outstanding common stock to the Company in exchange for 500,000,000 shares of Common Stock (the “Share
Exchange”). As a result of the Share Exchange, Image P2P became the Company’s wholly-owned subsidiary. Image P2P,
through its subsidiaries, is engaged in producing, marketing and selling tea polyphenol products, and is developing for production
tea polyphenol-based products. Image P2P is located in the PRC.
The
Share Exchange has been accounted for as a reverse- merger and recapitalization of Image Chain where Image Chain (the legal acquirer)
is considered the accounting acquiree and Image P2P (the acquiree) is considered the accounting acquirer. As a result of this
transaction, the Company is deemed to be a continuation of the business of Image P2P.
Accordingly,
the accompanying consolidated financial statements are those of the accounting acquirer, Image P2P. The historical stockholders’
equity of the accounting acquirer prior to the share exchange has been retroactively restated as if the share exchange transaction
occurred as of the beginning of the first period presented.
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* *
As
used in this Report henceforward, unless otherwise stated or the context clearly indicates otherwise, the terms “ICGL”,
“Image Chain”, the “Company,” the “Registrant,” “we,” “us” and “our”
refer to Image Chain after having given effect to the acquisition of Image P2P. Discussions of historical operating results are
of the results of Image P2P.
This
Report contains summaries of the material terms of the Exchange Agreement. The summaries are subject to, and are qualified in
their entirety by, reference to the Exchange Agreement, which is filed as an exhibit hereto and incorporated herein by reference.
We
file reports with the Securities and Exchange Commission pursuant to Section 13 of the Securities Exchange Act of 1934, as amended,
or the Exchange Act. Our reports can be found on EDGAR at
www.sec.gov
.
Our common stock
is quoted on the OTC Market website under the trading symbol “ICGL”.
This
Report responds to the following Items in
Form 8-K:
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Item
1.01
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Entry
into a Material Definitive Agreement
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Item
2.01
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Completion
of Acquisition or Disposition of Assets
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Item
3.02
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Unregistered
Sales of Equity Securities
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Item
5.01
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Changes
in Control of Registrant
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Item
5.06
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Change
in Shell Company Status
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Item
9.01
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Financial
Statements and Exhibits
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Prior
to the Share Exchange, we were a “shell company” (as such term is defined in
Rule 12b-2
under the Exchange Act). As a result of the Share Exchange, we have ceased to be a “shell company”. The information
contained in this Report, together with the information contained in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2016, subsequent amendments thereto, our Quarterly Reports on
Form
10-Q
and our Current Reports on
Form 8-K,
as filed with the SEC, constitute the current
“Form 10 information” necessary to satisfy the conditions contained in Rule 144(i)(2) under the Securities Act of
1933, as amended, or the Securities Act.
ITEM
1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
The
information contained in Item 2.01 below relating to the Exchange Agreement described therein is incorporated herein by reference.
ITEM
2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
THE
SHARE EXCHANGE
Exchange
Agreement
On
November 14, 2017, Image Chain entered into the Exchange Agreement with Image P2P and the Sellers. Pursuant to the Exchange
Agreement, the Sellers transferred all 50,000 shares of Image P2P outstanding common stock to Image Chain in exchange for
500,000,000 shares of newly issued Common Stock, representing an exchange rate of 10,000 shares of Common Stock received in exchange
for each 1 share of Image P2P common stock. As a result of the Share Exchange, Image P2P became our wholly-owned subsidiary.
Pursuant
to the Share Exchange, we acquired the business of Image P2P, which, through its subsidiaries, is engaged in producing, marketing
and selling tea polyphenol and developing tea polyphenol-based products. See “Description of Business” below.
All
Common Stock issued in the Share Exchange were newly issued shares. The pre-Share Exchange stockholders of the Company retained
all their shares of Common Stock and Preferred Stock, being 7,270,882 shares of Common Stock and 50,000 shares of Preferred
Stock. After giving effect to the Share Exchange, there were 507,270,882 shares of our Common Stock and 50,000 shares of
our Preferred Stock outstanding. No other securities convertible into or exercisable or exchangeable for our Common Stock are
outstanding.
Our
Common Stock is quoted on the OTC Markets quotation system under the symbol “ICGL.”
The
Exchange Agreement contained representations and warranties customary for the acquisition of a business through share exchange.
The
issuance of shares of our Common Stock to holders of Image P2P’s common stock in connection with the Share Exchange was
not registered under the Securities Act, in reliance upon the exemption from registration provided by Regulation S under the Securities
Act, or Regulation S, which exempts transactions offshore the United States. These securities may not be offered or sold in the
United States absent registration or an applicable exemption from registration under the Securities Act, and are subject to further
contractual restrictions on transfer as described below.
The
form of the Exchange Agreement is filed as an exhibit to this Report. All descriptions of the Exchange Agreement herein are qualified
in their entirety by reference to the text thereof filed as an exhibit hereto, which is incorporated herein by reference.
Accounting
Treatment; Change of Control
The
Share Exchange has been accounted for as a reverse-merger and recapitalization of Image Chain where Image Chain (the legal acquirer)
is considered the accounting acquiree and Image P2P (the acquiree) is considered the accounting acquirer. As a result of this
transaction, Image Chain is deemed to be a continuation of the business of Image P2P.
Accordingly,
the accompanying consolidated financial statements are those of the accounting acquirer, Image P2P. The historical stockholders’
equity of the accounting acquirer prior to the share exchange has been retroactively restated as if the share exchange transaction
occurred as of the beginning of the first period presented.
The
Share Exchange is intended to be treated as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986,
as amended. Except as described in this Report, no arrangements or understandings exist among present or former controlling stockholders
with respect to the election of members of our board of directors and, to our knowledge, no other arrangements exist that might
result in a change of control of the Company.
We
continue to be a “smaller reporting company,” as defined under the Exchange Act, and an “emerging growth company”
under the Jumpstart Our Business Startups Act, or the JOBS Act, following the Share Exchange. We believe that as a result of the
Share Exchange we have ceased to be a “shell company” (as such term is defined in
Rule
12b-2
under the Exchange Act).
DESCRIPTION
OF BUSINESS
Immediately
following the Share Exchange, the business of Image P2P became our business.
Corporate
Information
Image
Chain Group Limited, Inc. (formerly Have Gun Will Travel Entertainment, Inc.) was incorporated under the laws of Nevada on December
18, 2013, and initially sought to create reality television programming. As described above, in 2015 we acquired the “Image
Branded” tea business of FDHG, and disposed of that business in 2016, becoming a shell company. As a result of the Share
Exchange, we have acquired the tea polyphenol production, marketing and sales business of Image P2P, and the Image P2P tea polyphenol-based
products business under development.
Image
P2P was incorporated in the British Virgin Islands on April 21, 2015. AGW was incorporated on March 18, 2017 in the Hong Kong
SAR. AGW wholly owns FYSZ which was established on June 20, 2017 in the PRC. FYSZ is a wholly owned foreign entity under PRC law.
FYSZ wholly owns Fuzhiyuan Biotechnology, which was established on January 5, 2013 in the PRC. FYSZ acquired Fuzhiyuan Biotechnology
on July 14, 2017. AGW and FYSZ are intermediary holding companies. Image P2P conducts its operations through Fuzhiyuan Biotechnology.
Image P2P acquired AGW on Jul 28, 2017.
Our
authorized capital stock currently consists of 2,000,000,000 shares of Common Stock and 50,000 shares of Preferred Stock. Our
Common Stock is quoted on the OTC Markets under the symbol “ICGL”.
Our
principal executive offices are located at Room 503, 5/F, New East Ocean Centre, 9 Science Museum Road, Kowloon, Hong Kong, S.A.R.
Our telephone number is (852) 3188-2700. Our periodic and current reports with the SEC can be obtained from the SEC website, www.sec.gov.
Company
Overview
We
extract tea polyphenol from tea leaves for use in a wide variety of health and beauty products, beverages, filters and purifiers,
and other products. We produce tea polyphenol to the specific requirements of end-users, utilizing different types of tea leaves
harvested at different points in the growth cycle. We are also developing proprietary tea polyphenol-based products for sale.
Our newly-installed tea polyphenol extraction assembly continues to ramp up production, with a capacity of 155 metric tons of
tea polyphenol production per year as of June 30, 2017. Given sufficient access to raw materials and working capital, we expect
the annual manufacturing capacity of our currently installed extraction assembly to reach 600 tons. We operate our business
from our newly constructed facilities in Wan’An City, Jiangxi Province, PRC. Our facilities consist of our first extraction
assembly, polyphenol drying and processing clean room, warehouse, showroom, research facility and offices.
