ITEM 1. Description of Business
Business
Present Business
On July 2, 2007, International Packaging and Logistics Group, Inc. (“IPL Group” or “the Company”) 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 post-split 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 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 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.
History
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.
Effective February 3, 1998, Interactive Medical Technologies, Ltd., changed its name to Kaire Holdings Incorporated, and effective May 28, 2008 its name changed from Kaire Holdings Incorporated to International Packaging and Logistics Group, Inc.
On January 23, 2007, IPL Group and its wholly-owned subsidiary, YesRx.com, executed a Letter of Intent whereby YesRx.com would acquire all of the outstanding stock of H&H Glass Corporation, an Illinois corporation. H&H Glass was formed in 1989. As part of this transaction, on February 4, 2007, IPL Group discontinued its pharmacy business, and Effective Health, Inc., was shut down.
Acquisition of H&H Glass
On July 2, 2007, an Agreement and Plan of Merger was executed between IPL Group, its wholly-owned subsidiary YesRx.com, and H&H Glass, whereby YesRx.com acquired all of the outstanding stock of H&H Glass Corporation, an Illinois corporation in exchange for 3,915,000 shares of IPL Group’s common stock representing 87% of IPL Group’s outstanding stock. As part of the merger agreement, 225,000 shares were issued to Naccarato and Associates related to assistance with the merger.
As a result of the Merger, there was a change in control of IPL Group. In accordance with ASC Topic 805, H&H Glass was defined as the accounting acquirer. While the transaction is accounted for using the purchase method of accounting, in substance the transaction results in a reverse merger with a recapitalization of IPL Group’s capital structure.
Acquisition of EZ Link Corporation
On January 1, 2010, International Packaging and Logistics Group, Inc., (“IPL Group Inc.”), acquired a majority 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.
The capital stock of EZ Link Holdings, Ltd. consists of 50,000 authorized shares of common stock, US$1.00 par value, of which 24,500 shares were issued and outstanding and held by Seller (“Shares”). Upon the terms and conditions set forth below, Seller assigned fifty-one percent (51%) of its shares, or 25,500 shares in the aggregate, to Buyer, such that, following such transaction, EZ Link Holdings, was a majority owned subsidiary of Buyer. The parties agreed that 51% ownership of the issued and outstanding shares of EZ Link Holdings, Ltd. had an estimated market value of approximately US$857,143 (the “Purchase Price”).
(a) A portion of the Purchase Price amount (US$457,143) was paid in common shares of IPL Group, Inc. as of the closing date based on a per share value of US$1.00, or 457,143 shares. Such shares bear the appropriate restrictions.
(b) A portion of the Purchase Price amount (US$400,000) was paid in Series B Convertible preferred shares which are convertible into shares of IPL Group, Inc. common shares on a one for one basis. The preferred were valued at US$1.00 per share, and are exercisable pursuant to the terms and conditions specified in the purchase agreement.
Product Liability Insurance
We carry product liability insurance through Golden Eagle Insurance Corporation.
Competition
We do not compete with large glass manufacturing companies because they require very large minimum orders. Other importers are our main competition, which operate on a smaller scale, usually out of their homes and without name recognition. However, they do sometimes have a broader distribution network and warehousing facilities which can cover almost all of the United States and Canada market area. H&H Glass feels its competitive advantage is smaller minimum run requirements, shorter runaround on mold orders at a lower cost, and providing assistance in product design. H&H Glass generally has a longer service history than its competitors.
Some of our larger competitors are Owens Illinois, Vitro, Weaton’s and SGB Group (France).
Patents, Licenses and Trademarks
Not Applicable
Royalty Agreements
Not Applicable
Government Regulations
Not Applicable - No regulatory issues in Taiwan to restrict IPL Group business.
Research and Development Plan
Not Applicable
Employees
H&H Glass has four (4) full time employees and one (1) part time employee.
EZ Link has 30 full time employees.
ITEM 2.
