UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended June 30, 2014 or

 

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

 

For the transition period from _____________ to _____________

 

Commission file number 0-21384

 

INTERNATIONAL PACKAGING AND LOGISTICS GROUP, INC.

(Exact Name of Registrant as Specified in its Charter)

 

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

 

7700 Irvine Center Drive, Suite 870

Irvine, California

(Address of Principal Executive Offices)

 

92608

(Zip Code)

 

(949) 861-3560

(Registrant’s Telephone Number, Including Area Code)

 

 

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

 

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

x Yes       o No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act).

o Yes      x No

 

The number of shares outstanding of the Issuer’s common stock as of August 14, 2014 was 4,961,357

 

 

International Packaging and Logistics Group, Inc.,

and Subsidiaries

 

Condensed Consolidated Financial Statements

for the Three and Six Months Ended

 

June 30, 2014 and 2013

 

 

 

C O N T E N T S

 

 

Condensed Consolidated Balance Sheets	1
Condensed Consolidated Statements of Operations and Comprehensive Income	3
Condensed Consolidated Statements of Cash Flows	5
Notes to Condensed Consolidated Financial Statements	7 – 22

 

 

 

 

Part I. Financial Information

Item 1. Financial Statements

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Condensed Consolidated Balance Sheets

As of June 30, 2014 and December 31, 2013

(Unaudited)

 

		June 30				December 31
		2014				2013
Current Assets
Cash		$	1,621,629			$	1,192,443
Accounts receivable, net			6,554,102				6,106,850
Other current assets			3,466				–
Total Current Assets			8,179,197				7,299,293
Property, Plant and Equipment, net			47,007				7,050
Other Assets
Prepaids			3,156				25,892
Deposits			24,999				39,248
Contract in place			1,295,726				1,295,726
Deferred tax assets			264,314				264,315
Total Other Assets			1,588,195				1,625,181
Total Assets		$	9,814,399			$	8,931,524
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses		$	6,637,666			$	5,655,668
Notes payable - related party			80,000				80,000
Other current liabilities			5,538				21,010
Total Current Liabilities			6,723,204				5,756,678
Commitments and contingencies (Note 6)			–				–

 

 

See accompanying notes.

 

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Condensed Consolidated Balance Sheets

As of June 30, 2014 and December 31, 2013

(Unaudited)

 

			June 31 2014				December 31 2013
Stockholders' Equity
Convertible preferred shares: $0.0001 par value, 50,000,000 shares authorized, 974,730 Series A issued and outstanding			98				98
400,000 Series B issued and outstanding			40				40
Common stock: $0.001 par value, 900,000,000 shares authorized, 4,961,357 issued and outstanding			4,961				4,961
Additional paid-in capital			2,202,877				2,202,877
Accumulated other comprehensive income			44,491				34,414
Retained (deficit) earnings			(5,341	)			54,304
Non-controlling interest			844,069				878,152
Total Stockholders' Equity			3,091,195				3,174,846
Total Liabilities and Stockholders' Equity		$	9,814,399			$	8,931,524

 

 

 

See accompanying notes.

 

 

 

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Condensed Consolidated Statements of Operating and Comprehensive Income (Loss)

For the Six Months Ended June 30, 2014 and 2013

(Unaudited)

 

		Six Months Ended June 30,								Three Months Ended June 30
		2014				2013				2014				2013
Revenues
Packaging		$	16,088,153			$	16,647,979			$	8,130,122			$	7,992,803
Logistics			3,218,756				3,816,824				1,836,831				2,104,191
Total Revenues			19,306,909				20,464,803				9,966,953				10,096,994
Cost of Goods Sold
Packaging			15,397,590				15,994,563				7,716,754				7,657,269
Logistics			2,699,792				3,202,870				1,539,921				1,752,994
Total Cost of Goods Sold			18,097,382				19,197,433				9,256,675				9,410,263
Gross Profit			1,209,527				1,267,370				710,278				686,731
Operating Expenses
Administrative expenses			572,573				525,022				255,923				293,385
Rent			63,589				66,354				34,560				30,344
Salaries and wages			672,771				701,284				360,863				347,814
Total Operating Expenses			1,308,933				1,292,660				651,346				671,543
(Loss) income from Operations			(99,406	)			(25,290	)			58,932				15,188
Other Income
Interest income net			102				573				353				343
Other income (expense)			2,349				1,965				(33	)			1,576
Rent Income			567				192				191				193
Total Other Income			3,018				2,730				511				2,112
Net Income (Loss) before Income Taxes			(96,388	)			(22,560	)			59,443				17,300

 

 

See accompanying notes.

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Condensed Consolidated Statements of Operating and Comprehensive Income (Loss)

For the Six Months Ended June 30, 2014 and 2013

(Unaudited)

 

		Six Months Ended								Three Months Ended
		June 30,								June 30
		2014				2013				2014				2013
Income tax benefit (expense)			2,660				(12,529	)			(5,984	)			(14,629	)
Net Income (Loss)			(93,728	)			(35,089	)			53,459				2,671
Net loss (gain) attributable to non-controlling interest			34,083				1,830				8,761				(7,816	)
Net Income (Loss) attributable to common stockholders			(59,645	)			(33,259	)			62,220				(5,145	)
Comprehensive Income
Currency translation adjustment			10,077				(16,436	)			2,043				(28,064	)
Comprehensive Income (Loss)		$	(49,568	)		$	(49,695	)		$	64,263			$	(33,209	)
(Loss) earnings per weighted average share of common stock - basic		$	(0.01	)		$	(0.01	)		$	0.01			$	(0.00	)
(Loss) earnings per weighted average share of common stock - diluted		$	(0.01	)		$	(0.01	)		$	0.01			$	(0.00	)
Weighted average shares outstanding - basic			4,961,357				4,961,357				4,961,357				4,961,357
Weighted average shares outstanding - diluted			4,961,357				4,961,357				6,336,087				4,961,357

 

 

See accompanying notes.