Since
its founding in 2013, Fuzhiyuan Biotechnology focused on acquiring the technical processes, land, equipment and capital for the
construction of the largest tea polyphenol extraction and processing facility in the PRC. In 2013 and 2014 we developed working
relationships with experts in the field of tea polyphenols and extraction processes, located a suitable site for our facility,
negotiated with and applied to relevant government authorities for approval of our project, applied to lenders for financing the
acquisition of our land use rights and equipment, applied for construction loans, and negotiated with equipment suppliers
and construction firms. Construction of our facility began in 2015 and was substantially completed by the third quarter of 2016,
with initial commercial production and sales achieved in the fourth quarter of 2016. Our facility is still in the ramp-up phase,
which is currently expected to conclude in 2017.
Product
and Market Overview
Tea
polyphenol-based products have become popular in health-conscious communities throughout the world. Polyphenols are antioxidants
found at varying levels in most fruits and vegetables. Tea leaves contain relatively high levels of polyphenols. Research has
found intake of tea polyphenols through drinking tea to correlate to lower levels of certain types of cancer, stroke, heart disease
and Alzheimer’s disease. There is also clinical interest in the correlation, if any, to intake of tea polyphenols and weight
loss, and the control of the symptoms of type II diabetes. Although we supply tea polyphenols for use in tea polyphenol-based
products, we do not make any claims, either through our own sales and marketing, through our third- party distributors, or otherwise,
as to the medical benefits of our tea polyphenol products. We do not believe that we are engaged in the production of pharmaceutical
products, or that the markets in which our tea polyphenol are used regulate tea polyphenol-based products as pharmaceuticals.
Interest
in the health benefits of tea polyphenols have led to their incorporation in a range of products – shampoos, soaps, facial
wipes, creams and cosmetics; concentrated beverages, health beverages, sports beverages and caffeinated beverages; candies, cooking
oils, and syrups; air purifiers, air conditioner air filters, face masks and cleaning wipes. For example, in Japan, tea polyphenol
-based air conditioner air filters, shampoos, soaps and facial wipes are seen as providing superior anti-viral and anti-biotic
cleaning properties. In Germany, tea polyphenol-based beverages have gained acceptance for purported digestive and restorative
properties.
It
is difficult to estimate the global market for tea polyphenol-based products or tea polyphenols. According to our
understanding of the market and consultation with PRC research institutes, PRC production of tea polyphenols
reached 5,000 metric tons in 2015, and are estimated to be growing at over 30% per annum. The main markets for
tea polyphenols are East Asia and Europe. Based
on our understanding of tea leaf and tea polyphenol domestic and foreign markets, participation in trade fairs, sales and
marketing efforts, research into tea polyphenol-based products and consultation with relevant academic institutions in the
PRC, we believe that in the near-term the market for tea polyphenol will be characterized by increased demand at steady price
levels.
Our
Strengths
We
believe our competitive advantages currently include:
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our
understanding of tea leaf and tea polyphenol properties attained through cooperation with leading academics and our own internal
team of tea polyphenol production experts;
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technical
expertise in producing tea polyphenols to precise chemical specifications, which we believe will distinguish us from competitors
as tea polyphenols are incorporated in a wider range of tea polyphenol-based products;
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low
input costs as we continue to improve our extraction process know-how, thus improving production efficiency;
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location
in a key tea leaf growing region in China, with access to tea leaf supply from throughout the PRC; and
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s
calability
of our business – our current facility can host further
extraction assemblies in addition to the extraction assembly currently in operation.
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Our
Strategy
We
expect to grow and increase the profitability of our business through:
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further
lowering our input costs with process improvements in tea polyphenol extraction, drying and processing;
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growing
our revenues with increased sales and marketing activities;
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expanding
our sales channels by obtaining export licenses for tea polyphenol and tea polyphenol-based products;
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launching
our proprietary tea polyphenol-based products in 2018; and
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increasing
our production capacity through installation of further tea polyphenol extraction assemblies.
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As
of the date of this Report, we have not entered into any agreements for the financing, development or construction of further
tea polyphenol extraction assemblies.
Extraction
and Powder Process
The
extraction of tea polyphenol from tea leaves begins with the purchase of tea leaves. Tea leaves at different stages of the growth
cycle have different chemical properties, and so we maintain supplies of tea leaves harvested at different times in the grow season.
We prepare tea leaves for polyphenol extraction based on the chemical specifications of an order. Tea leaves are stored dry and
no chemical additives are introduced prior to the extraction process.
An
advanced emulsion and distillation process is used to extract tea polyphenols. After being steeped in water at a controlled temperature,
gravity, water pressure, heat and centrifuge separation are used to prepare an intermediate liquid for distillation. Chemical
catalysts are introduced to bring the tea polyphenols into the intermediate liquid and to stabilize the liquid for distillation.
The intermediate liquid is distilled through four different phases, with measuring of chemical composition of the liquid at each
phase. The distilled liquid is moved through a closed system to our powder process clean room. There, pressure and heat remove
water, leaving powdered tea polyphenol product. We package our tea polyphenol in our clean room, and store the packaged product
in temperature- and humidity-controlled storerooms onsite.
Suppliers
We
purchase tea leaves from a number of suppliers in the PRC. We typically pay deposits for the delivery of orders to an intermediate
warehouse managed by the supplier or an agricultural cooperative associated with the supplier. Tea leaves are delivered to our
facility by the distributor at our request and upon payment in full of the purchase price.
Due
to recent changes in the European Union quality standards for the import of tea leaves, a greater portion PRC domestic tea leaf
production is being exported, resulting in higher domestic market prices for tea leaves. We believe this development has been
fully reflected in the PRC tea leaf market during the year ended December 31, 2016, and do not expect this development to have
any further effect on our ability to obtain tea leaf supply, or the price we pay for tea leaves.
Sales
and Marketing
Third-party
distributors sell our tea polyphenol to end-users, primarily in markets outside the PRC. We have applied for an export license
for tea polyphenol and tea polyphenol-based products, and plan to export our products directly to end-users once the relevant
licenses are obtained.
As
a growth business, most of our office and research staff participate to some extent in our marketing efforts. We do not operate
a separate sales and marketing department. We engage in marketing of our tea polyphenol and tea polyphenol - based products with
both PRC and foreign distributors of tea polyphenol. Our staff promotes our tea polyphenol products at our showroom in Jiangxi
Province and at trade fairs. Our sales and marketing efforts focus on business development through client functions, participation
in trade fairs, distribution of marketing materials to potential customers and the media and active participation in academic
and trade groups. We plan to grow our sales and marketing function through the establishment of a separate sales and marketing
department, increased participation in domestic trade fairs and other sales events, participation in foreign marketing events
and online and other media promotion of tea polyphenol and tea polyphenol-based products.
Competition
We
compete primarily with other tea polyphenol manufacturers in the PRC and India. The barriers to entry for our industry are significant,
given the cost of the equipment and clean room, space required to house the manufacturing facilities, large tea leaf supply requirements
and manufacturing know-how required to produce tea polyphenols to specification. We believe the primary PRC competitors
in our industry have production capacity from 100 to 1100 metric tons and compete with us on price, which is determined
by our third-party distributors based on market demand. We believe that only a handful of market participants can compete with
us on technical specifications, and that this will be an increasingly important area of differentiation as the markets for tea
polyphenol-based products expands.
Intellectual
Property
We
have been awarded patents by the PRC government in relation to elements of our production process, and have been recognized as
possessing proprietary manufacturing know how for other elements of our production process. We believe these patents and proprietary
know-how evidence our manufacturing skill. However, we do not expect to differentiate ourselves in the market with these awards,
or believe that receipt of these awards will act as a barrier to entry for our competitors.
Research
and Development
In
addition to ongoing research and development regarding our tea polyphenol extraction and powder process, we are developing our
own tea polyphenol-based products. There can be no certainty these efforts will result in the development of a viable product
for market. The costs associated with improving our manufacturing process technologies are expensed as incurred in our cost of
revenues. Our costs associated with tea polyphenol-based product research and development were $23,721 for the six months ended
June 30, 2017 and $31,366 for the year ended December 31, 2016.
Government
Regulation
Foreign
Government Regulation
We
are subject to numerous PRC national, provincial and local environmental, health and safety laws and regulations relating to,
among other matters, safe working conditions, product stewardship and end-of-life handling or disposition of products, and environmental
protection, including those governing the generation, storage, handling, use, transportation and disposal of hazardous or potentially
hazardous materials. Some of these laws and regulations require us to obtain licenses or permits to conduct our operations. Environmental
laws and regulations are complex, change frequently and have tended to become more stringent over time. Although the costs to
comply with applicable laws and regulations, including requirements relating to the restriction of use of hazardous substances
in products, have not been material, we cannot predict the impact on our business of new or amended laws or regulations or any
changes in the way existing and future laws and regulations are interpreted or enforced, nor can we ensure we will be able to
obtain or maintain any required licenses or permits.
Employees
As
of November 14, 2017, we had 71 full-time employees. Within our workforce as of such date, 12 employees were
primarily engaged in marketing, sales and business development, 8 employees were primarily engaged in research and
development, 36 employees were engaged in manufacturing, and 15 employees were engaged in general management and
administration. We have no collective bargaining agreements with our employees, and we have not experienced any work stoppages.