ITEM 2. Description of Property
International Packaging and Logistics Group, Inc.’s corporate headquarters are located in the H&H Glass offices at 7700 Irvine Center Drive, Suite 870, Irvine California 92618. 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 December 31, 2013, total monthly base rent is $6,235 per month.
ITEM 3.
ITEM 3. Legal Proceedings
None
ITEM 4.
ITEM 4. Mine Safety Disclosure
Not applicable
PART II
ITEM 5.
ITEM 5. Market for Common Equity and Related Shareholder Matters
Our common stock is quoted on the Over-the-Counter Bulletin Board, (“the OTCBB”), under the trading symbol “IPLO”. The following table set forth the quarterly high and low bid prices per share for our common stock. The bid prices reflect inter-dealer prices, without retail markup, markdown, or commission and may not represent actual transactions. The low prices are often arbitrary prices put in the system by market makers.
As of December 31, 2013, there were approximately 828 registered shareholders of the Company’s Common Stock with 4,961,357 shares issues and outstanding.
Dividends
To date, the Company has not declared or paid dividends on its Preferred or Common Stock.
Transfer Agent and Registrar
The Company’s transfer agent is Jersey Transfer and Trust Company located at 201 Bloomfield Avenue, Verona, NJ 07044.
Securities authorized for issuance under equity compensation plans.
N/A
Recent Sales of Unregistered Securities
N/A
ITEM 6.
ITEM 6. Selected Financial Data
N/A
ITEM 7.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K 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.”) acquiring 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 majority 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, 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
Year Ended December 31, 2013 Compared to December 31, 2012
Revenue:
For the years ending December 31, 2013 and 2012, revenues were $41,012,840 and $40,242,146 respectively, for an increase of $770,694 or 1.9% over the same period in 2012. The increase in revenue is a mainly due to an increase in Packaging revenue of $2,942,991 or 9.5% as result of an improved economy offset by a decrease in Logistics revenue of $2,172,297 or 23.7%.
Cost of Goods Sold:
Cost of goods sold for the years ending December 31, 2013 and 2012 were $38,525,545 and $37,833,633 respectively, for an increase of $691,912 or 1.8% over the same period in 2012. This increase is mainly due to the increase in Packaging cost of goods sold of $2,809,356 or 9.4% due to the increase in business and offset by a decrease in Logistics cost of goods sold of $2,117,444 or 26.8% due to a decrease in revenue.
Gross Profit:
Gross profit was $2,487,295 and $2,408,513 for the years ending December 31, 2013 and 2012, an increase of $78,782 or 3.3% over the same period in 2012. The gross profit margin as a percent of sales for the years ending December 31, 2013 and 2012 was 6.1% and 6.0 % respectively for an increase of 0.1%. The increase is a result of a 3.5% increase in gross profit percent from the logistics business and a 0.1% increase in gross profit percentage from the packaging business.
Operating Expenses:
Operating expenses were $2,481,313 and $2,308,130 for the years ending December 31, 2013 and 2012, an increase of $173,183 (7.5%) over the same period in 2012. The increase in operating expenses was mostly attributable to the following:
Other Income (Expense):
Interest income (expense) for the years ended December 31, 2013 and 2012 was $2,210 and ($78) respectively for an increase of $2,288 (2933.3%) from the same period in 2012.
Other income for the years ended December 31, 2013 and 2012 was $3,737 and $5,702 respectively for a decrease of $1,965 (34.5%) over the same period in 2012.
Rental income for the years ended December 31, 2013 and 2012 was $1,151 and $0, respectively, an increase of $1,151 (100.0%) over the same period in 2012.
Liquidity and Capital Resources
Net cash used by operating activities for the year ended December 31, 2013 amounted to $185,881, which mainly consisted of the following: an increase in accounts receivable of $278,036, and an increase in deferred tax assets of $80,636, offset by the yearly net income of $84,655, depreciation expense of $2,921, an increase in other current assets of $36,649, a decrease in other current liabilities of $29,174, and an increase in accounts payable and accrued expenses of $19,392.