 

 

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2014 and 2013

(Unaudited)

 

		June 30 2014				June 30 2013
Cash flows from operating activities:
Net loss		$	(93,728	)		$	(35,090	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation expense			3,599				2,931
Changes in operating assets and liabilities:
Increase in accounts receivable			(443,374	)			(491,194	)
Decrease (increase) in deposits			14,412				(25,000	)
Decrease in current assets			18,916				46,555
Increase (decrease) in accounts payable and accrued expenses			1,061,812				(237,932	)
(Decrease) increase in other current liabilities			(96,082	)			21,389
Net cash provided by (used in) operating activities			465,555				(718,341	)
Cash flow from investing activities:
Purchase of property and equipment			(45,894	)			–
Net cash used in investing activities			(45,894	)			–

 

  

 

See accompanying notes.

 

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2014 and 2013

(Unaudited)

 

		June 30				June 30
		2014				2013
Cash flow from financing activities:
Net cash provided by financing activities		–				–
Effect of foreign currency translation			9,525				(8,427	)
Net increase/(decrease) in cash and cash equivalents			429,186				(726,768	)
Cash and cash equivalents at beginning of period			1,192,443				1,387,939
Cash and cash equivalents at end of period		$	1,621,629			$	661,171
Supplementary Disclosures of Cash Flow
Cash paid during the year for:
Interest		$	–			$	–
Taxes (refund)		$	–			$	–

 

 

 

 

See accompanying notes.

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2014

 

1.

Summary of Significant Accounting Policies

 

Organization and Basis of Presentation

 

These interim condensed consolidated financial statements represent the financial activity of International Packaging and Logistics Group, Inc., (“IPL Group” or “the Company”) a publicly traded company listed and traded on the NASDAQ Over the Counter Bulletin Board (“OTCBB”). The interim condensed consolidated financial statements for the three and six months ended June 30, 2014 and 2013 have been prepared in accordance with accounting principles generally accepted in the United States. The interim condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions have been eliminated. The Company’s fiscal year end is on December 31.

 

The foregoing unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, these condensed consolidated financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited condensed consolidated financial statements and the notes thereto included on Form 10-K for the period ended December 31, 2013. In the opinion of management, the unaudited interim condensed consolidated financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.

 

The preparation of interim condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the condensed consolidated financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumption are inherent in the preparation of the Company’s condensed consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions that could have a material effect on the reported amounts of the Company’s financial position and results of operations.

 

Operating results for the six month periods ended June 30, 2014, are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

 

Nature of Operations

 

On July 2, 2007, International Packaging and Logistics Group, Inc., through its wholly-owned subsidiary, YesRx.com (“YesRx”) acquired all the outstanding shares of H&H Glass, Inc. (“H&H Glass” or “H&H”), in exchange for 3,915,000 shares of its common stock in a reverse triangular merger (the “Merger”). H&H Glass is a glass importer that supplies custom products such as perfume bottles and food condiment bottles, plus provides complementary services such as container design and mold making. H&H Glass imports glass containers from Asia and distributes to North America. H&H Glass acquires its products mainly from one supplier in China and Taiwan and sells its products through several distributors in the United States and Canada who service small to medium sized customers. H&H imports in excess of 1,000 shipping containers of glass a year. Depending on the size of the product, a container can contain anywhere from 3,000 to 300,000 pieces.

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2014

 

1.

Summary of Significant Accounting Policies (continued)

 

On January 1, 2010, International Packaging and Logistics Group, Inc., acquired a majority interest in EZ Link Holdings, Ltd., company organized under the laws of the British Virgin Islands which contractually controls EZ Link Corporation (“EZ Link”), a logistics company headquartered in Taiwan. EZ Link was established in July 2003 under the laws of Taiwan, Republic of China (“PRC”) EZ LINK is a full service international freight forwarder, who has current networks to locations in China, Hong Kong, South East Asia, North East Asia, North America, Latin America and Europe.

 

Organization and Line of Business

 

International Packaging and Logistics Group, Inc., a Nevada corporation, was originally incorporated as Interactive Medical Technologies, Ltd., on June 2, 1986, in the state of Delaware. On April 17, 2008, IPL Group converted from a Delaware corporation to a Nevada Corporation.

 

EZ Link Holdings Ltd.

 

EZ Link Holdings Ltd. was incorporated in 2009, under the laws of the British Virgin Islands. The Company has no substantive operations of its own.

 

EZ Link Corp., a Taiwan company established in July 2003 with initial registered capital of NTD 13,500,000, is a freight forwarder with current networks of locations in China, Hong Kong, South East Asia, North East Asia, North America, Latin America and Europe, and holds the licenses and approvals necessary to operate its business in China.

 

Taiwan law currently has limits on foreign ownership of companies. To comply with these foreign ownership restrictions, on December 31, 2009, EZ Link Holdings entered into following exclusive agreements with EZ Link Corp. and its owners (collectively the “Contractual Arrangements”):

 

(1) Consulting Services Agreement, through which EZ Link Holdings has the right to advise, consult, manage and operate EZ Link Corp. and collect and own all of its net profits;

 

(2) Operating Agreement, through which EZ Link Holdings has the right to recommend director candidates and appoint the senior executives of EZ Link Corp, approve any transactions that may materially affect the assets, liabilities, rights or operations of EZ Link Corp, and guarantee the contractual performance

by EZ Link Corp. of any agreements with third parties, in exchange for a pledge by EZ Link Corp. of its accounts receivable and assets.