We consider our relations with our employees to be good.
Facilities
Our
corporate headquarters are located in the Industrial Park, Wan’An, Jiangxi Province, PRC, where we have the 50 year land
use rights, until the year 2063, to a 35,320 square meter tract of land. We have built 5,630 square meters of buildings on this
site, housing our first extraction assembly, polyphenol drying and processing clean room, warehouse, showroom, research facility
and offices. We believe that our existing facilities are adequate for our current needs. We further believe that upon completion
of ramp up of our facility, we will be the third largest producer of tea polyphenol in the PRC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following management’s discussion and analysis should be read in conjunction with the historical financial statements and
the related notes thereto contained in this Report. The management’s discussion and analysis contains forward-looking statements,
such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical
fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,”
“target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions
(“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain
of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause
actual results or events to differ materially from those expressed or implied by the forward-looking statements. The Company’s
actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as
a result of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events
or circumstances occurring after the date of this report.
On
November 14, 2017, Image Chain entered into the Exchange Agreement with Image P2P and the Sellers. Pursuant to the Exchange
Agreement, the Sellers transferred all 50,000 shares of Image P2P outstanding common stock to the Company in exchange for 500,000,000
shares of Common Stock. As a result of the Share Exchange, Image P2P became the Company’s wholly-owned subsidiary. Image
P2P, through its subsidiaries, is engaged in producing, marketing and selling tea polyphenol and developing tea polyphenol-based
products.
The
Share Exchange has been accounted for as a reverse- merger and recapitalization of Image Chain where Image Chain (the legal acquirer)
is considered the accounting acquiree and Image P2P (the acquiree) is considered the accounting acquirer. As a result of this
transaction, the Company is deemed to be a continuation of the business of Image P2P.
Accordingly,
the accompanying consolidated financial statements are those of the accounting acquirer, Image P2P. The historical stockholders’
equity of the accounting acquirer prior to the share exchange has been retroactively restated as if the share exchange transaction
occurred as of the beginning of the first period presented.
As
the result of the Share Exchange and the change in business and operations of the Company, a discussion of the past financial
results of the Company is not pertinent, and under applicable accounting principles the historical financial results of Image
P2P, the accounting acquirer, prior to the Share Exchange are considered the historical financial results of the Company.
The
following discussion highlights Image P2P’s results of operations and the principal factors that have affected our financial
condition as well as our liquidity and capital resources for the periods described, and provides information that management believes
is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein.
The following discussion and analysis are based on Image P2P’s audited and unaudited financial statements contained in this
Report, which we have prepared in accordance with United States generally accepted accounting principles. You should read the
discussion and analysis together with such financial statements and the related notes thereto.
Basis
of Presentation
The
audited consolidated financial statements of Image P2P for the fiscal years ended December 31, 2016 and 2017, and the unaudited
consolidated condensed financial statements of Image P2P for the six months ended June 30, 2016 and 2017, contained herein include
a summary of our significant accounting policies and should be read in conjunction with the discussion below. In the opinion of
management, all material adjustments necessary to present fairly the results of operations for such unaudited interim periods
have been included in these unaudited financial statements. All such adjustments are of a normal recurring nature.
Company
Overview
We
extract tea polyphenol from tea leaves for use in a wide variety of health and beauty products, beverages, filters and purifiers,
and other products. We produce tea polyphenol to the specific requirements of our users, utilizing different types of tea leaves
harvested at different points in the growth cycle. Tea-polyphenol products have become popular in health-conscious communities
throughout the world. In Japan, tea polyphenol-based air conditioner air filters, soaps and facial wipes are seen as providing
superior anti-viral and anti-biotic cleaning properties. In Germany tea polyphenol-based beverages have gained acceptance for
purported digestive and restorative properties. We are also developing proprietary tea polyphenol-based products for sale. The
government of the PRC has recognized our accomplishments in tea polyphenol extraction through the granting of process patents
and designating as proprietary aspects of our manufacturing know-how.
Our
newly- installed extraction assembly continues to ramp up production, with a capacity of 155 metric tons of tea polyphenol production
per year as of June 30, 2017. Given sufficient access to raw materials and working capital, we expect the annual manufacturing
capacity of our currently installed extraction assembly to reach 600 metric tons. We generated net revenues of $45,431 for the
year ended December 31, 2016 and $1,168,126 for the six months ended June 30, 2017. We had comprehensive losses of $1,500,078
and $261,759, respectively, for the same periods.
Third-
party distributors sell our tea polyphenol to end-users, primarily in markets outside the PRC. We engage in marketing of our tea
polyphenol and tea polyphenol-based products with both PRC and foreign distributors of tea polyphenol. Our staff promotes our
tea polyphenol products at our showroom in Jiangxi Province and at trade fairs. We have applied for an export license for tea
polyphenol and tea polyphenol- based products, and plan to export our products directly to end-users once the relevant licenses
are obtained. We book sales of our products upon delivery to the third-party distributor, who will typically warehouse the product
until a sale is made to an end-user. The third-party distributor only pays for our product upon receipt of payment from the end
-user. As all of our net revenues represent sales of our tea polyphenol for delivery in China to third-party distributors, we
do not classify sales revenue by geography.
We
expect our primary drivers of net revenue growth to be (i) increased production at our current facility, realized through continued
implementation of our improved extraction know how and sufficient supplies of raw materials, (ii) increased sales of our tea polyphenol
products, achieved through our sales and marketing efforts and global demand for tea polyphenol-based products, and (iii) improved
pricing for tea polyphenol, in line with increased global demand for our primary raw material, tea leaves. We expect to improve
our operating revenues by implementing the production know how we have developed through the ramp up of our current extraction
facility, resulting in lower use of our primary inputs – tea leaves, water and electricity – to achieve increased
levels of tea polyphenol manufacture. Although we have not entered into any contractual obligations in this regard, we may in
the future seek to grow our production capacity through the addition of one to two extraction assemblies at our existing facility.
Our
continued growth relies on the markets for tea polyphenol-based products and our cost competitiveness to supply tea polyphenol
to those markets. Should those markets deteriorate, or if other suppliers of tea polyphenol products supply those markets at lower
prices than those for our products, we may not be able to grow our business, may continue to incur losses and may incur increased
levels of losses. We also require capital to operate our business, and have historically incurred losses, relying on borrowings
from banks and our related parties to fund our operations. In addition, should we seek to grow our manufacturing capacity through
the addition of one to two extraction assemblies at our current facilities, we would need to incur substantial debt obligations
to purchase and install the required equipment.
Accordingly,
we may seek to fund our future operations and our expansion through public or private equity or debt financings or other sources.
However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at
all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our
financial condition and our ability to grow our business. To the extent that we incur debt to fund our operations or our growth,
our business may not generate sufficient revenues to timely repay those debt obligations.
Components
of Statements of Operations
Net
Revenues
Net
revenues consists entirely of sales of tea polyphenol products. To date, we have sold all of our tea polyphenol products through
third-party distributors. We book sales of our products upon delivery to the third-party distributor, who will typically warehouse
the product until a sale is made to an end-user. The third-party distributor only pays for our product upon receipt of payment
from the end-user. We review and maintain credit histories for our customers and may allow purchases on credit by worthy customers.
No interest is charged on accounts receivable. We warranty the chemical properties of our tea polyphenol products, and have had
no customer warranty claims to date. We expect net revenues to increase as we increase our production capacity at our current
facilities and as global tea polyphenol product prices remain steady or increase.
Cost
of Revenues
Cost
of revenues consists of our inputs to tea polyphenol extraction, namely tea leaves, water, electricity, catalysts, labor costs,
depreciation and overhead attributed to manufacturing. We expect to improve our cost of revenues per metric ton of tea
polyphenol produced by implementing the production know how we have developed through the ramp up of our current extraction
facility, resulting in lower use of our primary inputs – tea leaves, water and electricity.
Operating
Expenses
Our
operating expenses consist of selling and marketing expenses and general and administrative expenses. Our research and development
expenses are expensed as incurred and accounted for under general and administrative expenses.
Sales
and Marketing
Sales
and marketing expenses consist of the costs associated with business development through client functions, participation in trade
fairs, preparation of marketing materials and associated travel, lodging and meal expenses. We expense sales and marketing expenses
as incurred. We expect sales and marketing expenses to increase with our increase in production capacity, in particular if we
should gain an export license and begin marketing our tea polyphenol products directly overseas.
General
and Administrative
Our
general and administrative expenses consist primarily of compensation and related costs for personnel, including those engaged
in sales and marketing and research and development, as well as legal, audit and accounting services, allocated overhead costs,
such as office furniture, information technology hardware and systems and utilities, and travel, lodging and meal expenses for
our executive staff when traveling on Company business. We expect our general and administrative expenses to remain steady going
forward.
Interest
Expense
Interest
expense consists primarily of interest and amortization of related costs associated with our bank debt. We expect interest expense
to fluctuate in line with the market interest rates for bank lending and our levels of indebtedness.
