YBCC (YBAO) 10-Q 2019 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2019 or

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

For the transition period from _____________ to _____________

Commission file number000-21384

YBCC, INC.

(Exact Name of Registrant as Specified in its Charter)

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

17800 Castleton Street, Suite 386, City of Industry, California

(Address of Principal Executive Offices)

91748

(Zip Code)

(626) 213-3945

(Registrant’s Telephone Number, Including Area Code)

___________________________________________

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

Securities registered pursuant to Section 12(b) of the Act: None.

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

x Yes         o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 registrant was required to submit such files).

o Yes         x No

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

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

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.o

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act).o Yes  x No

The number of shares outstanding of the Issuer’s common stock as of June 7, 2019 was 9,894,214.

YBCC, Inc.

and Subsidiaries

FORM 10-Q for the Quarter Ended March 31, 2019

INDEX

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements		3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		23
Item 4.	Controls and Procedures		23
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings		24
Item 1A.	Risk Factors		24
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds		24
Item 3.	Defaults Upon Senior Securities		24
Item 4.	Mine Safety Disclosures		24
Item 5.	Other Information		24
Item 6.	Exhibits		25
Signatures			26

2

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

YBCC, INC., AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	March 31, 2019			December 31, 2018
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	37,447		$	50,397
Accounts receivable		214,442			–
Accounts receivable - related party		38,741			67,339
Inventory - net		320,586			305,161
Other receivable		34,892			36,015
Advance to suppliers		5,358			96,703
Prepaid expenses		28,436			26,047
Total current assets		679,902			581,662
Property, plant, and equipment - net		2,485,360			2,451,217
Intangible assets - net		684,823			672,178
Other assets		1,362			1,330
Total assets	$	3,851,447		$	3,706,387
Liabilities and Equity
Current liabilities
Accounts payable	$	147,735		$	63,568
Accrued expenses		213,086			200,197
Customer deposits		23,590			143,556
Customer deposits - related party		1,111			1,085
Taxes payable		130,923			124,775
Other payable		141,840			141,461
Other payable - related parties		2,873,230			2,705,938
Loan payable		166,400			162,423
Total current liabilities		3,697,915			3,543,003
Total liabilities		3,697,915			3,543,003
Equity
Convertible preferred stock, $0.0001 par value, 50,000,000 shares authorized, 974,730 series A issued and outstanding as of March 31, 2019 and December 31, 2018, respectively		98			98
Common stock, $0.001 par value, 900,000,000 shares authorized, 9,894,214 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively		9,894			9,894
Additional paid-in capital		1,162,328			1,162,328
Accumulated other comprehensive loss		(47,550	)		(57,332	)
Accumulated deficit		(1,373,337	)		(1,331,207	)
Total YBCC, Inc. stockholders' equity		(248,567	)		(216,219	)
Non-controlling interest		402,099			379,603
Total equity		153,532			163,384
Total liabilities and equity	$	3,851,447		$	3,706,387

See accompanying notes to these unaudited consolidated financial statements

3

YBCC, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

	For The Three Months Ended March 31,
	2019			2018
Sales revenue	$	599,699		$	261,180
Cost of goods sold		492,231			219,253
Gross profit		107,468			41,927
Operating expenses
Selling expenses		2,396			3,080
General & administrative expenses		130,860			144,010
Total operating expenses		133,256			147,090
Loss from operations		(25,788	)		(105,163	)
Other income (expenses):
Interest income		48			–
Other - net		(1,587	)		(5,031	)
Total other expenses		(1,539	)		(5,031	)
Loss before income taxes		(27,327	)		(110,194	)
Provision for income tax		(1,705	)		–
Net loss		(29,032	)		(110,194	)
Less: Net income (loss) attributable to non-controlling interest		13,098			(20,339	)
Net loss attributable to YBCC, Inc. stockholders	$	(42,130	)	$	(89,855	)
Net loss	$	(29,032	)	$	(110,194	)
Other comprehensive income
Foreign currency translation gain		19,180			21,759
Comprehensive loss		(9,852	)		(88,436	)
Less: comprehensive income (loss) attributable to non-controlling interest		22,496			(9,677	)
Comprehensive loss attributable to YBCC, Inc. stockholders	$	(32,348	)	$	(78,758	)
Loss per weighted average share of common stock - basic & diluted	$	(0.00	)	$	(0.01	)
Weighted average share outstanding - basic & diluted		9,894,214			9,894,214

See accompanying notes to these unaudited consolidated financial statements

4

YBCC, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

(UNAUDITED)

	Preferred Stock Series A				Common stock				Additional Paid-In		Accumulated Other Comprehensive Income			Accumulated				Non- Controlling			Total
	Shares		Amount		Shares		Amount		Capital		(Loss)			Deficit				Interest			Equity
Balance as of December 31, 2017		974,730	$	98		9,894,214	$	9,894	$	1,162,328	$	(36,581	)	$	(1,179,676	)	$	292,072		$	248,135
Foreign currency translation gain												11,097						10,662			21,759
Net loss															(89,856	)		(20,339	)		(110,195	)
Balance as of March 31, 2018		974,730	$	98		9,894,214	$	9,894	$	1,162,328	$	(25,484	)	$	(1,269,532	)	$	282,395		$	159,699
Balance as of December 31, 2018		974,730	$	98		9,894,214	$	9,894	$	1,162,328	$	(57,332	)	$	(1,331,207	)	$	379,603		$	163,384
Foreign currency translation gain												9,782						9,398			19,180
Net (loss) income															(42,130	)		13,098			(29,032	)
Balance as of March 31, 2019		974,730	$	98		9,894,214	$	9,894	$	1,162,328	$	(47,550	)	$	(1,373,337	)	$	402,099		$	153,532