 

In consideration of services provided by the consultant, EZ Link Corp will pay a consulting fee equal to all of its net income on a quarterly basis. There was a cumulative net loss from January 1, 2014 to June 30, 2014 of ($69,557).

 

The terms of these Consulting Agreements begin as of the date of the Contractual Agreements, and shall continue in perpetuity, unless terminated in accordance with relevant provisions in the agreements or by any other agreement reached by all parties.

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2014

 

1.

Summary of Significant Accounting Policies (continued)

 

Principles of Consolidation

  

The accompanying consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America. EZ Link Corp’s functional currency is New Taiwan Dollars (NTD), however, the accompanying consolidated financial statements have been re-measured and presented in United States Dollars (“USD”).

 

The consolidated financial statements include the accounts of IPL Group and its subsidiaries (collectively the “Company”). The Company’s subsidiaries include H&H Glass and 51% of EZ Link Holdings, Ltd. Intercompany accounts and transactions have been eliminated upon consolidation.

 

Consolidation of variable interest entities

The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries in which the Company has a controlling financial interest. The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity (“VIE”). 

 

Voting interest entities are entities that have sufficient equity and provide the equity investors voting rights that give them the power to make significant decisions related to the entity’s operations. The usual condition for a controlling financial interest in a voting interest entity is ownership of a majority voting interest.  Accordingly, the Company consolidates its majority-owned subsidiary, EZ Link Corp, in which it holds more than 50% of the voting rights or where control is exercised through other contractual rights. 

 

VIEs are entities that lack one or more of the characteristics of a voting interest entity. Either the entity does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties or the equity investors do not have the characteristics of a controlling financial interest. The entity that has a controlling financial interest in a VIE is referred to as the primary beneficiary and is required to consolidate the VIE. The Company’s majority-owned subsidiaries are not considered VIEs. 

 

The Company's consolidated financial statements include 100% of the assets, liabilities and earnings of a subsidiary, EZ Link Corp, which is more than 50% owned and control is established. The ownership interest of the minority owners of the Company’s subsidiary is called non-controlling interest.

 

The Company has concluded that EZ Link Corp is a VIE and that the Company’s 51% owned subsidiary, EZ Link Holdings, absorbs a majority of the risk of loss from the activities of EZ Link Corp. and enables the Company to receive a majority of its expected residual returns. Accordingly, the Company accounts for EZ Link Corp. as a VIE as of January 1, 2010.

 

The initial measurement of the assets and liabilities of EZ Link Corp. for the purpose of consolidation by the Company is at fair value. EZ Link Holdings, Ltd. has had no other business activities except for the entering into of the exclusive agreements with EZ Link Corp. and its shareholders.

 

The consolidated financial statements include the financial statements for the Company, its subsidiaries and the variable interest entity, EZ Link Corp. and EZ Link Corp.’s subsidiary EZ Link International. All significant inter-company transactions and balances between the Company, its subsidiaries and the variable interest entity are eliminated upon consolidation.

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2014

 

1.

Summary of Significant Accounting Policies (continued)

 

Country risk

 

As EZ Link Holding, Ltd. principal operations are conducted in Taiwan, it is subject to special considerations and significant risks not typically associated with companies in the US. These risks include, among others, risks associated with the political, economic and legal environments and foreign currency exchange limitations encountered in Taiwan. The EZ Link Holdings results of operations may be adversely affected by changes in the political and social conditions in Taiwan, and by changes in governmental policies with respect to laws and regulations, among other things.

 

In addition, most of the transactions undertaken in Taiwan are denominated in New Taiwan Dollars (“NTD”), which must be converted into other currencies before remittance out of Taiwan may be considered. Both the conversion of NTD into foreign currencies and the remittance of foreign currencies abroad require the approval of the Taiwan government.  Therefore, it is assumed that there will be limitations of distribution of profits from EZ Link Corp. to EZ Link Holdings.

 

Estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosures of contingent assets and liabilities at the date of the consolidated financial statements. Significant estimates include an allowance for doubtful accounts and depreciation of property, plant and equipment.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash equivalents include amounts invested in a money market account with a financial institution. Cash equivalents are carried at cost, which approximates fair value.

 

Contract in Place

 

Indefinite-lived intangible assets are not amortized, but reviewed at least annually for potential impairment through assessment of qualitative factors to determine if those assets are impaired. If, through the qualitative assessment, it is determined that it is more likely than not the asset is not impaired, no further testing is required. If it is determined that is more likely than not the asset is impaired or if the Company elects not to first assess qualitative factors, the Company’s impairment testing continues with the estimation of the fair value of the asset at the reporting unit level using an income (discounted cash flow) approach that requires significant management judgment with respect to revenue and expense growth rates and the selection and use of an appropriate discount rate.

 

The contract in place represents the fair value of the consulting contract and operating agreement between EZ Link Holdings, Ltd. and EZ Link Corp. Contract in place is considered an indefinite life intangible asset. We have elected December 31 as the date to perform our annual impairment test 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2014

 

1.

Summary of Significant Accounting Policies (continued)

 

Revenue Recognition

 

The Company recognizes product revenue provided that (1) persuasive evidence of an arrangement exists, (2) delivery to the customer has occurred, (3) the selling price is fixed or determinable and (4) collection is reasonably assured.  Delivery is considered to have occurred when title and risk of loss have transferred to the customer. The price is considered fixed or determinable when it is not subject to refund or adjustments. Outbound shipping and handling charges are included in net sales.