Foreign
Currency Translation gain/loss
Foreign
currency translation gain/loss consists of gains and losses from the translation of our financial statements from our functional
currency, the Renminbi, to United States dollars.
Results
of Operations
|
|
Six
Months Ended June 30,
|
|
|
Year
Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2016
|
|
|
2015
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Net
revenues
|
|
|
1,168,126
|
|
|
|
-
|
|
|
|
45,431
|
|
|
|
-
|
|
Cost
of revenues
|
|
|
1,160,702
|
|
|
|
-
|
|
|
|
601,119
|
|
|
|
-
|
|
Gross
profit
|
|
|
7,424
|
|
|
|
|
|
|
|
(555,688
|
)
|
|
|
-
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
and marketing expenses
|
|
|
49,513
|
|
|
|
-
|
|
|
|
20,785
|
|
|
|
-
|
|
General
and administrative expenses
|
|
|
187,817
|
|
|
|
340,186
|
|
|
|
496,154
|
|
|
|
308,297
|
|
Total
operating expenses
|
|
|
|
|
|
|
|
|
|
|
516,939
|
|
|
|
308,297
|
|
Operating
loss
|
|
|
(228,906
|
)
|
|
|
(340,186
|
)
|
|
|
(1,072,627
|
)
|
|
|
(308,297
|
)
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government
subsidy
|
|
|
6,037
|
|
|
|
24,482
|
|
|
|
24,050
|
|
|
|
-
|
|
Interest
income
|
|
|
40
|
|
|
|
-
|
|
|
|
56
|
|
|
|
-
|
|
Interest
expense
|
|
|
(126,111
|
)
|
|
|
(68,899
|
)
|
|
|
(148,961
|
)
|
|
|
(40,937
|
)
|
Total
other income (expense)
|
|
|
(120,034
|
)
|
|
|
45,417
|
|
|
|
(124,855
|
)
|
|
|
(40,937
|
)
|
Earnings
before tax
|
|
|
(348,940
|
)
|
|
|
(385,603
|
)
|
|
|
(1,197,482
|
)
|
|
|
(349,234
|
)
|
Income
tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
loss
|
|
|
(348,940
|
)
|
|
|
(385,603
|
)
|
|
|
(1,196,542
|
)
|
|
|
(349,234
|
)
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation gain
|
|
|
89,980
|
|
|
|
(110,553
|
)
|
|
|
(302,596
|
)
|
|
|
(245,495
|
)
|
Comprehensive
loss
|
|
|
(258,960
|
)
|
|
|
(505,156
|
)
|
|
|
(1,500,078
|
)
|
|
|
(594,729
|
)
|
Loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted earnings per share
|
|
|
(69.72
|
)
|
|
|
(77.04
|
)
|
|
|
(239.26
|
)
|
|
|
(69.78
|
)
|
Basic
and diluted weighted average shares outstanding
|
|
|
5,005
|
|
|
|
5,005
|
|
|
|
5,005
|
|
|
|
5,005
|
|
Comparison
of the Six Months Ended June 30, 2017 and 2016
Net Revenues
Net
revenues increased from nil to $1,168,126 as our tea polyphenol extraction assembly was operational for the six months ended June
30, 2017, but not operational for the six months ended June 30, 2016.
Cost
of Revenues
Cost
of revenues increased from nil to $1,160,702 as our tea polyphenol extraction assembly was operational for the six months ended
June 30, 2017, but not operational for the six months ended June 30, 2016. During the ramp-up phase of our new extraction assembly
cost of revenues was high, as we adjusted the assembly and its processes to manufacture tea polyphenol products to our specifications.
Operating
Expenses
Our
selling and marketing expenses increased from nil for the six months ended June 30, 2016 to $49,513 for the six months ended June
30, 2017, as we began marketing the products from our new extraction assembly. Our general and administrative expenses decreased
from $340,186 for the six months ended June 30, 2016 to $228,906 for the six months ended June 30, 2017, as efforts undertaken
to secure government approvals, financing and equipment for our enterprise were completed in 2016. Other than travel, lodging
and meal expenses in connection with these activities, our general and administrative expenses remained steady for the periods
presented.
Other
Income/Expense
Our
interest expense increased from $68,889 for the six months ended June 30, 2016 to $126,111 for the six months ended June 30,
2017 as a result of our increased level of borrowings to finance the acquisition of our extraction assembly, purchase raw materials
and otherwise fund our initial operations.
Other
Comprehensive Income/Loss
For
the six months ended June 30, 2016 we had a foreign currency loss of $110,553, compared to a foreign currency gain of $89,980
for the six months ended June 30, 2017. The variation in foreign currency gain or loss was tied directly to the fluctuation in
value of the Renminbi and Hong Kong dollar, our functional currencies, to the US dollar, the currency used for reporting our US
GAAP operating results.
Comparison
of the Years Ended December 31, 2016 and 2015
Net
Revenues
Net
revenues increased from nil to $45,431 as our tea polyphenol extraction assembly was operational for the year ended December 31,
2016, but not operational for the year ended December 31, 2015.
Cost
of Revenues
Cost
of revenues increased from nil to $601,119 as our tea polyphenol extraction assembly was operational for the year ended December
31, 2016, but not for the year ended December 31, 2015. During the ramp-up phase of our new extraction assembly, cost of revenues
was high, as we adjusted the assembly and its processes to manufacture tea polyphenol products to our specifications.
Operating
Expenses
Our
selling and marketing expenses increased from nil for the year ended December 31, 2015 to $20,785 for the year ended December
31, 2016, as we began marketing the products from our new extraction assembly. Our general and administrative expenses increased
from $308,297 for the year ended December 31, 2015 to $516,939 for the year ended December 31, 2016, in line with efforts to secure
government approvals, financing and equipment for our enterprise were undertaken in 2016. Other than travel, lodging and meal
expenses in connection with these activities, our general and administrative expenses remained steady for the periods presented.
Other
Income/Expense
Our
interest expense increased from $40,937 for the year ended December 31, 2015 to $148,961 for the year ended December 31, 2016
as a result of our increased level of borrowings to finance the acquisition of our extraction assembly, purchase raw materials
and otherwise fund our initial operations.
Other
Comprehensive Income/Loss
For
the year ended December 31, 2015 we had a foreign currency loss of $245,495, compared to a foreign currency gain of $302,596 for
the year ended December 31, 2016. The variation in foreign currency gain or loss was tied directly to the fluctuation in value
of the Renminbi and Hong Kong dollar, our functional currencies, to the US dollar, the currency used for reporting our US GAAP
operating results.
Liquidity
and Capital Resources
Since
the inception of our operating subsidiary Fuzhiyuan Biotechnology in 2013, we have incurred significant net losses and negative
cash flows from operations. During fiscal year 2016 and the six months ended June 30, 2017, we had net losses of $1,196,542 and
$348,940, respectively. At June 30, 2017, we had an accumulated deficit of $1,629,516, short-term bank loans of $2,508,522, long-term
bank loans of $1,839,680 and amounts due to related parties of $5,047,945. As discussed in the audit report for the year ended
December 31, 2016, these factors raise substantial doubt about our ability to continue as a going concern.
As
at June 30, 2017, we had cash and cash equivalents of $4,242. To date, we have financed our operations principally through borrowings
from banks and from our related parties. Depending on our future operational results, we may need to conduct one or more equity
or debt financings within the next 12 months.
We
could potentially need our available financial resources sooner than we currently expect, and we may incur additional indebtedness
to meet future financing needs. Adequate additional funding may not be available to us on acceptable terms or at all. In addition,
although we anticipate being able to obtain additional financing through non-dilutive means, we may be unable to do so. Our failure
to raise capital as and when needed could have significant negative consequences for our business, financial condition and results
of operations. Our future capital requirements and the adequacy of available funds will depend on many factors, many of which
are beyond our control.
Related
Party Loans
See
the section of this Report titled “Certain Relationships and Related Transactions” for a discussion of our operating
capital, equipment purchase and fixture purchase loans from our related parties. These unsecured loans do not bear interest or
fixed dates for repayment.
Short-term
Banks Loans
Short
term loans consisted of the following as of June 30, 2017 and December 31, 2016:
|
|
June
30, 2017
|
|
|
December
31, 2016
|
|
Jiangxi
Rural Credit Union & Rural Commercial bank
|
|
$
|
-
|
|
|
$
|
720,773
|
|
Jiangxi
Rural Credit Union & Rural Commercial bank
|
|
|
1,475,601
|
|
|
|
-
|
|
Jiangxi
Rural Credit Union & Rural Commercial bank
|
|
|
737,800
|
|
|
|
-
|
|
Jiangxi
Rural Credit Union & Rural Commercial bank
|
|
|
295,120
|
|
|
|
-
|
|
|
|
$
|
2,508,522
|
|
|
$
|
720,773
|
|
On
March 16, 2016, Fuzhiyuan Biotechnology entered into short-term loans with Jiangxi Rural Credit Union & Rural Commercial Bank
due on March 9, 2017. The loan was for general working capital purposes in the amount of $720,773. The loan carried an interest
rate of 6.30% and was secured by personal guarantee of Mr. QIU Peng, the authorized representative of Fuzhiyuan Biotechnology,
Director of Image P2P and shareholder of the Company.