See accompanying notes to these unaudited consolidated financial statements

5

YBCC, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For The Three Months Ended March 31,
	2019			2018
Operating activities
Net loss	$	(29,032	)	$	(110,194	)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation		58,053			57,503
Amortization		3,791			4,025
Changes in operating assets and liabilities:
Accounts receivable		(213,377	)		(63,605	)
Accounts receivable-related party		30,096			(13,221	)
Other receivable		3,826			(13,388	)
Advance to suppliers		93,247			(103,100	)
Prepaid expenses		(2,313	)		1,122
Inventory		(7,914	)		(132,744	)
Accounts payable		82,201			(96,100	)
Accrued expense		12,411			41,469
Customer deposit		(122,868	)		92,230
Tax payable		3,079			5,065
Other payable		(3,069	)		(35,256	)
Net cash used in operating activities		(91,869	)		(366,194	)
Cash flow from investing activities:
Purchase of property and equipment		(32,399	)		(5,123	)
Net cash used in investing activities		(32,399	)		(5,123	)
Cash flow from financing activities:
Advance from related party		188,981			10,000
Repayment to related party		(78,580	)		–
Loan from unrelated party		–			65,318
Net cash provided by financing activities		110,401			75,318
Effects of currency translation on cash and cash equivalents		917			7,764
Net decrease in cash and cash equivalents		(12,950	)		(288,235	)
Cash and cash equivalents at beginning of the period		50,397			369,607
Cash and cash equivalents at end of the period	$	37,447		$	81,372
Supplementary Disclosures of Cash Flow
Cash paid during the periods for
Income taxes	$	–		$	–
Interest	$	–		$	–

See accompanying notes to these unaudited consolidated financial statements

6

ybcc, Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

NOTE 1 -ORGANIZATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Operations – YBCC, Inc., (The “Company” or “YBAO”), formerly known as International Packaging and Logistic Group, Inc., a Nevada corporation, was originally incorporated on June 2, 1986, in the state of Delaware. On April 17, 2008, the Company redomiciled form the State of Delaware to the State of Nevada.

On July 2, 2007, the Company through its wholly-owned subsidiary, YesRx.com (“YesRx”) acquired all the outstanding shares of H&H Glass, Inc. (“H&H Glass”), in exchange for 3,915,000 shares of its common stock in a reverse triangular merger.

On May 15, 2016, the Company and Xiuhua Song (the “Purchaser”) entered into a Stock Purchase Agreement (the “Purchase Agreement”), pursuant to which IPLO (the “Seller”) would sell to the Purchaser, and the Purchaser will purchase from the Seller, an aggregate of 3,915,000 newly issued shares of IPLO Common Stock (the “Shares”), which Shares represented 87% of the issued and outstanding shares of common stock. On July 1, 2016, this transaction was completed.

On July 1, 2016, Standard Resources Ltd. (“Standard”), previously IPLO’s majority stockholder, and IPLO entered into a share purchase agreement (“H&H Vend Out”) whereby Standard would cancel 3,915,000 shares of IPLO common stock held by it in exchange for all of the outstanding shares of H&H Glass. The H&H Glass Vend Out was completed on August 31, 2016.

On July 1, 2016, the Company executed a Share Exchange Agreement (“Exchange Agreement”) by and among Yibaoccyb Limited, a British Virgin Islands limited liability company (“Yibaoccyb”), and the stockholders of 51% of Yibaoccyb’s common stock (the “Yibaoccyb Shareholders”), on the one hand, and the Company, on the other hand. Yibaoccyb owns 100% of YibaoConfucian Co., Ltd. (“YibaoHK”), a Hong Kong company. YibaoHK will own 100% of Shenzhen Confucian Biologics Co. Ltd. (yet to be formed, “Yibao”), which will be a wholly foreign-owned enterprise (“WFOE”) under the laws of the Peoples’ Republic of China (“PRC” or “China”). On August 31, 2016, YibaoHK entered into a series of contractual arrangements with Shandong Confucian Biologics Co., Ltd. (“Confucian”) which is a limited liability company headquartered in, and organized under the laws of, the PRC. The contractual arrangements are discussed below.

The Exchange Agreement was completed on August 31, 2016 concurrent with the H&H Vend Out. The Company issued 2,040,000 shares of the Company’s common stock (the “IPLO Shares”) to the Yibaoccyb Shareholders in exchange for 51% of the common stock of Yibaoccyb.

On December 22, 2016, the Company amended its Certificate of Incorporation (the “Amendment”). As a result of the Amendment, the Company’s corporate name was changed from International Packaging and Logistics Group, Inc. to YBCC, Inc.

Yibaoccyb is a limited liability company incorporated under the laws of the British Virgin Islands on May 30, 2016. Other than all the issued and outstanding shares of YibaoHK, Yibaoccyb has no other assets or operations.

YibaoHK is a limited liability company incorporated under the laws of the Hong Kong on June 15, 2016, which was formed by Yibaoccyb.

Confucian was founded on October 31, 2012. Confucian is in the Food Industrial Park inside the economic development Zone of JinXiang County, Jining City in the province of Shandong in China.

7

Confucian possesses manufacturing permits for food product, hygienic products, sanitary products, and health products. The Company's main business includes research and development of chondroitin and garlic oil; trading, cold storage, and pretreating of garlic, fruit, and vegetables products; trading of chemical products (excluding hazardous chemicals); import and export of goods and technology (excluding those restricted by China government); and, the manufacturing and sale of health products including powder, granules, tablets, hard capsule, soft capsule products.