 

Foreign Currency Translation

 

As of June 30, 2014 the accounts of the EZ Link were maintained, and its consolidated financial statements were expressed, in NTD. Such consolidated financial statements were translated into USD with NTD as the functional currency. All assets and liabilities were translated at the exchange rate on the consolidated balance sheet dates, stockholders’ equity are translated at the historical rates and the statements of income items are translated at the weighted average exchange rate for the year. The resulting translation adjustments are reported under other comprehensive income.

 

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. Such amounts were not material during each of the three and six month periods ended June 30, 2014 and 2013.

 

Cash flow from the Company's operations included in the statement of cash flows is calculated based upon the functional currency using the average translation rate. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with arithmetical changes in the corresponding balances on the consolidated balance sheet.

 

Concentration of Credit Risk

 

The Company maintains balances in a money market fund that is not federally insured. Balances in this fund were $1,123,414 and $783,519 at June 30, 2014 and December 31, 2013, respectively.

 

Accounts receivable are typically unsecured. The Company performs ongoing credit evaluations of its customers’ financial condition. It generally requires no collateral and maintains reserves for potential credit losses on customer accounts, when necessary. As of June 30, 2014, 77.7% of H&H Glass’s Accounts Receivable were attributable to three customers. As of December 31, 2013, 86.0% of H&H Glass’s Accounts Receivable were attributable to three customers.

 

At June 30, 2014 and December 31, 2013 H&H Glass had allowance for doubtful reserves of $19,358 and $64,837, respectively.

 

In general, the Company reserves 50% of an accounts receivable balance when it becomes 90 days past due and 100% of an accounts receivable balance that is over 365 past due.

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2014

 

1.

Summary of Significant Accounting Policies (continued)

 

Concentration of Credit Risk - continued

 

H&H Glass purchased 100% of its glass from one vendor in the three month period ending June 30, 2014 and 2013.  During the three-month period ending June 30, 2014 and 2013, H&H Glass purchased $7,102,154 and $7,271,607 of products from this vendor, respectively.  During the Six-month period ending June 30, 2014 and 2013, H&H Glass purchased $14,131,740 and $14,528,397 of products from this vendor, respectively. This concentration is due to the relatively small size of H&H Glass’s orders.  H&H Glass’s specialized short-run custom orders generally are not attractive to larger glass manufacturers. 

 

Non-controlling Interest

 

The Company accounts for its non-controlling interest of 49% in EZ Link Holdings, Ltd. in the condensed consolidated financial statements classified as a separate component of equity. In addition, net earnings, and components of other comprehensive income are attributed to both the Company and non-controlling interest.

 

Net Earnings/(Loss) per Share

 

Earnings/(loss) per common share is computed on the weighted average number of common shares outstanding during each year. Basic earnings per share is computed as net loss applicable to common stockholders’ divided by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur from common shares issuable through convertible preferred shares, stock options, warrants and other convertible securities when the effect would be dilutive.

 

Comprehensive Income (Loss)

 

The Company reports and displays comprehensive income and its components in a full set of general purpose consolidated financial statements. The Company’s translation income of $2,043 and a loss of $28,064 for the three month periods ended June 30, 2014 and 2013 and income of $10,077 and a loss of $16,436 for the six month periods ended June 30, 2014 and 2013, respectively, relate to the translation of financial statements from New Taiwan Dollar to US Dollars.

 

2.

Preferred Stock Transactions

 

Series A Convertible Preferred Stock

 

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

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2014

 

2.

Preferred Stock Transactions (continued

 

Series B Convertible Preferred Stock

 

As of January 1, 2010 pursuant to the purchase agreement for 51% ownership in EZ Link Holdings Ltd., approximately 47% of the purchase price amount of $400,000 was paid in Series B convertible preferred shares of IPL Group at a per share value of $1.00, or 400,000 shares.

 

The Series B preferred shares are convertible into common shares on a 1:1 ratio at a fixed rate of $1 per share.  Preferred shares have no voting rights, have no redemption rights and earn no dividends.

 

The Series B preferred shares would have been convertible into common shares in two equal tranches, the first tranche was to be upon completion and receipt of the financial statements as of and for the year ending December 31, 2010, if all of the following performance targets were met by EZ Link:

 

(a) Maintain revenues and before tax earnings same as the prior 12 month period; and

(b) Maintained a positive cash flow from operations over the prior 12 month period.

 

These criteria were not met during the period January 1, 2010 through December 31, 2013, so there have been no conversions of Series B preferred stock. However, the first tranche will be eligible for conversion again at December 31, 2014. If EZ Link does not reach its performance goals, the conversion rights will be extended each year, on an indefinite basis until the performance goals are reached.

 

The second tranche of the Series B preferred shares shall be convertible after the 12 month period after the first tranche becomes convertible, i.e. at the earliest the year ending December 31, 2015, if all of the following performance targets are met by EZ Link:

 

(a) 5% increase in revenues and 1% before tax earnings over the prior 12 month period; and

(b) Maintained a positive cash flow from operations over the prior 12 month period.

 

EZ Link did not reach its performance goals at December 31, 2013, so the conversion rights will be extended each year, on an indefinite basis until the performance goals are reached.

 

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

 

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

 

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

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2014

 

3.

Common Stock Transactions

 

During the six months ending June 30, 2014 and 2013 no stock was issued.

 

4.

Related Party Transactions

 

Allen Lin

 

The Company paid Mr. Allen Lin, President of H&H Glass and a member of the board of directors of the Company, salary of $66,950 and $65,000 for the three-month periods ended June 30, 2014 and 2013, respectively and $ 133,900 and $130,000 for the six-month periods ended June 30, 2014 and 2013, respectively.

 

Josephine Lin

 

Josephine Lin, Mr. Lin’s wife, is employed by the Company and was paid salary of $14,935 and $14,500 for the three-month periods ended June 30, 2014 and 2013 and $29,870 and $29,000 for the six-month periods ended June 30, 2014 and 2013, respectively.