In
March of 2017, Fuzhiyuan Biotechnology repaid the outstanding loan above, and procured bridge loans in the amount $612,374 that
was due and repaid in approximately one month.
On
March 30, 2017, Fuzhiyuan Biotechnology entered into a short-term loan with Jiangxi Rural Credit Union & Rural Commercial
Bank due on March 28, 2018 (the “short- term loan”). The short-term loan was for general working capital purposes
in the amount of $1,475,601. The short-term loan carried an interest rate of 6.30% and was secured by the personal guarantee of
Mr. QIU Peng, the authorized representative of Fuzhiyuan Biotechnology, Director of Image P2P and a shareholder of the Company,
and Mr. LI Ming Guang, a shareholder of the Company.
The
foregoing description of the short- term loan agreement does not purport to be complete and is qualified in its entirety by the
terms and conditions of the short-term loan agreement, as amended, which is attached hereto as Exhibit 10.1 and is incorporated
herein by reference.
On
April 28, 2017, Fuzhiyuan Biotechnology entered into a bank loan with Jiangxi Rural Credit Union & Rural Commercial Bank due
on April 25, 2020. The loan was for general working capital purposes in the amount of $737,800. The loan carried an interest rate
of 4.35% and was secured by personal guarantee of Mr. QIU Peng, the authorized representative of Fuzhiyuan Biotechnology, Director
of Image P2P and shareholder of the Company, and Mr. LI Ming Guang, a shareholder of the Company.
On
May 18, 2017, Fuzhiyuan Biotechnology entered into a bank loan with Jiangxi Rural Credit Union & Rural Commercial Bank due
on April 25, 2020. The loan was for general working capital purposes in the amount of $295,120 (RMB 2,000,000). The loan carried
an interest rate of nil and requires annual review by the bank to meet certain criteria or else the loan will become due on demand.
Long-term
Bank Loans
Long
term loan consisted of the following as of June 30, 2017 and December 31, 2016:
|
|
June
30, 2017
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
Current
portion
|
|
$
|
295,120
|
|
|
$
|
1,009,082
|
|
Long
term portion
|
|
|
1,839,680
|
|
|
|
1,797,222
|
|
|
|
$
|
2,134,800
|
|
|
$
|
2,806,304
|
|
On
October 30, 2015, Fuzhiyuan Biotechnology entered into a loan agreement with Industrial and Commercial Bank of China – Wan
An County Branch for an interest-only construction loan in the amount of approximately $2,403,808 (the “long-term loan”).
The long-term loan bares an adjustable interest rate; at the time of origination the interest rate was 4.75%. The interest rate
is adjustable every twelve months. The interest only construction loan was collateralized by the lands and buildings of Fuzhiyuan
Biotechnology with principal payments due annually for five years.
On
January 15, 2015, Fuzhiyuan Biotechnology entered into a loan agreement with Wan An County Xin Yuan Industrial Development Ltd
Co. for an interest only loan in the amount of approximately $801,269. The loan bore a fixed interest rate at 4.983% with a maturity
date of May 4, 2017. Fuzhiyuan Biotechnology repaid the loan upon maturity.
As
of June 30, 2017, Fuzhiyuan Biotechnology had made principal repayments of $727,347, the difference in balances between June 30,
2017 and December 31, 2016 was a result of the change of exchange rates in effect at those points in time.
Loan
maturity schedule as of June 30, 2017 and December 31, 2016:
|
|
June
30, 2017
|
|
|
December
31 2016
|
|
|
|
|
|
|
|
|
Due
in one year
|
|
$
|
295,120
|
|
|
$
|
1,009,082
|
|
Due
in two years
|
|
|
442,680
|
|
|
|
432,464
|
|
Due
in three years
|
|
|
590,240
|
|
|
|
576,618
|
|
Due
in four years
|
|
|
885,361
|
|
|
|
864,927
|
|
Due
in five years
|
|
|
-
|
|
|
|
-
|
|
Due
in greater than five years
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
2,213,401
|
|
|
|
2,883,091
|
|
The
long-term loan is subject to financial covenants and is collateralized by substantially all our assets (other than our intellectual
property) and limits our ability with respect to additional indebtedness, investments or dividends, among other things, subject
to customary exceptions. The Loan Agreement includes customary events of default.
The
foregoing description of the long-term loan agreement does not purport to be complete and is qualified in its entirety by the
terms and conditions of the long-term loan agreement, as amended, which is attached hereto as Exhibit 10.2 and is incorporated
herein by reference.
The
following table summarizes our cash flows for the periods presented:
|
|
Six
Months Ended June 30,
|
|
|
Year
Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2016
|
|
|
2015
|
|
Cash
flows from operating activities
|
|
$
|
(1,174,708
|
)
|
|
$
|
(1,486,390
|
)
|
|
$
|
(230,551
|
)
|
|
$
|
1,157,718
|
|
Cash
flows from investing activities
|
|
$
|
(776,341
|
)
|
|
$
|
(789,289
|
)
|
|
$
|
(2,033,016
|
)
|
|
$
|
(10,760,004
|
)
|
Cash
flows from financing activities
|
|
$
|
1,953,549
|
|
|
$
|
1,954,392
|
|
|
$
|
1,930,151
|
|
|
$
|
9,959,450
|
|
Operating
Activities
We
have historically experienced negative cash outflows as our new business obtained approvals for, and negotiated, the acquisition
of land, buildings, equipment and loan facilities to begin our tea polyphenol extraction operations, and we extended credit to
our purchasers of our tea polyphenol products. Our net cash used in operating activities primarily consists of our net loss from
continuing operations and increase in accounts receivables, offset in part by depreciation of fixed assets and increase in accounts
and other payables. Our operations to date have not generated significant cash receipts due to extension of credit to purchasers
of our tea polyphenol products. Our primary use of cash from operating activities is for the inputs of our tea polyphenol extraction
process. Cash from operating activities also goes to personnel costs, legal, audit and accounting services cost, travel, lodging
and meal expenses for our executive staff when traveling on Company business, sales and marketing costs and research and development.
We expect to continue to increase the cash flows from our operating activities as we increase our production volume, make new
sales and recover our outstanding accounts receivable.
During
the six months ended June 30, 2017, operating activities used $1,174,708 in cash, a decrease from $1,486,390 from the six months
ended June 30, 2016. The decrease in cash used was due primarily to a significant increase in our accounts payable and an increase
in depreciation of fixed assets exceeding the significant increase in accounts and other receivables. During the year ended December
31, 2016, operating activities used $230,551 in cash, an increase from the $1,157,718 in cash flows from operating activities
for the year ended December 31, 2015. The increase in cash used in operating activities was due to a significant increase in
net loss and inventories and a significant decrease in advance and prepayments to suppliers, offset in part by an increase in
depreciation of fixed assets and accounts and other payables.
Investing
Activities
Net
cash used in investing activities remained steady for the six months ended June 30, 2017 and June 30, 2016, at $776,341 and $789,289,
respectively. This was due to the net cash position remaining stable as a related party loan paid in the six months ended June
30, 2017 offset the purchase of plant and equipment in the six months ended June 30, 2016. Net cash used in investing activities
dropped significantly, from $10,760,004 for the year ended December 31, 2015 to $2,033,016 for the year ended December 31, 2016,
due to the purchase, or pre-payment for, most of our facilities and equipment occurring in the year ended December 31, 2015.
Financing
Activities
Net
cash provided by financing activities for the six months ended June 30, 2017 of $1,953,549 consisted of bank borrowings and borrowing
and payments to related parties, net, offset in part by repayment of bank borrowings. Net cash provided by financing activities
for the year ended December 31, 2016 of $1,930,151 consisted primarily of bank borrowings and borrowing and payments to related
parties, net. Net cash provided by financing activities for the year ended December 31, 2015 of $9,959,450 consisted of proceeds
of owners’ injection of capital, bank borrowings and borrowing and payments to related parties, net.
Off-Balance
Sheet Arrangements
During
the six months ended June 30, 2016 and 2017 and years ended December 31, 2015 and 2016, we did not have any off-balance sheet
arrangements as defined by applicable SEC regulations.
Critical
Accounting Policies and Estimates.
Our
financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The
preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates
are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our
actual results could differ from these estimates.
We
believe that the assumptions and estimates have the greatest potential impact on our financial statements. Therefore, we consider
these to be our critical accounting policies and estimates. For further information on all of our significant accounting policies,
see the notes to our financial statements.
Inventories
Inventories
consisting of finished goods and raw materials are stated at
the lower of cost or market value. Finished goods are comprised of direct materials, direct labor, inbound shipping costs, and
an appropriate proportion of overhead. We use the first in first out method of accounting for inventory.
