Item
1. Financial Statements
IMAGE
CHAIN GROUP LIMITED, INC.
Unaudited
Consolidated Balance Sheets
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
14,526
|
|
|
$
|
64,856
|
|
Accounts receivable,
net
|
|
|
111,332
|
|
|
|
89,689
|
|
Other receivables
and other current assets
|
|
|
-
|
|
|
|
24,629
|
|
Inventories
|
|
|
113,879
|
|
|
|
78,357
|
|
Advances and prepayment
to suppliers
|
|
|
69,249
|
|
|
|
10,523
|
|
Prepaid taxes and
taxes recoverable
|
|
|
103,364
|
|
|
|
99,863
|
|
Total Current assets
|
|
|
412,350
|
|
|
|
367,917
|
|
|
|
|
|
|
|
|
|
|
Plant and equipment, net
|
|
|
11,582,207
|
|
|
|
11,107,392
|
|
Construction in progress and prepayment
for equipment
|
|
|
522,144
|
|
|
|
504,459
|
|
Intangible assets, net
|
|
|
528,599
|
|
|
|
524,547
|
|
Other assets
|
|
|
147,011
|
|
|
|
142,032
|
|
Total Assets
|
|
$
|
13,192,311
|
|
|
$
|
12,646,347
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Short-term bank
loans
|
|
$
|
934,066
|
|
|
$
|
2,304,222
|
|
Long-term bank loans
– current portion
|
|
|
477,000
|
|
|
|
460,844
|
|
Accounts payable
|
|
|
801,093
|
|
|
|
837,159
|
|
Accrued liabilities
and other payables
|
|
|
2,142,974
|
|
|
|
1,409,572
|
|
Customers advances
and deposits
|
|
|
60,992
|
|
|
|
58,926
|
|
Due to related parties
|
|
|
5,158,710
|
|
|
|
4,998,751
|
|
Total Current Liabilities
|
|
|
9,574,835
|
|
|
|
10,069,474
|
|
|
|
|
|
|
|
|
|
|
Long-term bank loans
|
|
|
2,947,117
|
|
|
|
1,771,997
|
|
Total Liabilities
|
|
|
12,521,952
|
|
|
|
11,841,471
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Preferred Stock,
$0.001 par value, 50,000 shares authorized, issued and outstanding
|
|
|
50
|
|
|
|
50
|
|
Common stock, $0.001
par value, 2,000,000,000 shares authorized, 507,270,882 issued and outstanding
|
|
|
507,271
|
|
|
|
507,271
|
|
Additional paid
in capital
|
|
|
5,333,834
|
|
|
|
5,333,834
|
|
Accumulated other
comprehensive loss
|
|
|
(278,097
|
)
|
|
|
(390,246
|
)
|
Accumulated deficit
|
|
|
(4,892,699
|
)
|
|
|
(4,646,033
|
)
|
Total Stockholders’ Equity
|
|
|
670,359
|
|
|
|
804,876
|
|
Total Liabilities
and Stockholders’ Deficit
|
|
$
|
13,192,311
|
|
|
$
|
12,646,347
|
|
See
accompanying notes to Unaudited Consolidated Financial Statements
IMAGE
CHAIN GROUP LIMITED, INC.
Unaudited
Consolidated Statements of Operations and Comprehensive Loss
|
|
Three
months ended
|
|
|
|
March
31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
195,731
|
|
|
$
|
1,148,223
|
|
Cost of revenues
|
|
|
201,277
|
|
|
|
1,079,321
|
|
Gross Loss
|
|
|
(5,546
|
)
|
|
|
68,902
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
Selling and marketing
expenses
|
|
|
45,387
|
|
|
|
7,917
|
|
General
and administrative expenses
|
|
|
138,574
|
|
|
|
69,728
|
|
Total Operating
Expenses
|
|
|
183,961
|
|
|
|
77,645
|
|
|
|
|
|
|
|
|
|
|
Operating Loss
|
|
|
(189,507
|
)
|
|
|
(8,743
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(56,561
|
)
|
|
|
(37,072
|
)
|
Other
expense
|
|
|
(52
|
)
|
|
|
-
|
|
Total Other Expense
|
|
|
(56,613
|
)
|
|
|
(37,072
|
)
|
|
|
|
|
|
|
|
|
|
Loss Before Income Taxes
|
|
|
(246,120
|
)
|
|
|
(45,815
|
)
|
Provision for
income taxes
|
|
|
(546
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(246,666
|
)
|
|
$
|
(45,815
|
)
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
Foreign
currency translation gain
|
|
|
112,149
|
|
|
|
30,526
|
|
Total Comprehensive
Loss
|
|
$
|
(134,517
|
)
|
|
$
|
(15,289
|
)
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
Loss per Common Share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
Basic and Diluted
Weighted Average Common Shares Outstanding
|
|
|
507,270,882
|
|
|
|
500,000,000
|
|
See
accompanying notes to Unaudited Consolidated Financial Statements
IMAGE
CHAIN GROUP LIMITED, INC.