Details of the Company’s structure as of March 31, 2019 is as follow:

 

Reverse Merger Accounting – Since YBCC and Yibaoccyb were entities under Mrs. Song’s common control prior to the share exchange, the transaction was accounted for as a restructuring transaction in accordance with generally accepted accounting principles in the United States of America ("GAAP"). YBCC has recast prior period unaudited consolidated financial statements to reflect the conveyance of Yibaoccyb’s common shares as if the restructuring transaction had occurred as of the earliest date of the unaudited consolidated financial statements.

Basis of Accounting and Presentation - The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by GAAP for complete audited financial statements. The accompanying unaudited financial information should be read in conjunction with the audited consolidated financial statements, including the notes thereto, as of and for the year ended December 31, 2018, included in our 2018 Annual Report on Form 10-K filed with the SEC. The information furnished in this report reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of our financial position, results of operations and cash flows for each period presented. The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the results for the year ending December 31, 2019 or for any future period.

Principles of Consolidation - The accompanying unaudited consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America. Confucian’s functional currency is Chinese Renminbi (RMB), however, the accompanying unaudited consolidated financial statements have been re-measured and presented in United States Dollars ($).

8

The unaudited consolidated financial statements include the accounts of YBCC and its subsidiaries. The Company’s subsidiaries include 51% of Yibaoccyb, YibaoHK and Confucian, of which 49% of Yibaoccyb’s consolidated operating results was shown in non-controlling interest on the consolidated balance sheets.

Intercompany accounts and transactions have been eliminated upon consolidation.

Use of Estimates - The preparation of unaudited consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimate and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The most significant estimates reflected in the consolidated financial statements include allowance for doubtful accounts, allowance for inventory, depreciation, useful lives of property and equipment, deferred income taxes, useful life of intangible assets, and contingencies. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the unaudited consolidated financial statements in the period they are determined to be necessary.

Cash and Cash Equivalents – For purpose of the unaudited consolidated statements of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of 90 days or less to be cash equivalents.

Accounts Receivable - The Company extends credit to its customers. Accounts receivable was recorded at the contract amount after deduction of trade discounts and, allowances, if any, and do not bear interest. The allowance for doubtful accounts, when necessary, is the Company’s best estimate of the amount of probable credit losses from accounts receivable. The Company determines the allowance based on historical write-off experience, customer specific facts and economic conditions.

As of March 31, 2019 and December 31, 2018, accounts receivable were $214,442 and $0, respectively. The Company believes that its accounts receivables are fully collectable and determined that an allowance for doubtful accounts was not necessary.

Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers.

Inventories - Inventory is valued at the lower of cost ornet realizable value. Cost is determined using first-in, first-out method.

Inventory, comprised principally of finished goods, raw material and packaging material, are valued at the lower of cost or market.

	March 31, 2019		December 31, 2018
Finished goods	$	63,886	$	135,996
Work in progress		52,781		45,012
Raw materials		143,094		87,193
Packaging material		60,825		36,960
Total	$	320,586	$	305,161

The Company periodically estimates an inventory allowance for estimated unmarketable inventories. Inventory amounts are reported net of such allowances, if any. There were no allowances for inventory as of March 31, 2019 and December 31, 2018.

Property, Plant and Equipment – Property, plant, and equipment are stated at cost less accumulated depreciation. The costs of a constructed asset are accumulated in the account Construction-in-Progress until the asset is placed into service. When the asset is completed and placed into service, the account Construction-in-Progress will be credited for the accumulated costs of the asset and will be debited to the appropriate Property, Plant and Equipment account. Depreciation begins after the asset has been placed into service.

9

Expenditures for maintenance and repairs are charged to operations; major expenditures for renewals and betterments are capitalized. Assets that are still kept in service after reaching the end of their estimated useful lives are depreciated over the estimated useful life of their residual value. Gain or loss on disposal of property, plant, and equipment is recognized as non-operating income or expenses.

Depreciation is computed by applying the following methods and estimated lives: 

Category	Estimated Life	Method
Manufacturing equipment	10	Straight Line
Office equipment	5	Straight Line
Buildings	20	Straight Line

Intangible Assets - Land use rights represent the exclusive right to occupy and use a piece of land in the PRC during the contractual term of the land use right. Land use rights are carried at cost and charged to expense on a straight-line basis over the respective periods of the rights of 50 years or the remaining period of the rights upon acquisition.

Non-Controlling Interest – The Company accounted for its non-controlling interest of 49% in Yibaoccyb as a separate component of equity. In addition, net loss, and components of other comprehensive income are attributed to both the Company and non-controlling interest.

Revenue Recognition - We account for a contract with a customer when the written contract is committed, the rights of the parties, including payment terms, are identified, the contract has commercial substance and consideration is probable of collection. Substantially all of our revenue is derived by fulfilling customer orders for the purchase of our products under contracts which contain a single performance obligation, to supply continually defined quantities of product at fixed prices. We account for shipping and handling activities that occur before the customer has obtained control of a good as a fulfillment cost rather than as an additional promised service. We recognize revenue at the point in time that control of the ordered product(s) is transferred to the customer, which is upon delivery to the customer, or its designee at a customer location or other customer-designated delivery point.

