UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.DC 20549
FORM 10-Q
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES(Mark One)
EXCHANGE ACT OF 1934
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended February 29, 2012
orNovember 30, 2023
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
☐ | 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: 333-146758333-267039
China Infrastructure Construction CorporationCANNABIS BIOSCIENCE INTERNATIONAL HOLDINGS, INC.
(Exact(Exact name of registrantRegistrant as specified in its charter)
Colorado | ||
(State or other jurisdiction of | incorporation or organization) | (IRS Employer Identification |
6201 Bonhomme Road, Suite 466S, Houston, TX | 77036 | |
(Address of Principal Executive Office) | (ZIP Code) |
Shidai Caifu Tiandi Suite 1906-1909
1 Hangfeng Road Fengtai District
Beijing, China 100070
(Address of principal executive offices)
86-10-5809-0217(214) 733-0868
(Registrant’s telephone number, including area code)
CHINA INFRASTRUCTURE CONSTRUCTION CORP.
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
N/A | N/A | N/A |
Indicate by check mark whether the registrantRegistrant (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 registrantRegistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x☐ Yes ¨☒ No
Indicate by check mark whether the registrantRegistrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrantRegistrant was Requiredrequired to submit and post such files).
S ☒ Yes£☐ No
Indicate by check mark whether the registrantRegistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”,filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | |
Non-accelerated filer | Smaller reporting
| ||
|
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrantRegistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). £☐ Yes x☒ No
AsIndicate the number of April 20, 2012, there wereshares outstanding 14,095,620of each of the issuer’s classes of common stock, as of the latest practicable date: shares of the registrant’s common stock no par value.
CANNABIS BIOSCIENCE INTERNATIONAL HOLDINGS, INC.
QUARTERLY REPORT ON FORM 10-Q
for the Quarterly Period Ended November 30, 2023
TABLE OF CONTENTS
Page | |||
PART I - FINANCIAL INFORMATION | |||
Financial | |||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of | ||
Item | Quantitative and | ||
Item 4. | Controls and Procedures | 21 | |
PART II - OTHER INFORMATION | |||
Item 1. | Legal Proceedings | 22 | |
Item 1A. | Risk Factors | 22 | |
Item 2. | Unregistered Sales of Equity Securities and Use of | ||
Item | Defaults upon Senior Securities | ||
Mine Safety Disclosures | |||
Other Information | 22 | ||
Item 6. | Exhibits | 23 | |
SIGNATURES | 24 |
2 |
PART I – FINANCIAL INFORMATION
PART I-FINANCIAL INFORMATIONItem 1. Financial Statements.
CANNABIS BIOSCIENCE INTERNATIONAL HOLDINGS, INC.
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION(formerly named China Infrastructure Construction Corp.)
CONSOLIDATED BALANCE SHEETS
AS OF FEBRUARY 29, 2012 (Unaudited) AND MAY 31, 2011
February 29, | May 31, | |||||||
2012 | 2011 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 73,498 | $ | 136,702 | ||||
Restricted cash | 301 | 10,868 | ||||||
Trade accounts receivable,net | 22,848,170 | 30,058,457 | ||||||
Other receivables | 1,139,046 | 983,199 | ||||||
Inventories | 469,614 | 348,102 | ||||||
Total current assets | 24,530,629 | 31,537,328 | ||||||
Long-term assets | ||||||||
Property, plant and equipment,net | 11,137,992 | 8,898,993 | ||||||
Prepayments | 14,233,457 | 15,240,990 | ||||||
Accounts receivable, net – long-term | 54,649,371 | 33,129,309 | ||||||
Deferred tax assets | 1,950,470 | 2,038,913 | ||||||
Other receivables – long-term | 2,341,569 | 2,197,961 | ||||||
Total long-term assets | 84,312,859 | 61,506,166 | ||||||
TOTAL ASSETS | $ | 108,843,488 | $ | 93,043,494 | ||||
LIABILITIES AND EQUITY | ||||||||
Trade accounts payable | $ | 14,981,264 | $ | 13,114,202 | ||||
Related party payable | 526,932 | 296,325 | ||||||
Other payables | 4,279,916 | 3,494,914 | ||||||
Current portion of capital lease obligations | 3,212,818 | 3,171,246 | ||||||
Accrued expenses | 792,242 | 980,075 | ||||||
Tax payable | 9,714,852 | 6,401,831 | ||||||
Bank loan payable | 1,586,200 | - | ||||||
Total current liabilities | 35,094,224 | 27,458,593 | ||||||
Long-term liabilities | ||||||||
Long-term portion of capital lease obligations | 153,845 | 515,662 | ||||||
Total long-term liabilities | 153,845 | 515,662 | ||||||
TOTAL LIABILITIES | $ | 35,248,069 | $ | 27,974,255 | ||||
EQUITY | ||||||||
Preferred stock, no par value, 10,000,000 shares authorized; no shares issued or outstanding | $ | - | $ | - | ||||
Common stock, no par value, 100,000,000 shares authorized; 14,095,620 and 12,930,620 shares issued and outstanding as of February 29, 2012 and May 31, 2011, respectively | 44,734,563 | 43,279,066 | ||||||
Retained earnings | 18,443,131 | 14,778,106 | ||||||
Accumulated other comprehensive income | 6,154,300 | 4,107,477 | ||||||
Total China Infrastructure Construction Corporation Stockholder’s Equity | 69,331,994 | 62,164,649 | ||||||
Non-controlling interests | 4,263,425 | 2,904,590 | ||||||
TOTAL EQUITY | 73,595,419 | 65,069,239 | ||||||
TOTAL LIABILITIES AND EQUITY | $ | 108,843,488 | $ | 93,043,494 |
November 30, 2023 | May 31, 2023 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 337 | $ | 8,913 | ||||
Accounts receivable | 19,403 | 10,549 | ||||||
TOTAL CURRENT ASSETS | 19,739 | 19,462 | ||||||
Right-of-use asset | 82,102 | 23,920 | ||||||
TOTAL ASSETS | $ | 101,842 | $ | 43,382 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued expenses | $ | 213,521 | $ | 111,299 | ||||
Bank overdraft | 3,808 | – | ||||||
Deferred revenue | – | 28,641 | ||||||
Related party payables | 224,717 | 105,173 | ||||||
Short-term loans (Net of amortization of loan fees) | 151,267 | 121,407 | ||||||
SBA loan - current | 12,079 | 14,592 | ||||||
Lease liabilities - current | 54,915 | 4,435 | ||||||
TOTAL CURRENT LIABILITIES | 660,307 | 385,547 | ||||||
LONG-TERM LIABILITIES | ||||||||
SBA loan | 249,500 | 249,500 | ||||||
Lease liabilities | 33,920 | – | ||||||
TOTAL LONG-TERM LIABILITIES | 283,420 | 249,500 | ||||||
TOTAL LIABILITIES | 943,726 | 635,047 | ||||||
STOCKHOLDERS’ DEFICIENCY | ||||||||
Authorized | shares of preferred stock, of which shares have been designated Series A Convertible Preferred Stock and shares have been designated Series B Preferred Stock– | – | ||||||
Common Stock, without par value: | shares authorized; and shares issued and outstanding at November 30, 2023, and May 31, 2023, respectively.– | – | ||||||
Additional paid-in capital | 4,147,071 | 4,091,071 | ||||||
Accumulated deficit | (4,988,956 | ) | (4,682,736 | ) | ||||
TOTAL STOCKHOLDERS’ DEFICIENCY | (841,885 | ) | (591,665 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | $ | 101,842 | $ | 43,382 |
The accompanying notes are an integral part of this statement.these consolidated financial statements.
3 |
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATIONCANNABIS BIOSCIENCE INTERNATIONAL HOLDINGS, INC.
(formerly named China Infrastructure Construction Corp.)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE AND NINE MONTHS ENDED FEBRUARY, 2012 AND 2011
(Unaudited)
Three Months Ended February 29, | Nine Months Ended February 29, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Sales revenue, net | ||||||||||||||||
Concrete Sales | $ | 8,459,624 | $ | 18,211,981 | $ | 39,321,243 | $ | 65,329,631 | ||||||||
Manufacturing Service | 113,038 | 2,571,701 | 2,062,953 | 2,571,701 | ||||||||||||
Total revenue | 8,572,662 | 20,783,682 | 41,384,196 | 67,901,332 | ||||||||||||
Cost of revenues | ||||||||||||||||
Concrete Sales | 6,657,232 | 11,549,212 | 27,699,805 | 45,306,297 | ||||||||||||
Manufacturing Service | 95,574 | 710,935 | 678,852 | 710,935 | ||||||||||||
Total cost of revenues | 6,752,806 | 12,260,147 | 28,378,657 | 46,017,232 | ||||||||||||
Gross profit | 1,819,856 | 8,523,535 | 13,005,539 | 21,884,100 | ||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative expenses | 2,840,141 | 10,083,492 | 6,528,955 | 13,377,622 | ||||||||||||
Operating income (loss) | (1,020,285 | ) | (1,559,957 | ) | 6,476,584 | 8,506,478 | ||||||||||
Other income (expense): | ||||||||||||||||
Interest income | - | 9,219 | 511 | 10,213 | ||||||||||||
Interest expense | (12,314 | ) | (51,688 | ) | (23,691 | ) | (154,895 | ) | ||||||||
Other income | 8,333 | 137,660 | 112,225 | 156,326 | ||||||||||||
Other expense | - | - | - | (8,935 | ) | |||||||||||
Total other income (expense) | (3,981 | ) | 95,191 | 89,045 | 2,709 | |||||||||||
Earnings (loss) before tax | (1,024,266 | ) | (1,464,766 | ) | 6,565,629 | 8,509,187 | ||||||||||
Income tax | 272,056 | 273,429 | 2,539,715 | 854,359 | ||||||||||||
Net income (loss) | $ | (1,296,322 | ) | $ | (1,738,195 | ) | $ | 4,025,914 | $ | 7,654,828 | ||||||
Net income (loss) attributable to: | ||||||||||||||||
-Common stockholders | (1,241,695 | ) | (1,668,679 | ) | 3,665,025 | 7,186,021 | ||||||||||
-Non-controlling interest | (54,627 | ) | (69,516 | ) | 360,889 | 468,807 | ||||||||||
$ | (1,296,322 | ) | $ | (1,738,195 | ) | $ | 4,025,914 | $ | 7,654,828 | |||||||
Earnings (loss) per share | ||||||||||||||||
- Basic and Dilutive | $ | (0.09 | ) | $ | (0.13 | ) | $ | 0.27 | $ | 0.56 | ||||||
Weighted average shares outstanding | ||||||||||||||||
- Basic and Dilutive | 13,549,503 | 12,930,620 | 13,553,234 | 12,930,199 | ||||||||||||
Comprehensive Income | ||||||||||||||||
Net Income (loss) | $ | (1,296,322 | ) | $ | (1,738,195 | ) | $ | 4,025,914 | $ | 7,654,828 | ||||||
Foreign currency translation adjustment | 821,121 | 887,918 | 2,136,170 | 2,109,425 | ||||||||||||
Comprehensive Income (loss) | (475,201 | ) | (850,277 | ) | 6,162,084 | 9,764,253 | ||||||||||
Comprehensive income attributable to non-controlling interests | (20,014 | ) | (15,937 | ) | 450,236 | 581,931 | ||||||||||
Comprehensive income (loss) attributable to China Infrastructure Construction Corporation | $ | (455,187 | ) | $ | (834,340 | ) | $ | 5,711,848 | $ | 9,182,322 |
Three Months Ended November 30 | Six Months Ended November 30 | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Revenues | $ | 63,748 | $ | 82,581 | $ | 136,569 | $ | 219,162 | ||||||||
Cost of revenues | 15,092 | 7,090 | 23,912 | 53,324 | ||||||||||||
Gross profit | 48,656 | 75,491 | 112,656 | 165,838 | ||||||||||||
Cost and expenses | ||||||||||||||||
General and administrative | 8,407 | 20,969 | 53,376 | 53,505 | ||||||||||||
Contract labor | 46,326 | 189,158 | 141,980 | 363,007 | ||||||||||||
Professional fees | 45,028 | 16,022 | 107,422 | 108,144 | ||||||||||||
Officer compensation | 12,000 | 13,500 | 24,000 | 25,500 | ||||||||||||
Rent and lease | 31,210 | 17,902 | 52,163 | 36,148 | ||||||||||||
Travel | 197 | 1,548 | 1,898 | 3,139 | ||||||||||||
Total operating expenses | 143,168 | 259,099 | 380,839 | 589,443 | ||||||||||||
Operating loss | (94,512 | ) | (183,608 | ) | (268,182 | ) | (423,605 | ) | ||||||||
Other income (expense) | ||||||||||||||||
Forgiveness of debt | – | – | – | 41,666 | ||||||||||||
Interest | (29,916 | ) | (36,278 | ) | (38,035 | ) | (49,978 | ) | ||||||||
Total other income | (29,916 | ) | (36,278 | ) | (38,035 | ) | (8,312 | ) | ||||||||
Net loss | $ | (124,428 | ) | $ | (219,886 | ) | $ | (306,217 | ) | $ | (431,917 | ) | ||||
Average common stock outstanding | ||||||||||||||||
Average earnings (loss) per share | $ | ) | $ | ) | $ | ) | $ | ) |
The accompanying notes are an integral part of this statement.these consolidated financial statements.
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
4 |
CANNABIS BIOSCIENCE INTERNATIONAL HOLDINGS, INC.