Unaudited
Consolidated Statements of Cash Flows
|
|
Three
months ended
|
|
|
|
March
31,
|
|
|
|
2018
|
|
|
2017
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(246,666
|
)
|
|
$
|
(45,815
|
)
|
Adjustments to reconcile net loss to
net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
|
|
14,175
|
|
|
|
13,093
|
|
Depreciation of
fixed assets
|
|
|
59,099
|
|
|
|
44,160
|
|
Expenses paid by
related party
|
|
|
70,667
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivables
|
|
|
(18,289
|
)
|
|
|
(1,281,261
|
)
|
Other receivables
|
|
|
25,205
|
|
|
|
7,813
|
|
Inventories
|
|
|
(32,405
|
)
|
|
|
427,205
|
|
Advances and prepayments
to suppliers
|
|
|
(57,696
|
)
|
|
|
(31,160
|
)
|
Accounts payables
|
|
|
(64,673
|
)
|
|
|
294,880
|
|
Accrued
liabilities and other payables
|
|
|
676,244
|
|
|
|
1,364,284
|
|
Net cash provided
by operating activities
|
|
|
425,661
|
|
|
|
783,373
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
|
Purchase of plant
and equipment
|
|
|
(143,560
|
)
|
|
|
(56,439
|
)
|
Payments
for building construction
|
|
|
-
|
|
|
|
(23,184
|
)
|
Net cash used
in investing activities
|
|
|
(143,560
|
)
|
|
|
(79,623
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
|
Repayment of bank
borrowings
|
|
|
(334,109
|
)
|
|
|
(704,220
|
)
|
Proceeds
from related parties
|
|
|
-
|
|
|
|
-
|
|
Net cash used
in financing activities
|
|
|
(334,109
|
)
|
|
|
(704,220
|
)
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency translation
on cash and cash equivalents
|
|
|
1,686
|
|
|
|
(99
|
)
|
|
|
|
|
|
|
|
|
|
Net decrease of cash and cash equivalents
|
|
|
(50,322
|
)
|
|
|
(569
|
)
|
Cash and cash
equivalents–beginning of year
|
|
|
64,848
|
|
|
|
1,777
|
|
Cash and cash
equivalents–end of year
|
|
$
|
14,526
|
|
|
$
|
1,208
|
|
|
|
|
|
|
|
|
|
|
Supplementary cash
flow information:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
17,243
|
|
|
$
|
12,357
|
|
Income
taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
See
accompanying notes to Unaudited Consolidated Financial Statements
IMAGE
CHAIN GROUP LIMITED, INC.
Notes
to Unaudited Consolidated Financial Statements
1.
THE COMPANY AND PRINCIPAL BUSINESS ACTIVITIES
Business
Image
Chain Group Limited, Inc. (formerly Have Gun Will Travel Entertainment, Inc.) (“ICGL” or the “Company”)
was incorporated under the laws of Nevada on December 18, 2013. From inception through the date of the Share Exchange as defined
below, the Company was an emerging forward-thinking full-service television pre-production company dedicated to the creation of
original concepts and programming with a bold and innovative edge in the reality television space for sale, option and licensure
to independent producers, cable television networks, syndication companies, and other entities. On June 11, 2015, the Company
amended its Articles of Incorporation with the State of Nevada 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 “Amendments”). The name
change was undertaken in order to more closely align with the operations of the Company’s wholly-owned subsidiary, Fortune
Delight Holdings Group Ltd (“FDHG”). The increase in authorized shares was undertaken to allow the Company to utilize
the newly available shares to raise capital. The board of directors and the stockholders of the Company approved the Amendments
on May 8, 2015.