Amounts billed and due from our customers are classified as accounts receivables on our consolidated balance sheets and require payment on a short-term basis. Invoices are generally issued at the point control transfers and substantially all of our invoices are due within 30 days or less. Periodically, we require payment prior to the point in time we recognize revenue. Amounts received from customers prior to revenue recognition on a contract are contract liabilities, are classified as customer deposit on our consolidated balance sheets and are typically applied to an invoice within 30 days of receipt. As of March 31, 2019 and December 31, 2018, the Company had customer deposits (including related party deposit) of $24,701 and $144,641, respectively.

Cost of goods sold- Cost of goods sold includes cost of inventory sold during the period, net of discounts and inventory allowances, freight and shipping costs, warranty and rework costs, and sales tax.

Impairment of Long-Live Assets – The Company applies FASB ASC 360, “Property, Plant and Equipment,” which addresses the financial accounting and reporting for the recognition and measurement of impairment losses for long-lived assets. In accordance with ASC 360, long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company will recognize the impairment of long-lived assets in the event the net book value of such assets exceeds the future undiscounted cash flows attributable to those assets. There is no impairment loss of our long-lived assets recognized for the three months ended March 31, 2019 and 2018, respectively.

Income Taxes – The Company adopts FASB ASC Topic 740, "Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

10

In accordance with ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB ASC Topic 740”, which requires income tax positions to meet a more-likely-than-not recognition threshold to be recognized in the financial statements. Tax positions that previously failed to meet the more-likely-than-not threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. As of March 31, 2019, and December 31, 2018, management considered that the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.

The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations themselves are subject to change because of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings. Therefore, the actual liability may be materially different from our estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities or deferred tax asset valuation allowance.

The Company has made a comprehensive review of its portfolio of tax positions in accordance with recognition standards established by ASC 740-10 and has not recognized any material uncertain tax positions.

In addition, companies in the PRC are required to pay an Enterprise Income Tax at 25%.

Foreign Currency Translation - The Company's functional currency is the Chinese Renminbi (RMB). The reporting currency is that of the US Dollar. Assets, liabilities and owners’ contribution are translated at the exchange rates as of the balance sheet date. Income and expenditures are translated at the average exchange rate of the year. The RMB is not freely convertible into foreign currency and all foreign currency exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US dollar at the rates used in translation.

The exchange rates used to translate amounts in RMB into USD for the purposes of preparing the consolidated financial statements were as follows:

Balance sheet
Balance sheet as of March 31, 2019	RMB 6.71 to US $1.00
Balance sheet as of December 31, 2018	RMB 6.88 to US $1.00
Statement of operation and other comprehensive income
Statement of operation and other comprehensive income for three months ended March 31, 2019	RMB 6.74 to US $1.00
Statement of operation and other comprehensive income for three months ended March 31, 2018	RMB 6.35 to US $1.00

Fair Value of Financial Instruments – FASB ASC 820, “Fair Value Measurement” specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs). In accordance with ASC 820, the following summarizes the fair value hierarchy:

Level 1 Inputs— Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.

Level 2 Inputs— Inputs other than the quoted prices in active markets that are observable either directly or indirectly.

Level 3 Inputs— Inputs based on valuation techniques that are both unobservable and significant to the overall fair value measurements

11

ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure, fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company did not identify any assets or liabilities that are required to be presented at fair value on a recurring basis. Carrying values of non-derivative financial instruments, including cash, accounts and other receivable, prepaid expenses, accounts payable, taxes payable, and other payables, approximated their fair values due to the short maturity of these financial instruments. There were no changes in methods or assumptions during the periods presented.

Net Earnings (Loss) Per Share – Earnings/(loss) per common share is computed on the weighted average number of common shares outstanding during each year. Basic earnings per share is computed as net loss applicable to common stockholders divided by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur from common shares issuable through convertible preferred shares, stock options, warrants and other convertible securities when the effect would be dilutive. In this case, the Preferred Shares would not be dilutive since the conversion price is $3.00 and the quoted price is significantly lower than the conversion price. Therefore, there were no dilutive securities for the three months ended March 31, 2019 and 2018, respectively.

Reclassifications – Certain classifications have been made to the prior year consolidated financial statements to conform to the current year presentation. The reclassification had no impact on previously reported net loss or accumulated deficit.

Recent Accounting Pronouncements –In July 2017, the FASB issued ASU 2017-11,Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815):(Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting effect. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

In June 2016, the FASB issued ASC Update No. 2016-13,Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326). This Update requires an entity to estimate probable credit losses of financial instruments. The estimated losses and subsequent adjustments to such loss estimate will be recorded through an allowance account which is deducted from the amortized cost of the financial instruments. This guidance is effective for fiscal years, and interim periods beginning after December 15, 2019. Early adoption is permitted for periods beginning after December 15, 2018. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.

NOte 2 -going concern

The Company sustained net losses of $29,032 and $110,194 during the three months ended March 31, 2019 and 2018, respectively. The Company has accumulated deficit of $1,373,337 and $1,331,207 as of March 31, 2019 and December 31, 2018, respectively. The Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations and/or obtain additional financing, as may be required.

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The accompanying unaudited consolidated financial statements have been prepared assuming the Company will continue as a going concern; however, the above condition raises substantial doubt about the Company’s ability to do so. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

Management’s Plan to Continue as a Going Concern

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) obtaining capital from the sale of its equity securities, (2) sales of the Company’s products, (3) short-term and long-term borrowings from banks, and (4) short-term borrowings from stockholders or other related parties when needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually to secure other sources of financing and attain profitable operations.