Revenue
Recognition
Our
revenue recognition policies are in compliance with SEC Staff accounting bulletin (SAB) 104. Sales revenue is recognized at the
date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed,
no other significant obligations of exist on our part and collectability is reasonably assured. Payments received before all of
the relevant criteria for revenue recognition are satisfied are recorded as customer deposits. Our revenue consists of invoiced
value of goods, net of a value-added tax (VAT).
Accounts
Receivable
Accounts
receivable are carried at the amounts invoiced to customers less allowance for doubtful accounts. The allowance is an estimate
based on a review of individual customer accounts on a regular basis. Accounts receivable are written off when deemed uncollectible.
Recoveries of accounts receivable previously written off are recorded when received. We review the collectability of accounts
receivable based on an assessment of historical experience, current economic conditions, and other collection indicators.
Construction
in Progress and Prepayments for Equipment
Construction
in progress represents direct and indirect construction or acquisition costs for buildings. Prepayments for equipment represents
advances and down-payments for equipment that is either yet to be delivered or has been delivered but requires installation and
testing in order to be put in to use. Amounts recorded as construction in progress and prepayments for equipment are transferred
to plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed.
We begin depreciating those assets when they have transferred to plant and equipment and put into use.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Beneficial
Ownership of officers, directors and persons holding more than 5% of any class of Image Chain’s voting securities.
The
following table sets forth certain information as of the date hereof with respect to the beneficial ownership of our shares of
common stock by (i) each executive officer and director, (ii) all executive officers and directors as a group, and (iii) beneficial
owners of 5% or more of our outstanding Common Stock. This table reflects the issuance of our Common Stock pursuant to the Share
Exchange. The Share Exchange did not contemplate members of the management team of Image P2P being appointed as officers or directors
of Image Chain, and so the table below provides ownership disclosure for the current directors and officers of Image Chain.
Beneficial
ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting or investment
power with respect to securities. Common Stock subject to options, warrants or convertible securities exercisable or convertible
within 60 days as of the date hereof are deemed outstanding for computing the percentage of the person or entity holding such
options, warrants or convertible securities but are not deemed outstanding for computing the percentage of any other person. As
of the date hereof, we had 507,320,882 shares of Common Stock issued and outstanding, including 50,000 shares of Preferred Stock
under contract for exchange into Common Stock.
Unless
otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all
ordinary shares beneficially owned by them. The Company does not maintain any equity compensation plans.
|
|
Number of Shares of
|
|
|
|
|
|
|
Common
Stock
|
|
|
Percentage
|
|
Name
of Beneficial Owner
|
|
Beneficially
Owned
|
|
|
of
Class
|
|
David
Po(1)
|
|
|
46,800
|
|
|
|
*
|
|
Jonathan
Ka Kit Tam(1)
|
|
|
200,000
|
|
|
|
*
|
|
Kevin Lai(1)
|
|
|
200,000
|
|
|
|
*
|
|
All
Directors and Officers as a Group (3 persons)
|
|
|
446,800
|
|
|
|
*
|
|
QIU Peng(2)
|
|
|
46,000,000
|
|
|
|
9.1
|
%
|
LI Mingguang(2)
|
|
|
28,000,000
|
|
|
|
5.5
|
%
|
*
Less than 1%.
(1)
In care of Image Chain Group Limited, Inc., Room 503, 5F, New East Ocean Centre, 9 Science Museum Road, Kowloon, Hong Kong Special
Administrative Region, People’s Republic of China.
(2)
In care of Jiangxi Fuzhiyuan Biotechnology Limited, Industrial Park, Wan’An, Jiangxi Province, PRC, 343800.
Change
in Control Arrangements
As
of December 31, 2016, there are no arrangements that would result in a change in control of the Company.
DIRECTORS
AND EXECUTIVE OFFICERS
Identification
of Directors and Executive Officers:
As
of the date of this Report, our Board of Directors consisted of three members. The Share Exchange did not contemplate members
of the management team of Image P2P being appointed as officers or directors of Image Chain, and so the table below provides disclosure
of the current directors and officers of Image Chain.
Name
|
|
Title
|
|
Age
|
David
Po
|
|
Chief
Executive Officer, President, Secretary, Director
|
|
55
|
Jonathan
Ka Kit Tam
|
|
Chief
Financial Officer, Assistant Secretary, Director
|
|
45
|
Kevin
Lai
|
|
Director
|
|
36
|
David
Po
Mr.
Po was appointed our Chief Executive Officer, President, Treasurer, Secretary and Director on May 1, 2017. Mr. Po has a distinguished
career in international business, with an extensive history of transacting deals between Asia and western countries, primarily
the United States. From 2003 until present, Mr. Po served as Director and Chief Executive Officer of Everbest Real Estate Services
(“Everbest”), a marketing and sales company serving the Japanese, Chinese and Hong Kong markets for a major U.S.-based
residential, multi-family, industrial and commercial real estate development company. Everbest ceased operations prior to Mr.
Po joining the Company. Mr. Po received a Bachelor of Science degree from the University of California, San Diego.
Jonathan
Ka Kit Tam
Dr.
Tam was appointed our Chief Financial Officer, Assistant Secretary and Director on August 6, 2017. Since 2004, Dr. Tam has been
the founder, sole Director, Chief Executive Officer and President of UStar Investment Group and the affiliated DSI Institute.
UStar and DSI arrange academic research and funding of research by Chinese academics abroad and international academics in China.
UStar and DSI are currently active in arranging academic studies and symposiums in connection with the PRC’s “One
Belt, One Road” initiative. Dr. Tam is also the founder and sole director of Dragon Star International, Inc., SCA Wellness,
Inc. and Wei Shu North America, Inc., companies involved in academic placements, beauty and health travel and the import of agricultural
goods, respectively.
Dr.
Tam holds a Doctorate of Business Administration from the EU Business School, conducted post-doctoral work at Oxford University
and holds a Bachelor of Business Administration from the University of Wisconsin-Madison. Dr. Tam continues to supervise the UStar
and DSI businesses, and has agreed that he will dedicate no less than 20 hours a week of his time to his responsibilities as Chief
Financial Officer and Director of the Company.
Kevin
Lai
Mr.
Lai is an investment analyst for Funde Asset Management (Hong Kong) Co., Ltd., and served Image Chain from 2015 to 2016 as a marketing
manager. He was appointed to our Board of Directors on May 1, 2017. From 2009 to 2015, Mr. Lai served as administrative
director for Shanghai HuaPeng Explosion-proof Technology Co., Ltd. (“HuaPeng”), a Shanghai-based company specializing
in safe transportation, storage and delivery of flammable and hazardous materials. At HuaPeng, Mr. Lai focused on operations and
external relations. Mr. Lai received a bachelor degree from Fort Hays State University.
Employment
Agreements
We
currently do not have employment agreements with any of our executive officers or directors.
Family
Relationships
There
are no family relationships between any of our directors or executive officers.
Term
of Office
All
directors hold office for a one (1) year period and have been duly elected and qualified. There is no agreement with respect to
the election of directors. The Company has not compensated its directors for service on the Board of Directors of ICGL or any
of its subsidiaries or any committee thereof. Any non-employee director of ICGL or its subsidiaries will be reimbursed for expenses
incurred for attendance at meetings of the Board of Directors and any committee of the Board of Directors, although no such committee
has been established. Each executive officer of ICGL is appointed by and serves at the discretion of the Board of Directors.
None of the officers or directors of ICGL is currently an officer or director of a company required to file reports with the
Securities and Exchange Commission, other than ICGL.
Involvement
in Certain Legal Proceedings
To
our knowledge, no director, nominee for director, or executive officer of the Company has been a party in any legal proceeding
material to an evaluation of his ability or integrity during the past ten years.
Board
Committees
Audit
committee
We
do not have a separately-designated standing audit committee. The Board of Directors performs the functions of an audit committee,
but no written charter governs the actions of the Board of Directors when performing the functions that would generally be performed
by an audit committee. The Board of Directors approves the selection of our independent accountants and meets and interacts with
the independent accountants to discuss issues related to financial reporting. In addition, the Board of Directors reviews the
scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual
operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters
including fees to be paid to the independent auditor and the performance of the independent auditor.
Compensation
and Nominations Committees
We
currently have no compensation or nominating committee or other board committee performing equivalent functions. Currently, the
member of our Board of Directors participates in discussions concerning executive officer compensation and nominations to the
Board of Directors.
Shareholder
communications
The
Company does not have a process for security holders to send communications to the board of directors due to the fact that minimal
securities are traded on a stock exchange.
Code
of Conduct and Ethics
We
have adopted a Code of Ethics, as required by sections 406 and 407 of the Sarbanes-Oxley Act of 2002. It has been filed as an
Exhibit to our registration statement on Form S-1 on February 5, 2014.