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.
Effective
May 1, 2017, the Company increased 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 decrease in shares of Preferred Stock is still in process.
FDHG,
previously, through its wholly-owned operating subsidiaries, was in the business of promoting and distributing its own branded
teas that are grown, harvested, cured, and packaged in the People’s Republic of China (“PRC”). The Company’s
headquarters was previously located in Guangzhou, Guangdong Province, PRC.
Share
Exchange and Reorganization
On
November 14, 2017, the Company entered into a share exchange agreement (the “SEA”) with Image P2P Trading Group Limited
(“Image P2P”) and Image P2P’s shareholders whereby the Company issued 500,000,000 new common shares in exchange
for all of the issued and outstanding ordinary shares of Image P2P, which totaled 50,000. Image P2P is an investment holding company
incorporated and domiciled in the British Virgin Islands.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of
Regulation S-X. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2018. Notes to the unaudited interim condensed consolidated financial statements
that would substantially duplicate the disclosures contained in the audited consolidated financial statements for fiscal year
2017 have been omitted. This report should be read in conjunction with the audited consolidated financial statements and the footnotes
thereto for the fiscal year ended December 31, 2017 included in the Company’s Form 10-K as filed with the Securities and
Exchange Commission on April 17, 2018.
Principles
of consolidation
The
consolidated financial statements include the accounts of the Company and its subsidiaries. All significant inter-company accounts
and transactions have been eliminated. The consolidated financial statements include 100% of assets, liabilities, and net income
or loss of those wholly-owned subsidiaries.
The
Company’s subsidiaries are listed as follows:
Name
of Company
|
|
Place
of
incorporation
|
|
Attributable
equity interest %
|
|
Authorized
capital
|
Image
P2P Trading Group Limited (“BVI”)
|
|
British
Virgin Islands
|
|
100
|
|
USD
50,000
|
Asia
Grand Will Limited (“AGWL”)
|
|
Hong
Kong
|
|
100
|
|
HKD
1
|
Fuzhi
Yuan (Shenzhen) Holdings Limited (“FZHL”)
|
|
PRC
|
|
100
|
|
RMB
500,000
|
Jiangxi
Fu Zhi Yuan Biotechnology Co., Limited (“FZY”)
|
|
PRC
|
|
100
|
|
RMB
50,000,000
|
Use
of estimates
The
preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information
available at the time the estimates are made; however, actual results could differ materially from those estimates.
Foreign
currency translation
The
accompanying financial statements are presented in United States dollars (“USD”). The functional currency of the Company
is the USD. The functional currency of AGW is the Hong Kong dollar (“HKD”). The functional currency of SZFY and JXFZYBL
is the Renminbi (“RMB”). The financial statements of the Companies subsidiaries have been translated into United States
dollars from RMB and HKD at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and
expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.
Exchange
Rates
|
|
3/31/2018
|
|
|
12/31/2017
|
|
|
3/31/2017
|
|
Spot rate RMB : US$ exchange
rate
|
|
|
0.159
|
|
|
|
0.1536
|
|
|
|
0.1451
|
|
Average year RMB : US$ exchange rate
|
|
|
0.1572
|
|
|
|
0.1480
|
|
|
|
0.1452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year end HKD : US$ exchange rate
|
|
|
0.129
|
|
|
|
0.129
|
|
|
|
0.129
|
|
Average year HKD : US$ exchange rate
|
|
|
0.129
|
|
|
|
0.129
|
|
|
|
0.129
|
|
The
RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions.
No representation is made that the RMB amounts could have been, or could be, converted into US Dollars at the rates used in translation.
Earnings
per share
The
Company computes earnings per share (“EPS”) in accordance with ASC Topic 260, “Earnings per share”. Basic
EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding
for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common
shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented,
or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e. those that increase income per share
or decrease loss per share) are excluded from the calculation of diluted EPS. As of for the three ended March 31, 2018 and 2017,
the Company did not have any potentially dilutive securities outstanding.
Financial
Instruments
The
Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, prepaid expenses and
other current assets, accounts payable and accrued liabilities and due to stockholders. The carrying amounts of such financial
instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest
rates of these instruments.
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).