(formerly named China Infrastructure Construction Corp.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED FEBRUARY 29, 2012 AND 2011
(Unaudited)
Nine Months Ended February 29, | ||||||||
2012 | 2011 | |||||||
Cash flows from operating activities | ||||||||
Net income (loss) | $ | 4,025,914 | $ | 7,654,828 | ||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operations: | ||||||||
(Gain) Loss from property, plant and equipment disposal | - | 8,935 | ||||||
Bad debt expenses | 1,657,571 | 8,016,081 | ||||||
Depreciation | 1,237,233 | 1,190,034 | ||||||
Shares issued for compensation | 837,500 | 316,250 | ||||||
Stock option expenses | 617,997 | 505,859 | ||||||
Changes in operating liabilities and assets: | ||||||||
Trade accounts receivable | (13,875,032 | ) | (15,597,087 | ) | ||||
Prepayments | 1,445,799 | (2,805,594 | ) | |||||
Inventories | (109,409 | ) | (161,797 | ) | ||||
Other receivables | 213,891 | (961,399 | ) | |||||
Deferred tax assets | 148,547 | - | ||||||
Trade accounts payable | 2,497,003 | (342,068 | ) | |||||
Other payables | 427,044 | 886,375 | ||||||
Accrued expenses | 61,640 | 101,161 | ||||||
Shares to be issued | - | 77,700 | ||||||
Tax payable | 3,071,446 | 1,701,318 | ||||||
Net cash provided by (used in) operating activities | 2,257,144 | 590,596 | ||||||
Cash flows from investing activities: | ||||||||
Property, plant, and equipment additions | (4,611,175 | ) | (506,657 | ) | ||||
Property, plant, and equipment disposal | - | 37,375 | ||||||
Proceeds from related party receivable | - | 1,079,179 | ||||||
Net cash provided by (used in) investing activities | (4,611,175 | ) | 609,897 | |||||
Cash flows from financing activities: | ||||||||
Cash contributed by non controlling interest of Laoting | 908,599 | - | ||||||
Restricted cash | 10,567 | 76,680 | ||||||
Proceeds from Bank loan payable and capital lease obligations | 1,418,871 | 31,111 | ||||||
Payment to Bank loan payable and capital lease obligations | (280,815 | ) | (2,006,905 | ) | ||||
Proceeds from related party payable | 8,538,597 | - | ||||||
Payments to related party payable | (8,308,175 | ) | (76,427 | ) | ||||
Net cash provided by (used in) financing activities | 2,287,644 | (1,975,541 | ) | |||||
Effect of rate changes on cash | 3,183 | 23,185 | ||||||
Net Increase (decrease) of cash and cash equivalents | (63,204 | ) | (751,863 | ) | ||||
Cash and cash equivalents–beginning of year | 136,702 | 1,102,879 | ||||||
Cash and cash equivalents–end of period | $ | 73,498 | $ | 351,016 | ||||
Supplementary cash flow information: | ||||||||
Interest paid in cash | $ | 1,637 | $ | 102,703 | ||||
Acquisition of property, plant and equipment through other payable | 275,898 | - | ||||||
Disposal of property, plant and equipment through long-term investment and accounts payable | 1,038,629 | - | ||||||
Related party receivable offset by payable to related party payable | $ | (526,932 | ) | $ | - |
Six Months ended November 30 | ||||||||
2023 | 2022 | |||||||
OPERATING ACTIVITIES | ||||||||
Net loss | $ | (306,217 | ) | $ | (431,917 | ) | ||
Adjustments to reconcile net income: | ||||||||
Amortization of right-of-use-asset and liability | (58,183 | ) | (3,766 | ) | ||||
Forgiveness of PPP loan | – | (41,666 | ) | |||||
Changes in assets and liabilities | ||||||||
Accounts receivable | (8,854 | ) | (27,635 | ) | ||||
Bank overdraft | 3,808 | – | ||||||
Accounts payable and accrued expenses | 102,220 | (4,354 | ) | |||||
Deferred revenue | (28,641 | ) | – | |||||
NET CASH USED IN OPERATIONS | (295,867 | ) | (509,337 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Proceeds from sales of common stock | 75,000 | 387,666 | ||||||
Rescission of sales of common stock | (19,000 | ) | – | |||||
Proceeds of short-term loans | 29,860 | 63,829 | ||||||
Proceeds from shareholder loans | 119,544 | 49,949 | ||||||
Change in lease liability | 84,400 | – | ||||||
Modification of SBA loan | (2,513 | ) | – | |||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 287,291 | 501,444 | ||||||
NET DECREASE IN CASH | (8,576 | ) | (7,893 | ) | ||||
CASH AT BEGINNING OF PERIOD | 8,913 | 31,982 | ||||||
CASH AT END OF PERIOD | $ | 337 | $ | 24,089 | ||||
Supplemental disclosure of cash flow information | ||||||||
Cash paid for interest | $ | 35,697 | $ | 25,037 | ||||
Cash paid for taxes | $ | – | $ | – |
The accompanying notes are an integral part of this statement.these consolidated financial statements.
5 |
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATIONCANNABIS BIOSCIENCE INTERNATIONAL HOLDINGS, INC.
(formerly named China Infrastructure Construction Corp.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited)
Series A Convertible Preferred Stock | Series B Convertible | Common Stock | Additional Paid-In | Accumulated | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Capital | Deficit | Total | |||||||||||||||||||||||||
Balance - May 31, 2023 | 2,500,000 | $ | – | 1,000 | $ | – | 10,059,677,919 | $ | 4,091,071 | $ | (4,682,736 | ) | $ | (591,665 | ) | |||||||||||||||||
Sales of common stock for cash | – | – | – | – | 291,071,428 | 74,997 | – | 74,997 | ||||||||||||||||||||||||
Rescission of stock sale | – | – | – | – | (19,000,000 | ) | (19,000 | ) | – | (19,000 | ) | |||||||||||||||||||||
Net loss for the quarter | – | – | – | – | – | – | (181,789 | ) | (181,789 | ) | ||||||||||||||||||||||
Balance - August 31, 2023 | 2,500,000 | – | 1,000 | – | 10,331,749,347 | 4,147,071 | (4,864,528 | ) | (717,456 | ) | ||||||||||||||||||||||
Net loss for the quarter | – | – | – | – | – | – | (124,428 | ) | (124,428 | ) | ||||||||||||||||||||||
Balance - November 30, 2023 | 2,500,000 | $ | – | 1,000 | $ | – | 10,331,749,347 | $ | 4,147,071 | $ | (4,988,956 | ) | $ | (841,885 | ) | |||||||||||||||||
Balance - May 31, 2022 | 2,500,000 | $ | 2,500 | – | $ | – | 8,612,998,299 | $ | 3,286,605 | $ | (3,650,156 | ) | $ | (361,052 | ) | |||||||||||||||||
Sales of common stock for cash | – | – | – | – | 125,000,000 | 75,000 | – | 75,000 | ||||||||||||||||||||||||
Change in value of common stock | – | (2,500 | ) | – | – | – | 2,500 | – | – | |||||||||||||||||||||||
Exchange of Series B preferred | – | – | 1,000 | – | (595,467,205 | ) | – | – | – | |||||||||||||||||||||||
Net loss for the quarter | – | – | – | – | – | – | (212,030 | ) | (212,030 | ) | ||||||||||||||||||||||
Balance - August 31, 2022 | 2,500,000 | – | 1,000 | – | 8,142,531,094 | 3,364,105 | (3,862,186 | ) | (498,081 | ) | ||||||||||||||||||||||
Sales of common stock | – | – | – | – | 704,388,889 | 312,666 | – | 312,666 | ||||||||||||||||||||||||
Net loss for the quarter | – | – | – | – | – | – | (219,886 | ) | (219,886 | ) | ||||||||||||||||||||||
Balance - November 30, 2022 | 2,500,000 | $ | – | 1,000 | $ | – | 8,846,919,983 | $ | 3,676,771 | $ | (4,082,072 | ) | $ | (405,301 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
6 |
CANNABIS BIOSCIENCE INTERNATIONAL HOLDINGS, INC.
(formerly named China Infrastructure Construction Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 29, 2012 (Unaudited) AND MAY 31, 2011November 30, 2023
AND FOR THE NINE MONTHS ENDED FEBRUARY, 2012 AND 2011
(Unaudited)
China Infrastructure Construction Corporation (“China Infrastructure”Note 1 – Organization and Business
Organization and Operations
Cannabis Bioscience International Holdings, Inc., a Colorado corporation (the “Company”), formerly Fidelity Aviation Corporation, was organizedformed on February 28, 2003, as a limited liability company under the name Fidelity Aircraft Partners LLC. On December 16, 2009, it converted to a corporation under the name Fidelity Aviation Corporation, and on August 24, 2009, it changed its name to China Infrastructure Construction Corp. On February 28, 2018, the Company changed its name to Hippocrates Direct Healthcare, Inc.; on July 4, 2018, it resumed the name China Infrastructure Construction Corp. On December 6, 2022, it changed its name to its present name. The Company provides educational systems focused on medical cannabis in cities throughout the United States and six countries in Latin America. The Company provides services to third parties in therapeutic areas of clinical trials and conducts clinical trials relating to cannabinoids for its own account. The Company has one non-operating subsidiary, Alpha Fertility and Sleep Center, LLC, a ColoradoTexas limited liability company, (“Fidelity LLC”). On December 16, 2004, Fidelity LLC converted itself into Fidelity Aviation Corporation by filing a Statement of Conversion and Articles of Incorporation with the Colorado Secretary of State. Fidelity was formed to purchase large commercial (transport category) jet airframes, salvage the usable aircraft parts and components from them and sell the parts and components. The Board of Directors evaluated the future market for aircraft partsthrough which it conducted its sleep center business and resolved not to pursue this line of business anymore.until April 30, 2023.
On October 8, 2008, China Infrastructure entered into and consummated the transactions contemplated under a Share Exchange Agreement with Northern Construction Holdings, Ltd., a Hong Kong limited company (“NCH”) and its shareholder pursuant to which China Infrastructure issued 1,200,000 (12,000,000 pre-reverse split) sharesNote 2 – Summary of China Infrastructure common stock (the “Share Exchange”) in exchange for all issued and outstanding common stock of NCH.Significant Accounting Policies
The Share Exchange resulted in (i) a change in control of China Infrastructure with the shareholder of NCH owning approximately 78% of issued and outstanding shares of common stock of China Infrastructure, (ii) NCH becoming a wholly-owned subsidiary of China Infrastructure, and (iii) appointment of certain nominees of the shareholder of NCH as directors and officers of China Infrastructure and resignation of John Schoenauer as director, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer of China Infrastructure.Accounting Principles
As a result of the Share Exchange Agreement, Beijing Fortune Capital Management Co., Ltd. (“BFCM”), a 95% owned subsidiary of NCH, became our indirect majority-owned subsidiary. Also as a result of the Share Exchange Agreement, Beijing Chengzhi Qianmao Concrete Co., Ltd., (“Beijing Concrete”), the operating company, and a 99.5% owned subsidiary of BFCM, also became our indirect majority-owned subsidiary.
For accounting purposes, the share exchange transaction was treated as a capital transaction where the acquiring corporation issued stock for the net monetary assets of the shell corporation, accompanied by a recapitalization. The accounting is similar in form to a reverse acquisition, except that goodwill or other intangibles are not recorded. All references to NCH common stock have been restated to reflect the equivalent numbers of China Infrastructure common shares.
On January 15, 2010, Beijing Concrete increased its registered capital from RMB 15 million (approximately $2.2 million) to RMB 30 million (approximately $4.4 million) and BFCM increased its investment in Beijing Concrete accordingly. Its share capital increased from RMB 10 million (approximately $1.47 million) to RMB 15 million (approximately $2.2 million). As a result, BFCM owns 99.67% of Beijing Concrete from January 15, 2010.
On February 1, 2010, Beijing Concrete formed a subsidiary, Shaanxi Hongruida Concrete Ltd. (“Hongruida”) and contributed RMB 10 million (approximately $1.47 million) to its capital. Beijing Concrete is the sole shareholder of Hongruida. Hongruida was organized to implement the 10-year strategic cooperative agreement with one of the Company’s major clients, China Railway Construction Group Co., Ltd (“CRCG”). Under the Agreement, the Company and CRCG will jointly manage the concrete mixing stations to be operated by Hongruida. CRCG will provide the cement for manufacturing the concrete mix in such concrete mixing stations, and will be able to purchase the concrete mix at discounted prices. Also, in accordance with the Agreement, each party will lease certain equipment to the concrete mixing stations. The Company and CRCG will share 75% and 25% of the annual profits of such concrete mixing stations in Xi’an. Hongruida commenced its operations at the end of March 2010.
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 29, 2012 (Unaudited) AND MAY 31, 2011
AND FOR THE NINE MONTHS ENDED FEBRUARY, 2012 AND 2011
On June 27, 2011, the Company formed a new subsidiary, Laoting County Kejian Concrete Co. Ltd, in Tangshan, Hebei Province. The new subsidiary is a joint venture with 51% owned by Beijing Concrete and 49% owned by two other individuals. The total registered capital is 12 million RMB, about USD $2.34 million.
When we refer in this report to business and financial information for periods prior to the consummation of the reverse acquisition, we are referring to the business and financial information of NCH on a consolidated basis unless the context suggests otherwise.
The Company through its subsidiaries in Hong Kong and the People’s Republic of China (“PRC” or “China”), engages in the production of ready-mixed concrete for developers and the construction industry in the PRC. In addition, we have a technical service agreement with an independently owned concrete mixture station, pursuant to which we are paid by percentages of sales for technical support provided.
The accompanying unaudited consolidated financial statements arehave been prepared by management using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“USU.S. GAAP”). This basis differs from that used in for interim financial statements and with the statutory accountsinstructions to Article 10 of Regulation S-X of the Company, which were prepared in accordance withU.S. Securities and Exchange Commission (the “SEC”). Accordingly, they do not contain all of the accounting principlesinformation and relevantfootnotes required by U.S. GAAP for annual financial regulations applicable to enterprises instatements. In the PRC. Allopinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary adjustments have been made(consisting only of normal recurring accruals) to present the financial statements in accordance with US GAAP.
The Company faces a number of risks and challenges as a result of having primary operations and marketing in the PRC. Changing political climates in the PRC could have a significant effect on the Company’s business.
The directors, executive officers and their affiliates or related parties own, beneficially and in the aggregate, the majority of the voting power of the registered capital of the Company. Accordingly, the directors, executive officers and their affiliates, if they voted their shares uniformly, would have the ability to control the approval of most corporate actions, including increasing the authorized capital stockposition of the Company at November 30, 2023, and the dissolution, merger or saleresults of operations and cash flows for the periods presented. The results of operations for the six months ended November 30, 2023, are not necessarily indicative of the Company’s assets.
Theoperating results for the full fiscal year or any future period. These unaudited consolidated financial statements includeshould be read in conjunction with the audited financial statements of China Infrastructure, and its wholly-owned and majority-owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation. The Company’s foreign subsidiaries have fiscalrelated notes thereto for the year ends ofended May 31, and the results are consolidated up to that date. Non-controlling interests consist of other stockholders’ ownership interests in majority-owned subsidiaries of the Company.