EXECUTIVE
COMPENSATION
The
Share Exchange did not contemplate members of the management team of Image P2P being appointed as officers or directors of Image
Chain. Item 11 of Image Chain’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the SEC
on April 17, 2017, is incorporated herein by reference.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Related
Party Transactions
Image
P2P Related Party Transactions
Image
P2P related parties’ relationships are as follows:
Mr.
QIU Peng
|
|
Director,
CEO and Majority Shareholder of the Company
|
Ms.
HUANG Min
|
|
Mr.
QIU Peng’s spouse
|
Mr.
QIU Yi Sheng
|
|
Mr.
QIU Peng’s father
|
Wan An Fu Zhi Yuan Cha Ye Ltd. Co.
WanAn
MingCha Yuan Chaye Zhongzhi Cooperative
|
|
Mr.
QIU Peng, CEO of the Company as shareholder and officer of Wan An Fu Zhi Yuan Chan Ye Ltd.
|
Image
P2P Related Party Accounts Receivable, Prepayments and Advances
Amounts
due from related parties as of June 30, 2017 and December 31, 2016:
|
|
2017
|
|
|
2016
|
|
WanAn
MingChaYuan Chaye Zhongzhi Cooperative
|
|
$
|
773,215
|
|
|
$
|
-
|
|
|
|
$
|
773,215
|
|
|
$
|
-
|
|
The
outstanding receivables from WanAn MingChaYuan Chaye Zhongzhi Cooperative
comprised of bank loan proceeds received
in trust on behalf of the Company as required by the bank. These amounts are due on demand and are non-interest bearing.
The
largest amount due thereunder in the year ended December 31, 2016 was $nil, and the total interest and principal paid in that
period were $nil and $nil, respectively. The largest amount due in the current year to the date of this Report was $773,215, and
the total interest and principal paid in that period were $nil and $nil, respectively.
Advances
and prepayments to suppliers as of June 30, 2017 and December 31, 2016:
|
|
June
30, 2017
|
|
|
December
31, 2016
|
|
Wan
An Fu Zhi Yuan Cha Ye Ltd. Co.
|
|
$
|
9,149
|
|
|
$
|
8,938
|
|
The
outstanding advances and prepayments to Wan An Fu Zhi Yuan Cha Ye Ltd. Co. consist of raw material tea leaves purchases. These
amounts are due on demand and non -interest bearing. The advances and prepayments can be used to offset against purchases of inventory
by the Company.
The largest amount due thereunder
in the year ended December 31, 2016 was $8,938, and the total interest and principal paid in that period were $nil and $nil, respectively.
The largest amount due in the current year to the date of this Report was $9,149, and the total interest and principal paid in
that period were $nil and $nil, respectively.
Image
P2P Related Party Accounts Payable
Amounts
due to related parties as of June 30, 2017 and December 31, 2016:
|
|
2017
|
|
|
2016
|
|
Mr.
Peng
Qiu
|
|
$
|
4,515,672
|
|
|
$
|
3,484,730
|
|
Mr.
Yi Sheng
Qiu
|
|
|
532,273
|
|
|
|
519,988
|
|
|
|
$
|
5,047,945
|
|
|
$
|
4,004,718
|
|
The
outstanding payables to Mr. QIU Peng and Mr. QIU Yi Sheng consist of working capital advances and borrowings. These amounts are
due on demand and are non-interest bearing.
The largest amount due thereunder
in the year ended December 31, 2016 was $4,004,718, and the total interest and principal paid in that period were $nil and $nil,
respectively. The largest amount due in the current year to the date of this Report was $5,047,945, and the total interest and
principal paid in that period were $nil and $nil, respectively.
Accounts
Payables as of June 30, 2017 and December 31, 2016:
|
|
2017
|
|
|
2016
|
|
Wan An Huan Sheng Biomass Energy Ltd. Co.
|
|
$
|
169,065
|
|
|
$
|
73,377
|
|
The
accounts payables to related party includes an outstanding balance payable to Wan An Huan Sheng Biomass Energy Ltd. Co.
for purchases of raw materials in the normal course of business.
The
largest amount due thereunder in the year ended December 31, 2016 was $73,377, and the total interest and principal paid in that
period were $nil and $nil, respectively. The largest amount due in the current year to the date of this Report was $169,065, and
the total interest and principal paid in that period were $nil and $nil, respectively.
Image Chain Related Party Transactions
Amounts
due from related parties consisted of the following:
|
|
June
30, 2017
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
|
|
Junrui WU, former director of FDHG
|
|
$
|
-
|
|
|
$
|
49,328
|
|
Amounts
due to related parties consisted of the following:
|
|
June
30, 2017
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
|
|
David Po, Chairman and Chief Executive Officer
|
|
$
|
168,957
|
|
|
$
|
-
|
|
Mr.
Wu previously had an outstanding balance owed to the Company in the amount of $49,328 at December 31, 2016. During the six months
ended June 30, 2017, Mr. Wu paid expenses and professional fees on behalf of the Company and has fully settled the outstanding
balance owed by him to the Company.
The
balance owed to Mr. Po was incurred for all of the professional expense payments made by him on behalf of the Company.
The largest amount due thereunder in the
year ended December 31, 2016 was $49,328, and the total interest and principal paid in that period were $nil and $nil, respectively.
The largest amount due in the current year to the date of this Report was $326,736, and the total interest and principal paid
in that period were $nil and $nil, respectively.
Image
Chain Office Lease
The
Company operates its principal office under a sublease with Image Industrial Development Ltd., an entity that, prior to the Share
Exchange, owned 20% of the issued and outstanding common equity of the Company. Under our sublease, we pay approximately $90.40
per month in rental payments, which represents a substantial discount to the prevailing market rental rates for comparable office
space.
Director
Independence
We
adhere to the NASDAQ listing standards in determining whether a director is independent. Our board of directors consults with
its counsel to ensure that the board’s determinations are consistent with those rules and all relevant securities and other
laws and regulations regarding the independence of directors. The NASDAQ listing standards define an “independent director”
as a person, other than an executive officer of a company or any other individual having a relationship which, in the opinion
of the issuer’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities
of a director.
Consistent
with these considerations, and considering their positions as executive officers and recent employees of the Company, we have
determined that Messrs. Po, Tam and Lai do not qualify as independent directors. We do not maintain a compensation, nominating
or audit committee.
Policies
and Procedures for Related Party Transactions
Our
board of directors has adopted a policy, effective upon the completion of this offering, that our executive officers, directors,
nominees for election as a director, beneficial owners of more than 5% of any class of our Common Stock and any members of the
immediate family of any of the foregoing persons are not permitted to enter into a related person transaction with us without
the prior consent of our audit committee. Any request for us to enter into a transaction with an executive officer, director,
nominee for election as a director, beneficial owner of more than 5% of any class of our Common Stock or any member of the immediate
family of any of the foregoing persons in which the amount involved exceeds $120,000 and such person would have a direct or indirect
interest must first be presented to our audit committee for review, consideration and approval. In approving or rejecting any
such proposal, our audit committee is to consider the material facts of the transaction, including, but not limited to, whether
the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or
similar circumstances and the extent of the related person’s interest in the transaction. We did not have a formal review
and approval policy for related party transactions at the time of any of the transactions described above. However, all of the
transactions described above were entered into after presentation, consideration and approval by our board of directors and/or
our audit committee.
MARKET
PRICE OF AND DIVIDENDS ON COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market
Information
Our
common stock is quoted on the OTC Markets (“OTCQB”) under the symbol “ICGL”. The Common Stock was initially
quoted on the OTCQB on January 3, 2015, however, there has been very limited trading to date, and an active trading market may
never develop.
The
table below sets forth the high and low closing prices of the Company’s Common Stock during the periods indicated as reported
by the OTCQB.
|
|
Bid
Price
|
|
|
|
HIGH
|
|
|
LOW
|
|
Period
ended November 13, 2017
|
|
$
|
175
.00
|
|
|
$
|
175
.00
|
|
Third Quarter
ended September 30, 2017
|
|
$
|
175
.00
|
|
|
$
|
175
.00
|
|
Second Quarter
ended June 30, 2017
|
|
$
|
500.00
|
|
|
$
|
500.00
|
|
First Quarter
ended March 31, 2017
|
|
$
|
6.25
|
|
|
$
|
0.01
|
|
Fourth Quarter ended December 31, 2016
|
|
$
|
13.00
|
|
|
$
|
13.00
|
|
Third Quarter
ended September 30, 2016
|
|
$
|
20.00
|
|
|
$
|
7.30
|
|
Second Quarter
ended June 30, 2016
|
|
$
|
9.50
|
|
|
$
|
7.75
|
|
First Quarter
ended March 31, 2016
|
|
$
|
10.00
|
|
|
$
|
7.00
|
|
Fourth Quarter
ended December 31, 2015
|
|
$
|
9.00
|
|
|
$
|
6.99
|
|
Third Quarter
ended September 30, 2015
|
|
$
|
8.00
|
|
|
$
|
5.00
|
|
Second Quarter
ended June 30, 2015
|
|
$
|
6.25
|
|
|
$
|
0.55
|
|
First Quarter
ended March 31, 2015
|
|
$
|
6.25
|
|
|
$
|
0.01
|
|
Holders
As
of the date of this Report there were 308 holders of record of our Common Stock. This does not include an indeterminate
number of persons who hold our Common Stock in brokerage accounts and otherwise in “street name.” As of the date of
this Report, there are 507,270,882 shares of our Common Stock outstanding. There are no options, warrants or other securities
convertible into our Common Stock, other than the 50,000 shares of our Preferred Stock currently outstanding. Our Preferred Stock
currently outstanding are under contract for conversion into 50,000 shares of our Common Stock, representing a conversion basis
of 1 share of Preferred Stock for 1 share of Common Stock.