NOte 3 -concentration of credit risk

We maintain our cash balance in several banks in China and United States. The consolidated cash balances as of March 31, 2019 and December 31, 2018 were $37,447 and $50,397, respectively. The cash balances in China as of March 31, 2019 and December 31, 2018 were $21,255 and $41,831, respectively.In China, a depositor has up to RMB 500,000 insured by the People’s Bank of China Financial Stability Bureau (“FSD”)which were within the insured limit. The cash balances in our US account as of March 31, 2019 and December 31, 2018 were $16,192 and $8,566, respectively, which were within federal insured limit of $250,000.

NOTe 4 -other receivable

Total other receivable consists of balances of VAT receivable of $34,892 and $36,015 as of March 31, 2019 and December 31, 2018, respectively.

Note 5 -property, plant and equipment

Property, plant and equipment as of March 31, 2019 and December 31, 2018 are summarized as following:

	March 31, 2019			December 31, 2018
Buildings	$	1,799,871		$	1,756,860
Leasehold improvement		16,963			14,254
Vehicles		11,548			11,272
Manufacturing equipment		1,390,214			1,186,877
Office equipment		91,249			89,191
Construction in process		–			140,637
Property, plant, and equipment - total		3,309,845			3,199,091
Less: accumulated depreciation		(824,485	)		(747,874	)
Fixed assets, net	$	2,485,360		$	2,451,217

For the three months ended March 31, 2019 and 2018, depreciation expenses were $58,053 and $57,503, respectively.

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note 6 -intangible assets -net

All land in the PRC is owned by the government and cannot be sold to any individual or entity. Instead, the government grants landholders a "land use right" after a purchase price for such "land use right" is paid to the government. The "land use right" allows the holder to use the land for 50 years and enjoys all the incidents of ownership of the land.

The summary of land use rights as of March 31, 2019 and December 31, 2018 are summarized as following:

The land use right term	March 31, 2019			December 31, 2018
May, 2013 - Apr. 2063	$	536,438		$	523,619
Dec. 2015 - Sept. 2065		201,156			196,349
Dec. 2015 – Sept. 2065		24,480			23,896
Intangible assets- total		762,074			743,864
Less: accumulated amortization		(77,251	)		(71,686	)
Intangible assets, net	$	684,823		$	672,178

For the three months ended March 31, 2019 and 2018, amortization expenses were $3,791 and $4,025, respectively.

NOTE 7 -COMMITMENTS AND CONTINGENCIES

The Company does not have known future commitments

NOTE 8 -INCOME TAX

The Company’s income tax expense is mainly contributed by its subsidiaries in PRC. Under the Law of People’s Republic of China on Enterprise Income Tax, domestically owned enterprises and foreign-invested enterprises are subject to a uniform tax rate of 25%. A reconciliation between the income tax computed at the U.S. statutory rate and the Company’s provision for income tax in the PRC is as follows:

	March 31			March 31
	2019			2018
Tax expense at statutory rate-US		21	%		21	%
Foreign statutory income tax rate difference		(4	)%		0	%
Valuation Allowance		(43	)%		(85	)%
Utilization of net operating loss deduction		20	%		0	%
Effective income tax rates		(6	)%		0	%

The Company recorded $1,705 and nil of income tax expense for the three months period ended March 31, 2019 and 2018, respectively. As of March 31, 2019 and December 31, 2018, management determined that it was unlikely that the Company's deferred tax assets would be realized and have provided for a full valuation allowance associated with the net deferred tax assets. As of March 31, 2019 and December 31, 2018, the aggregate balances of our gross unrecognized tax benefits were $210,155 and $208,236, respectively, of which a valuation allowance recognized against the unrecognized tax benefits.

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The Company periodically analyzes its tax positions taken and expected to be taken and has determined that since inception there has been no need to record a liability for uncertain tax positions. The Company classifies income tax penalties and interest, if any, as part of selling, general and administrative expenses in the accompanying statements of operations. There was no accrued interest or penalties as of March 31, 2019 and December 31, 2018.

The Company is neither under examination by any taxing authority, nor has it been notified of any impending examination.

The2017 Tax Cuts and Jobs Act creates a new requirement that certain income (i.e., Global Intangible Low-Taxed Income (“GILTI”)) earned by controlled foreign corporations (“CFCs”) must be included currently in the gross income of the CFCs’ U.S. shareholder income. GILTI is the excess of the shareholder’s net CFC tested income over the net deemed tangible income return. The Company has elected to recognize the tax on GILTI in the period the tax is incurred. For the three months ended March 31, 2019 and 2018, no GILTI tax obligation existed and the GILTI tax expense was nil.

NOTE 9 -NON-CONTROLLING INTEREST

On July 1, 2016, the Company executed the Exchange Agreement with Yibaoccyb and the Yibaoccyb Shareholders. From and after the Closing Date, Yibaoccyb became a 51% owned subsidiary of the Company. Yibaoccyb owns 100% of YibaoHK. YibaoHK will own 100% of Shenzhen Confucian Biologics Co. Ltd. (yet to be formed, “Yibao WFOE”), which will be wholly foreign-owned enterprise (“WFOE”) under the laws of the Peoples’ Republic of China (“PRC” or “China”). On August 31, 2016, YibaoHK entered into a series of contractual arrangements with Confucian and currently is 100% owner of Confucian.