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 29, 2012 (Unaudited) AND MAY 31, 2011
AND FOR THE NINE MONTHS ENDED FEBRUARY, 2012 AND 2011
2023.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principlesU.S. GAAP requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosuresdisclosure of contingent assets and liabilities at the datedates of the financial statements and the reported amounts of incomerevenue and expenses during the reporting period.periods. Making estimates requires management to exercise significant judgment. Certain of these estimates could be affected by external conditions, including those unique to the Company’s businesses, and general economic conditions. These external conditions could have an effect on the Company’s estimates that could cause actual results to differ materially from its estimates. Actual results could differ from those estimates. The Company re-evaluates all of its accounting estimates at least quarterly based on these conditions and records adjustments when necessary. Significant estimates relied upon in preparing these statements include revenue recognition, accounts receivable reserves, accrued expenses, share-based compensation and the recoverability of the Company’s net deferred tax assets and any related valuation allowance.
For purposes of the statements of cash flows, cash and cash equivalents includes cash on hand and demand deposits held by banks. Deposits held in financial institutions in the PRC are not insured by any government entity or agency.
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Restricted cash represents deposits held in the escrow account and are not insured by any government entity or agency.Principles of Consolidation
The consolidated financial statements include the accounts of the Company extends unsecured credit toand its customerswholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Reclassification
Certain amounts in the ordinary courseprior consolidated financial statements have been reclassified to conform to the presentation of business but mitigates the associated risks by performing credit checkscurrent period financial statements. These reclassifications had no impact on the results of operations, changes in equity, or cash flows.
Cash and actively pursuing past due accounts. TradeCash Equivalents
Cash equivalents are short-term, highly liquid investments that are readily convertible to cash with original maturities of three months or less at the date acquired. The Company had zero investment securities that were deemed cash equivalents at November 30, 2023, and May 31, 2023, respectively.
Accounts Receivable
Included in accounts receivable on the balance sheets are recognizedamounts primarily related to customers. The Company estimates losses on receivables based on known troubled accounts and carried at original invoice amount less an allowance for any uncollectible amounts. Anhistorical experience of losses incurred. Receivables are considered impaired and written off when it is probable that all contractual payments due will not be collected in accordance with the terms of the related agreement. Based on experience and the judgment of management, there was no allowance for doubtful accounts is establishedat November 30, 2023, and determined based on management’s regular assessment of known requirements, aging of receivables, payment history, the customer’s current credit worthiness and the economic environment. These factors continuously change, and can have an impact on collections and the Company’s estimation process. These impacts may be material. Management reviews and maintains an allowance for doubtful accounts that reflects the management’s best estimate of potentially uncollectible trade receivables. Certain accounts receivable amounts are charged off against allowances after a designated period of collection efforts. Subsequent cash recoveries are recognized as income in the period when they occur. The ultimate collection of the Company’s accounts receivable may take more than one year, and any portion of accounts receivable expected to be collected more than one year from the sale date is reflected as noncurrent, net of allowance for doubtful accounts relating to that portion of the receivables. The bifurcation between current and noncurrent portions of accounts receivable is based on management’s estimate and historical collection experience.
Inventories are stated at the lower of cost, determined on a weighted average basis, and net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose.
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 29, 2012 (Unaudited) AND MAYMay 31, 2011
AND FOR THE NINE MONTHS ENDED FEBRUARY, 2012 AND 2011
Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the useful lives of the assets. Major renewals are capitalized and depreciated; maintenance and repairs that do not extend the life of the respective assets are charged to expense as incurred. Upon disposal of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in income. Depreciation related to property and equipment is reported in cost of revenues. Property, plant and equipment are depreciated over their estimated useful lives as follows:
Long-lived assets of the Company are reviewed annually to assess whether the carrying value has become impaired according to the guidelines established in FASB Codification (ASC) 360. The Company considers assets to be impaired if the carrying value exceeds the future projected cash flows from related operations. The Company also re-evaluates the periods of depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives. As of February 29, 2012, the Company expects these assets to be fully recoverable. No impairment of assets was recorded in the periods reported.
Accumulated other comprehensive income represents foreign currency translation adjustments.
The Company receives revenue from sales of concrete products and from provision of manufacturing service. The Company's revenue recognition policies are in compliance with ASC 605. Revenue is recognized at the date of shipment to customers or manufacturing services have been rendered when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Both of our product sales and manufacturing service are non-returnable. Therefore, we do not estimate deductions or allowance for returns. Revenues are presented net of any discounts, reward, or incentive given to customers. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.2023.
Our products delivered to customers are checked on site by customers and, once the products are accepted by customers, they will sign the acceptance notice. There is no warranty issue after the delivery.
Similar to sales of concrete products, we delivered products on which we provided manufacturing service to customers or provided manufacturing service on site. Customers check products upon receipt and will sign the acceptance notice once the products are accepted. There is no warranty issue after the acceptance.
Reward or incentive given to our customers is an adjustment of the selling prices of our products; therefore, the consideration is characterized as a reduction of revenue when recognized in our income statement.
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 29, 2012 (Unaudited) AND MAY 31, 2011
AND FOR THE NINE MONTHS ENDED FEBRUARY, 2012 AND 2011
Revenue Recognition
The Company recognizes itsfollows the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), as amended. This standard requires a company to recognize revenues net of value-added taxes (“VAT”). The Company enjoys a free VAT policy accordingwhen it transfers goods or services to customers in an amount that reflects the national policy, which encourages the development of the cement industry if the manufacturer satisfies the environmental protection requirements. The Company has enjoyed the free VAT policy from January 1, 2006consideration that it expects to December 31, 2010. Starting from January 1, 2011,receive for them.
Under ASU No. 2014-09, the Company is subject to VAT which is levied at the raterecognizes revenue when a customer obtains control of 6% on the invoiced value of sales.
Cost ofpromised goods sold consists primarily of the costs of the raw materials, freight charges, direct labor, depreciation of plant and machinery, warehousing cost and overhead associated with the manufacturing process and commission expenses.
ASC 605-45-20 “Shipping and Handling Costs” establishes standards for the classification of shipping and handling costs. All amounts billedor services, or when they are shipped to a customer, relatedin an amount that reflects the consideration that it expects to shippingreceive in exchange for them. The Company recognizes revenues following the five-step model prescribed under ASU No. 2014-09: (a) it identifies a contract with a customer; (b) it identifies the performance obligations in the contract; (c) it determines the transaction price; (d) it allocates the transaction price to the performance obligations in the contract; and handling are classified as revenue.(e) it recognizes revenues when (or as) it satisfies its performance obligation.
The Company generates revenue from multiple streams, namely, clinical trials, consulting fees, seminars and merchandise sales. Revenues from product sales are recognized when a customer obtains control of the Company’s product, which occurs at a point in time or over time, typically upon shipment to the customer or when services are fulfilled and the customer receives benefit from such services. Revenue is deferred and a liability is established to the extent that the Company receives payments from customers in advance of goods being shipped or services being rendered.
The Company expenses advertisingincremental costs of obtaining a contract as incurred. Advertising costs,and when incurred if any,the expected amortization period of the asset in which it would have been recognized is one year or less or the amount is immaterial.
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A performance obligation is a contractual promise to transfer a distinct product or service to a customer and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Each contract has a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. Revenue from contracts that satisfy the criteria for overtime recognition is recognized as the work progresses. The majority of the Company’s revenue is derived from services provided to customers and is executed typically over a period that is typically between 1 to 12 months, based on evaluation of when these services are includedrendered. Contracts will continue to be recognized over time because of the continuous transfer of control to the customer as services are rendered to customers. Payments made by customers in selling, general and administrative expenseadvance of services being rendered are recorded as deferred revenue.
Our significant payment terms for customer contracts vary based on the income statement.
The accompanying financial statementsrevenue stream. Franchising business clients are presented in US dollars. The functional currencyrequired to advance a percentage of the Company is U.S. Dollars and that of Beijing Concrete is the Renminbi (“RMB”)franchise fee upon acceptance of the PRC.contract. These advances, when received, are accounted for as contract liabilities on the consolidated balance sheet and are subsequently recognized in revenue when they are earned. Contracts for clinical trials typically provide for progress payments based on the number of patients seen, with final payments generally due within 30 days upon completion of work or the termination of the contract. Revenue is recognized when all performance obligations under the terms of a contract are satisfied. The financial statementsCompany requires advance payments from its consulting customers and these payments are translated into US dollars from RMBrecorded as contract liabilities on the consolidated balance sheet until service is performed and revenue is recognized. These advance payments are not treated as financing component based on the guidance in ASC 606-10-32-196-16 and -17, whereby the timing of when services are provided are at period-end exchange rates for assetsthe discretion of the customers or a substantial amount of the consideration promised by the customer is variable and liabilities, and weighted average exchange rates for revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.
On July 21, 2005, the PRC changed its foreign currency exchange policy from a fixed RMB/USD exchange rate into a flexible rate undernot in the control of the PRC’s government. We usecustomer or the Closing Rate Method in currency translation of the financial statements of the Company.
RMB is not freely convertible into the currency of other nations. All such exchange transactions must take place through authorized institutions. There is no guaranteesignificant financing component to any of the RMBCompany’s contracts.
Contracts for educational services require nonrefundable payment in advance and are recorded as revenue when received.
There is no significant financing component to any contracts.
Contract Modifications
Contracts for the Company’s clinical trial business are subject to modification. These modifications may create new, or change existing, enforceable rights and obligations of the parties thereto. Modifications are generally effected pursuant to an amendment or addendum to the original contract. A contract modification is accounted for as a new contract if it reflects an increase in scope that is regarded as distinct from the original contract and is priced in line with the standalone price for the related services. If a contract modification is not considered a new contract, the modification is combined with the original contract and the impact on revenue recognition will depend on whether the remaining services are distinct from the original contract. If they are distinct from those in the original contract, all remaining performance obligations will be accounted for on a prospective basis, with unrecognized consideration allocated to the remaining performance obligations. If the remaining goods or services are not distinct, the modification will be treated as if it were a part of the existing contract and the effect that the contract modification has on the transaction price and the measure of progress toward satisfaction of the performance obligations are recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification on a cumulative catch-up basis.
Remaining Performance Obligations
The Company follows ASC 606, which requires the allocation of the transaction price to the remaining performance obligations of a contract and applies a practical expedient allowing it not to disclose the amount of the transaction price allocated to the remaining performance obligations for contracts with an original expected duration of one year or less. At November 30, 2023, and May 31, 2023, the Company had no remaining performance obligations.
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ASC 718, “Compensation – Stock Compensation,” prescribes accounting and reporting standards for all share-based payment transactions. In June 2018, FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which aligns accounting for share-based payments issued to non-employees to that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for share-based payments to non-employees under Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees. This guidance became effective for the Company on January 1, 2019. Based on its completed analysis, the Company has determined that adopting this guidance will not have a material impact on its financial statements. The Company follows FASB guidance related to equity-based payments, which requires that equity-based compensation be accounted for using a fair value method and recognized as expense in the accompanying statements of operations. Equity-based compensation expense will be recognized as compensation expense.
Leases
The Company has adopted ASU 2016-02, Leases (Topic 842), along with related clarifications and improvements, under which lessees are required to recognize a lease liability, which represents the discounted obligation to make future minimum lease payments and a corresponding right-of-use asset on the balance sheet for most leases. The guidance retains the historical accounting for lessors and does not make significant changes to the recognition, measurement, and presentation of expenses and cash flows by a lessee. Enhanced disclosures are also required to give financial statement users the ability to assess the amount, timing and uncertainty of cash flows arising from leases.
Cash Flows
The Company follows ASU 2016-18, “Statement of Cash Flows (Topic 230),” requiring that the statement of cash flows explain the change in the total cash, cash equivalents, and amounts could have been,generally described as restricted cash or couldrestricted cash equivalents. The provisions of this guidance are to be converted into US dollars at ratesapplied using a retrospective approach, which requires application of the guidance for all periods presented.
Fair Value Measurements
The Company has adopted ASC Topic 820, Fair Value Measurements, which defines fair value as used in translation.numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair-value measurements.
The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, is carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of the Company’s short- and long-term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features, such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.
ASC Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820 also establishes a fair-value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC Topic 820 describes three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Quoted prices for similar assets and liabilities in active markets or inputs that are observable.
Level 3: Inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).
Income Taxes
The Company accounts for income taxes in accordance with Accounting Standards Codification No. 740, “Income Taxes” (“ASC 740 (formerly SFAS 109, “Accounting for Income Taxes.”740”) Under. This codification prescribes the use of the asset and liability method as required by ASC 740 ,whereby deferred income taxestax asset and liability account balances are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years todetermined based on differences between the financial statement carrying amountsreporting and the tax bases of existing assets and liabilities. Under ASC 740,liabilities and for carryforward tax losses. Deferred taxes are measured using the effect on deferred income taxes of a change inenacted tax rates is recognizedand laws that will be in income ineffect when the period that includes the enactment date. Adifferences are expected to reverse. The Company provides a valuation allowance, is recognizedif necessary, to reduce deferred tax assets to their estimated realizable value if it is more likely than not that some portion or all of athe deferred tax asset will not be realized.
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 29, 2012 (Unaudited) AND MAY 31, 2011
AND FOR THE NINE MONTHS ENDED FEBRUARY, 2012 AND 2011
ASC 740 (formerly FIN 48) clarifiesDeferred tax liabilities and assets are classified as current or noncurrent based on the accounting and disclosureclassification of the related asset or liability for financial reporting or according to the expected reversal dates of the specific temporary differences, if not related to an asset or liability for financial reporting.
The Company accounts for uncertain tax positions and prescribes a recognition threshold and measurement attribute for recognition and measurementin accordance with the provisions of ASC 740, which provides guidance as to the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in its financial statements, under which a company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
The tax benefits recognized in financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Accordingly, the Company would report a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification,The Company elects to recognize any interest and penalties, accountingif any, related to unrecognized tax benefits in interim periods, disclosure and transition.tax expense.
The Company’s operations are subject to income and transaction taxes in the United States, Hong Kong, and the PRC jurisdictions. Significant estimates and judgments are required in determining the Company’s worldwide provision for income taxes. Some of these estimates are based on interpretations of existing tax laws or regulations, and as a result the ultimate amount of tax liability may be uncertain. However, the Company does not anticipate any events that would lead to changes to these uncertainties.Loss per Share
The Company and its subsidiaries are subject to income taxes on an entity basis on income arising in, or derived from, the tax jurisdiction in which they operate. Effective January 1, 2009, the PRC government implemented a new 25% tax rate across the board for all enterprises regardless of whether domestic or foreign enterprise without any tax holiday which is defined as "two-year exemption followed by three-year half exemption" hitherto enjoyed by taxpayers. As a result of the new tax law of a standard 25% tax rate, tax holidays terminated as of December 31, 2008. However, the PRC government has established a set of transition rules to allow enterprises who had already started tax holidays, before January 1, 2009, to continue enjoying the tax holidays until being fully utilized. The exemption of income tax to the Company lasted until December 31, 2010, and from January 1, 2011, the Company is subject to an income tax at an effective rate of 25%.