 

William Gresher

 

For each three-month period ended June, 2014 and 2013, Mr. Gresher, a member of the Board of Directors, was paid $1,500 in cash for Director fees.

 

For each six-month period ended June 30, 2014 and 2013, Mr. Gresher, a member of the Board of Directors, was paid $3,000 in cash for Director fees.

 

Owen Naccarato

 

For each three-month period ending June 30, 2014 and 2013 respectively, Mr. Naccarato, a member of the Board of Directors, was paid $9,000 in cash for legal fees and for the three month periods ending June 30, 2014 and 2013 was paid $1,500 in cash for Directors fees.

 

For each six-month period ending June 30, 2014 and 2013 respectively, Mr. Naccarato, a member of the Board of Directors, was paid $18,000 in cash for legal fees and for the six-month periods ending June 30, 2014 and 2013 was paid $3,000 in cash for Directors fees.

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2014

 

4.

Related Party Transactions - continued

 

Easy Global Company, Ltd.

 

The chairman of Easy Global Company, Ltd. is also a shareholder of EZ Link Corporation. EZ Link rents its offices from Easy Global Company, Ltd. During the three months ended June 30, 2014 and 2013, EZ Link paid $11,383 and $11,489, respectively and for the six months ended June 30, 2014 and 2013, EZ Link paid $22,697 and $23,177 to Easy Global Company for rent expense.

 

5.

Property and Equipment

 

The Company’s property and equipment at June 30, 2014 and December 31, 2013, consisted of the following:

 

		June 30, 2014				December 31, 2013
Furniture and fixtures		$	14,552			$	14,552
Computers and equipment			190,432				146,180
			204,984				160,732
Less accumulated depreciation			(157,977	)			(153,682	)
Total		$	47,007			$	7,050

 

The Company recorded depreciation expense for the six-month periods ending June 30, 2014 and 2013 of $3,599 and $2,931 respectively.

 

6.

Commitments and Contingencies

 

Litigation

 

The Company is not currently aware of any formal legal proceedings or claims that the Company believes will have, individually or in the aggregate, a material adverse effect on the Company’s financial position or results of operations.

 

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2014

 

6.

Commitments and Contingencies - continued

 

Leases

 

Operating leases

 

H&H Glass rents approximately 2,900 square feet of office space for its headquarters. The lease began on January 1, 2013 and expires on August 31, 2019. As of June 30, 2014, total monthly base rent is $6,235 per month.

 

EZ Link rents 2,388 square feet of office space for its headquarters. The lease began on October 1, 2011, through March 31, 2012. The lease is renewed annually. As of March 31, 2014, total base monthly rent is $3,840 per month.

 

EZ Link also rents 182 square feet of office space. The lease began on April 15, 2011, and expires on April 14, 2014. The lease has a 3% increase each year. As of June 30, 2014, total base monthly rent is $1,436.

 

EZ Link also maintains operating leases for parking spaces and vehicles used in its operations expiring through June 23, 2014.

 

Future minimum payments on the non-cancellable leases described above as of June 30, 2014, are:

 

Fiscal Year ended December 31,
2014			57,681
2015			80,899
2016			83,335
2017			85,133
2018			86,652
Thereafter			59,624
		$	453,324

 

7.

Earnings per Share

 

Earnings per share have been calculated using the weighted average number of shares outstanding during each period. There was a net loss during the six months ended June 30, 2014 and 2013 and the three months ended June 30, 2013, therefore the Company’s Convertible Preferred Shares would not constitute potentially dilutive securities. There was a net income during the six months ended June 30, 2014 therefore the Company’s Convertible Preferred Shares would constitute potentially dilutive securities.

 

Earnings (loss) per share of common stock are calculated as follows:

 

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2014

 

7.	Earnings per Share (continued)

 

		For the Three Months Ended June 30,
		2014				2013
BASIC EARNINGS PER SHARE OF COMMON STOCK:
Net earnings available to the Company’s common stockholders		$	62,220			$	(5,145	)
Weighted average common shares outstanding			4,961,357				4,961,357
Basic earnings per share of common stock		$	0.01			$	(0.00	)
DILUTED EARNINGS PER SHARE OF COMMON STOCK:
Net earnings available to the Company’s common stockholders		$	62,220			$	(5,145	)
Weighted average common shares outstanding			4,961,357				4,961,357
Effect of dilutive securities:
Convertible preferred stock			1,374,730				–
Weighted average common shares outstanding after effect of dilutive securities			6,336,087				4,961,357
Diluted earnings per share of common stock		$	0.01			$	(0.00	)

 

		For the Six Months Ended June 30,
		2014				2013
BASIC EARNINGS PER SHARE OF COMMON STOCK:
Net earnings available to the Company’s common stockholders		$	(59,645	)		$	(33,259	)
Weighted average common shares outstanding			4,961,357				4,961,357
Basic earnings per share of common stock		$	(0.01	)		$	(0.01	)
DILUTED EARNINGS PER SHARE OF COMMON STOCK:
Net earnings available to the Company’s common stockholders		$	(59,645	)		$	(33,259	)
Weighted average common shares outstanding			4,961,357				4,961,357
Effect of dilutive securities:
Convertible preferred stock			–				–
Weighted average common shares outstanding after effect of dilutive securities			4,961,247				4,961,357
Diluted earnings per share of common stock		$	(0.01	)		$	(0.01	)

 

  

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 30, 2014

 

8.