Non-controlling interest consisted of the following:

	March 31,		December 31,
	2019		2018
Beginning balance	$	379,603	$	292,072
Net income attributed to non-controlling interest		13,098		107,469
Foreign currency translation gain (loss) attributable to non-controlling interest		9,398		(19,938	)
Ending balance	$	402,099	$	379,603

note 10 -related party transactions

Name of Entity or Individual	Relationship with the Company and subsidiaries
Wenxiu Song	Owner of Confucian
Hengchun Zhang	Owner of Confucian
Xiuhua Song	CEO and Director
Shandong Yibao Biologics Co, Ltd	Affiliated company with common shareholders
Shandong Yibao Import & Export Trading Co, Ltd	Affiliated company with common shareholders
Jinxiang Confucian Food Testing Co, Ltd	Affiliated company with common shareholders

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Sales revenue:

	For the Three Months Ended March 31,
	2019		2018
Shandong Yibao Biologics Co. Ltd	$	141,607	$	128,612
Total	$	141,607	$	128,612

Accounts receivable:

	March 31, 2019		December 31, 2018
Shandong Yibao Biologics Co. Ltd	$	38,741	$	67,339
Total	$	38,741	$	67,339

Customer deposit:

	March 31, 2019		December 31, 2018
Shandong Yibao Import & Export Trading Co. Ltd	$	1,111	$	1,085
Total	$	1,111	$	1,085

The Company has the following payables to related parties:

	March 31, 2019		December 31, 2018
To Xiuhua Song	$	2,486,607	$	2,392,258
To Hengchun Zhang		182,784		255,502
To Shandong Yibao Biologics Co. Ltd.		144,237		–
To Jinxiang Confucian food Testing Co. Ltd.		59,602		58,178
Total	$	2,873,230	$	2,705,938

As of March 31, 2019 and December 31, 2018, the Company had a total amount of $2,873,230 and $2,705,938 due to related parties, respectively. The amounts were non-interest bearing and due upon demand.

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NOTE 11 -MAJOR SUPPLIERS AND CUSTOMERS

The Company purchases majority of its inventory and packaging supplies from three suppliers which accounted for 27.81%, 19.26% and 11.47% of the total purchases for the three months ended March 31, 2019.

The Company had four major customers for the three months ended March 31, 2019: Ping Xiang Import and Export Company accounted for 27.55% of revenue, Lianyungang Kangia International Co Ltd. accounted for 21.42% of revenue, Shandong Yibao Biologics accounted for 20.36% of revenue andAnhui Xiancheng Import and Export Company accounted for 14.58% of revenuefor the three months ended March 31, 2019.

The Company purchases majority of its inventory and packaging supplies from three suppliers which accounted for 31.40%, 9.51% and 8.70% of the total purchases for the three months ended March 31, 2018.

The Company had four major customers for the three months ended March 31, 2018: Shandong Yibao Biologics for 49.24% of revenue, Ping Xiang Import and Export Company accounted for 24.77% of revenue, Anhui Xiancheng Import and Export Company accounted for 15.33% of revenue, Wuhan Youni Biologics Co. Ltd accounted for 10.30% of revenue for the three months ended March 31, 2018.

NOTE 12 -SUBSEQUENT EVENTS

Management has evaluated subsequent events through June 7, 2019, the date which the consolidated financial statements were available to be issued. All subsequent events requiring recognition as of March 31, 2019 have been incorporated into these consolidated financial statements and there are no subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events.”

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

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

The information contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year ended December 31, 2018 and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our consolidated financial statements and the notes to the consolidated financial statements included elsewhere in this Form 10-Q.

The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Annual Report on Form 10-K for the year ended December 31, 2018 in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited consolidated Financial Statements and notes thereto that appear elsewhere in this report.

Overview

The Company is a manufacture and research based bio-science company. It has large capacity in manufacturing tablets, granule, oral liquid, powders, soft gels and capsules products. The Company distributes its products through its own network and white label products. It also has access to a member-based distribution system owned by its affiliated company.

The Company possesses manufacturing permits for food product, hygienic products, sanitary products, and health products. The Company's main business scope include technology study and transfer of Chondroitin and Garlic Oil; trading, cold storage, and pretreating of Garlic, fruit, and vegetables products; trading of Chemical products (excluding hazardous chemicals); Import and export of goods and technology (excluding those restricted by government); the manufacturing and sale of health products including powder, granules, tablets, hard capsule, soft capsule products.

Product Overview

The Company’s main products can be divided into two groups, one is health food products and the other is hygienic products

Health Food Products

· Phytocholesterol tabletting candy,

Phytosterol has strong anti-inflammatory effects to the human body, which can inhibit the absorption of cholesterol for human and biochemical synthesis of cholesterol. Promote the degradation and metabolism of cholesterol. Phytosterol can be used for prevention & therapy of coronary atherosclerosis heart disease. In treating ulcers, skin squamous carcinoma and cervical cancer has obvious curative effect. Can promote wound healing, make muscle proliferation, enhance capillary circulation; also can be used as blocking agent of formation of gallstones.

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· Polydextrose tabletting candy,

Regulating blood lipid, reduce fat accumulation preventing the fat.

· Dunaliella salina haematococcus pluvialis tabletting candy,

Replenishing the body's astaxanthin, Natural carotene and variety of minerals, have a great effect of antioxidant activity, protect skin, protect vision and improve immunity.

· Dunaliella salina Gum Base candy,

Dunaliella salina is rich in antioxidant needed by the human body health, resistance to radiation and enhance human immunity of natural carotenoids and 70 kinds of minerals and trace elements.

· Haematococcus pluvialis Gum candy,

The main components of Haematococcus Pluvialis is astaxanthin. It has nine anti-aging effect: can be Anti-aging and protect the skin; Protect the eye health; helps to support the cardiovascular system, maintain a healthy joints and connective tissue; increases strength and endurance.

· Fish Oil Gum candy,

Adjusting blood liquid, prevent blood clots, cerebral thrombosis, cerebral hemorrhage and stroke; prevent arthritis and alzheimer's disease, improve the memory and vision, control presbyopia.