Effective
January 1, 2018, the Company adopted ASC 606, “Revenue from Contracts with Customers.” The Company has evaluated the
new guidance and its adoption did not have a significant impact on the Company’s financial statements and a cumulative effect
adjustment under the modified retrospective method of adoption will not be necessary. The will be no change to the Company’s
accounting policies.
Cost
of revenue
Cost
of revenue includes the following expenses; inventory and various expenses related to make the products.
Reclassifications
Certain
prior period amounts have been reclassified to conform with the current period presentation.
Recent
Accounting Pronouncements
The
Company is currently assessing the above the accounting pronouncements and their potential impact from their adoption on the financial
statements.
3.
GOING CONCERN
These
financial statements have been prepared assuming that Company will continue as a going concern, which contemplates the realization
of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
As
of March 31, 2018, the Company had accumulated deficits of $4,892,699 and incurred losses to maintain its listing as an U.S. public
company. There was substantial doubt regarding the Company’s ability to continue as going concern at March 31, 2018. Management
continues to employ its previous plan to support the Company’s operations and maintain its business strategy by raising
additional funds through public and private offerings, or loans from related parties, or to rely on officers and directors to
perform essential functions with minimal compensation was unsuccessful.
If
the Company does not raise additional money via public or private offerings or related party loans, the Company may be unable
to continue as going concern. Additional financing may not become available on acceptable terms and there can be no assurance
that any additional financing that the Company does obtain will be sufficient to meet its needs in the long term.
The
accompanying financial statements have been adjusted to the expected recoverable amounts. Management believes no further adjustments
for recoverability and classification of assets or liabilities are necessary.
4.
ACCOUNTS RECEIVABLE
Accounts
receivable at March 31, 2018 and December 31, 2017, consist of the following:
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
Accounts receivable
|
|
$
|
1,454,372
|
|
|
$
|
1,387,241
|
|
Less: Allowance
for doubtful accounts
|
|
|
(1,343,040
|
)
|
|
|
(1,297,552
|
)
|
|
|
$
|
111,332
|
|
|
$
|
89,689
|
|
5.
INVENTORIES
Inventories
at March 31, 2018 and December 31, 2017 consist of the following:
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
Raw materials
|
|
$
|
40,785
|
|
|
$
|
72,516
|
|
Finished goods
(includes write down)
|
|
|
73,094
|
|
|
|
5,841
|
|
Inventory
allowance
|
|
|
(77,817
|
)
|
|
|
(75,181
|
)
|
|
|
$
|
113,879
|
|
|
$
|
78,357
|
|
6.
PLANT AND EQUIPMENT
Plant
and equipment at March 31, 2018 and December 31, 2017 consist of the following:
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
At Cost:
|
|
|
|
|
|
|
|
|
Buildings
|
|
$
|
6,499,501
|
|
|
$
|
6,279,367
|
|
Equipment
|
|
|
6,646,532
|
|
|
|
6,281,133
|
|
Motor vehicles
|
|
|
53,515
|
|
|
|
51,702
|
|
Furniture and
fixtures
|
|
|
23,624
|
|
|
|
22,824
|
|
|
|
$
|
13,223,172
|
|
|
$
|
12,635,026
|
|
Less: Accumulated
depreciation
|
|
|
(1,640,965
|
)
|
|
|
(1,527,634
|
)
|
|
|
$
|
11,582,207
|
|
|
$
|
11,107,392
|
|
Depreciation
expenses translated at the average exchange rates for the three months ended March 31, 2018 and 2017 were $59,099 and $44,160,
respectively.
7.
INTANGIBLE ASSETS
Intangible
assets at March 31, 2018 and December 31, 2017 consist of the following:
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
Land use rights, at cost
|
|
$
|
577,376
|
|
|
$
|
557,821
|
|
Less: Accumulated
amortization
|
|
|
(48,777
|
)
|
|
|
(33,274
|
)
|
|
|
$
|
528,599
|
|
|
$
|
524,547
|
|
Amortization
expenses translated at the average exchange rates for the three months ended March 31, 2018 and 2017 were $14,175 and $13,093,
respectively.
8.
LOANS AND INTEREST
Bank
loans at March 31, 2018 and December 31, 2017 consist of the following:
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
Short-term bank loan
|
|
$
|
934,066
|
|
|
$
|
2,304,222
|
|
Long-term bank loans – current
portion
|
|
|
477,000
|
|
|
|
563,766
|
|
Long-term bank
loans
|
|
|
2,947,117
|
|
|
|
1,669,075
|
|
|
|
$
|
4,358,183
|
|
|
$
|
4,537,063
|
|
Interest
expenses translated at the average exchange rates for the three months ended March 31, 2018 and 2017 were $56,561 and $37,072,
respectively.