Segment Reporting

 

The management approach model is based on the way a Company’s management organizes segments within the Company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

 

Following is a summary of segment information for the three and six months ended June 30, 2014:

 

Six months ended June 30, 2014		Packaging				Logistics				Total
Revenue		$	16,088,153				3,218,756				19,306,909
Operating Income			(22,233	)			(77,173	)			(99,406	)
Total Assets			8,780,447				1,033,952				9,814,399
Interest Income			0				401				401
Interest Expense			(299	)			0				(299	)
Depreciation		$	0				3,559				3,559

 

Three months ended June 30, 2014		Packaging				Logistics				Total
Revenue		$	8,130,122				1,836,831				9,966,953
Operating Income			71,377				(12,445	)			58,932
Total Assets			8,780,447				1,033,952				9,814,399
Interest Income			0				353				353
Interest Expense			0				0				0
Depreciation		$	0				1,794				1,794

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2014

 

9.

Unrestricted Net Assets

 

EZ Link Corp. has retained earnings of approximately $976 as of June 30, 2014. Distributions and other payments to EZ Link Holdings, Ltd. from its subsidiary, EZ Link Corp. may not permitted by the Taiwan government. Condensed financial information of the United States operations is as follows:

 

		June 30,				June 30
Balance Sheets		2014				2013
Assets
Cash and cash equivalents		$	1,352,492			$	151,647
Accounts receivable, net			5,857,641				5,654,095
Other current assets			(2,158	)			(1,240	)
Total current assets			7,207,975				5,804,502
Investment in EZ Link Holdings, Ltd.			857,143				857,143
Deposits			12,433				37,433
Deferred tax assets			264,314				183,679
Total assets		$	8,341,865			$	6,882,757
Liabilities
Accounts payable		$	5,979,543			$	4,638,623
Accrued liabilities			91,528				60,676
Notes payable to related party			80,000				80,000
Total current liabilities			6,151,071				4,779,299
Total liabilities			6,151,071				4,779,299
Stockholders' equity
Common stock			4,961				4,961
Preferred stock			138				138
Additional paid-in capital			2,202,877				2,202,877
Retained earnings			(17,182	)			(104,518	)
Total stockholders' equity			2,190,794				2,103,458
Total liabilities and stockholders' equity		$	8,341,865			$	6,882,757

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2014

 

9.

Unrestricted Net Assets - continued

 

		Three Months				Three Months
		June 30,				June 30,
Statement of Operations		2014				2013
Net sales		$	8,130,122			$	7,992,803
Cost of goods sold			(7,716,754	)			(7,657,269	)
Operating expenses			(341,991	)			(361,455	)
Loss from operations			71,377				(25,921	)
Other income and (expense)
Interest income (expense)			0				36
Other income (expense)			(40	)			1,245
Realized gain on investment			–				–
Income tax benefit (payable)			–				(1,600	)
Total other income			(40	)			(319	)
Net Income		$	71,337			$	(26,240	)

 

 

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2014

 

9.

Unrestricted Net Assets - continued

 

		Six Months				Six Months
		June 30,				June 30,
Statement of Operations		2014				2013
Net sales		$	16,088,153			$	16,647,979
Cost of goods sold			(15,397,590	)			(15,994,563	)
Operating expenses			(712,796	)			(684,632	)
Loss from operations			(22,233	)			(31,216	)
Other income and (expense)
Interest income (expense)			(299	)			217
Other income (expense)			(40	)			1,245
Realized gain on investment			–				–
Income tax benefit (payable)			(1,600	)			(1,600	)
Total other income			(1,939	)			(138	)
Net Income		$	(24,172	)		$	(31,354	)

 

 

 

 

International Packaging and Logistics Group, Inc., and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2014

 

9.

Unrestricted Net Assets - continued

 

		Six Months				Six Months
		June 30,				June 30,
Statements of Cash Flows		2014				2013
Net cash provided by operating activities:		$	502,809			$	(964,355	)
Cash flow from investing activities
Proceeds from sale of investment			–				–
Net cash provided by investing activities			–				–
Cash flow from financing activities:
Proceeds from note payable - related party			–				–
Net cash provided by financing activities			–				–
Net increase in cash			502,809				(964,355	)
Cash, beginning of period			849,683				1,115,982
Cash, end of period		$	1,352,492			$	151,627

 

 

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

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS’

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  In some cases, forward-looking statements are identified by terms such as “may”, “will”, “should”, “could”, “would”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “projects”, “predicts”, “potential”, and similar expressions intended to identify forward-looking statements.

 

These forward-looking statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this Report. Except as otherwise required by law, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained in this Report to reflect any change in our expectations or any change in events, conditions, or circumstances on which any of our forward-looking statements are based or to conform to actual results. We qualify all of our forward-looking statements by these cautionary statements.

 

Overview

 

We import glass containers from Asia and distribute to the North American market including Canada. This was a result of International Packaging and Logistic Group, Inc. (“IPL Group Inc.” or the “Company”) acquiring H&H Glass, Inc. (“H&H Glass”) in July of 2007. IPL Group, Inc. closed its pharmacy business in February 2007.

 

H&H Glass is a glass importer that supplies custom products such as perfume bottles and food condiment bottles, plus provides complementary services such as product design and the making of product molds. H&H Glass acquires its products from 3 to 5 suppliers in China and Taiwan and sells its products through several distributors in the United States and Canada who service small- to medium-sized customers. H&H imports in excess of 1,000 containers of glass a year. Depending on the size of the product, a container can contain anywhere from 3,000 to 300,000 pieces.