· Earthworm Protein tabletting candy,

Improve blood circulation, inhibiting platelet aggregation, reduce glucose concentrations, prevent blood clots, has the very good control efficiency for coronary heart disease, arteriosclerosis, and other hematologic disorders.

· Collagen Protein tabletting candy,

It is rich in glycine, proline hydroxyproline and other amino acid needed for human body. Have a good health care effect for skin, hair, bones and muscles.

· Krill Oil Gum candy,

It is rich in EPA and DHA. Enhancing health effects, including cardiovascular, nerve, bones, joints, vision, skin care, etc.

· Phosphatidylserine tabletting candy,

Improve the function of brain; help to repair the injure of brain; promote the recovery of brainfag; protect central nervous system. Used for auxiliary treatment dementia and agedness memory loss.

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· Milk Powder tabletting candy.

Milk tablet is kind of leisure food. Supplement of the nutrition of human needed in specific environment.

Hygienic Products

The hygienic product line includes the following products:

· Gel for women,

Anti-bacteria product. Auxiliary treatment bacterial, mould sex vaginitis.

· Skin comfortable liquid

Anti-bacteria product. Used for sterilization, antibacterial of skin. Inhibit the bromhidrosis and relief beriberi itch.

Confucian owns 100,000 stage purification workshops, advanced production lines and manufacturing equipment. The Company has a higher capacity for OEM processing of tablets, hard capsules, soft capsules, oral liquid, granules, and powders.

Beauty products

· Shampoo

Shampoo that is rich in triticum vulgare, hydrolyzed lupine protein, silk collagen and organ oil. It helps to repair hair and gives a visible shine.

· Conditioner

Conditioner that is rich in triticum vulgare, hydrolyzed lupine protein, silk collagen and organ oil. It helps to nourish and moisturize hair.

· Peptides skin care set

This set includes moisturizer, eye cream, lotion, serum, facial cleanser. It encourages collagen production for more youthful looking skin.

Plan of Operations

By following the Company motto of being “passionate for the health industry, bringing together the world's resources, focusing on consumer demand, and creating a win-win situation,” the Company is eager to develop businesses in the international health and pharmaceutical market.

The Company’s near-term goal is to reach breakeven within a 6-month period time. In order to reach such goal, the Company is increasing its sales and production volume through arrangements and networking with its existing customers and its affiliated companies. Additionally, it plans to increase the size of its sales department to develop new customers.

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The Company’s ultimate goal is to make the business profitable and competitive in the international health and pharmaceutical market. To achieve such goal, the Company needs to cooperate with other businesses having capital, market, technology, or products, recruit sufficient workforce and various talents to serve the company, and actively develop new technology and new product through research and development.

Results of Operations

Three Months Ending March 31, 2019 Compared to March 31, 2018

Revenue:

For the three months ended March 31, 2019 and 2018, revenues were $599,699 and $261,180 respectively, for an increase of $338,519 over the same period in 2018.The increase is mainly due to the increase in the number of customers and the increase in demand from consumers for healthy and beauty products. 

Cost of Goods Sold:

Cost of goods sold for the three months ended March 31, 2019 and 2018 were $492,231 and $219,253 respectively, for an increase of $272,978 over the same period in 2018. This increase is mainly due to the increase of sales orders, production is increased accordingly.

Gross Profit:

Gross profit was $107,468 and $41,927 for the three months ended March 31, 2019 and 2018, an increase of $65,541 over the same period in 2018. The gross profit margin as a percent of sales for the three months ending March 31, 2019 and 2018 was 18% and 16% respectively, with an increase of 2% mainly due to improved worker proficiency and improved production management.

Operating Expenses:

Operating expenses for the three-month period ended March 31, 2019 and 2018 were $133,256 and $147,090 respectively for a decrease of $13,834 or 9% from the same period of prior year. The major expenses for the three-month period ended March 31, 2019 and 2018 consist of payroll, professional fees and depreciation. The decrease of $13,834 was mainly due to a decrease in payroll expense of $21,147.

Other Income (Expense):

Other income (expense) consists of interest income and expenses and other non-operation related income and expenses. Other income (expense) for the three months ended March 31, 2019 and 2018 were ($1,539) and ($5,031) respectively for a decrease of $3,492 compared to the same period in 2018.

Liquidity and Capital Resources

The Company suffered recurring losses from operations and has an accumulated deficit of $1,373,337 at March 31, 2019. The Company has a cash balance of $37,447 and a negative working capital of $3,018,013 as of March 31, 2019. The Company has incurred losses of $29,032 and $110,194 for the three months ended March 31, 2019 and 2018, respectively. The Company has not continually generated significant revenues. Unless our operations continue to generate significant revenues and cash flows from operating activities, our continued operations will depend on whether we are able to raise additional funds through various sources, such as equity and debt financing, other collaborative agreements and strategic alliances. Our management is actively engaged in seeking additional capital to fund our operations in the short to medium term. Such additional funds may not become available on acceptable terms and there can be no assurance that any additional funding that we do obtain will be sufficient to meet our needs in the long term.

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Net cash used in operating activities for the three months ended March 31, 2019 amounted to $91,869, compared to $366,194 used in operating activities for the three months ended March 31, 2018. The decrease of $274,325 in the net cash used in our operating activities was primarily due to the decrease in the change of net loss of $81,162 from operations, decease in the change of accounts receivable-related party of $43,317, decrease in the change of other receivable of $17,214, decrease in the change of advance to suppliers of $196,347, decrease in the change of inventory of $124,830, decrease in the change of accounts payable of $178,301, and decrease in change of other payable of $32,187; partially offset by the increase in accounts receivable of $149,772, increase in change of prepaid expense of $3,435, increase in change of accrued expenses of $29,058, and increase in the change of customer deposit of $215,098.