Short
term loans
On
March 30, 2017, FZY entered into a short-term loan with Jiangxi Rural Credit Union & Rural Commercial Bank due on March 28,
2018. The loan was for general working capital purposes in the amount $1,536,148 (RMB 10,000,000). The loan carried an interest
rate of 6.30% and was secured by personal guarantee of Mr. Peng Qiu, the authorized representative of FZY and Director of the
Company and Mr. Ming Guang Li, a friend of Mr. Peng Qiu. During the three months ended March 31, 2018, the Company repaid $334,109.
The Company is negotiating an extension for the short-term loan with Jiangxi Rural Credit Union & Rural Commercial Bank.
Long
term loans
On
October 30, 2015, the Company 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 (RMB 15,000,000). The loan bares an adjustable
interest rate, at the time origination was 4.75%. The interest rates are adjustable every twelve months. The interest-only construction
loan was collateralized by the lands and buildings off the Company with variable maturity dates of up to 5 years.
On
April 28, 2017, FZY entered into a bank loan with Bank of Beijing due on April 25, 2021. The loan was for construction of a new
Polyphenols production line in the amount of $307,230 (RMB 2,000,000). The loan carried an interest rate of 4.35% and was secured
by personal guarantee of Mr. Peng Qiu, the authorized representative of FZY and Ms. Huang Min, spouse of Mr. Qiu Peng.
On
April 28, 2017, FZY 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 $768,074 (RMB 5,000,000). The loan carried an interest
rate of 4.35% and was secured by personal guarantee of Mr Peng Qiu, the authorized representative of FZY and Director of the Company
and Mr. Ming Guang Li, a friend of Mr. Peng Qiu.
Loan
maturity schedule as of December 31, 2017:
Loan Maturity schedule
|
|
|
|
|
Due in 2018
|
|
$
|
2,867,988
|
|
Due in 2019
|
|
|
717,381
|
|
Due in 2020
|
|
|
644,464
|
|
Due in 2021
|
|
|
307,230
|
|
Due in 2022
|
|
|
-
|
|
Due in greater
than five years
|
|
|
-
|
|
|
|
$
|
4,537,063
|
|
9.
RELATED PARTY TRANSACTIONS
Related
parties’ relationships are as follows:
David
Po
|
Director,
CEO and Majority Shareholder of the Company
|
Peng
Qiu
|
Shareholder
of the Company
|
Min
Huang
|
Mr.
Peng Qiu’s spouse
|
Yi
Sheng Qiu
|
Mr.
Peng Qiu’s father
|
Wan
An Fu Zhi Yuan Cha Ye Ltd. Co.
|
Mr.
Peng Qiu, CEO of the Company as shareholder and officer.
|
Wu
Junrui
|
Former
management of the Company
|
Amounts
due to related parties at March 31, 2018 and December 31, 2017 consist of the following:
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
Peng Qiu
|
|
$
|
4,101,859
|
|
|
$
|
4,031,991
|
|
David Po
|
|
|
483,313
|
|
|
|
412,647
|
|
Yi Sheng Qiu
|
|
|
573,538
|
|
|
|
554,113
|
|
|
|
$
|
5,158,710
|
|
|
$
|
4,998,751
|
|
The
owing to related parties consist of working capital advances and borrowings. These amounts are due on demand and are non-interest
bearing.
Advances
and prepayments to suppliers at March 31, 2018 and December 31, 2017 consist of the following:
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
Wan An Fu Zhi Yuan Cha Ye
Ltd. Co.
|
|
$
|
9,858
|
|
|
$
|
9,524
|
|
The
advances and prepayments to suppliers account includes an outstanding balance paid to Wan An Fu Zhi Yuan Cha Ye Ltd. Co. for the
purchase of tea leaves, a primary raw material, in the normal course of business. These amounts are due on demand and are non-interest
bearing. The advances and prepayments to suppliers account balance is reduced when the Company takes physical delivery of the
inventory.