 

In addition, as of January 1, 2010, International Packaging and Logistics Group, Inc., acquired a 51% interest in EZ Link Holdings, Ltd., a company organized under the laws of the British Virgin Islands on December 18, 2009, which controls EZ Link Corporation (“EZ Link”), a logistics company headquartered in Taiwan. EZ Link was established in July 2003 under the laws of Taiwan, Republic of China. EZ Link Holdings, Ltd. consolidates EZ Link under ASC Topic 810 as it controls EZ Link through a management contract. EZ Link is a full service international freight forwarder, who has current networks to locations in China, Hong Kong, South East Asia, North East Asia, North America, Latin America and Europe.

 

Plan of Operation

 

Our general operating plan is as follows:

 

Short Term

 

·	Continue growing revenue and profits through the existing business;
·	Meet the challenge of the declining world economy while maintaining revenue and profitability - our goal will be to  focus closely on product mix, improve our gross margin and develop new projects with existing clients;
·	Expand the supply network for our products;
·	Expand our current business model to include other areas that fall within our distribution expertise such as packaging using plastic and acrylic materials.
·	Integrate our new logistics business into our overall plan

 

 

 

Long Term

 

	Expand our service into other areas such as Europe and Australia through the same supplier channel.  Our existing business model copies to other markets naturally.
	Expand the client base and areas of service of our logistics business.

 

Results of Operations

 

Three and six months ending June 30, 2014 and 2013

 

Revenue:

 

For the three months ending June 30, 2014 and 2013, revenues were $9,966,953 and $10,096,994, respectively, for a decrease of $130,041 (1.3%) over the same period in 2013. The decrease in revenue is mainly due to two factors; 1) a increase in packaging revenue of $137,319 (1.7%) due to a decrease in sales deductions, 2) offset by a decrease in logistics revenues of $267,360 (12.7%) , mainly due to a decrease in overall shipping.

 

For the six months ending June 30, 2014 and 2013, revenues were $19,306,909 and $20,464,803, respectively, for a decrease of $1,157,894 (5.7%) over the same period in 2013. The decrease in revenue is mainly due to two factors; 1) a decrease in packaging revenue of $559,826 (3.4%) due to a decrease in sales, 2) and a decrease in logistics revenues of $598,068 (15.7%), mainly due to a decrease in overall shipping.

 

Cost of Goods Sold:

 

Cost of goods sold for the three months ending June 30, 2014 and 2013 were $9,256,675 and $9,410,263 respectively, for a decrease of $153,588 (1.6%) over the same period in 2013. This decrease consists of a decrease in Logistics cost of goods sold of $213,073 (2.3%) which was a direct result of the decrease in overall shipping, offset by an increase in packaging cost of goods sold of $59,485 (1.0%) from the same period in 2013 mainly due to an increase in packaging revenue.

 

Cost of goods sold for the six months ending June 30, 2014 and 2013 were $18,097,382 and $19,197,433 respectively, for a decrease of $1,100,051 (5.7%) over the same period in 2013. This decrease consists of a decrease in Logistics cost of goods sold of $503,078 (15.8%) which was a direct result of the decrease in overall shipping, plus a decrease in packaging cost of goods sold of $403,027 (2.5%) from the same period in 2013 mainly due to a increase in packaging revenue during the first quarter.

 

Gross Profit:

 

Gross profit was $710,278 and $686,731 for the three months ending June 30, 2014 and 2013, an increase of $23,547 (3.4%) over the same period in 2013. The gross profit margin as a percent of sales for the three months ending June 30, 2014 and 2013 was 7.1% and 6.8 %, respectively, for an increase of 0.3%. The increase is a result of a 0.9% increase in gross profit percent from the packaging business plus an increase of 0.6% gross profit percent from the logistics business over prior year.

 

Gross profit was $1,209,527 and $1,267,370 for the six months ending June 30, 2014 and 2013, a decrease of $57,843 (4.6%) over the same period in 2013. The gross profit margin as a percent of sales for the six months ending June 30, 2014 and 2013 was 6.3% and 6.2 %, respectively, for a decrease of 0.1%. The decrease is a result of a 0.8% decrease in gross profit percent from the packaging business offset by an increase of 0.1% gross profit percent from the logistics business over prior year.

 

 

Operating Expenses:

 

Operating expenses for the three month period ended June 30, 2014 and 2013 were $651,346 and $671,543 respectively for a decrease of $20,543 (3.0%) from the same period prior year. Operating expenses for the six month period ended June 30, 2014 and 2013 were $1,308,933 and $1,292,660 respectively for an increase of $16,273 (1.3%) from the same period prior year. These differences in operating expenses were mostly attributable to the following:

 

Three months ending:		6/30/2014				6 /30/2013				$ VAR				$ VAR
Salaries & Related Expense		$	360,863			$	347,814			$	13,049				3.8%			Packaging salary increased in 2014 by $7,775 plus an
																		$5,274 increase in EZ Link salary (bonuses).
Rent			34,560				30,344				4,216				13.9%			Packing rent increased $4,788 and EZ Link rent decreased
																		by $572. Increase due to new contract - packaging.
Insurance			55,652				45,822				9,830				21.5%			Packaging insurance increased by $9,532 plus
																		an increase in EZ Link Group insurance of $298.
Meals & Entertainment			14,453				8,505				5,948				69.9%			Packaging expense was up $6,017, EZ Link up $69.
Travel Expense			98,601				51,024				47,577				93.2%			Increase in packaging travel of $43,111, increase in
																		EZ Link travel of $4,466.
Accounting			26,005				110,285				(84,280	)			-76.4%			Prior year had $84,500 of audit fees included first quarter.
Miscellaneous			61,212				77,749				(16,537	)			-21.3%			Miscellaneous items
Total Expenses		$	651,346			$	671,543			$	(20,197	)			-3.0%

 