Dividend payments by the Company are limited by certain statutory regulations in the PRC. No dividends may be paid by the Company without first receiving prior approval from the Foreign Currency Exchange Management Bureau. However, no such restrictions exist with respect to loans and advances.
ASC 825 (formerly SFAS 107, “Disclosures about Fair Value of Financial Instruments”) defines financial instruments and requires disclosure of the fair value of those instruments. ASC 820 (formerly SFAS 157, “Fair Value Measurements”), adopted July 1, 2008, defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 29, 2012 (Unaudited) AND MAY 31, 2011
AND FOR THE NINE MONTHS ENDED FEBRUARY, 2012 AND 2011
Level 1: inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
Level 3: inputs to the valuation methodology are unobservable and significant to the fair value.
The carryingcomputes basic earnings per share amounts reported in the balance sheets for current receivables and payables, including short-term loans, qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments, their expected realization and, if applicable, the stated rate of interest is equivalent to rates currently available.
The Company records stock-based compensation expense pursuant to ASC 718 (formerly SFAS 123R, “Share Based Payment.”) The Company uses the Black-Scholes option pricing model which requires the input of highly complex and subjective variables including the expected life of options granted and the Company’s expected stock price volatility over a period equal to or greater than the expected life of the options. Because changes in the subjective assumptions can materially affect the estimated value of the Company’s employee stock options, it is management’s opinion that the Black-Scholes option pricing model may not provide an accurate measure of the fair value of the Company’s employee stock options. Although the fair value of employee stock options is determined in accordance with ASC 718 using an option pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.
Stock-based compensation expense is recognized based on awards expected to vest, and there were no estimated forfeitures as the Company has a short history of issuing options. ASC 718 (formerly SFAS 123R) requires forfeitures to be estimated at the time of grant and revised in subsequent periods, if necessary, if actual forfeitures differ from those estimates.
The Company reports earnings per share in accordance with the provisions of ASC 260 (formerly SFAS No. 128, "Earnings Per Share.") ASC 260 requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. ” Basic earnings per share excludes dilution and is computedcalculated by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the reporting period. Diluted earningsloss per share takes into accountis computed by dividing net loss by the potential dilution that could occur if securities or other contracts to issueweighted average number of shares of common stock, were exercised and converted into common stock. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market priceequivalents and potentially dilutive securities outstanding during the period. At November 30, 2023, and November 30, 2022, the Company had dilutive securities.
Recently Issued Accounting Standards
In accordance with FASB ASC 230, cash flows from the Company's operations is calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 29, 2012 (Unaudited) AND MAY 31, 2011
AND FOR THE NINE MONTHS ENDED FEBRUARY, 2012 AND 2011
ASC 280 “Segment reporting” (formerly SFAS 131) requires use of the management approach model for 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. Since management does not disaggregate Company data, the Company has determined that only one segment exists.
In January 2011, the FASB issued an Accounting Standard Update (“ASU”) No. 2011-01, “Receivables Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, to be concurrent with the effective date of the guidance for determining what constitutes a troubled debt restructuring, as presented in proposed Accounting Standards Update, Receivables (Topic 310): Clarifications to Accounting for Troubled Debt Restructurings by Creditors. The amendments in this Update apply to all public-entity creditors that modify financing receivables within the scope of the disclosure requirements about troubled debt restructurings in Update 2010-20. Under the existing effective date in Update 2010-20, public-entity creditors would have provided disclosures about troubled debt restructurings for periods beginning on or after December 15, 2010. The amendments in this Update temporarily defer that effective date, enabling public-entity creditors to provide those disclosures after the Board clarifies the guidance for determining what constitutes a troubled debt restructuring. The deferral in this Update will result in more consistent disclosures about troubled debt restructurings. This amendment does not defer the effective date of the other disclosure requirements in Update 2010-20. In the proposed Update for determining what constitutes a troubled debt restructuring, the Board proposed that the clarifications would be effective for interim and annual periods ending after June 15, 2011. For the new disclosures about troubled debt restructurings in Update 2010-20, those clarifications would be applied retrospectively to the beginning of the fiscal year in which the proposal is adopted. The Company does not expect the adoption of ASU 2011-01 tobelieve there are any other recently issued, but not yet effective, accounting standards that would have a significant impact on itsthe Company’s financial position or results of operations.
Note 3 – Going Concern
The accompanying consolidated financial statements.statements have been prepared in conformity with U.S. GAAP, which contemplate the Company’s continuation as a going concern in accordance with ASC 240-40-50. The Company’s history of recurring losses, negative working capital and negative cash flows from operating activities raises substantial doubt about its ability to continue as a going concern. The Company has not generated any profits since inception and its current cash balances will not meet its working capital needs. During the quarter ended November 30, 2023, the Company had a net loss from operations of $306,217, net cash used in operations of $295,867, a working capital deficit of $640,567 and an accumulated deficit of $4,988,956.
The ability of the Company to continue as a going concern depends on the successful execution of its operating plan, which includes expanding its operations and raising either debt or equity financing. There is no assurance that the Company will be able to expand its operations or obtain such financing on satisfactory terms or at all. If the Company is unsuccessful in these endeavors, it may be required to curtail or cease its operations.
The accompanying financial statements do not include any adjustments related to the recoverability or classification of asset carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
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Note 4 – Debt
PPP Loans
During the years ended May 31, 2021, and May 31, 2020, the Company received one loan of $31,750, two loans of $20,833 each and three loans of $5,000 each under the Payroll Protection Program (the “PPP”). The PPP was established in 2020 as part of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) to provide loans to qualifying businesses for amounts up to 2.5 times their average monthly payroll expenses. At May 31, 2022, the Company’s outstanding PPP loans of $41,666 were recorded as current liabilities; these loans were forgiven on June 21, 2022. On May 5, 2021, pursuant to the CARES Act, the Company received forgiveness of the loan of $31,750; it received forgiveness of a loan of $5,000; on March 16, 2021, it received forgiveness for a loan of $5,000; and on March 18, 2021, it received forgiveness for a loan of $5,000, Each such forgiveness was recorded as other income during the year in which it received official notice that it was forgiven.
EIDL Loans
In May 2020, the Company received $143,100 from the Small Business Administration as an Economic Injury Disaster Loan (“EIDL”) to help fund its operations during the COVID-19 pandemic. The loan bears interest at the rate of 3.75% per annum and is payable in monthly installments of $698 over a 30-year period, with deferral of payments for the first 12 months. An additional $10,000 borrowed under EIDL, which was provided for payroll, was forgiven and recorded as Other Income during 2022.
In June 2020, the Company received proceeds of $106,200 from the Small Business Administration through a second EIDL loan to help fund its operations during the COVID-19 pandemic. The loan bears interest at the rate of 3.75% per annum and is payable in monthly installments of $518 over a 30-year period. An additional $4,000 borrowed under EIDL, which was provided for payroll, was forgiven and recorded as Other Income during 2022.
The Company’s EIDL loans were recorded in the balance sheet as follows:
Schedule of EIDL loans | ||||||||
November 30, 2023 (Unaudited) | May 31, 2023 (Audited) | |||||||
SBA (EIDL) current portion | $ | 12,079 | $ | 14,592 | ||||
SBA (EIDL) noncurrent portion | 249,500 | 249,500 | ||||||
Total EIDL Loans | $ | 261,579 | $ | 264,092 |
Short-Term Loans
The Company has reviewed the Accounting Standards Updates up through No. 2011-12.
Certain prior period amounts have been reclassifiedentered into agreements under which it sold receivables to conform to the current period presentation.
third parties. In accordance with ASC 470, these transactions are treated as loans encumbering the Escrow Agreement and the Subscription Agreement (note 15) signed by China Infrastructure Construction Corporation, Trillion Growth China General Partner and Anslow & Jaclin, LLP (the “Escrow Agent”) in October 2009, the Company was required to keep with the Escrow Agent $120,000 immediately on the Closing Date of the Subscription Agreement. This fund can only be disbursed when certain criteria are met. As of February 29, 2012 and May 31, 2011, the amount not disbursed was $301 and $10,868, respectively.
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 29, 2012 (Unaudited) AND MAY 31, 2011
AND FOR THE NINE MONTHS ENDED FEBRUARY, 2012 AND 2011
February 29, 2012 | May 31, 2011 | |||||||
Trade Accounts Receivable | $ | 26,194,811 | $ | 32,787,147 | ||||
Less: Allowance for Bad Debt | (3,346,641 | ) | (2,728,690 | ) | ||||
$ | 22,848,170 | $ | 30,058,457 |
February 29, 2012 | May 31, 2011 | |||||||
Long Term Accounts Receivable | $ | 61,817,345 | $ | 38,973,730 | ||||
Less: Allowance for Bad Debt | (7,167,974 | ) | (5,844,421 | ) | ||||
$ | 54,649,371 | $ | 33,129,309 |
Other receivables in current assets amounted to $1,139,046 and $983,199 as of February 29, 2012 and May 31, 2011, respectively. Other receivables in current assets consists of other receivables related to the sale of construction in progress in Tangshan.
Other receivables in long-term assets amounted to $2,341,569 and $2,197,961 as of February 29, 2012 and May 31, 2011, respectively.
As of February 29, 2012, other receivables includes $2.93 million related to a construction in progress disposal to an unrelated party. On February 28, 2010, we sold construction in progress in Tangshan to an unrelated third party at a price of approximately $3.8 million. The amount is due in 4 annual equal installments starting September 1, 2010. The receivable is unsecured, interest free, and with fixed repayment dates. It also includes insurance claims and deposits, that are from unrelated parties, interest free, unsecured, and with no fixed repayment date, and advances to employees for business purposes.
The allowances on the other accounts receivable are recorded when circumstances indicate collection is doubtful for particular accounts receivable. The Company provides for allowances on a specific account basis. Even though there is a default on payment, the Company expects payment in the next quarter; therefore, there is no provision for bad debt allowance made for the other receivables at February 29, 2012 and May 31, 2011.
Inventories consist of the following:
February 29, 2012 | May 31, 2011 | |||||||
Raw materials | $ | 469,614 | $ | 348,102 | ||||
$ | 469,614 | $ | 348,102 |
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 29, 2012 (Unaudited) AND MAY 31, 2011
AND FOR THE NINE MONTHS ENDED FEBRUARY, 2012 AND 2011
Plant and equipment consist of the following:
February 29, 2012 | May 31, 2011 | |||||||
Office trailers | $ | 911,941 | $ | 798,993 | ||||
Machinery and equipment | 5,476,127 | 2,840,269 | ||||||
Machinery and equipment, capital lease | 6,315,838 | 6,348,228 | ||||||
Motor vehicles | 679,838 | 499,808 | ||||||
Motor vehicles, capital lease | 288,380 | 279,854 | ||||||
Furniture and office equipment | 637,353 | 601,619 | ||||||
Construction in progress | 1,730,432 | 1,906,796 | ||||||
Total property, plant and equipment | 16,039,909 | 13,275,567 | ||||||
Accumulated depreciation | (2,668,288 | ) | (2,685,392 | ) | ||||
Accumulated depreciation, capital lease | (2,233,629 | ) | (1,691,182 | ) | ||||
Net property, plant and equipment | $ | 11,137,992 | $ | 8,898,993 |
Depreciation expense included in general and administrative expenses for the nine months ended February 29, 2012 and 2011 was $207,239 and $144,504, respectively. Depreciation expense included in cost of sales for the nine months ended February 29, 2012 and 2011 was $1,029,994 and $1,045,530, respectively.
Construction in progress represents direct costs of construction and design fees incurred for the Company’s new project in Tangshan. All construction costs associated with this project are accumulated and capitalized as construction in progress. The construction in progress is closed out to the appropriate asset classification when the project is substantially complete, occupied, or placed into service. No depreciation is provided until it is completed and ready for its intended use.
On February 28, 2010, we sold construction in progress in Tangshan to an unrelated third party at a price of approximately $3.8 million. The amount is due in 4 annual equal installments starting September 1, 2010. As of May 31, 2010, the book value of the construction in progress sold was approximately $3.3 million. A gain from property, plant and equipment disposal of $496,816 was recorded. Total other receivable for sales of Tangshan construction in progress was $2,169,070 and $2,874,586 as of February 29, 2012 and May 31, 2011, respectively.
After the Tangshan project was sold, construction in progress represents direct costs of construction and design fees incurred for the Company’s new location for the production facility in Beijing Daxing. Similar to the Tangshan project, all construction costs associated with this project are accumulated and capitalized as construction in progress. The construction in progress is closed out to the appropriate asset classification when the project is substantially complete, occupied, or placed into service. No depreciation is provided until it is completed and ready for its intended use.
Interest costs totaling $0 were capitalized into construction in progress for the nine months ended February 29, 2012 and 2011.
Prepayments consist of the long-term refundable performance bond, prepaid expenses, mainly prepaid rent expense, and the monies deposited with the suppliers for raw materials and capital lease lessor for lease payment. The total outstanding amount was $14,233,457 and $15,240,990 as of February 29, 2012 and May 31, 2011, respectively. There is no provision made for the prepayment at February 29, 2012 and May 31, 2011.
February 29, 2012 | May 31, 2011 | |||||||
Advance to suppliers | $ | 2,153,551 | $ | 8,561,700 | ||||
Prepaid expenses | 8,844,058 | 2,769,473 | ||||||
Performance bond | 3,235,848 | 3,909,817 | ||||||
$ | 14,233,457 | $ | 15,240,990 |
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 29, 2012 (Unaudited) AND MAY 31, 2011
AND FOR THE NINE MONTHS ENDED FEBRUARY, 2012 AND 2011
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
Total outstanding amount of related party payable was $526,932 and $296,325 as of February 29, 2012 and May 31, 2011, respectively. These payables bear no interest and have no fixed payment terms. Currently, the related party payable consists of the following:
February 29, 2012 | May 31, 2011 | |||||||
Yang Rong (CEO) | $ | 526,932 | $ | 151,711 | ||||
Xiuqiong Long | - | 144,614 | ||||||
Total | $ | 526,932 | $ | 296,325 |
Total outstanding amount of related party receivables was $0 and $0 as of February 29, 2012 and May 31, 2011, respectively.