Accounts
payable at March 31, 2018 and December 31, 2017 consist of the following:
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
Wan An Huan Sheng Biomass
Energy Ltd. Co.
|
|
$
|
188,481
|
|
|
$
|
182,098
|
|
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.
10.
Stockholders’ Deficit
Preferred
Stock
The
Company is authorized to issue 50,000 shares, with a stated par value of $0.001 per share with such powers, preferences, rights
and restrictions which shall be determined by the Corporation’s Board of Directors in its sole discretion, and which designations
and issuances shall not require the approval of the shareholders of the Corporation.
During
the three months ended March 31, 2018, there were no issuances of Preferred Stock.
As
of March 31, 2018 and December 31, 2017, 50,000 shares of preferred stock were issued and outstanding.
Common
Stock
The
Company is authorized to issue 2,000,000,000 shares of common stock at a par value of $0.001.
During
the three months ended March 31, 2018, there were no issuances of common stock.
As
of March 31, 2018 and December 31, 2017, 507,270,882 shares of common stock were issued and outstanding.
12.
RISKS
A.
|
Credit
risk
|
|
|
|
The
Company is subject to risk borne from credit extended to customers.
|
|
|
|
FZY’s
bank deposits are with banks located in the PRC. These banks do not carry federal deposit insurance.
|
|
|
B.
|
Interest
risk
|
|
|
|
The
Company is subject to interest rate risk when its loans become due and require refinancing.
|
|
|
C.
|
Economic
and political risks
|
|
|
|
The
Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition, and results
of operations may be influenced by changes in the political, economic, and legal environments in the PRC.
|
|
|
D.
|
Inflation
risk
|
|
|
|
Management
monitors changes in prices levels. Historically inflation has not materially impacted the company’s financial statements;
however, significant increases in the price of raw materials and labor that cannot be passed on the Company’s customers
could adversely impact the Company’s results of operations.
|
|
|
F.
|
Concentrations
risks
|
|
|
|
The
Company had a concentration of risk in demand for its products. During the three months ended March 31, 2018, three customers
representing 20.8%, 24.8% and 27.4% of the Company’s sales.
|
|
|
|
During
the three months ended March 31, 2018, the Company had a concentration of risk in supply for raw materials, one vendor that
supplied tea comprised 100% of the Company’s purchases. Additionally, as single vendor that supplied ethyl acetate to
the Company comprised 5% of the Company’s purchases.
|
13.
SUBSEQUENT EVENTS
The
Company has evaluated subsequent events through the date which the financial statements were available to be issued. All subsequent
events requiring recognition as of March 31, 2018 have been incorporated into these financial statements and there are no subsequent
events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events.”
Item
2. Management’s Discussion and Analysis of Financial Condition or Plan of Operation
Cautionary
Statements
This
Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements, including, without limitation,
in the sections captioned “Management’s Discussion and Analysis of Financial Condition or Plan of Operation,”
and elsewhere. Any and all statements contained in this Quarterly 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 Quarterly 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:
|
●
|
market
acceptance of our tea polyphenol products;
|
|
●
|
our
ability to successfully sell and market tea polyphenol products in our existing and expanded geographies;
|
|
●
|
competition
from existing producers or products or new products and technologies that may emerge in the markets for our tea polyphenol
products;
|
|
●
|
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;
|
|
●
|
our
ability to obtain regulatory approval in targeted markets for our tea polyphenol products and proposed tea polyphenol-based
products;
|
|
●
|
volatility
or decline of our stock price;
|
|
●
|
potential
fluctuation of quarterly results;
|
|
●
|
continued
failure to earn revenues or profits;
|
|
●
|
inadequate
capital to continue or expand our business, and inability to raise additional capital or financing to implement our business
plans;
|
|
●
|
decline
in demand for our products and services;
|
|
●
|
rapid
adverse changes in markets;
|
|
●
|
litigation
with or legal claims and allegations by outside parties against us;
|
|
●
|
insufficient
revenues to cover operating costs;
|
|
●
|
estimates
of our future revenue, expenses, capital requirements and our need for additional financing; and
|
|
●
|
developments
relating to our competitors and the tea polyphenol, tea polyphenol-based products and wider health products industry.
|
Because
the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by
the forward-looking statements. ICGL cautions you not to place undue reliance on the statements, which speak only as of the date
of this Quarterly Report. The cautionary statements contained or referred to in this section should be considered in connection
with any subsequent written or oral forward-looking statements that ICGL or persons acting on its behalf may issue. ICGL does
not undertake any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions
to any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report, or to reflect the
occurrence of unanticipated events, except as required by law.