Net cash used in investing activities for the three months ended March 31, 2019 amounted at $32,399 compared to net cash used in investing activities of $5,123 for the three months ended March 31, 2018, resulting in an increase of $27,276. The increase was mainly due to decrease of construction in process for three months ended March 31, 2019 by $143,364; partially offset by increase of purchase of property and equipment by $170,640.

Net cash provided by financing activities for the three months ended March 31, 2019 amounted at $110,401, compared to net cash provided by financing activities of $75,318 for the three months ended March 31, 2018, resulting in a net increase of $35,083. The increase in net cash provided by financing activities was mainly due to advances received from a related party.

Going Concern

The accompanying unaudited consolidated financial statements have been prepared assuming the Company will continue as a going concern; however, the above condition raises substantial doubt about the Company’s ability to do so. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) obtaining capital from the sale of its equity securities, (2) sales of the Company’s products, (3) short-term and long-term borrowings from banks, and (4) short-term borrowings from stockholders or other related party(ies) when needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually to secure other sources of financing and attain profitable operations.

Capital Resources

Over the next twelve months, management believes there will not be sufficient working capital obtained from operations due to the Company in its early development stage.

Off-Balance Sheet Arrangements

As of March 31, 2019, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

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ITEM 3. Quantitative and Qualitative Disclosures about Mark Risk

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item

ITEM 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures:

As of March 31, 2019, we conducted an evaluation under the supervision and with the participation of the Company's Chief Executive Officer and the Chief Financial Officer, management has evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation and because of the material weaknesses in our internal control over financial reporting described below, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company's disclosure controls and procedures were not effective as of March 31, 2019.

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

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

Similarly, the Shandong Confucian Biologic Co., Ltd. operation also has a material weakness due to lack of segregation of duties. Its size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties within our internal control system. We have retained an outside professional firm to assist in the separation of duties on an ongoing basis. The use of the outside firm has proven successful in assisting in the separation of duties.

Limitations on the Effectiveness of Internal Controls

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

Changes in Internal Control over Financial Reporting

There were no changes in internal control over financial reporting that occurred during the current quarter covered by this report that have materially affected, or are reasonably likely to 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

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

On December 23, 2016, the Company received cash payment of $300,000 in advance for issuance of 3,000,000 shares of common stock, or $0.10 per share. On January 3, 2017, 3,000,000 shares were issued to seven investors, none of which is a related-party to the Company.

ITEM 3. Defaults Upon Senior Securities

Not Applicable

ITEM 4. Mine Safety Disclosures

None

ITEM 5. Other Information

None

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ITEM 6. Exhibits

a) Exhibits

2.1	Share Exchange Agreement among IPLO, Yibaoccyb and Xiuhua Song dated July 1, 2016(Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 11, 2016.)
10.1	Stock Purchase Agreement between IPLO and Xiuhua Song dated May 15, 2016.(Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 11, 2016.)
10.2	Stock Purchase Agreement among IPLO, Standard Resources Ltd., and H&H Glass Inc. dated July 1, 2016. (Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 11, 2016.)
10.3	Consulting Services Agreement between YibaoHK and Shandong Confucian Biologics Co. Ltd. dated August 31, 2016(Incorporated by reference to Exhibit 99.6 to the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on September 6, 2016.)
10.4	Equity Pledge Agreement between YibaoHK, Shandong Confucian Biologics Co. Ltd. and the owners of Shandong Confucian Biologics Co. Ltd. dated August 31, 2016(Incorporated by reference to Exhibit 99.7 to the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on September 6, 2016.)
10.5	Operating Agreement between YibaoHK, Shandong Confucian Biologics Co. Ltd. and the owners of Shandong Confucian Biologics Co. Ltd. dated August 31, 2016(Incorporated by reference to Exhibit 99.8 to the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on September 6, 2016.)
10.6	Voting Rights and Proxy Agreement between YibaoHK, Shandong Confucian Biologics Co. Ltd. and the owners of Shandong Confucian Biologics Co. Ltd. dated August 31, 2016(Incorporated by reference to Exhibit 99.9 to the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on September 6, 2016.)
10.7	Option Agreement between YibaoHK, Shandong Confucian Biologics Co. Ltd. and the owners of Shandong Confucian Biologics Co. Ltd. dated August 31, 2016(Incorporated by reference to Exhibit 99.10 to the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on September 6, 2016.)
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) (Section 302 of the Sarbanes-Oxley Act of 2002)
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) (Section 302 of the Sarbanes-Oxley Act of 2002)
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C.ss.1350 (Section 906 of the Sarbanes-Oxley Act of 2002)
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C.ss.1350 (Section 906 of the Sarbanes-Oxley Act of 2002)
101.INS*	XBRL Instance Document
101.SCH*	XBRL Schema Document
101.CAL*	XBRL Calculation Linkbase Document
101.DEF*	XBRL Definition Linkbase Document
101.LAB*	XBRL Label Linkbase Document
101.PRE*	XBRL Presentation Linkbase Document

* To be filed by amendment

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SIGNATURES

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

		YBCC, INC.
		(Registrant)
Dated: June 11, 2019	By:	/s/Xiuhua song
		Xiuhua Song
		Chief Executive Officer
		Principal Financial Officer and Director

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