Six months ending:			6 /30/2014				6 /30/2013				$ VAR				% VAR
Salaries & Related Expense		$	672,771			$	701,284			$	(28,513	)			-4.1%			Packaging salary lower in 2014 by $12,997 plus
																		$40,674 increase in EZ Link salary (bonuses).
Rent			63,589				66,354				(2,765	)			-4.2%			Packaging rent lower by $2,097 and EZ Link rent decreased
																		by $668. Decrease due to new contract - packaging.
Insurance			109,461				101,985				7,476				7.3%			Packaging insurance increased $6,593, EZ Link up $883.
Meals & Entertainment			22,203				16,504				5,699				34.5%			Packaging increased by $5,046
Travel Expense			183,294				107,962				75,332				69.8%			Increase in packaging travel of $71,518, increase in
																		EZ Link travel of $3.814.
Accounting			104,755				128,285				(23,530	)			-18.3%			$23,600 less in audit fees run through the current year.
Miscellaneous			152,860				170,286				(17,426	)			-10.2%			Miscellaneous items
Total Expenses		$	1,308,933			$	1,292,660			$	16,273				1.3%

 

 

Other Income (Expenses):

 

Interest income (expense) for the three months ended June 30, 2014 and 2013 was $353 and $343, respectively, for an increase of $10 (2.9%) from the same period prior year. Interest income (expense) for the six months ended June 30, 2014 and 2013 was $102 and $573, respectively, for a decrease of $471 (82.2%) from the same period prior year.

 

Other income (expense) was ($33) for the three months ending June 30, 2014, a decrease of $1,609 (102.1%) over the same period in 2013.  Other income was $2,349 for the six months ending June 30, 2014, an increase of $384 (19.4%) over the same period in 2013

 

Rent income was $191 for the three months ending June 30, 2014, a decrease of $2 (1.0%) from the same period prior year.   Rent income was $567 for the six months ending June 30, 2014, an increase of $375 (195.3%) from the same period prior year.   

 

Liquidity and Capital Resources

 

Cash flow used in operations for the six months ending June 30, 2014 amounted to $465,465, which mainly consisted the following: by 1) six month net loss of $93,728, 2) increase in accounts receivable of $443,374 and a decrease in current liabilities of $96,082 offset by 1) depreciation expense of $3,599, 2) decrease in current assets of 18,916, 3) increase in accounts payable and accrued expenses of $1,061,812 and 4) the return of $14,412 of deposits.

 

On June 30, 2014, the Company had total assets of $9,814,399 compared to $8,931,524 on December 31, 2013, an increase of $882,875 or 9.8%.  The Company had total stockholders’ equity of $3,091,195 on June 30, 2014, compared to stockholders’ equity of $3,174,846 on December 31, 2013, a decrease of $83,651 (2.6%). As of June 30, 2014, the Company's working capital position decreased by $86,622 (5.6%) from working capital of $1,542,615 at December 31, 2013 to working capital of $1,455,993 at June 30, 2014.  

 

Capital Resources

 

Over the next twelve months, management is of the opinion that sufficient working capital will be obtained from operations or from current working capital of the company.

 

Federal Income Tax

 

The Company deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities

 

EZ Link Corporation is governed by the Taiwan’s Income Tax Law and local income tax laws. Pursuant to the Taiwan Income Tax Law, enterprises are subject to tax at a statutory rate of 17%. The local government has also provided companies with various incentives to encourage economic development in the region. Such incentives include reduced tax rates and other measures

 

ITEM 4.       Controls and Procedures.

 

Disclosure Controls and Procedures

 

As of June 30, 2014, under the supervision and with the participation of the Company's Chief Executive Officer and the Chief Financial Officer, management has evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation and because of the material weaknesses in our internal control over financial reporting described below, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2014.

 

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

 

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

 

Similarly, the EZ Link operation also has a material weakness due to lack of segregation of duties. Its size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties within our internal control system. We have retained an outside professional firm to assist in the separation of duties on an ongoing basis. The use of the outside firm has proven successful in assisting in the separation of duties. However, additional people are not needed to do the administrative work therefore segregation of duties will continue to be an ongoing weakness.

 

Limitations on the Effectiveness of Internal Controls

 

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

 

Changes in Internal Control over Financial Reporting

 

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

 

 

 

 

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

 

None

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

None

 

Item 3.

Defaults Upon Senior Securities

 

None

 

Item 4.

Submission of Matters of a Vote to Security Holders

 

None

 

Item 5.

Other Information

 

None

 

 

 

 

Item 6.

Exhibits

 

a) Exhibits

 

	31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) ( Section 302 of the Sarbanes-Oxley Act of 2002)
	31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) ( Section 302 of the Sarbanes-Oxley Act of 2002)
	32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C.ss.1350 (Section 906 of the Sarbanes-Oxley Act of 2002)
	32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C.ss.1350 (Section 906 of the Sarbanes-Oxley Act of 2002)
	99.1	Temporary Hardship Exemption
	101.INS	XBRL Instance Document*
	101.SCH	XBRL Schema Document*
	101.CAL	XBRL Calculation Linkbase Document*
	101.DEF	XBRL Definition Linkbase Document*
	101.LAB	XBRL Label Linkbase Document*
	101.PRE	XBRL Presentation Linkbase Document*

 

*	To be furnished by amendment per Temporary Hardship Exemption under Regulation S-T.

 

 

 

 

SIGNATURES

 

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

 

 

International Packaging and Logistics Group, Inc.

(Registrant)

 

 

 

Dated:  August 20, 2014		By: /s/ Owen Naccarato
		Owen Naccarato
		Chief Executive Officer
		Principal Financial Officer and Director

 

 

		By: /s/ Allen Lin
		Allen Lin, Director
		President H&H Glass

 

		By: /s/ William Gresher
		William Gresher, Director