Dividends
Holders
of common stock are entitled to receive such dividends as may be declared by the Company’s Board of Directors. Image P2P
did not declare or pay dividends during its fiscal years ended December 31, 2016 or 2015.
To
the extent the Company has any future earnings, it will likely retain earnings to expand corporate operations and not use such
earnings to pay dividends.
Transfer
Agent and Registrar
The
transfer agent and registrar for ICGL’s common stock is Globex Transfer, LLC, 780 Deltona Blvd., Suite 202, Deltona, FL
32725, telephone 813-344-4490.
Repurchases
of Our Securities
None.
Recent
Sales of Unregistered Securities
Item
3.02 of this Report is incorporated herein by reference.
No
Public Offering
The
filing of this Report is not made in connection with a current plan of the Company to conduct a public offering of its securities.
Indemnification
of Officers and Directors
Our
Bylaws, subject to the provisions of the Nevada Revised Statutes, contain provisions which allow the Company to indemnify any
person against liabilities and other expenses incurred as the result of defending or administering any pending or anticipated
legal issue in connection with service to us if it is determined that person acted in good faith and in a manner which he reasonably
believed was in or not opposed to the best interest of the Company. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our director, officer and controlling person, we have been advised that in the opinion of the
SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
DESCRIPTION
OF SECURITIES
Common
Stock
We
are authorized to issue 2,000,000,000 shares of common stock, $.001 par value per share, of which 507,270,882 shares are issued
and outstanding. Each outstanding share of Common Stock is entitled to one vote, either in person or by proxy, on all matters
that may be voted upon by their holders at meetings of the stockholders. The Board of Directors may not cause a reverse split
of the outstanding Common Stock without an affirmative vote of the holders of 50% of the capital stock of the corporation entitled
to vote or by the consent of the stockholders. Shares of Common Stock may be issued from time to time without prior approval by
the stockholders. Common Stock may be issued for such consideration as may be fixed from time to time by the Board of Directors.
The Board of Directors may issue such shares of Common Stock in one or more series, with such voting powers, designations, preferences
and rights or qualifications, limitations or restrictions thereof as shall be stated in the resolution or resolutions.
Preferred
Stock
We
are authorized to issue 50,000 shares of preferred stock, $.001 par value, of which 50,000 shares are issued and outstanding.
Shares of Preferred Stock may be issued from time to time without prior approval by the stockholders. Preferred Stock may be issued
for such consideration as may be fixed from time to time by the Board of Directors. The Board of Directors may issue such shares
of Preferred Stock in one or more series, with such voting powers, designations, preferences and rights or qualifications, limitations
or restrictions thereof as shall be stated in the resolution or resolutions.
LEGAL
PROCEEDINGS
We
are not aware of any pending legal proceedings to which we are a party or of which any of our property is the subject, nor are
we aware of any such proceedings that are contemplated by any governmental authority. From time to time, we may become involved
in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent
uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
ITEM
302 UNREGISTERED SALES OF EQUITY SECURITIES
The
information set forth in Item 2.01 of this Report is incorporated herein by reference.
On
November 14, 2017, pursuant to the terms of the Exchange Agreement, all 50,000 shares of common stock of Image P2P were
exchanged for 500,000,000 shares of Common Stock. This transaction was exempt from registration pursuant to Regulation S promulgated
under the Securities Act, which exempts transactions offshore the United States. None of the securities were sold through an underwriter
and, accordingly, there were no underwriting discounts or commissions involved.
Sales
of Unregistered Securities of Image Chain
The
following list sets forth information as to all securities Image Chain sold from November 14, 2014 through immediately
prior to the consummation of the Share Exchange, which were not registered under the Securities Act.
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1.
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On
June 25, 2015, Image Chain sold an aggregate of 228,175,000 shares of its Common Stock, to multiple investors, at a price
per share of HKD$1.60. Such investors paid cash in an aggregate amount of HKD$365,080,000. On June 26, 2015, Image Chain sold
an aggregate of 96,825,000 shares of Common Stock to multiple investors, at a price per share equal to USD$0.20. Such investors
paid cash in an aggregate amount of USD$1,936,500. All of the aforementioned shares were sold pursuant to Rule 506(b) of Regulation
D under the Securities Act as transactions not involving a public offering. None of the securities were sold through an underwriter
and, accordingly, there were no underwriting discounts or commissions involved.
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2.
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On
September 4, 2017, Image Chain delivered an aggregate of 3,320,000 shares of Common Stock to a group of employees and service
providers in exchange for services rendered or to be rendered to Image Chain. The fair market value of the Common Stock was
determined by the Board of Directors to be US$5.00 per share. The issue of Common Stock was made in reliance on Regulation
S, exempting transactions offshore the United States, except with respect to the issue of Common Stock to our Chief Executive,
Mr. David Po, which was made in reliance on Section 4(a)(2) of the Securities Act, as a transaction not involving any public
offering. None of the securities were sold through an underwriter and, accordingly, there were no underwriting discounts or
commissions involved.
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We
believe the above transactions were exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the
Securities Act or Regulation S under the Securities Act. The recipients of the securities in each of these transactions represented
their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution
thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had adequate
access to information about Image Chain.
ITEM
5.01 CHANGES IN CONTROL OF REGISTRANT
The
information regarding change of control of Image Chain in connection with the Share Exchange set forth in Item 2.01, “Completion
of Acquisition or Disposition of Assets—The Share Exchange” is incorporated herein by reference.
ITEM
5.06 CHANGE IN SHELL COMPANY STATUS
Prior
to the Share Exchange, we were a “shell company” (as such term is defined in
Rule 12b-2
under the Exchange Act). As a result of the Share Exchange, we have ceased to be a shell company. The information contained
in this Report, together with the information contained in our Annual Report on
Form 10- K
for the fiscal year ended December 31, 2016, and our subsequent Quarterly Reports on
Form 10-Q
and Current Reports on
Form 8-K,
as filed with the SEC, constitute the current “Form
10 information” necessary to satisfy the conditions contained in Rule 144(i)(2) under the Securities Act.
ITEM
9.01 FINANCIAL STATEMENTS AND EXHIBITS
(a)
Financial statements of business acquired.
In
accordance with Item 9.01(a), Image P2P’s audited financial statements as of, and for the fiscal years ended, December 31,
2015 and 2016, are filed as Exhibit 99.1 hereto and Image P2P’s unaudited condensed financial statements as of, and for
the six months ended, June 30, 2016 and 2017, and the accompanying notes, are filed as Exhibit 99.2 hereto.
(b)
Pro forma financial information.
In
accordance with Item 9.01(b), the unaudited pro forma condensed combined financial statements as of, and for the fiscal year ended,
December 31, 2016, and for the six months ended, June 30, 2017, and the accompanying notes, are filed as Exhibit 99.3 hereto.
(c)
Shell Company Transactions.
Reference
is made to Items 9.01(a) and 9.01(b) and the exhibits referred to therein, which are incorporated herein by reference.
(d)
Exhibits.
In
reviewing the agreements included or incorporated by reference as exhibits to this Current Report on Form 8-K, please remember
that they are included to provide investors with information regarding their terms and are not intended to provide any other factual
or disclosure information about the Image Chain, Image P2P or the other parties to the agreements. The agreements may contain
representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been
made solely for the benefit of the parties to the applicable agreement and:
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should
not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the
parties if those statements prove to be inaccurate;
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have
been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement,
which disclosures are not necessarily reflected in the agreement;
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may
apply standards of materiality in a way that is different from what may be viewed as material to other investors; and
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were
made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and
are subject to more recent developments.
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Accordingly,
these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other
time. Additional information about the Image Chain and Image P2P may be found elsewhere in this Current Report on Form 8-K and
the Image Chain’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
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IMAGE
CHAIN GROUP LIMITED, INC.
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/s/
David Po
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Dated:
November 14, 2017
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Name:
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David
Po
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Title:
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Chief
Executive Officer
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(1)
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Incorporated
by reference to Form S-1 Registration Statement filed on May 2, 2014.
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(2)
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Incorporated
by reference to Form 8-K current report filed on February 14, 2017.
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