Overview
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 Quarterly 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 Quarterly 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 Quarterly 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, as a result 50,000 shares of Preferred Stock are authorized and outstanding.
Image
P2P Trading Group Limited
Image
P2P Trading Group Limited (“Image P2P”), a company organized under the laws of the British Virgin Islands, was incorporated
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 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 occurred
as of the beginning of the first period presented.
As
used in this Quarterly Report, 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.
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 completed ramp up in 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 of tea polyphenol. 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 achieved in the fourth quarter of 2016. The ramp-up of our facility concluded in 2017.
Results
of Operations
|
|
Three
months ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
|
195,731
|
|
|
|
1,148,223
|
|
Cost of revenues
|
|
|
201,277
|
|
|
|
1,079,321
|
|
Gross
Profit (Loss)
|
|
|
(5,546
|
)
|
|
|
68,902
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Selling
and marketing expenses
|
|
|
45,387
|
|
|
|
7,917
|
|
General
and administrative expenses
|
|
|
138,574
|
|
|
|
69,728
|
|
Total
operating expenses
|
|
|
183,961
|
|
|
|
77,645
|
|
Operating
loss
|
|
|
(189,507
|
)
|
|
|
(8,743
|
)
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(56,561
|
)
|
|
|
(37,072
|
)
|
Other
expense
|
|
|
(52
|
)
|
|
|
-
|
|
Total
other income (expense)
|
|
|
(56,613
|
)
|
|
|
(37,072
|
)
|
Loss Before Income
Taxes
|
|
|
(246,120
|
)
|
|
|
(45,815
|
)
|
Provision for Income
Taxes
|
|
|
(546
|
)
|
|
|
-
|
|
Net
loss
|
|
|
(246,666
|
)
|
|
|
(45,815
|
)
|
Other
Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
Foreign
currency translation gain (loss)
|
|
|
112,149
|
|
|
|
30,526
|
|
Total
Comprehensive loss
|
|
|
(134,517
|
)
|
|
|
(15,289
|
)
|
Loss per share
|
|
|
|
|
|
|
|
|
Basic and Diluted Loss
per Common Share
|
|
|
0.00
|
|
|
|
0.00
|
|
Basic and Diluted Weighted
Average Common Shares Outstanding
|
|
|
507,270,882
|
|
|
|
500,000,000
|
|
Three
months ended March 31, 2018 compared to three months ended March 31, 2017.
Net
Revenues
Net
revenues decreased from $1,148,223 for the three months ended March 31, 2017 to $195,731 for the three months ended March
31, 2018 as our tea polyphenol extraction operations continued at a slow pace as demand from our distributors’ customers
continued to be low, and our lack of capital meant we were unable to obtain sufficient supply of our primary production input,
tea leaves.
Cost
of Revenues
Cost
of revenues decreased from $1,079,321 for the three months ended March 31, 2017 to $201,277 for the three months ended
March 31, 2018, in line with our significant drop in revenue. Our cost of revenues was greater than our revenues for the three
months ended March 31, 2018 due to our fixed personnel and depreciation costs remaining constant, while our variable input costs,
primarily tea leaves, increased significantly in price due to seasonal fluctuations in price and our inability to buy in bulk.
Operating
Expenses
Our
selling and marketing expenses increased from $7,917 for the three months ended March 31, 2017 to $45,387 for the three
months ended March 31, 2018, as we increased efforts to market the products from our new extraction assembly, as well as our planned
tea polyphenol-based products. Our general and administrative expenses increased from $69,728 for the three months ended
March 31, 2017 to $138,574 for the three months ended March 31, 2018. Efforts undertaken to secure government approvals, financing
and equipment for our enterprise were completed in 2016, reducing general and administrative expenses. However, general and administrative
expenses were significantly increased from the fourth quarter of 2017 by (i) research and development expenses for tea polyphenol-based
products, (ii) construction expenses for a waste water treatment facility and (iii) legal and accounting professional service
fees.