On December 31, 2013 the Company had total assets of $8,931,524 compared to $8,842,118 on December 31, 2012, an increase of $89,406 or 1.0%. The Company had total stockholders’ equity of $3,174,846 on December 31, 2013, compared to total stockholders’ equity of $3,108,136 on December 31, 2012, an increase of $66,710 (2.1%). As of December 31, 2013 the Company's working capital position increased by $14,294 (0.9%) from working capital of $1,528,321 at December 31, 2012 to working capital of $1,542,615 at December 31, 2013.
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 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
Subsequent Events
None
ITEM 7A.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
N/A
ITEM 8.
ITEM 8. Financial Statements
The report of Independent Registered Public Accounting Firm and financial statements are set forth in this report beginning on Page.
ITEM 9.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
ITEM 9A.
ITEM 9A. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. Our Chief Executive Officer and Principal Financial Officer, after evaluating the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Annual Report on Form 10-K (the "Evaluation Date"), were unable to conclude that as of the Evaluation Date, our disclosure controls and procedures are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.
(b) Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting during our most recent fiscal quarter that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.
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.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13a-15(f). Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO Framework").
A material weakness is a deficiency or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Our management concluded we have a material weakness due to lack of segregation of duties. 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.
Based on this evaluation and because of the material weaknesses, management has concluded that our internal control over financial reporting was not effective as of December 31, 2013.
This annual report does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to rules of the SEC that permit the company to provide only management's report on internal control in this annual report.
Item 9B.
Item 9B. Other Information.
N/A
PART III
ITEM 10.
ITEM 10. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act
The Company has three directors and a sole executive officer, and their ages and positions with the Company as of December 31, 2011 are as follows:
Allen Lin has over 20 years of packaging industry and financial venture investment experiences which included successful start-ups, H & H Glass Inc., in 1989, where he is instrumental in global manufacturing outsourcing for rigid packaging material (including but not limited to glass containers) in packaging distribution solutions for North America. Mr. Lin recently earned a degree of Mater of International Law from a national university in Germany and also holds an MBA from a national university in Chicago, Illinois, USA (graduated with Honor). Mr. Lin has gained international exposure from the tasks involved in identifying merger and acquisition candidates in the packaging distribution network and promoting his packaging business in the North American, South American and European continents. Born and raised in Taiwan, Mr. Lin is fluent in both Chinese and English.
William Gresher recently retired in July 2009 as the Chief Financial Officer with The Mexmil Company where he had been for 4 years. Prior to Mexmil, Mr. Gresher held high level financial positions in several companies including the Chief Financial Officer for Distinctive Appliances, Inc. (DACOR), in Pasadena, CA, Vice President of Finance for Fadal Engineering in Chatsworth, CA., Vice President Corporate Financial Planning for Allergan Inc., Irvine, CA., Vice President Controller, Bentley Laboratories, Inc., Irvine CA, a division of Baxter International, Inc., Controller of Bell & Howell Co., Lincolnwood, IL., and several years with Arthur Andersen & Co., Chicago, IL. Mr. Gresher has a Bachelors Degree in Accounting and an MBA from Northern Illinois University. Mr. Gresher started his career as a CPA with Arthur Andersen & Co. Next, Mr. Gresher moved to Bell & Howell for 8 years of which 4 years were spent in Tokyo, Japan where he was Plant Controller for their manufacturing operations. The next 10 years were spent with Baxter International in a variety of managerial positions including Director of Finance - Asia Pacific, Assistant Corporate Controller and Vice President Finance for Bentley Laboratories in Irvine California. At Allergan Inc., Mr. Gresher held Vice President positions for the Humphrey, International and European divisions, as well a Vice President Corporate Financial Planning.
Owen Naccarato has been corporate counsel and secretary for the Company since 2007. Mr. Naccarato also has for the last fifteen years been a practicing attorney specializing in corporate and securities law. Prior to practicing law, Mr. Naccarato held various high level financial and operating positions with fortune 500 firms. Mr. Naccarato is a member of the American Bar Association, the California State Bar Association, the Orange County and the Los Angeles County Bar Associations. Mr. Naccarato has a J.D. from Western State University, an MBA from DePaul University and an undergraduate degree in accounting from Northern Illinois University. Mr. Naccarato is also a Director for Smart-tek Solutions, Inc. and Greengro Technologies Inc.
Compensation of Directors:
Directors received remuneration totaling in aggregate of $12,000 during the years ended December 31, 2013 and 2012. Directors receive $500 a month in directors’ fees with the exception of Mr. Lin who received no compensation for the years ended December 31, 2013 and 2012.
Compliance with Section 16(a) of the Securities Exchange Act of 1934:
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers, and persons who own more than 10% of a registered class of the Company’s equity securities to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than 10% shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.
To the Company’s knowledge, based solely on its review of the copies of such reports furnished to the Company and written representations that no other reports were required during the fiscal year ended December 31, 2011, all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with.
Code of Ethics for the Chief Executive Officer and the Principal Financial Officer
On September 7, 2004, the sole Board of Directors of the Company adopted the Code of Ethics for Chief Executive Officer and the Principal Financial Officer, which was included as exhibit 14.1 with the December 31, 2004 Form 10KSB.
ITEM 11.
ITEM 11. Executive Compensation
The following table sets forth certain summary information regarding compensation paid by IPL Group for services rendered during the fiscal years ended December 31, 2012 and 2011, respectively, to the Company’s Chief Executive Officer and Chief Financial Officer during such period.
Summary Compensation Table
Executive Compensation:
During 2013 Mr. Naccarato received $6,000 in director’s fees.
Outstanding Equity Awards at Fiscal Year-end
The following table sets forth certain summary information regarding outstanding equity awards as of December 31, 2013 to the Company's Chief Executive Officer and Chief Financial Officer and most highly paid executive officers during such period.
Compensation of Directors
Options/SAR Grants in the Last Fiscal Year:
None
Employment Agreements
None
Employee Benefits
H&H Glass offers health insurance to all its employees. H&H Glass also has a discretionary post-employment benefit plan available to its employees.
EZ Link does not have an employee benefit plan.
ITEM 12.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information known to the Company with respect to the beneficial ownership of the Company’s common stock as of December 31, 2013 by (i) each person who is known by the Company to own beneficially more than 5% of the Company's common stock and (ii) the Company's directors and executive officer, and (iii) all officers and directors of the Company as a group.
(1) Beneficial Ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days of December 31, 2013 are deemed outstanding for computing the percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage of any other person. Except as pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned.
(2) Percentage based on 4,961,357 shares of common stock outstanding as of December 31, 2013.
(3) Standard Resources LTD is a related company to Allen Lin, the founder and CEO of H&H Glass.
ITEM 13.
ITEM 13. Certain Relationships and Related Transaction
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 $305,000 and $230,000 for the years ended December 31, 2013 and 2012, respectively.
Josephine Lin
Josephine Lin, Mr. Lin’s wife, is employed by the Company and was paid a salary of $58,000 and $56,000 for the years ended December 31, 2013 and 2012, respectively.
Owen Naccarato
During 2013, Mr. Naccarato, the Company’s Chief Executive Office and acting Chief Financial Officer, was paid director fees of $6,000 and $36,000 for legal fees performed.
William Gresher
During 2013 and 2012, Mr. Gresher, a member of the Board of Directors, was paid $6,000 per year director fees.
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 year ended December 31, 2013 and 2012, EZ Link paid $34,560 and $34,879 respectively to Easy Global Company for rent expense.
ITEM 14.
ITEM 14. Principal Accountant Fees and Services
The Company paid or accrued the following fees in each of the prior two fiscal years to its independent certified public accountants, PMB Helin Donovan, LLP:
“Audit Fees” consisted of fees billed for services rendered for the audit of the Company’s annual financial statements and audit related fees are for review of the financial statements included in the Company’s quarterly reports on Form 10-Q.
ITEM 15.
ITEM 15. Exhibits, List and Reports in Form 8-K
(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)
(b) Reports on Form 8-K
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
International Packaging and Logistics Group, Inc.
By: /s/ Owen Naccarato
Owen Naccarato
Chief Executive Officer
Dated: April 9, 2014
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Owen Naccarato April 9, 2014
Owen Naccarato Chief Executive Officer,
Principal Financial Officer and Director
/s/ Allen Lin April 9, 2014
Director
/s/ William Gresher April 9, 2014
Director
International Packaging and Logistics Group, Inc.,
and Subsidiaries
Consolidated Financial Statements
for the Years Ended
December 31, 2013 and 2012
C O N T E N T S
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
International Packaging and Logistics Group, Inc.:
We have audited the accompanying balance sheets of International Packaging and Logistics Group, Inc. (the “Company”) as of December 31, 2013 and 2012, and the related consolidated statements of operations and comprehensive income (loss), consolidated statements of stockholders’ equity and consolidated statements of cash flows for each of the years in the two-year period ended December 31,2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of International Packaging and Logistics Group, Inc. as of December 31, 2013 and 2012, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2013 in conformity with accounting principles generally accepted in the united States of America.
PMB Helin Donovan, LLP
/s/ PMB Helin Donovan, LLP
April 8, 2014
Austin, Texas
International Packaging and Logistics Group, Inc., and Subsidiaries
Consolidated Balance Sheets
As of December 31, 2013 and December 31, 2012
See accompanying notes.
International Packaging and Logistics Group, Inc., and Subsidiaries
Consolidated Balance Sheets
As of December 31, 2013 and December 31, 2012
See accompanying notes.
International Packaging and Logistics Group, Inc., and Subsidiaries
Consolidated Statement of Operations And Comprehensive Income (Loss)
As of December 31, 2013 and 2012
See accompanying notes.
International Packaging and Logistics Group, Inc., and Subsidiaries
Consolidated Statement of Operations And Comprehensive Income (Loss)
As of December 31, 2013 and 2012
See accompanying notes.
International Packaging and Logistics Group, Inc., and Subsidiaries
Consolidated Statements of Stockholders’ Equity
For the Years Ended December 31, 2013 and 2012
See accompanying notes.
International Packaging and Logistics Group, Inc., and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2013 and 2012
See accompanying notes.
International Packaging and Logistics Group, Inc., and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2013 and 2012
See accompanying notes.
International Packaging and Logistics Group, Inc., and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2013 and 2012
1. Summary of Significant Accounting Policies
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.
On January 1, 2010, International Packaging and Logistics Group, Inc., (“IPL Group”), acquired a majority interest in EZ Link Holdings, Ltd., a 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.
International Packaging and Logistics Group, Inc., and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2013 and 2012
1. Summary of Significant Accounting Policies (continued)
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 Income from January 1, 2013 to December 31, 2013 of $4,502. The cumulative net income from inception of this contractual arrangement through December 31, 2013 is approximately $78,874.
The terms of these Consulting Agreements begin as of the date of the Contractual Agreements, and shall continue in perpetuity, unless terminated in accordance with relevant provisions in the agreements or by any other agreement reached by all parties.
Principles of Consolidation
The accompanying consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America. EZ Link Corp’s functional currency is New Taiwan Dollars (NTD), however, the accompanying consolidated financial statements have been re-measured and presented in United States Dollars ($).
The consolidated financial statements include the accounts of IPL Group, Inc. and its subsidiaries (collectively the “Company”). The Company’s subsidiaries include H&H Glass and 51% of EZ Link Holdings, Ltd.
The accompanying consolidated financial statements at December 31, 2013, include EZ Link Holdings, Ltd., and subsidiaries from the January 1, 2010 date of acquisition. 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. All significant intercompany accounts and transactions have been eliminated in consolidation. 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.
International Packaging and Logistics Group, Inc., and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2013 and 2012
1. Summary of Significant Accounting Policies (continued)
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.
Country risk
As EZ Link Holding, Ltd.’s 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 on 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.
International Packaging and Logistics Group, Inc., and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2013 and 2012
1. Summary of Significant Accounting Policies (continued)
Contract in Place
Goodwill and indefinite-lived intangible assets are not amortized. The carrying value of goodwill is reviewed at least annually for possible impairment. The Company first assesses qualitative factors in order to determine if goodwill is impaired. If, through the qualitative assessment, it is determined that it is more likely than not that goodwill is not impaired, no further testing is required. If it is determined that it is more likely than not that goodwill 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 goodwill 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. No impairment losses were recognized during the years ended December 31, 2013 or 2012.
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 the only intangible asset with an indefinite life on our consolidated balance sheets and is accounted for as goodwill. We have elected December 31 as the date to perform our annual impairment test.
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 December 31, 2013, 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 years ended December 31, 2013 and 2012.
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. No representation is made that the NTD amounts could have been, or could be, converted into USD at the rates used in translation.
Concentration of Credit Risk
The Company maintains balances in a Money Market Fund that is not federally insured. Balances in this fund were $783,519 and $956,365 at December 31, 2013 and December 31, 2012, 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 December 31, 2013, 86.0% of H&H Glass’s Accounts Receivable were attributable to three customers. As of December 31, 2012, 85.0% of H&H Glass’s Accounts Receivable were attributable to three customers.
International Packaging and Logistics Group, Inc., and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2013 and 2012
1. Summary of Significant Accounting Policies (continued)
At December 31, 2013 and 2012 H&H Glass had allowance for doubtful reserves of $59,223 and $16,194, respectively.
In general the Company will reserve a receivable based one of the following reasons; If the receivable is over 90 days old, the Company will reserve 50%, and if over 12 months old, the Company will reserve 100% of the amount.
H&H Glass purchased 100% of its glass from one vendor in the twelve- month periods ending December 31, 2013 and 2012. During the twelve-month period ending December 31, 2013 and 2012, H&H Glass purchased $29,752,826 and $26,594,010 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. As customer orders have been growing in size, H&H Glass has begun to seek additional suppliers.
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 loss/(gain) on translation was $17,945 and ($5,187) for the year ended December 31, 2013 and 2012, respectively, related to the translation of financial statements from NTD to US Dollars.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed for financial reporting purposes using the straight-line method over the estimated useful lives of the assets. Repairs and maintenance that do not extend the useful life of property and equipment are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the asset and its accumulated depreciation are removed, and the resulting gain or loss is reflected in income.
International Packaging and Logistics Group, Inc., and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2013 and 2012
1. Summary of Significant Accounting Policies (continued)
The estimated service lives of property and equipment are principally as follows:
Computers and equipment 3-10 years
Furniture & Fixtures 5-10 years
Income Taxes
The Company accounts for its income taxes using the Financial Accounting Standards Board ASC 740, “Income Taxes,” which requires the establishment of a deferred tax asset or liability for the recognition of future deductible or taxable amounts and operating loss and tax credit carryforwards. Deferred tax expense or benefit is recognized as a result of timing differences between the recognition of assets and liabilities for book and tax purposes during the year.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are recognized for deductible temporary differences and operating loss, and tax credit carryforwards. A valuation allowance is established to reduce the deferred tax asset if it is “more likely than not” that the related tax benefits will not be realized.
The Company accounts for income taxes in accordance ASC Topic 740. Realization of an uncertain income tax position must be estimated as “more likely than not” (i.e., greater than 50% likelihood of receiving a benefit) before it can be recognized in the financial statements. Further, the recognition of tax benefits is required to be recorded in the financial statements to be based on the amount most likely to be realized assuming a review by tax authorities having all relevant information. ASC 740 also clarifies the financial statement classification of tax-related penalties and interest and sets forth new disclosures regarding unrecognized tax benefits. As of December 31, 2013 and 2012, the Company has not recognized any obligation for uncertain tax positions.
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.
2. Preferred Stock
Description of the 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 the Consolidated Financial Statements
For the Years Ended December 31, 2013 and 2012
2. Preferred Stock (continued)
Description of the 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 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 so there were no conversions as of December 31, 2013 or 2012. 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 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.
International Packaging and Logistics Group, Inc., and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2013 and 2012
2. Preferred Stock (continued)
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.
3. Common Stock
During the years ending December 31, 2013 and 2012, no stock was issued.
4. Related Party Transactions
Allen Lin
The Company paid Mr. Allen Lin, President of H&H Glass, the majority stockholder and a member of the board of directors of the Company, salary of $305,000 and $250,000 for the years ended December 31, 2013 and 2012, respectively.
Josephine Lin
Josephine Lin, Mr. Lin’s wife, is employed by the Company and was paid salary of $58,000 and $56,000 for the years ended December 31, 2013 and 2012, respectively.
William Gresher
Mr. Gresher, a member of the Board of Directors, was paid $6,000 per year in cash for Director fees in the years ended December 31, 2013 and 2012.
Owen Naccarato
For the years ended December 31, 2013 and 2012 respectively, Mr. Naccarato, a member of the Board of Directors, was paid $36,000 in cash for legal fees and for the year ended December 31, 2013 was paid $6,000 in cash for Directors fees.
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 year ended December 31, 2013 and 2012, EZ Link paid $34,560 and $34,879, respectively to Easy Global Company for rent expense.
International Packaging and Logistics Group, Inc., and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2013 and 2012
5. Other Income
During the year ended December 31, 2013 and 2012, the Company recorded $7,099 and $5,624 in Other Income, respectively, as follows:
6. Property and Equipment
The Company’s property and equipment at December 31, 2013 and December 31, 2012, consisted of the following:
The Company recorded depreciation expense for the year ended December 31, 2013 and 2012, of $2,921 and $13,634 respectively.
7. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses at December 31, 2013 and 2012, consisted of the following:
International Packaging and Logistics Group, Inc., and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2013 and 2012
8. Income Taxes
Significant components of the provision for taxes based on income are as follows for the years ended December 31:
Significant temporary differences that give rise to the deferred tax assets as of December 31, 2013 and 2012 follow:
The Company has federal net operating loss carryforwards totaling $619,863 and $807,580 in state carryforwards. These net operating losses expire from 2021 through 2031. The Company has not recorded any valuation allowance against these deferred tax assets.
Tax years that remain open by the Internal Revenue Service and the California Franchise Tax Board are 2010 through 2013. Additionally, NOLs from earlier years may be examined when they are utilized.
International Packaging and Logistics Group, Inc., and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2013 and 2012
9. 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.
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 December 31, 2013, 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 December 31, 2013, 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 December 31, 2013, 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.
International Packaging and Logistics Group, Inc., and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2013 and 2012
9. Commitments and Contingencies (continued)
Future minimum payments on the non-cancellable leases described above for fiscal years following December 31, 2013, are:
10. Earnings per Share
Earnings per share have been calculated using the weighted average number of shares outstanding during each period. There was net income during the years ended December 31, 2013 and 2012, therefore the Company’s Convertible Preferred Shares would constitute potentially dilutive.
Earnings (loss) per share of common stock are calculated as follows:
International Packaging and Logistics Group, Inc., and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2013 and 2012
11. 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 years ended December 31, 2013 and 2012:
International Packaging and Logistics Group, Inc., and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2013 and 2012
12. Unrestricted Net Assets
EZ Link Corp. has retained earnings of approximately $70,533 as of December 31, 2013. 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:
International Packaging and Logistics Group, Inc., and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2013 and 2012
12. Unrestricted Net Assets (continued)
Information of the United States operations is as follows:
International Packaging and Logistics Group, Inc., and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2013 and 2012
12. Unrestricted Net Assets - continued