Other payables in current liabilities consist of the following as of February 29, 2012 and May 31, 2011:
February 29, 2012 | May 31, 2011 | |||||||
Commission payable | $ | 1,654,812 | $ | 814,224 | ||||
Payable to CRCG (note 1) | 563,111 | 311,035 | ||||||
Beijng Xin Hai Wang Yue Commercial Ltd. | 454,020 | 1,250,191 | ||||||
Staff and other companies deposit | 1,607,973 | 1,119,464 | ||||||
Total other payables | $ | 4,279,916 | $ | 3,494,914 |
Commission expense has been included in cost of goods sold.
Accrued expenses amounted to $792,242 and $980,075 as of February 29, 2012 and May 31, 2011. The accrued expenses mainly include accrued land lease expenses, accrued electricity and utility expenses, professional fees, and accrued interest.
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 29, 2012 (Unaudited) AND MAY 31, 2011
AND FOR THE NINE MONTHS ENDED FEBRUARY, 2012 AND 2011
Interest
Total interest expense and financial charges for the nine months ended February 29, 2012 and 2011 on all debt amounted to $23,691 and $154,895, respectively. Total interest income for the nine months ended February 29, 2012 and 2011 amounted to $511 and $10,213, respectively.
Capital Leases
The Company has entered into operating lease agreements for six mixing buildings, twenty-nine mixing trucks, two automobiles, and equipments which are located at various production facilities. The leases were entered on or about May 2010 and will expire on various dates. Lease terms range from one year to three years, and annual interest rates range from 5.94% to 11.13%. The Company has been delinquent on some of the lease payments, which have yet to be resolved as ofFebruary 29, 2012. Delinquency in lease payments may result in termination of the contracts.
The minimum future lease payments for this property atFebruary 29, 2012are shown in the following table:
Lease Commitments | ||||||||||||||||||||||||
From | To | Buildings | Trucks | Automobiles | Equipment | Total | ||||||||||||||||||
2/29/2012 | 5/31/2012 | $ | 1,132,865 | $ | 1,233,316 | $ | 67,048 | $ | 138,698 | $ | 2,571,927 | |||||||||||||
6/1/2012 | 5/31/2013 | 566,311 | 59,150 | 39,589 | 46,979 | 712,029 | ||||||||||||||||||
6/1/2013 | 5/31/2014 | 299,701 | - | - | - | 299,701 | ||||||||||||||||||
$ | 1,998,877 | $ | 1,292,466 | $ | 106,637 | $ | 185,677 | $ | 3,583,657 |
The outstanding lease commitment as ofFebruary 29, 2012was $3,583,657, which consists of principal of $3,366,663 and interest of $216,994. Delinquent lease payments as ofFebruary 29, 2012 totaled $1,970,177.
Non-controlling interest consists of other stockholders’ ownership interest in majority-owned subsidiaries of the Company which is about 5.48% of the total ownership of Beijing Concrete before the change of the non-controlling interest and 5.32% of the total ownership after the change of the non-controlling interest (Note 1). Non-controlling interest also consists of 49% of the total ownership of the newly formed subsidiary, Laoting County Kejian Concrete Co. Ltd, which is owned by two other individuals. As of February 29, 2012 and May 31, 2011, the balance of non-controlling interest was $4,263,425 and $2,904,590, respectively.
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 29, 2012 (Unaudited) AND MAY 31, 2011
AND FOR THE NINE MONTHS ENDED FEBRUARY, 2012 AND 2011
Stock Issuance for Compensation
On June 1, 2010, the Company hired a consulting company. As compensation, the Company paid $45,000 and issued 115,000 shares of restricted common stock, and another 100,000 shares of restricted common stock will be issued upon certain terms. The shares are valued at market price of a total of $316,250 at $2.75 per share. The cash paid was first recorded as prepaid expenses. The shares issued are recorded as deferred consulting fee. Both the prepaid expenses and deferred consulting fee will amortize to expense over the agreement term of the six-month period. As of February 29, 2012, prepaid expenses for this service have a balance of $0 and deferred consulting fee has a balance of $0.
On November 18, 2010, the Company hired an investor relations company. As compensation, the Company agreed to issue 30,000 shares of restricted common stock. The shares are valued at a market price of $77,700 at $2.59 per share. As of February 29, 2012, the shares have not been issued and the payable is included in the liabilities sectionevent of the balance sheet. On July 30, 2011, the Company issueddefault and are accounted for as a debt, such that payments are allocated to its legal counselprincipal and interest expense as compensation 250,000 shares of common stock, which sharesthey are valued at $212,500. On October 19, 2011, the Company issued to various employees a total of 740,000 shares for employee reward, which shares are valued at $555,000 at $0.75 per share. On November 21, 2011, the Company issued to its consulting company as compensation 175,000 shares of common stock, which shares are valued at $70,000 at $0.40 per share.
Options
On December 17, 2009, we granted to the previous CFO options to purchase 300,000 shares of common stock, with an exercise price of $3.90 per share, which was the closest stock issuance price of the date of grant. The options will vest over 2 years and expire 3 years after the vesting date or after a termination date whichever is earlier. All the options were forfeited immediately when the CFO resigned the position on October 25, 2010.
On February 12, 2010, we granted to our CEO options to purchase 400,000 shares of common stock, with an exercise price of $3.90 per share. The options will vest over 2 years and no option can be exercised after 5 years from the vesting date.
The assumptions used in calculating the fair value of the above options granted using the Black-Scholes option- pricing modelmade. These transactions are as follows:
· | In May 2022, the Company entered into a financing agreement with an unrelated party for a loan of $50,000 at an annual interest rate | ||
On August 8, 2022, the Company entered into a financing agreement with an unrelated party for a loan of $45,000 at an annual interest rate of 26.4%, to be repaid at the rate of $3,057 per week for 20 weeks. On October 17, 2022, this loan was refinanced to include an additional $10,000, such that it bears interest at an annual interest rate of 26.4% and was to be repaid at the rate of $3,057 per week for four weeks. | |||
· | On December 20, 2022, the Company increased the loan to $76,000 and modified the financing agreement such that the loan bears interest at an annual interest rate of 26.4% and is to be repaid at the rate of $6,114 per week for 17 weeks. The outstanding balance at November 30, 2023, including interest, was $30,673. |
12 |
On February 12, 2010, we granted three independent directors each, options to purchase 10,000 sharesJune 29, 2022, the Company borrowed $12,500 from an unrelated party at an annual interest rate of common stock,14%. This loan is payable at the weekly rate of $589 for 24 weeks. On October 13, 2022, an additional loan of $6,304 was obtained with an exercise pricea weekly payment of $3.90 per share. The options will vest over 1 year and no option can be exercised after 3 years from$297 for 24 weeks. At November 30, 2023, the grant date.outstanding balance of this loan, including interest, was $15,072.
On March 22, 2010, we granted one independent director options to purchase 10,000 sharesAugust 3, 2022, the Company borrowed $15,000 from an unrelated party at an annual interest rate of common stock, with an exercise price42.5%, repayable at the rate of $3.90$1,188 per share. The options will vest over 1 year and no option can be exercised after 3 years frommonth for 18 months. At November 30, 2023, the grant date.outstanding balance of this loan, including interest, was $15,727.
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 29, 2012 (Unaudited) AND MAY 31, 2011
AND FOR THE NINE MONTHS ENDED FEBRUARY, 2012 AND 2011
The assumptions used in calculating the fair value of options granted using the Black-Scholes option- pricing model are as follows:
On October 25, 2010, we granted to our newly appointed CFO options to purchase 150,000 shares of common stock, with an exercise price of $3.90 per share. The options will vest over 1 yearNote 5 – Right-of-Use Assets and expire 3 years after the vesting date or after a termination date whichever is earlier.Lease Liabilities
The assumptionsCompany leases real property from unrelated parties under leases that are classified as operating leases. The right-of-use assets for operating leases are included in right-of-use assets on the balance sheets, with the corresponding lease liability in liabilities. Lease expense is recognized on a straight-line basis over the lease term. Renewals and terminations are included in the calculation of right-of-use assets and lease liabilities when they are considered reasonably certain to be exercised. When the implicit rate is unknown, the incremental borrowing rate, based on the commencement date, is used in calculatingdetermining the fairpresent value of the above option granted using the Black-Scholes option- pricing model are as follows:
Following is a summary of the stock option activity:
Options outstanding | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||
Outstanding, May 31, 2011 | 590,000 | $ | 3.90 | $ | 0.00 | |||||||
Granted | - | - | - | |||||||||
Forfeited | - | - | - | |||||||||
Exercised | - | - | - | |||||||||
Outstanding February 29, 2012 | 590,000 | $ | 3.90 | $ | 0.00 |
Following is a summary of the status of options outstanding at February 29, 2012:
Outstanding Options | Exercisable Options | ||||||||||
Exercise Price | Number | Average Contractual Life | Average Price | Number | |||||||
$ | 3.90 | 590,000 | 1.13 | $ | 3.90 | 240,000 |
Warrantslease payments.
On October 16, 2009,The following amounts related to leases were recorded in connection with the Share Purchase Agreement in October 2009,balance sheets:
Schedule of leases | ||||||||
November 30, 2023 (Unaudited) | May 31, 2023 (Audited) | |||||||
Right-of-use asset | $ | 82,102 | $ | 155,387 | ||||
Less: Accumulated amortization | – | (131,467 | ) | |||||
Right-of-use asset, net | $ | 82,102 | $ | 23,920 | ||||
Lease liabilities – current | $ | 54,915 | $ | 4,435 | ||||
Lease liabilities – noncurrent | 33,920 | – | ||||||
Operating lease liability | $ | 88,835 | $ | 4,435 |
The Company reimburses related parties for an office space operating lease under a month-to-month arrangement, payable at the Company issued 153,846 warrants to Hunter Wise Financial Group, LLC, the Placement Agent. The warrants carry an exercise pricediscretion of $3.90 and a 5-year term. The Warrants contain standard adjustment provisions upon stock dividend, stock split, stock combination, recapitalization, and a change of control transaction.management. See Note 10.
On March 22, 2010, in connection withThe Company’s total operating lease expense was $31,210 and $17,902 during the Share Purchase Agreement in March 2010, the Company issued 69,231 warrants to various parties as part of placement cost. The warrants carry an exercise price of $3.90quarters ended November 30, 2023, and a 5-year term. The Warrants contain standard adjustment provisions upon stock dividend, stock split, stock combination, recapitalization, and a change of control transaction.
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 29, 2012 (Unaudited) AND MAY 31, 2011
AND FOR THE NINE MONTHS ENDED FEBRUARY, 2012 AND 2011
November 30, 2022, respectively. See Note 10 for additional lease information.
On March 22, 2010, in connection with the Share Purchase Agreement in March 2010, the Company issued 1,281,083 warrants to October 2010 investors. The warrants carry an exercise price of $6.00 and a 3-year term. The Warrants contain standard adjustment provisions upon stock dividend, stock split, stock combination, recapitalization, and a change of control transaction.Note 6 -- Revenue
Placement Agent Warrants meetMost of the conditions for equity classification pursuantCompany’s revenue is generated by the performance of services to FASB ASC 815 “Derivativescustomers and Hedging”recognized at a point in time based on the evaluation of when the customer obtains control of the products. Revenue is recognized when all performance obligations under the terms of a contract are satisfied, net of certain taxes and EITF 00-19, “Accounting for Derivative Financial Instruments Indexedgain/loss resulting from changes in foreign currency. Revenue is recorded when customer acceptance is received and all performance obligations have been satisfied. Sales of goods typically do not include multiple products and/or service elements.
The table below summarizes the Company’s disaggregated revenue information:
Schedule of disaggregated revenue | ||||||||||||||||
Three Months Ended November 30, | Six Months Ended November 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Clinical trials | $ | 52,010 | $ | 70,750 | $ | 114,968 | $ | 188,496 | ||||||||
Consulting fees | 8,334 | – | 16,667 | – | ||||||||||||
Seminar fees | 1,975 | 3,511 | 1,925 | 15,864 | ||||||||||||
Royalties | – | 42 | – | 42 | ||||||||||||
Merchandise | 1,429 | 8,278 | 3,009 | 14,760 | ||||||||||||
Total revenue | $ | 63,748 | $ | 82,581 | $ | 136,569 | $ | 219,162 |
13 |
Cost of revenue consists of third-party costs associated with patient stipends, sleep study fees and audio/video fees. At November 30, 2023, and November 30, 2022, cost of revenues totaled $23,912 and $53,324, respectively.
Note 7 – Stockholders’ Deficit
The Company is authorized to and Potentially Settled in, a Company's Own Stock.” Therefore, these warrants were classified as equity and accounted for asissue 20,010,000,000 of capital stock, of which shares are common stock, issuance cost.without par value, and are preferred stock, issuable in series.
Warrants Outstanding | Warrants Exercisable | Weighted Average Exercise Price | Average Remaining Contractual Life in Years | |||||||||||||
Outstanding, May 31, 2011 | 1,504,160 | 1,504,160 | $ | 5.69 | 2.05 | |||||||||||
Granted | - | - | - | - | ||||||||||||
Forfeited | - | - | - | - | ||||||||||||
Exercised | - | - | - | - | ||||||||||||
Outstanding, February 29, 2012 | 1,504,160 | 1,504,160 | $ | 5.69 | 1.30 |
Preferred Stock
The Company has establisheddesignated shares of preferred stock as Series A Convertible Preferred Stock (the “Series A Stock”). Until July 20, 2022, each share had a par value of $ ; on that date, the Company amended its own employee welfare planarticles of incorporation to provide that each such share has no par value. Under this amendment, (i) Series A Stock is entitled to receive dividends on the shares of Common Stock into which such shares are convertible, (ii) has the voting power of the number of shares of Common Stock into which such shares are convertible, (iii) is redeemable at the option of the Company for a redemption price equal to the number of shares of Common Stock into which the redeemed shares are convertible and (iv) are senior to the Common Stock and junior to the Series B Convertible Preferred Stock described below. At November 30, 2023, and May 31, 2023, there were shares of Series A Stock issued and outstanding.
On July 20, 2022, the Company designated a series of preferred stock, named Series B Preferred Convertible Preferred Stock, comprising accordance with Chinese law and regulations.exchange for Common Stock to an existing common shareholder. The Company makes contributionshas deemed the value of the preferred and common shares to be the same, resulting in no change to additional paid capital.
Common Stock
During the six months ended November 30, 2023, the Company issued 56,000, net of a rescission of an employee welfare plan. The total expenseissuance of shares of Common Stock for $19,000.
At November 30, 2023, and May 31, 2023, there were respectively
and shares of Common Stock issued and outstanding.On July 20, 2022, the Company adopted its 2022 Equity Incentive Plan, which provides for the abovegrant of incentive and non-statutory stock options, stock appreciation rights, restricted stock, unrestricted stock, restricted stock units and performance awards to directors, officers, employees and consultants, as determined by the Board, as plan was $66,938 and $78,572 foradministrator. The Company will recognize as share-based compensation expense all share-based payments to employees over the nine months ended February 29, 2012 and 2011, respectively.requisite service period (generally the vesting period) in its consolidated statements of operations based on the fair values of the awards that are issued.
The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the nine months ended February 29, 2012 and 2011:
2012 | 2011 | |||||||
U.S. Statutory rates | 34.0 | % | 34.0 | % | ||||
Foreign income not taxable in USA | (34.0 | )% | (34.0 | )% | ||||
China income taxes | 25.0 | % | 25.0 | % | ||||
China income tax exemption | - | (15.0 | )% | |||||
Accruals in foreign jurisdictions | 6.7 | % | - | |||||
Total provision for income taxes | 31.7 | % | 10.0 | % |
USANote 9 – Income Taxes
The Company and its subsidiaries are subject toprovides for income taxes under ASC 740. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recorded based on an entitythe differences between the financial statement and tax basis on income arising in, or derived from,of assets and liabilities and the tax jurisdictionrates in which they operate. Aseffect when these differences are expected to reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Group has only net loss generatedCompany will not realize tax assets through future operations.
14 |
On December 22, 2017, the 2017 Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law, making significant changes to the Code. These changes included a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system and a one-time transition tax on the mandatory deemed repatriation of foreign earnings. The Company is required to recognize the effect of the tax law changes in the United States, there was noperiod of enactment, such as re-measuring its U.S. deferred tax expense orassets and liabilities as well as reassessing the net realizability of its deferred tax liabilityassets and liabilities. The Tax Act did not give rise to any material impact on the balance sheets and statements of operations due to the Internal Revenue ServiceCompany’s historical worldwide loss position and the full valuation allowance on its net U.S. deferred tax assets.
Due to changes in ownership provisions of the income tax laws of the United States as of February 29, 2012America, net operating loss carryforwards of approximately $4,891,136 and May 31, 2011. The Group believes that the realization of the benefits arising from this loss appears to be uncertain due to its limited operating history$3,229,732 at November 30, 2023, and continuing lossesNovember 30, 2022, respectively, for United Statesfederal income tax purposes. Accordingly,reporting purposes are subject to annual limitations. When a change in ownership occurs, the Company has provided 100% valuation allowance at the period end for its United States operation.
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 29, 2012 (Unaudited) AND MAY 31, 2011
AND FOR THE NINE MONTHS ENDED FEBRUARY, 2012 AND 2011
use of net operating loss carryforwards may be limited in future years. They generally expire 20 years from when incurred.
Hong KongIncome taxes for 2017 to 2023 remain subject to examination.
As the Group has no income generated in Hong Kong, there was no tax expense or tax liability due to the tax rule of Hong Kong as of February 29, 2012Note 10 – Commitments and May 31, 2011.Contingencies
People’s Republic of China (PRC)
Under the Income Tax Laws of the PRC, the Company’s subsidiaries are generally subject to an income tax at an effective rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments. The exemption of income tax to the Company lasted until December 31, 2010, and from January 1, 2011, the Company is subject to an income tax at an effective rate of 25%. The Company over accrued income tax and therefore total provision for income tax is over 25%. The current income tax expense and deferred tax expense for the nine months ended February 29, 2012 and 2011 are as follows:
February 29, 2012 | February 28, 2011 | |||||||
Current income tax | $ | 2,688,262 | $ | 854,359 | ||||
Deferred tax expense | (148,547 | ) | - | |||||
Income tax | $ | 2,539,715 | $ | 854,359 |
The Company adopted accounting policiesleases premises of approximately 4,500 square feet located at 6201 Bonhomme Road, Suites 460S and 466S, Houston, Texas. The lease provided for base rent of $3,382 per month, increasing to (i) $3,529 per month on July 1, 2020, (ii) $3,676.04 per month on July 1, 2021, and (iii) $3,823 per month on July 1, 2022, subject to CPI increase. On March 23, 2023, the Company amended the lease to extend its term to June 30, 2024, at a base rent of $4,779 per month. On September 5, 2023, the lease was amended to extend its term to June 30, 2025, at rentals of $0 per month for the two months ended November 30, 2023, $$4,779 per month for the 10 months ending June 30, 2024, and $4,926 per month for the 12 months ending June 30, 2025. For information regarding the recording of the right-of-use asset and the lease liability in accordance with U.S. GAAP with regard to provisions, reserves, inventory valuation method, and depreciation that are consistent with requirementsthe balance sheets in respect of this lease, see Note 5.
Two of the Company’s officers leased 1,400 square feet in Houston, Texas (the “Officers’ Leased Property”), under Chinese income tax laws. The Company had deferred tax assetsa lease, the term of $1,950,470 and $2,038,913 as ofwhich commenced on February 29, 20122020, and expired on March 14, 2022, at a rent of $3,449 per month. These officers made a portion of these premises available to the Company for office space on a month-to-month basis, for which the Company paid them $2,817 per month. On March 15, 2022, these officers entered into a new lease for the same premises, which expired on September 14, 2022, at a rent of $3,008 per month, and these officers continued to make a portion of these premises available to the Company for use as office space, for which the Company is paying them $2,817 per month on a month-to-month basis. On September 15, 2022, the officers that leased the Officers’ Leased Property entered into a new lease for these premises, which expired on March 14, 2023, at a rent of $3,038 per month, and these officers continued to make a portion of these premises available to the Company for use as office space, for which the Company paid them $2,817 per month. On March 2, 2023, these officers entered into a new lease for the same premises, which expires on September 14, 2023, at a rent of $3,168 per month; they are continuing to make a portion of these premises available to the Company for use as office space, for which the Company paid them $2,817 per month. On September 6, 2023, these officers entered into a new lease therefor, which commenced on September 15, 2023, and will expire on September 14, 2024, at a rent of $3,164 per month and they are making a portion of these premises available to the Company for use as office space, for which the Company is paying them $2,817 per month.
Note 11 – Related Party Transactions
See Note 10 for information respecting the lease of real property to the Company by two of its officers.
The balance of related party liabilities owed to certain shareholders totaled $224,717 and $105,173 at November 30, 2023, and May 31, 2011, respectively, from its Chinese operations, mainly due to bad debt allowance.
2012 | 2011 | |||||||
Deferred tax assets, China subsidiary | $ | 1,950,470 | $ | 2,038,913 | ||||
Bad debt allowance | - | - | ||||||
Valuation allowance | - | - | ||||||
Total | $ | 1,950,470 | $ | 2,038,913 |
The exemption of income tax to the Company lasted until December 31, 2010, and from January 1, 2011, the Company is subject to an income tax. As such, the estimated tax savings due to the tax exemption for the nine months ended February 29, 2012 and 2011 amounted to approximately $0 and $2,800,486, respectively. The net effect on earnings per share if the income tax had been applied would decrease the basic and diluted earnings per share for the nine months ended February 29, 2012 and 2011 by $0.00 and $0.34, respectively.
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 29, 2012 (Unaudited) AND MAY 31, 2011
AND FOR THE NINE MONTHS ENDED FEBRUARY, 2012 AND 2011
Other income was $112,225 for the nine months ended February 29, 2012. It consists of income from selling recycled paper, and vehicle accident compensation. Other expenses were $0 for the nine months ended February 29, 2012.
Other income was $156,326 for the nine months ended February 28, 2011. It mainly consists of gain on property, plant and equipment disposal. Other expenses were $8,935 for the nine months ended February 28, 2011.
The following is a reconciliation of the basic and diluted earnings per share for the nine months ended February 29, 2012 and 2011:
2012 | 2011 | |||||||
Net income (loss) for earnings per share | $ | 3,665,025 | $ | 7,186,021 | ||||
Weighted average shares used in basic computation | 13,553,234 | 12,930,199 | ||||||
Diluted effect of warrants and options | - | - | ||||||
Weighted average shares used in diluted computation | 13,553,234 | 12,930,199 | ||||||
Earnings (loss) per share, basic | $ | 0.27 | $ | 0.56 | ||||
Earnings (loss) per share, diluted | $ | 0.27 | $ | 0.56 |
Weighted average stock prices for the nine months ended February 29, 2012 and 2011 are lower than warrants and option exercise prices (disclosed in note 15) so there is no diluted effect.
Concentration of credit risk exists when changes in economic, industry or geographic factors similarly affect groups of counter parties whose aggregate credit exposure is material in relation to the Company’s total credit exposure.
No customer accounted for more than 10% of the Company’s total sales for the nine months ended February 29, 2012. Two major customers, China Railway Construction Group and Jiangxi Jinggangshan Road and Bridge Construction Company accounted for 23% and 12% of the Company’s total sales for the nine months ended February 28, 2011,2023, respectively.
No customer accounted for more than 10% ofDuring the Company’s accounts receivable balance at February 29, 2012. One major customer, China Construction Group accounted for 18% ofyear ended May 31, 2023, the Company’s accounts receivable balance at February 28, 2011.Company wrote off $12,000 owed by a former related party.
One major vendor, Hebei Province Linzhang Village Construction Engineering, Inc, accounted for 13% of the Company’s total inventory purchases for the nine months ended February 29, 2012. One major vendor, Hekai Stone and Sand Company accounted for 12% of the Company’s total inventory purchases for the nine months ended February 28, 2011.
No customer accounted for more than 10% of the Company’s accounts payable at February 29, 2012. One major vendor, Shuhong Liu accounted for 11% of the Company’s accounts payable at February 28, 2011.
15 |
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 29, 2012 (Unaudited) AND MAY 31, 2011
AND FOR THE NINE MONTHS ENDED FEBRUARY, 2012 AND 2011
Note 12 – Off-Balance-Sheet Arrangements
The Company has not, historically, carried any property or casualty insurance. No amounts have been accrued for any liability that could arise from the lack of insurance. Management feels the chances of such an obligation arising are remote.no off-balance sheet arrangements.
Deposits in banks in the PRC are not insured by any government entity or agency, and are consequently exposed to riskNote 13 – Concentration of loss. Management believes the probability of a bank failure, causing loss to the Company, is remote.Risk
As of February 29, 2012, the Company was committed to minimum rentals for the leased land under long-term non-cancellable operating leases as follows:
Twelve Months Ended February 29, | ||||
2013 | $ | 189,939 | ||
2014 | 177,376 | |||
2015 | 178,434 | |||
2016 | 177,376 | |||
2017 | 180,549 | |||
Thereafter | 2,463,093 | |||
Total: | $ | 3,366,767 |
We currently have a ten-year lease with an annual payment of approximately $48,000, from March 1, 2008 to February 28, 2018, for our Beijing production base. We have built our offices and manufacturing facilities on this site. On April 30, 2011, this lease was ended due to demolition and we moved to a new location and entered into a new lease, which is from April 2011 to January 23, 2034 with a total payment of RMB 16,400,000. We also lease land for our Xi’an production facility. The annual payment is approximately $63,448. We also leased two offices in Beijing as our headquarter office. One office lease is from December 15, 2009 to December 14, 2011, with an annual payment of approximately $114,175. We decided to lease a new office instead of renewing this lease after it ended. The new lease is a one-year lease, starting on November 28, 2011, with annual payment of approximately $16,750. The other one is from July 11, 2010 to July 10, 2012, with an annual payment of approximately $48,000. However, this lease was ended on January 10, 2011 as we decided one office is enough.
Operating lease expenses amounted to $212,027 and $184,911 for the nine months ended February 29, 2012 and 2011, respectively.
On December 31, 2009, the Company reached a three year agreement with the Institute of Building Materials (“IBM”), a subsidiary of the China Academy of Building Research ("CABR"). Under the Agreement, CHNC will work exclusively with the Institute of Building Materials to obtain technical research, development and support. The Institute of Building Materials will also provide training courses to CHNC employees. CHNC will feature the Institute of Building Materials as CHNC’s technological partner in its corporate material. The Institute of Building Materials will use its relationships and brand influence in the construction industry to assist CHNC in business development. The Company agrees to pay IBM approximately $51,000 each year. As of February 29, 2012, the Company was committed to pay $34,068 for 2011 and $51,000 for calendar year 2012.
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 29, 2012 (Unaudited) AND MAY 31, 2011
AND FOR THE NINE MONTHS ENDED FEBRUARY, 2012 AND 2011
The Company had revenue, net of taxes and foreign currency gain/loss of $112,656 and $165,839 for the six months ended November 30, 2023, and November 30, 2022, respectively.
The Company had one customer that provided 70% of gross revenue for the six months ended November 30, 2023, and two customers that provided 82% of gross revenue for the quarter ended November 30, 2022.
Note 14 – Subsequent Events
During the six months ended November 30, 2023, the COVID-19 pandemic continued to have a material adverse effect on the Company’s educational business because governmental measures that we imposed to control it resulted in the closing of classrooms and other educational venues, and also hindered the Company’s franchising and consulting activities. As the pandemic has abated, many of these restrictions have been removed and the Company is beginning to resume normal operations. If the pandemic does not continue to abate, because of infections resulting from emerging virus variants or for other reasons, restrictions could be reimposed or increased. The ultimate impact of the pandemic will depend on future developments, which are highly uncertain and cannot be predicted.
On January 16, 2024, the Company issued 50,000,000 shares of Common Stock to an unrelated party as consideration under a consulting agreement.
Management has evaluated all other subsequent events through the datewhen these consolidated financial statements were issued and has determined that none of the filing.them requires disclosure herein.
16 |
ITEMItem 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSManagement’s Discussion and Analysis of Financial Condition and Results of Operations.
SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS IN THIS REPORT, INCLUDING STATEMENTS IN THE FOLLOWING DISCUSSION, ARE WHAT ARE KNOWN AS "FORWARD-LOOKING STATEMENTS", WHICH ARE BASICALLY STATEMENTS ABOUT THE FUTURE. FOR THAT REASON, THESE STATEMENTS INVOLVE RISK AND UNCERTAINTY SINCE NO ONE CAN ACCURATELY PREDICT THE FUTURE. WORDS SUCH AS "PLANS", "INTENDS", "WILL", "HOPES", "SEEKS", "ANTICIPATES", "EXPECTS "AND THE LIKE OFTEN IDENTIFY SUCH FORWARD-LOOKING STATEMENTS, BUT ARE NOT THE ONLY INDICATION THAT A STATEMENT IS A FORWARD-LOOKING STATEMENT. SUCH FORWARD-LOOKING STATEMENTS INCLUDE STATEMENTS CONCERNING OUR PLANS AND OBJECTIVES WITH RESPECT TO THE PRESENT AND FUTURE OPERATIONS OF THE COMPANY, AND STATEMENTS WHICH EXPRESS OR IMPLY THAT SUCH PRESENT AND FUTURE OPERATIONS WILL OR MAY PRODUCE REVENUES, INCOME OR PROFITS. NUMEROUS FACTORS AND FUTURE EVENTS COULD CAUSE THE COMPANY TO CHANGE SUCH PLANS AND OBJECTIVES OR FAIL TO SUCCESSFULLY IMPLEMENT SUCH PLANS OR ACHIEVE SUCH OBJECTIVES, OR CAUSE SUCH PRESENT AND FUTURE OPERATIONS TO FAIL TO PRODUCE REVENUES, INCOME OR PROFITS. THEREFORE, THE READER IS ADVISED THAT THE FOLLOWING DISCUSSION SHOULD BE CONSIDEREDREAD IN LIGHT OFCONJUNCTION WITH THE DISCUSSION OF RISKSCOMPANY’S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS, THE NOTES THERETO AND THE OTHER FACTORS CONTAINEDFINANCIAL INFORMATION APPEARING IN THIS REPORT ON FORM 10-Q AND IN THE COMPANY'S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. NO STATEMENTS CONTAINED IN THE FOLLOWING DISCUSSION SHOULD BE CONSTRUED AS A GUARANTEE OR ASSURANCE OF FUTURE PERFORMANCE OR FUTURE RESULTS.REPORT.
UnlessIntroduction
The financial data discussed below are derived from the context otherwise requires, The "Company"unaudited consolidated financial statements of the Company as of November 30, 2023, which were prepared and presented in accordance with United States generally accepted accounting principles for interim financial statements. These financial data are only a summary and should be read in conjunction with the unaudited financial statements and related notes contained herein, which more fully present the Company’s financial condition and operations as at that date, and with its audited financial statements and notes thereto contained in its Registration Statement on Form S-1 (File No. 333-267038), "we," "us,"which was declared effective on December 5, 2023. Further, the Company urges caution regarding the forward-looking statements which are contained in this report because they involve risks, uncertainties and "our," referother factors affecting its operations, market growth, service, products and licenses that may cause the Company’s actual results and achievements, whether expressed or implied, to (i) China Infrastructure Construction Corporation; (ii) Beijing Chengzhi Qianmao Concrete Co., Ltd. (Beijing Concrete”), (iii) Beijing Fortune Capital Management, Ltd. (BFCM”), (iv) Shaanxi Hongruida Concrete Ltd. (Hongruida”), (v) Northern Construction Holdings, Ltd. (NCH”) and (vi) Laoting County Kejian Concrete Co. Ltd. (“Laoting”).differ materially from the expectations the Company describes in its forward-looking statements.
OverviewGeneral Statement of Business
China Infrastructure Construction Corporation (the “Company,” “China Infrastructure,” “CHNC,” “we” or “our”) was organized in Colorado on February 28, 2003.
The Company, headquartered in Houston, Texas, conducts clinical trials for Sponsors and CROs and as a Sponsor through Alpha Research Institute and cannabis-related education in classrooms, seminars and online through Pharmacology University
Going Concern
Going Concern
As indicated in Note 3 of the notes to the audited consolidated financial statements for the year ended May 31, 2023, and the report thereon of the Company’s independent auditing firm, there is substantial doubt as to the ability of the Company to continue as a going concern. The Company has incurred recurring losses and recurring negative cash flow from operating activities and has an accumulated deficit, and its subsidiariesability to continue as a going concern depends on the successful execution of its operating plan, which includes the resumption of services that were interrupted by the COVID-19 pandemic, increasing sales of existing services and introducing new services, as well as raising either debt or equity financing.
The Company needs substantial additional capital to fund its business, including the completion of its business plan and repayment of its debts. No assurance can be given that any additional capital can be obtained or, if obtained, will be adequate to meet its needs, and the Company may need to take measures to remain a going concern. If adequate capital cannot be obtained on a timely basis and satisfactory terms, the Company’s operations could be materially negatively impacted, or it could be forced to terminate its operations.
Impact of the Covid-19 Pandemic
The COVID-19 pandemic has adversely impacted the Company and its financial results in Hong Kongdifferent ways, depending on the particular business operation, as follows:
Pharmacology University Business. The Company encountered quarantines, restrictions on gatherings and other governmental regulations that precluded classroom education, as well as restrictions on travel that reduced consulting activities. The Company reduced the impact of the pandemic by developing online educational programs and transitioning its workforce to a remote working environment without reducing its workforce. Revenue from this operation was increased from $18,323 in the year ended May 31, 2019 (unaudited), to $44,799 and $38,440 in the years ended May 31, 2020, and May 31, 2021, respectively; revenue for the year ended May 31, 2022, was $18,341 and for May 31, 2023, was $42,655. Revenues of this business for the three months and six months ended November 30, 2023, were $1,925 and $1,925, respectively, compared with revenues for the three months and six months ended November 30, 2022, of $5,949 and $15,864, respectively.
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Clinical Trials. Quarantines, restrictions on gatherings and other governmental regulations, amplified by potential patients’ fears of contracting COVID-19 at the Company’s clinics, negatively affected clinical trials. In addition, these clinics were subject to closure if cases of the virus were detected. Revenue from this operation changed from $165,666 in the year ended May 31, 2019 (unaudited), to $84,979 and $706,008 in the years ended May 31, 2020, and May 31, 2021, respectively; revenue for the year ended May 31, 2022, was $196,637; revenue for the year ended May 31, 2023, was $266,280. Revenues of this business for the three months and six months ended November 30, 2023, were $52,010 and $102,993, respectively, compared with revenues for the three months and six months ended November 30, 2022, of $70,750 and $188,496, respectively.
The Company believes that it may have been negatively impacted by the association of the pandemic with the People’s Republic of China (“PRC”because “China” appeared in its former corporate name. Although the Company has no operations in or “China”), engages in productionany relationship with China, the Company believes that potential investors may have been deterred from considering the Company because of ready-mixed concrete for developersconcerns related to that country. For this reason, and because the construction industry in the PRC. The Company primarily operates throughCompany’s corporate name does not reflect its indirect majority-owned subsidiary, Beijing Chengzhi Qianmao Concrete Co., Ltd. (“Beijing Concrete”), a company organized under the laws of the PRC.activities, it changed its name to Cannabis Bioscience International Holdings, Inc. on December 6, 2022.
Beijing Concrete currently has four production facilities. One facility is located in Beijing’s Daxing District, one is in Shidu, a suburban area of Beijing, one is in Xi’an West New High-tech Zone, and another one is located at the Tangshan harbor, about two hundred kilometers from Beijing. The plant located in Xi’an was put into operation at the end of March 2010.
Our facilities generate revenues by selling concrete and providing manufacturing services. Since March 2010, our Caifeidian facility has been providing manufacturing services to our customers. In this business model, the customer provides to us raw materials to be used for production of concrete for the customer. Our customers, mostly large contractors working on big projects, have more bargaining power to negotiate lower prices for raw materials. The Company benefits from this as well because it does not need to advance cash to buy raw materials. Starting from 2011, the Caifeidian facility provides only manufacturing services to its customers. In October 2010, the Shidu facility also switched to providing only manufacturing services to its customers.
On June 27, 2011, the Company formed a new subsidiary, Laoting County Kejian Concrete Co. Ltd., in Tangshan, Hebei Province. The new subsidiary is a joint venture with 51% equity interest held by Beijing Concrete and 49% held by two other individuals. The total registered capital is 12 million RMB, or approximately USD $2.34 million.
Results of Operations
Comparison of the Three months ended February 29, 2012 Compared to Three months ended February 28, 2011Months Ended November 30, 2023, and November 30, 2022
Net Revenue
Net RevenueThe following table sets forth information from the statements of operations for the three months ended February 29, 2012 was $8,572,662 as compared to $20,783,682 for the same period last year, a decrease of $12,211,020, or approximately 58.75%. The decrease in net revenue is mainly caused by the slowdown of the real estateNovember 30, 2023, and infrastructure build out affected by the slowdown of the Chinese economy. Additionally, one major project for Tangshan Harbor Construction Engineering Co., Ltd in the Caifeidian facility was completed in June 2011; therefore, the sales volume of concrete products decreased. Manufacturing services also decreased due to the completion of this project.November 30, 2022.
Three Months Ended November 30, | ||||||||
2023 | 2022 | |||||||
Revenues | $ | 63,748 | $ | 82,581 | ||||
Cost of revenues | 15,092 | 7,090 | ||||||
Gross profit | 48,656 | 75,491 | ||||||
Total operating expenses | 143,168 | (259,099 | ) | |||||
Operating loss | (94,512 | ) | (183,608 | ) | ||||
Non-operating income (expense): | ||||||||
Interest | (29,916 | ) | (36,278 | ) | ||||
Other income | – | – | ||||||
Net loss | $ | (124,428 | ) | $ | (219,886 | ) |
Revenues
Cost of Goods Sold
Cost of goods soldRevenues were $63,748 and $82,581 for the three months ended February 29, 2012 was $6,752,806 as compared to $12,260,147 for the same period last year, a decrease of $5,507,341, or approximately 44.92%.November 30, 2023, and November 30, 2022, respectively. The decrease in cost of goods sold iswas primarily due to reduced revenue caused by the slowdown of the Chinese economy and also by the relocation and the equipment replacement as well as the completion of the project for Tangshan Harbor Construction Engineering Co., Ltda $18,740 decrease in the Caifeidian facility.revenues from clinical trials sales.
Gross Profit
Cost of Revenues
Gross profitCost of revenues for the three months ended February 29, 2012November 30, 2023, and November 30, 2022, were $15,092 and $7,090, respectively. The difference was $1,819,856,primarily due to a decrease$8,002 reduction in cost of $6,703,679 or approximately 78.65%, as compared to $8,523,535 for the same period last year. The decreaserevenues in gross profit is attributable to the decreased revenue and the increase of price of raw material as well as less portion of manufacturing service in the revenue.clinical trials.
Gross Profit Margin
Gross profit margin for the three months ended February 29, 2012 was 21.23% compared to 41.01% for the same period last year. The decrease of the gross profit margin is mainly the result of higher raw material price and less manufacturing service proportion in the revenue mix.
18 |
Total Operating Expenses
General and administrative Expenses
General and administrativeThe following table sets forth total operating expenses for the three months ended February 29, 2012 were $2,840,141, as compared to $10,083,492 for the same period last year, a decrease of $7,243,351, or approximately 71.83%. The decrease of the generalNovember 30, 2023, and administrative expenses was primarily due to decrease of bad debt expense.November 30, 2022:
Operating income (loss)
Three Months Ended November 30, | ||||||||
2023 | 2022 | |||||||
General and administrative | $ | 8,407 | $ | 20,969 | ||||
Contract labor | 46,326 | 189,158 | ||||||
Professional fees | 45,028 | 16,022 | ||||||
Officer compensation | 12,000 | 13,500 | ||||||
Rent | 31,210 | 17,902 | ||||||
Travel | 197 | 1,548 | ||||||
Total operating expenses | $ | 143,168 | $ | 259,099 |
OurTotal operating lossexpenses were $143,168 and $259,099 for the three months ended February 29, 2012November 30, 2023, and November 30, 2022, respectively. The decrease is attributable to a reduction of $142,832 in contract labor, offset by an increase of $29,006 in professional fees. A significant portion of professional fees was $1,020,285,incurred in connection with the Company’s Registration Statement on Form S-1, which was declared effective on December 5, 2023.
Operating Loss
Operating loss decreased from $183,608 for the three months ended November 30, 2022, to $94,512 for the three months ended November 30, 2023, primarily due to a decrease in contract labor of $539,672 or approximately 34.59% as compared to a loss of $1,559,957 for the same period last year. The decrease of operating loss was due to the decreased general and administrative expenses and offset by decreased net revenue.$142,832.
Other Income Taxes(Expense)
For the three months ended February 29, 2012, our business operations were solely conducted by our subsidiaries incorporated in the PRCNovember 30, 2023, and we are governed by the PRC Enterprise Income Tax Laws. PRC enterprise income tax is calculated based on taxable income determined under PRC GAAP. In accordance with the Income Tax Laws, a PRC domestic company is subject to enterprise income tax at the rate of 25%.November 30, 2022, interest was $29,916 and $36,278, respectively.
Our income taxes during the three months ended February 29, 2012 were $272,056, a decrease of $1,373, or approximately 0.50%, compared to $273,429 for the same period last year.
Net Income (loss) Attributable To China Infrastructure Construction CorporationLoss
Net loss was $1,241,695 for the three months ended February 29, 2012, a decrease of $426,984 or approximately 25.59%, as compared to net loss of $1,668,679November 30, 2023, was $124,428 versus $219,886 for the same period last year. The decrease was primarily due tothree months ended November 30, 2022, for the decreased bad debt expenses offset by the decrease of revenue.reasons described above.
Nine months ended February 29, 2012 Compared to Nine months ended February 28, 2011
Net Revenue
Net Revenue for the nine months ended February 29, 2012 was $41,384,196 as compared to $67,901,332 for the same period last year, a decrease of $26,517,136 or approximately 39.05%. The decrease in net revenue is mainly caused by the slowdownComparison of the Chinese economySix Months Ended November 30, 2023, and the relocation of Beijing Concrete starting from March 2011 till October 2011 resulting equipment replacement and reducing concrete production and sales. Additionally, one major project in the Caifeidian facility was completed in June 2011; therefore, the sales volume of concrete products decreased. Manufacturing services also decreased due to the completion of this project.
Cost of Goods Sold
Cost of goods sold for the nine months ended February 29, 2012 was $28,378,657 as compared to $46,017,232 for the same period last year, a decrease of $17,638,575, or approximately 38.33%. The decrease in cost of goods sold is mainly due to the reduced production in Beijing Concrete caused by relocation and equipment replacement as well as the completion of the customer’s project in the Caifeidian facility.
Gross Profit
Gross profit for the nine months ended February 29, 2012 was $13,005,539, a decrease of $8,878,561 or approximately 40.57%, as compared to $21,884,100 for the same period last year. The decrease in gross profit is attributable to the decreased revenue.
Gross Profit Margin
Gross profit margin for the nine months ended February 29, 2012 was 31.42% compared to 32.23%for the same period last year. The decrease of the gross profit margin is mainly the result of the decreased proportion of manufacturing service in the total revenue.
General and administrative Expenses
General and administrative expenses for the nine months ended February 29, 2012 were $6,528,955, as compared to $13,377,622 for the same period last year, a decrease of $6,848,667, or approximately 51.19%. The decrease of the general and administrative expenses was primarily due to the decrease of bad debt allowance offset by the decrease of revenue.
Operating Income
Our operating income for the nine months ended February 29, 2012 was $6,476,584, a decrease of $2,029,894, or approximately 23.86%, as compared to $8,506,478 for the same period last year. The decrease of operating income was due to the decreased net revenue offset by the decreased general and administrative expenses.
Income Taxes
For the nine months ended February 29, 2012, our business operations were solely conducted by our subsidiaries incorporated in the PRC and we are governed by the PRC Enterprise Income Tax Laws. PRC enterprise income tax is calculated based on taxable income determined under PRC GAAP. In accordance with the Income Tax Laws, a PRC domestic company is subject to enterprise income tax at the rate of 25%.
Our income taxes during the nine months ended February 29, 2012 were $2,539,715, an increase of $1,685,356, or approximately 197.26%, compared to $854,359 for the same period last year. This is because Beijing Concrete, our PRC subsidiary, was considered by the respective tax authorities a resource multipurpose utilization enterprise, which qualified it for an exemption from income tax until December 31, 2010.
Net Income Attributable To China Infrastructure Construction Corporation
Net income was $3,665,025 for the nine months ended February 29, 2012, a decrease of $3,520,996 or approximately 49.00%, as compared to $7,186,021 for the same period last year. The decrease was primarily due to the decreased operating income and the increased income tax resulting from cancellation of tax exemption enjoyed by Beijing Concrete in 2010.
Liquidity and Capital ResourcesNovember 30, 2022
As of February 29, 2012, we had cash and cash equivalents of $73,498. We have historically funded our working capital needs from operations, advance payments from customers, bank borrowings, and capital from shareholders. Our working capital requirements are influenced by the level of our operations, the numerical and dollar volume of our project contracts, the progress of our contract execution, and the timing of accounts receivable collections.
The following table sets forth a summaryinformation from the statements of our cash flowsoperations for the periods indicated:six months ended November 30, 2023, and November 30, 2022.
Nine Months Ended | ||||||||
February 29, 2012 | February 28, 2011 | |||||||
Unaudited | Unaudited | |||||||
Net cash provided by (used in) operating activities | $ | 2,257,144 | $ | 590,596 | ||||
Net cash provided by (used in) investing activities | (4,611,175 | ) | 609,897 | |||||
Net cash provided by (used in) financing activities | 2,287,644 | (1,975,541 | ) | |||||
Effect of exchange rate change on cash and cash equivalents | 3,183 | 23,185 | ||||||
Increase (Decrease) in cash and cash equivalents | (63,204 | ) | (751,863 | ) | ||||
Cash and cash equivalents, beginning balance | 136,702 | 1,102,879 | ||||||
Cash and cash equivalents, ending balance | 73,498 | 351,016 |
Six Months Ended November 30, | ||||||||
2023 | 2022 | |||||||
Revenues | $ | 136,569 | $ | 219,162 | ||||
Cost of revenues | 23,912 | 53,324 | ||||||
Gross profit | 112,656 | 165,838 | ||||||
Total operating expenses | 380,839 | (589,443 | ) | |||||
Operating loss | (268,182 | ) | (423,605 | ) | ||||
Non-operating income (expense): | ||||||||
Interest | (38,035 | ) | (49,978 | ) | ||||
Other income | – | 41,666 | ||||||
Net loss | $ | (306,217 | ) | $ | (431,917 | ) |
Operating Activities
Net cash provided by operating activities was $2,257,144
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Revenues
Revenues were $136,569 and $219,162 for the ninesix months ended February 29, 2012, an increase of $1,666,548, or 282.18%, as compared to $590,596 for the same period last year.November 30, 2023, and November 30, 2022, respectively. The increase of net cash provided by operating activities was due to the decrease of prepayments, increase in trade accounts payable and tax payable and by less amount of increase in accounts receivable. Regarding accounts receivable, we typically had long-term annual and multi-year contracts with our major customers. We entered into varying payment terms with our customers ranging from payment before delivery, payment on delivery or up to 1 year after the project completion. As of February 29, 2012, trade accounts receivable that are expected to be collected in more than one year amounted to $54,649,371, or 70.52% of total trade accounts receivable.
Investing Activities
Net cash used in investing activities was $4,611,175 for the nine months ended February 29, 2012, an increase of $5,221,072 as compared to $609,897net cash provided by investing activities for the same period last year. The increase of net cash used by investing activities was primarily due to the increased investmentsa $82,593 decrease in revenues from clinical trials sales and a decrease of property, plant,$4,024 in revenues from cannabis-related educational classes and equipment and fewer proceeds from related party receivable.seminars.
Financing ActivitiesCost of Revenues
Cost of revenues for the six months ended November 30, 2023, and November 30, 2022, were $23,912 and $53,324, respectively. The difference was primarily due to a $29,412 reduction in cost of revenues for clinical trials.
Total Operating Expenses
The following table sets forth total operating expenses for the six months ended November 30, 2023, and November 30, 2022:
Six Months Ended November 30, | ||||||||
2023 | 2022 | |||||||
General and administrative | $ | 53,376 | $ | 53,505 | ||||
Contract labor | 141,980 | 363,007 | ||||||
Professional fees | 107,422 | 108,144 | ||||||
Officer compensation | 24,000 | 25,500 | ||||||
Rent | 52,163 | 36,148 | ||||||
Travel | 1,898 | 3,139 | ||||||
Total operating expenses | $ | 380,839 | $ | 589,443 |
Total operating expenses were $380,839 and $589,443 for the six months ended November 30, 2023, and November 30, 2022, respectively. The decrease was primarily attributable to reductions of $221,027 and $722 in contract labor and professional fees, respectively.
Operating Loss
Operating loss decreased from $423,605 for the six months ended November 30, 2022, to $268,182 for the six months ended November 30, 2023, primarily due to a decrease of $221,027 in contract labor. A significant portion of professional fees was incurred in connection with the Company’s Registration Statement on Form S-1, which was declared effective on December 5, 2023.
Other Income (Expense)
For the six months ended November 30, 2023, and November 30, 2023, interest was $38,036 and $49,978, respectively. During the six months ended November 30, 2023, the Company recorded income of $41,666 from forgiveness of a loan. As a result, other income (expense) for the six months ended November 30, 2023, and November 30, 2022, showed losses of $38,036 and $8,312, respectively.
Net Loss
The net loss for the six months ended November 30, 2023, was $306,217, versus $431,917 for the six months ended November 30, 2022, for the reasons described above.
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Changes in Financial Condition and Results of Operations
At November 30, 2023, the Company had $337 in cash and cash equivalents and accounts receivable of $19,403, negative working capital of $640,567 and no commitments for capital expenditures. At May 31, 2023, the Company had $8,913 in cash and cash equivalents and accounts receivable of $10,549, negative working capital of $366,085 and no commitments for capital expenditures. The Company had cash and cash equivalents of $791 on the date of this Report.
During the six months ended November 30, 2023, and November 30, 2022, the Company had net cash used in operations of $295,867 and $509,337, respectively, and net cash provided by financing activities was $2,287,644 forof $287,291 and $501,444, respectively. During the nine monthsyears ended February 29, 2012, an increase of $4,263,185 compared toMay 31, 2023, and May 31, 2022, the Company had net cash used in operations of $898,367 and $870,704, respectively, and net cash provided by financing activities of $1,975,541 for the same period last year.$875,298 and $861,364, respectively. The increase was primarily due to deceased payment to bank loan payableCompany had accumulated deficits of $4,988,956 at November 30, 2023, and capital lease obligations combined with increased cash from Laoting’s non-controlling interest, which amounted to $908,599 offset by increase of payment to related party payable and due to increase of proceeds from bank loan payable and capital lease obligation.$4,682,736 at May 31, 2023.
Critical Accounting Policies and EstimatesImpact of the COVID-19 Pandemic
Management's discussionAs indicated elsewhere in this report, the Company was materially and analysisadversely impacted by the COVID-19 pandemic. With the lifting of the restrictions imposed in response to the pandemic, the Company is resuming normal operations in its financial conditionPharmacology University and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Our financial statements reflect the selection and application of accounting policies which require management to make significant estimates and judgments. See note 3 to our consolidated financial statements, "Summary of Significant Accounting Policies." Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe that the following reflect the more critical accounting policies that currently affect our financial condition and results of operations.Alpha Research Businesses.
Revenue recognitionOff-Balance-Sheet Arrangements
The Company receives revenue from sales of concrete products and from provision of manufacturing service. The Company's revenue recognition policies are in compliance with ASC 605. Sales revenue is recognized at the date of shipmenthas no off-balance-sheet arrangements.
Recent Accounting Pronouncements
Refer to customers or services have been rendered when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligationsNote 2 of the Company exist and collectability is reasonably assured. Our sales are non-returnable. Therefore, we do not estimate deductions or allowance for sales returns. Sales are presented net of any discounts, reward, or incentive given to customers. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.accompanying financial statements.
Our products delivered to customers would be checked on site by customersItem 3. Quantitative and once the products are accepted by customers, they will sign the acceptance notice. There is no warranty issue after the delivery. Reward or incentive given to our customers is an adjustment of the selling prices of our products and therefore the consideration is characterized as a reduction of revenue when recognized in our income statement.Qualitative Disclosures About Market Risk.
The Company recognizes its revenues net of value-added taxes (“VAT”). The Company enjoyedis a free VAT policy according to the national policy, which encourages the developmentsmaller reporting company as defined by Rule 12b-2 of the cement industry if the manufacturer satisfies the environmental protection requirements. The Company has enjoyed the free VAT policy from January 1, 2006Securities Exchange Act of 1934 and accordingly is not required to December 31, 2010. Starting from January 1, 2011, the Company is subject to VAT which is levied at the rate of 6% on the invoiced value of sales.provide information under this item.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimatesItem 4. Controls and assumptions that affect the amounts reported in the combined financial statements and accompanying notes. Management believes that the estimates utilized in preparing its financial statements are reasonable and prudent. Actual results could differ from these estimates.
Inventories
Inventories are stated at the lower of cost, determined on a weighted average basis, and net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
ITEM 4T. CONTROLS AND PROCEDURES.Procedures.
Evaluation of Disclosure Controls and Procedures
The SecuritiesCompany’s management has evaluated the effectiveness of the design and Exchange Commission definesoperation of the termCompany’s disclosure controls and procedures” to meanprocedures (as defined in Rule 13a-15(e) under the Exchange Act) as of November 30, 2023. Based on this evaluation, the principal executive officer and the principal accounting officer concluded that these disclosure controls and other procedures were not effective as of an issuersuch date, at a reasonable level of assurance, in ensuring that are designed to ensure thatthe information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 isis: (i) accumulated and communicated to management (including its principal executive officer and principal accounting officer) in a timely manner and (ii) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’sSEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed
Changes in Internal Control Over Financial Reporting
There were no changes in internal control over financial reporting during the three months ended November 30, 2023, that have materially affected, or are reasonably likely to ensure that information required to be disclosedmaterially affect, the Company’s internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
The Company is a smaller reporting company as defined by an issuer in the reports that it files or submitsRule 12b-2 promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) and accordingly is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it isnot required to disclose in the reports it filesprovide information under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.item.
Changes in Internal Control over Financial Reporting
Except for the above, there was no other change in the Company's internal control over financial reporting during the period ended February 29, 2012, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II-OTHER INFORMATION
ITEMItem 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSUnregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
During the six months ended November 30, 2023, the Company sold 272,071,428 shares of Common Stock to 10 unrelated persons for an aggregate purchase price of $70,000, without registration under the Securities Act. Another sale of 19,000,000 shares of Common Stock for $19,000 was rescinded. On January 16, 2024, the Company issued 50,000,000 shares of Common Stock to an unrelated party as consideration under a consulting agreement. All of these issuances were made in reliance upon the exemptions from registration afforded by Section 4(a)(2) thereof and Rule 506(b) or (c) promulgated thereunder.
Use of Proceeds
On December 5, 2023, the Company’s Registration Statement on Form S-1 was declared effective. The Company registered 6,250,000,000 shares of Common Stock for sale for its account, in addition to 3,837,154,885 shares of Common Stock that may be sold by certain selling stockholders. As of the date of the date of this report, the Company has sold no shares and accordingly has received no proceeds of the offering.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
On December 28, 2023, Henry Levinski, a member of the board of directors and vice president of the Company, passed away. Dante Picazo, the Company’s chief executive officer, is performing Mr. Levinski’s duties as an officer. The vacancy in the board of directors created by his death has not been filled.
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ITEMItem 6. EXHIBITS.
(a) The following exhibits are filed herewith:Exhibits.
Exhibit Number | ||||
Title | ||||
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer and Principal Accounting Officer | ||||
32 | Section 1350 Certification of Principal Executive Officer and Principal Accounting Officer | |||
101.INS* | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | |||
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |||
101.CAL* | ||||
Inline XBRL Taxonomy Extension Calculation Linkbase | Document | |||
101.DEF* | ||||
Inline XBRL Taxonomy Extension Definition Linkbase | Document | |||
101.LAB* | ||||
Inline XBRL Taxonomy Extension Label Linkbase | Document | |||
101.PRE* | ||||
Inline XBRL Taxonomy Extension Presentation Linkbase | ||||
104* | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
____________
* To be filed by amendment
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
Date: January 24, 2024 | /s/ Dante Picazo | ||
Dante Picazo Principal Executive Officer | |||
Date: April 20, 2012
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