Other
Income/Expense
Our
interest expense increased from $37,072 for the three months ended March 31, 2017 to $56,561 for the three months ended
March 31, 2018 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 three months ended March 31, 2017 we had a foreign currency gain of $30,526, compared to a foreign currency
gain of $112,149 for the three months ended March 31, 2018. 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 the three months ended March 31, 2017 and the three months ended March 31, 2018, we had net
losses of $45,815 and $246,666, respectively. At March 31, 2018, we had an accumulated deficit of $4,892,699, short-term
bank loans of $934,066 long-term bank loans of $3,424,117 and amounts due to related parties of $5,158,710. As discussed
in our financial statements for the three months ended March 31, 2018, these factors raise substantial doubt about our ability
to continue as a going concern.
As
at March 31, 2018, we had cash and cash equivalents of $14,526. 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
“Related Party Transactions” in Note 9 of Notes to the Financial Statements. 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.
Bank
Loans
Short-term
and long-term bank loans consisted of the following as of March 31, 2018 and December 31, 2017:
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
Short-term
bank loan
|
|
$
|
934,066
|
|
|
$
|
2,304,222
|
|
Long-term bank loans - current portion
|
|
$
|
477,000
|
|
|
$
|
460,844
|
|
Long-term bank loans – long-term
portion
|
|
|
2,947,117
|
|
|
|
1,771,997
|
|
On
March 30, 2017, Fuzhiyuan Biotechnology entered into a short-term loan agreement 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 $1,536,148 (RMB10,000,000). 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 Company is negotiating an extension of the short-term loan
with Jiangxi Rural Credit Union & Rural Commercial Bank.
The
above short-term loan
may be accelerated, and penalty interest
at the rate of 50% of the then-current interest rate imposed, upon standard events of default, including failure to pay principal
or interest, fraud, loss of guarantee, cross-default, discontinuation of business, inability to perform under the loan, change
in credit worthiness, undisclosed related party transactions, violation of law in connection with the loan, government investigation
of Fuzhiyuan Biotechnology or its principals, or other material adverse development in the business of Fuzhiyuan Biotechnology.
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 (RMB15,000,000)(the “long-term
loan”). The long-term loan bears 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 variable maturity dates of up to five years.
On
April 28, 2017, Fuzhiyuan Biotechnology entered into a bank loan agreement with Bank of Beijing due on April 25, 2021. The loan
was for construction of a new polyphenols production line in the amount of $307,230 (RMB2,000,000). The loan carried an interest
rate of 4.35% and was secured by the personal guarantee of Mr. QIU Peng, the authorized representative of Fuzhiyuan Biotechnology,
Director of Image P2P and shareholder of the Company, and Ms. MIN Huang, the spouse of Mr. QIU Peng and a shareholder of the Company.
On
April 28, 2017, Fuzhiyuan Biotechnology entered into a bank loan agreement 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 $768,074(RMB5,000,000). The loan
carried an interest rate of 4.35% and was secured by the 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.
Loan
maturity schedule as of December 31, 2017:
|
|
December
31, 2017
|
|
|
|
|
|
Due in
2018
|
|
$
|
2,867,988
|
|
Due in 2019
|
|
|
717,381
|
|
Due in 2020
|
|
|
644,464
|
|
Due in 2021
|
|
|
307,230
|
|
Due in 2022
|
|
|
-
|
|
Due
in greater than five years
|
|
$
|
-
|
|
|
|
|
4,537,063
|
|
The
long-term loans are subject to financial covenants and are 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 long-term loans may be accelerated upon standard events of default, including
failure to pay principal or interest, fraud, loss of collateral, cross-default, discontinuation of business, inability to perform
under the loan, change in credit worthiness, undisclosed related party transactions, violation of law in connection with the loans,
government investigation of Fuzhiyuan Biotechnology or its principals, failure to construct the Fuzhiyuan Biotechology manufacturing
facility (or polyphenol production line, as applicable) or to commence operation of the manufacturing facility, significant
violations of environmental or worker protection laws at the manufacturing facility, or other material adverse development in
the business of Fuzhiyuan Biotechnology.
The
foregoing description of the long-term loan agreements does not purport to be complete. The description of the October 30,
2015 loan agreement is qualified in its entirety by the terms and conditions of the long-term loan agreement, as amended,
which is attached as Exhibit 10.2 to the Company’s Annual Report on Form 10-K filed April 17, 2018, and incorporated herein
by reference.
The
following table summarizes our cash flows for the periods presented: