The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States and the rules
of the SEC, and should be read in conjunction with the audited financial statements and notes thereto contained in our Annual Report,
as updated in subsequent filings we have made with the SEC. In the opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been
reflected herein. The results of operations for the periods presented are not necessarily indicative of the results to be expected for
the full year.
JOWAY
HEALTH INDUSTRIES GROUP INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
REVENUES
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUES
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
13,132
|
|
|
|
51,900
|
|
|
|
96,557
|
|
|
|
155,497
|
|
OPERATING EXPENSES
|
|
|
13,132
|
|
|
|
51,900
|
|
|
|
96,557
|
|
|
|
155,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(13,132
|
)
|
|
|
(51,900
|
)
|
|
|
(96,557
|
)
|
|
|
(155,497
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses
|
|
|
-
|
|
|
|
(162
|
)
|
|
|
-
|
|
|
|
(204
|
)
|
OTHER LOSS, NET
|
|
|
-
|
|
|
|
(162
|
)
|
|
|
-
|
|
|
|
(204
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES
|
|
|
(13,132
|
)
|
|
|
(52,062
|
)
|
|
|
(96,557
|
)
|
|
|
(155,701
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAXES
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS FROM CONTINUING OPERATIONS
|
|
|
(13,132
|
)
|
|
|
(52,062
|
)
|
|
|
(96,557
|
)
|
|
|
(155,701
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations of discontinued component, net of taxes
|
|
|
-
|
|
|
|
(145,035
|
)
|
|
|
-
|
|
|
|
(378,825
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
|
(13,132
|
)
|
|
|
(197,097
|
)
|
|
|
(96,557
|
)
|
|
|
(534,526
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE LOSS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
-
|
|
|
|
1,436
|
|
|
|
-
|
|
|
|
(42,691
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS
|
|
$
|
(13,132
|
)
|
|
$
|
(195,661
|
)
|
|
$
|
(96,557
|
)
|
|
$
|
(577,217
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS PER COMMON SHARE, BASIC AND DILUTED:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations - Basic & diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
Discontinued operations - Basic & diluted
|
|
$
|
-
|
|
|
$
|
(0.01
|
)
|
|
|
-
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, BASIC AND DILUTED
|
|
|
20,054,000
|
|
|
|
20,054,000
|
|
|
|
20,054,000
|
|
|
|
20,054,000
|
|
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements
JOWAY
HEALTH INDUSTRIES GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
Six Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
$
|
(96,557
|
)
|
|
$
|
(155,701
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Receivable from disposal of subsidiaries
|
|
|
119,070
|
|
|
|
-
|
|
Special dividend payable
|
|
|
(119,070
|
)
|
|
|
-
|
|
Other payables
|
|
|
29,560
|
|
|
|
22,000
|
|
Net cash used in operating activities
|
|
|
(66,997
|
)
|
|
|
(133,701
|
)
|
Net cash used in operating activities from discontinued component
|
|
|
-
|
|
|
|
(181,387
|
)
|
Net cash provided by operating activities
|
|
|
(66,997
|
)
|
|
|
(315,088
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Due to related parties
|
|
|
66,997
|
|
|
|
62,641
|
|
Net cash provided by financing activities
|
|
|
66,997
|
|
|
|
62,641
|
|
Net cash provided by financing activities from discontinued component
|
|
|
-
|
|
|
|
24,340
|
|
Net cash provided by financing activities
|
|
|
66,997
|
|
|
|
86,981
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
|
|
-
|
|
|
|
54,941
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH, beginning of period
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH, end of period
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party loan released by Jinghe Zhang
|
|
$
|
295,928
|
|
|
$
|
-
|
|
Related party loan released by Joway Shengshi
|
|
$
|
463,698
|
|
|
$
|
-
|
|
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements
JOWAY HEALTH INDUSTRIES GROUP INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 1 – ORGANIZATION
The unaudited condensed consolidated
financial statements include the financial statements of Joway Health Industries Group Inc. (referred to herein as “Joway Health”),
its subsidiaries, and variable interest entities (“VIEs”) where Joway Health is deemed the primary beneficiary. Joway Health,
its subsidiaries and VIEs are collectively referred to herein as the “Company”, “we” and “us”.
Joway Health (formerly G2 Ventures, Inc.) was
originally incorporated under the laws of the State of Texas on March 21, 2003. On September 21, 2010, Joway Health entered into a Share
Exchange Agreement (the “Share Exchange”) with the sole stockholder of Dynamic Elite International Limited. As a result of
the Share Exchange, Dynamic Elite became a wholly-owned subsidiary of Joway Health and the stockholders of Dynamic Elite acquired approximately
76.08% of the issued and outstanding stock of Joway Health. The share exchange transaction resulted in the shareholders of Dynamic Elite
acquiring a majority voting interest in Joway Health. Generally accepted accounting principles in the United States of America require
that the company whose shareholders retain the majority interest in the combined business be treated as the acquirer for accounting purposes.
The reverse acquisition process utilizes the capital structure of Joway Health and the assets and liabilities of Dynamic Elite recorded
at historical cost. On December 22, 2010, Joway Health changed its jurisdiction of incorporation from the State of Texas to the State
of Nevada.
Dynamic Elite International Limited (referred
to herein as “Dynamic Elite”) was incorporated under the laws of the British Virgin Islands on June 2, 2010 as a limited liability
company (a BVI company). Dynamic Elite engages in manufacturing and distributing tourmaline products in China. Its wholly owned subsidiary,
Tianjin Junhe Management Consulting Co., Ltd. was incorporated on September 15, 2010 in Tianjin, People’s Republic of China (“PRC”).
Other than the equity interest in Junhe Consulting, Dynamic Elite does not own any assets or conduct any operations.
Tianjin Junhe Management Consulting Co., Ltd.
(referred to herein as “Junhe Consulting”) conducts its business through Tianjin Joway Shengshi Group Co., Ltd. that is consolidated
as a variable interest entity.
Tianjin Joway Shengshi Group Co., Ltd. (referred
to herein as “Joway Shengshi”) was incorporated in PRC on May 17, 2007. Joway Shengshi is currently owned 99% by Jinghe Zhang,
the Company’s current CEO and President and 1% by Song Baogang. Joway Shengshi engages in manufacturing and distributing tourmaline
products in China. Shenyang Joway Electronic Technology Co., Ltd., Tianjin Joway Decoration Engineering Co., Ltd. and Tianjin Oriental
Shengtang Trading Import & Export Trading Co., Ltd are subsidiaries of Joway Shengshi.
Shenyang Joway Electronic Technology Co., Ltd.
(referred to herein as “Joway Technology”) was originally named Liaoning Joway Technology Engineering Co., Ltd. which was
incorporated on March 28, 2007 in PRC. The name was changed on June 22, 2011. It engages in the distribution of Tourmaline Activated Water
Machines and Tourmaline Wellness Houses. Prior to July 25, 2010, Joway Shengshi owned 90.91% of Joway Technology. Joway Shengshi entered
into a share acquisition agreement with Jingyun Chen, another stockholder of Joway Technology on July 25, 2010 to acquire the remaining
9.09% of the share of Joway Technology. As a result of the share acquisition, Joway Technology became a wholly-owned subsidiary of Joway
Shengshi.
Tianjin Joway Decoration Engineering Co., Ltd.
(referred to herein as “Joway Decoration”) was incorporated on April 22, 2009 in PRC. It engages in the distribution of Tourmaline
Activated Water Machines, Tourmaline Wellness House for family use and Tourmaline Wellness House materials. Prior to July 9, 2010, Joway
Shengshi owned 90% of Joway Decoration. Joway Shengshi entered into a share acquisition agreement with Jingyun Chen, another stockholder
of Joway Decoration on July 9, 2010 to acquire the remaining 10% of the shares of Joway Decoration. As a result of the share acquisition,
Joway Decoration became a wholly-owned subsidiary of Joway Shengshi. Jingyun Chen is currently the General Manager of Joway Decoration.
Tianjin Oriental Shengtang Import & Export
Trading Co., Ltd (referred to herein as “Shengtang Trading”) was incorporated on September 18, 2009 in the PRC. It engages
in purchasing raw materials which it sells to other companies of the group. Prior to July 28, 2010, Joway Shengshi owned 95% of Shengtang
Trading. Joway Shengshi entered into a share acquisition agreement with Wang Aiying, another stockholder of Shengtang Trading on July
28, 2010 to acquire the remaining 5% of the shares of Shengtang Trading. As a result of the share acquisition, Shengtang Trading became
a wholly-owned subsidiary of Joway Shengshi.
The following table lists the Company and its
subsidiaries:
Name
|
|
Domicile and Date of Incorporation
|
|
Paid in Capital
|
|
|
Percentage of Effective Ownership
|
|
Principal Activities
|
Joway Health Industries Group Inc.
|
|
March 21, 2003,
Nevada
|
|
|
USD 20,054
|
|
|
86.8% owned by Crystal Globe Limited
13.2%owned by other institutional and individual investors
|
|
Investment Holding
|
Dynamic Elite International Limited
|
|
June 2, 2010,
British Virgin Islands
|
|
|
USD 10,000
|
|
|
100% owned by Joway Health Industries Group Inc.
|
|
Investment Holding
|
Tianjin Junhe Management Consulting Co., Ltd.
|
|
September 15, 2010, PRC
|
|
|
USD 20,000
|
|
|
100% owned by Dynamic Elite International Limited
|
|
Advisory
|
Tianjin Joway Shengshi Group Co., Ltd.
|
|
May 17, 2007, PRC
|
|
|
USD 7,216,140.72
|
|
|
99% owned by Jinghe Zhang, and 1% owned by Baogang Song
|
|
Production and distribution of Healthcare Knit Goods and Daily Healthcare and Personal Care products
|
Shenyang Joway Electronic Technology Co., Ltd.
|
|
March 28, 2007, PRC
|
|
|
USD 142,072.97
|
|
|
100% owned by Tianjin Joway Shengshi Group Co., Ltd
|
|
Distribution of Tourmaline Activated Water Machine and construction of Tourmaline Wellness House
|
Tianjin Joway Decoration Engineering Co., Ltd.
|
|
April 22, 2009, PRC
|
|
|
USD 292,367.74
|
|
|
100% owned by Tianjin Joway Shengshi Group Co., Ltd
|
|
Distribution of Wellness House for family use and Activated Water Machine and construction of Tourmaline Wellness House
|
Tianjin Oriental Shengtang Import & Export Trading Co., Ltd.
|
|
September 18, 2009, PRC
|
|
|
USD 292,463.75
|
|
|
100% owned by Tianjin Joway Shengshi Group Co., Ltd
|
|
Distribution of tourmaline products
|
On September 16, 2010, prior to the share exchange,
Junhe Consulting entered into a series of contractual agreements (the “Contractual Agreements”) with Joway Shengshi and Joway
Shengshi’s owners. The following is a brief description of the Contractual Agreements entered into between Junhe Consulting and
Joway Shengshi or Joway Shengshi’s owners:
1. Consulting Services Agreement. Pursuant
to the consulting services agreement between Junhe Consulting and Joway Shengshi, Junhe Consulting has the right to advise, consult, manage
and operate Joway Shengshi, and collect and own all of the net profits of the Operating Entities.
2. Operating Agreement. Under the operating
agreement between Junhe Consulting and Joway Shengshi, Junhe Consulting has the right to recommend director candidates and appoint the
senior executives of Joway Shengshi, approve any transactions that may materially affect the assets, liabilities, rights or operations
of Joway Shengshi, and guarantee the contractual performance by Joway Shengshi of any agreements with third parties, in exchange for a
pledge by Joway Shengshi of its accounts receivable and assets.
3. Voting Rights Proxy Agreement. Under
the voting rights proxy agreement between Joway Shengshi’s owners and Junhe Consulting, the owners of Joway Shengshi have vested
their collective voting control over Joway Shengshi to Junhe Consulting and will only transfer their respective equity interests in Joway
Shengshi to Junhe Consulting or its designee.
4. Option Agreement. Under the option agreement
between Joway Shengshi’s owners and Junhe Consulting, the owners of Joway Shengshi have granted Junhe Consulting the irrevocable
right and option to acquire all of their equity interests in Joway Shengshi.
5. Equity Pledge Agreement. Under the equity
pledge agreement between Joway Shengshi’s owners and Junhe Consulting, the owners of Joway Shengshi have pledged all of their rights,
titles and interests in Joway Shengshi to Junhe Consulting to guarantee Joway Shengshi’s performance of its obligations under the
Consulting Services Agreement.
As a result of the Contractual Agreements, Joway
Shengshi is effectively a variable interest entity of Junhe Consulting. Accordingly, the Company through its wholly-owned subsidiary Junhe
Consulting, consolidates Joway Shengshi’s results of operation, assets and liabilities in its financial statements.
In connection with the Share Exchange and as consideration
for entering into the VIE Agreements, Jingshe Zhang and Baogang Song, the shareholders of Joway Shengshi (the “Grantees”),
entered into a Call Option Agreement, dated July 20,2010 with Lionel Evan Liu (the “Grantor”), the sole shareholder of Crystal
Globe (the controlling shareholder of Dynamic Elite), a British Virgin Islands company (the “Call Option Agreement”), pursuant
to which the Grantees had the right to purchase up to 100% of the shares of Crystal Globe (the “Call Option”) at an exercise
price of $2.00 per share (the “Exercise Price”) for a period of five years. The Call Option vested as to 34% of the shares
of Crystal Globe on April 2, 2011 and as to 33% on each of April 2, 2012 and 2013 (the respective “Call Option Effective Date”).
On March 28, 2015, the Grantor and Grantees amended the Call Option Agreement, to (i) reduce the Exercise Price to $0.00 per share and
(ii) extend the Grantees’ rights to exercise their call option within ten years from the respective Option Effective Date.
On November 13, 2016, Jinghe Zhang exercised the
Call Option as to 99% of the shares of Crystal Globe and Baogang Song exercised his Call Option as to 1% of the shares of Crystal Globe.
As a result of exercising the Call Option, Jinghe Zhang became the controlling shareholder of Crystal Globe and in turn, the controlling
shareholder of the Company. On November 20, 2016, Baogang Song transferred 1% of the shares of Crystal Globe to Jinghe Zhang. Consequently,
Jinghe Zhang controls 17,408,000 shares, or 86.8%, of the issued and outstanding shares of the Company’s common stock.
On December 31, 2020, upon the Company completed
the Merger Agreement with Crystal Globe (refer to NOTE 4), Joway Health becomes a “shell company” (as such term is defined
in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Going forward, the Company intends to seek, investigate
and, if such investigation warrants, engage in a business combination with a private entity whose business presents an opportunity for
the Company’s stockholders.
NOTE 2
– GOING CONCERN
The accompanying unaudited condensed consolidated
financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization
of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
As reflected in the accompanying unaudited condensed consolidated financial
statements, for the six months ended June 30, 2021 and 2020, we incurred net losses of $96,557 and $534,526, respectively. As of June
30, 2021, we had an accumulated deficit of $7.3 million. Management believes these factors raise substantial doubt about our ability to
continue as a going concern for the next twelve months.
The continuation of our company as a going concern
through the next twelve months is dependent upon (1) the continued financial support from our stockholders or external financing. Management
believes that our existing stockholders will provide the additional cash to meet our obligations as they become due, and (2) that it will
be able to implement its business plan to expand our company’s operations and generate sufficient revenues to meet its obligations.
These conditions raise substantial doubt about
our company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible
future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from
the outcome of these uncertainties. Management believes that the actions presently being taken to obtain additional funding and implement
its strategic plan provides the opportunity for our company to continue as a going concern.
NOTE 3 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US
GAAP”) for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).
Accordingly, they do not include all of the information and the footnotes required by generally accepted accounting principles for complete
financial statements. The Company’s functional currency is the Chinese Renminbi (“RMB”) in 2020; however, the accompanying
unaudited consolidated financial statements have been translated and presented in United States Dollars (“USD”). All significant
inter-company transactions and balances have been eliminated. These unaudited condensed consolidated financial statements include all
adjustments that, in the opinion of management, are necessary to make the financial statements not misleading.
Operating results for the six month period ended
June 30, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021. The accompanying
unaudited consolidated financial statements should be read in conjunction with the Company’s form 10-K for the fiscal year ended
December 31, 2020 which was filed on August 16, 2021.
Use of Estimates
The preparation of these unaudited condensed consolidated
financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial
statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the
best information available at the time the estimates are made. Actual results could differ from those estimates.
Reclassification
Certain prior year balances were reclassified
to conform to the current year’s presentation with consideration of reflecting all of the Company’s subsidiaries and VIEs
as discontinued operations. None of these reclassifications had an impact on reported financial position or cash flows for any of the
periods presented.
Basis of Consolidation
For the periods prior to the sale of Dynamic Elite,
its subsidiaries, and controlled VIEs, the Company unaudited condensed consolidated financial statements include Dynamic Elite, its wholly
owned subsidiaries, and controlled VIEs. All significant inter-company accounts and transactions have been eliminated in the consolidation.
Foreign Currency Translation
The accompanying unaudited condensed consolidated
financial statements are presented in USD. The functional currency of the Company is RMB in 2020. The unaudited condensed consolidated
financial statements are translated into United States dollars from RMB at period-end exchange rates as to assets and liabilities and
average exchange rates as to revenues and expenses. Equity accounts are translated at their historical exchange rates when the equity
transactions occurred. The resulting transaction adjustments are recorded as a component of stockholders’ equity. Gains and losses
from foreign currency transactions are included in net income.
|
|
For the
six months
ended
June 30,
|
|
|
For the
year
ended
December 31,
|
|
|
|
2020
|
|
|
2020
|
|
Period ended RMB: USD Exchange rate
|
|
|
7.0795
|
|
|
|
6.5249
|
|
Average RMB: USD Exchange rate
|
|
|
7.0319
|
|
|
|
6.8976
|
|
The RMB is not freely convertible into foreign
currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB
amounts could have been, or could be, converted into USD at the rates used in translation.
Foreign currency translation adjustments have
been reported as comprehensive income (loss) in the unaudited condensed consolidated financial statements and totaled $1,436 for the three
months ended June 30, 2020, and $(42,691) for the six months ended June 30, 2020. No foreign currency translation adjustments for the
three months and six months ended June 30, 2021.
Other Comprehensive Income
Other comprehensive income is defined as the change
in equity during the period from transactions and other events, excluding the changes resulting from investments by owners and distributions
to owners, and is not included in the computation of income tax expense or benefit. Accumulated other comprehensive income represents
the accumulated balance of foreign currency translation adjustments.
Concentrations of Credit Risk
Prior to the Merger Agreement, the Company’s
operations are carried out in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be
influenced by the political, economic, and legal environment in the PRC, and by the general state of the PRC’s economy. The Company’s
operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America.
The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary
measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. Financial instruments which
potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. Substantially
all of the Company’s cash is maintained with state-owned banks within the PRC, and no deposits are covered by insurance. The Company
has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts.
Fair Value of Financial Instruments
Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value as follows:
|
●
|
Level 1—defined as observable inputs such as quoted
prices in active markets for identical assets or liabilities;
|
|
●
|
Level 2—defined as inputs other than quoted prices
in active markets that are either directly or indirectly observable; and
|
|
●
|
Level 3—defined as unobservable inputs in which little
or no market data exists, therefore requiring an entity to develop its own assumptions.
|
The carrying amounts reported in the balance sheets
for cash, accounts receivable, other receivable, accounts payable, other payable, and amounts due from related parties generally approximate
their fair market values based on the short-term maturity of these instruments. ASC 825-10 “Financial Instruments” allows
entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option
may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is
elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting
date. The Company did not elect to apply the fair value option to any outstanding instruments.
Revenue Recognition
The Company recognizes revenue when control of
promised goods or services is transferred to the company’s customers, in an amount that reflects the consideration the Company expects
to be entitled to in exchange for those goods or services.
Prior to the Merger Agreement, with respect to
sales of product to both franchisee and non-franchisee customers, the Company transfers control, invoices the customer and recognizes
revenue upon shipment to the customer. Sales prices are based on fixed price lists that are different depending on whether the price list
is for franchisee customers or for non-franchisee customers. Sales, value add and other taxes collected concurrent with revenue-producing
activities are excluded from revenue.
Income Taxes
The Company accounts for income taxes in accordance
with FASB ASC 740 “Income Taxes” (formerly SFAS No. 109 Accounting for Income Taxes), which is an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been
recognized in the Company’s financial statements or tax returns. ASC 740 additionally requires the establishment of a valuation
allowance to reflect the likelihood of realization of deferred tax assets. Realization of deferred tax assets is dependent upon future
earnings, if any, of which the timing and amount are uncertain.
According to ASC 740, the evaluation of a tax
position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained
upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second
step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in
the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50% likelihood of being realized
upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized
in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not
criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. ASC 740 also
provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition.
Basic and Diluted Earnings per Share
The Company reports earnings per share in accordance
with FASB ASC 260 “Earnings per share”. The Company’s basic earnings per share are computed using the weighted average
number of shares outstanding for the periods presented. Diluted earnings per share are computed based on the assumption that any dilutive
options or warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, the Company’s
outstanding stock warrants are assumed to be exercised, and funds thus obtained were assumed to be used to purchase common stock at the
average market price during the period. There were no dilutive instruments outstanding during the three month and six month periods ended
June 30, 2021 and 2020.
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various
aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also
clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company adopted the standard in the first
quarter of 2021. Adoption of the standard did not have a significant impact on the Company’s consolidated statement of earnings
in 2021.
Other accounting standards that have been issued
or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a
material impact on the Company’s consolidated financial statements upon adoption.
NOTE 4
– DECONSOLIDATION
On November 20, 2020, Joway Health entered into
a Merger Agreement (the “Merger Agreement”) with Dynamic Elite International Limited, a British Virgin Islands company and
a wholly-owned subsidiary of the Company (“Dynamic Elite”), Crystal Globe Limited, a British Virgin Islands company (“Crystal
Globe”) and Joway Merger Subsidiary Limited, a British Virgin Islands company and a wholly-owned subsidiary of Crystal Globe (“Merger
Sub”). The Merger Agreement provides that, upon the terms and subject to the satisfaction or waiver of the conditions set forth
therein, Merger Sub will be merged with and into Dynamic Elite (the “Merger”), with Dynamic Elite continuing as the surviving
corporation as a wholly-owned subsidiary of Crystal Globe.
Crystal Globe, as the majority shareholder holding
approximately 86.81% of the Company, is also the sole shareholder of Dynamic Elite after the Merger. Mr. Jinghe Zhang, as the President,
Chief Executive Officer, Chairman and Director, and the majority beneficial owner of the Company, also serves as sole shareholder and
executive director of Crystal Globe. As a result, the Company and Dynamic Elite are under common control of Crystal Globe and Mr. Jinghe
Zhang.
Pursuant to the terms of the Merger Agreement,
at the effective time of the Merger (the “Effective Time”) and as a result of the Merger, the ordinary shares of common stock
of Dynamic Elite issued and outstanding immediately prior to the Effective Time, all of which are held by the Company, will be cancelled
and extinguished. In accordance with the Merger Agreement, Crystal Globe has offered a cash consideration of $0.045 per share for outstanding
shares of Joway Health’s common stock (the “Merger Consideration”). As of November 20, 2020, Joway Health reported 20,054,000
shares of common stock outstanding. As a result, Joway Health recognized a loss of $1,340,795 from this transaction.
In January 2021, Joway Health had received $119,070
from Crystal Globe and distributed proportionately to the Company’s minority shareholders, other than Crystal Globe, which represents
2,646,000 shares of Joway Health’s common stock. Since the remaining 17,408,000 shares of Joway Health’s common stock is owned
by Crystal Globe, the $0.045 per share payment for the 17,408,000 shares is offset.
The following is a reconciliation of the deconsolidation:
|
|
Amount
|
|
Selling price
|
|
$
|
902,430
|
|
Disposed assets and liabilities:
|
|
|
|
|
Cash
|
|
|
79,446
|
|
Current assets
|
|
|
1,133,812
|
|
Fixed assets
|
|
|
3,194,533
|
|
Intangible assets
|
|
|
465,007
|
|
Liabilities
|
|
|
(1,977,822
|
)
|
Accumulated other comprehensive income
|
|
|
(651,751
|
)
|
|
|
|
2,243,225
|
|
Loss from disposal of discontinued component, net of income tax
|
|
$
|
(1,340,795
|
)
|
NOTE 5
– RECEIVABLE FROM RELATED PARTY
Receivable from related party consist of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
(Unaudited)
|
|
|
2020
|
|
Crystal Globe
|
|
$
|
-
|
|
|
$
|
119,070
|
|
The receivable from Crystal Globe is related to
the Merger Agreement which is part of the Merger Consideration for Joway Health’s minority shareholders who hold 2,646,000 shares
of Joway Health’s common stock.
In January 2021, Joway Health had received $119,070
from Crystal Globe and distributed proportionately to the Company’s minority shareholders.
NOTE 6– SPECIAL DIVIDEND PAYABLE
As of June 30, 2021 and December 31, 2020, the
Company reported $0 and $119,070 as special dividend payables, respectively. The payables are related to the Merger Agreement which is
part of the Merger Consideration for Joway Health’s minority shareholders who hold 2,646,000 shares of Joway Health’s common
stock.
On November 20, 2020, Joway Health entered into
a Merger Agreement (the “Merger Agreement”) with Dynamic Elite International Limited, a British Virgin Islands company and
a wholly-owned subsidiary of the Company (“Dynamic Elite”), Crystal Globe Limited, a British Virgin Islands company (“Crystal
Globe”) and Joway Merger Subsidiary Limited, a British Virgin Islands company and a wholly-owned subsidiary of Crystal Globe (“Merger
Sub”). The Merger Agreement provides that, upon the terms and subject to the satisfaction or waiver of the conditions set forth
therein, Merger Sub will be merged with and into Dynamic Elite (the “Merger”), with Dynamic Elite continuing as the surviving
corporation as a wholly-owned subsidiary of Crystal Globe.
Crystal Globe, as the majority shareholder holding
approximately 86.81% of the Company, is also the sole shareholder of Dynamic Elite after the Merger. Mr. Jinghe Zhang, as the President,
Chief Executive Officer, Chairman and Director, and the majority beneficial owner of the Company, also serves as sole shareholder and
executive director of Crystal Globe. As a result, the Company and Dynamic Elite are under common control of Crystal Globe and Mr. Jinghe
Zhang.
Pursuant to the terms of the Merger Agreement,
at the effective time of the Merger (the “Effective Time”) and as a result of the Merger, the ordinary shares of common stock
of Dynamic Elite issued and outstanding immediately prior to the Effective Time, all of which are held by the Company, will be cancelled
and extinguished. In accordance with the Merger Agreement, Crystal Globe has offered a cash consideration of $0.045 per share for outstanding
shares of Joway Health’s common stock (the “Merger Consideration”). As of November 20, 2020, Joway Health reported 20,054,000
shares of common stock outstanding.
As a result of the Merger Agreement, Joway Health
needs to distribute proportionately the Merger Consideration to the Company’s shareholders. In January 2021, Joway Health had received
$119,070 from Crystal Globe and distributed proportionately to the Company’s minority shareholders, other than Crystal Globe, which
represents 2,646,000 shares of Joway Health’s common stock. Since the remaining 17,408,000 shares of Joway Health’s common
stock is owned by Crystal Globe, the $0.045 per share payment for the 17,408,000 shares is offset.
NOTE 7 – RELATED PARTY
TRANSACTIONS
Payables due to related parties consist
of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
(Unaudited)
|
|
|
2020
|
|
Jinghe Zhang
|
|
$
|
917
|
|
|
$
|
233,693
|
|
Joway Shengshi
|
|
|
-
|
|
|
|
459,853
|
|
Total
|
|
$
|
917
|
|
|
$
|
693,546
|
|
The amounts owed to related parties are non-interest bearing and have
no specified repayment terms.
Transactions with Jinghe Zhang
The Company is a shell company and has no cash,
Mr. Jinghe Zhang, our President, Chief Executive Officer and director, agreed to advance operating capital to the Company. For the three
months ended June 30, 2021 and 2020, the Company received $59,756 and $71,060 from Mr. Jinghe Zhang, respectively, for its continuing
operating component. For the six months ended June 30, 2021 and 2020, the Company received $63,153 and $133,701 from Mr. Jinghe Zhang,
respectively, for its continuing operating component. For the three months and six months ended June 30, 2021, the Company received $0
from Mr. Jinghe Zhang, respectively, for its discontinued operating component. For the Company’s discontinued operation component,
during the three months and six months ended June 30, 2020, the Company received $96,392 and $120,732 from Mr. Jinghe Zhang, respectively.
On April 28, 2021, Mr. Jinghe Zhang released the
Company from $295,928.47 of indebtedness owed to him from the Company. As of June 30, 2021, the total unpaid principal balance due to
Mr. Jinghe Zhang for advances was $917.
Transactions with Joway Shengshi
Joway Shengshi is a company of the discontinued
operations. Mr. Jinghe Zhang owns 99% of the equity interest in Joway Shengshi. For the three months ended June 30, 2021 and 2020, the
Company received $0 from Joway Shengshi, respectively, for its continuing and discontinued operating components. For the six months ended
June 30, 2021 and 2020, we received $3,844 and $0 of advances from Joway Shengshi, respectively, for our continuing operation component.
For our discontinued operation component, we received $0 from Joway Shengshi for the six months ended June 30, 2021 and 2020.
On April 28, 2021, Joway Shengshi released the
Company from $463,697.67 of indebtedness owed to it from the Company. As of June 30, 2021, the total unpaid principal balance due to Joway
Shengshi for advances was $0.
Disposal of all of Joway Health’s subsidiaries
and VIEs
On November 20, 2020, Joway Health entered into
a Merger Agreement (the “Merger Agreement”) with Dynamic Elite International Limited, a British Virgin Islands company and
a wholly-owned subsidiary of the Company (“Dynamic Elite”), Crystal Globe Limited, a British Virgin Islands company (“Crystal
Globe”) and Joway Merger Subsidiary Limited, a British Virgin Islands company and a wholly-owned subsidiary of Crystal Globe (“Merger
Sub”). The Merger Agreement provides that, upon the terms and subject to the satisfaction or waiver of the conditions set forth
therein, Merger Sub will be merged with and into Dynamic Elite (the “Merger”), with Dynamic Elite continuing as the surviving
corporation as a wholly-owned subsidiary of Crystal Globe.
Crystal Globe, as the majority shareholder holding
approximately 86.81% of the Company, is also the sole shareholder of Dynamic Elite after the Merger. Mr. Jinghe Zhang, as the President,
Chief Executive Officer, Chairman and Director, and the majority beneficial owner of the Company, also serves as sole shareholder and
executive director of Crystal Globe. As a result, the Company and Dynamic Elite are under common control of Crystal Globe and Mr. Jinghe
Zhang.
Pursuant to the terms of the Merger Agreement,
at the effective time of the Merger (the “Effective Time”) and as a result of the Merger, the ordinary shares of common stock
of Dynamic Elite issued and outstanding immediately prior to the Effective Time, all of which are held by the Company, will be cancelled
and extinguished. In accordance with the Merger Agreement, Crystal Globe has offered a cash consideration of $0.045 per share for outstanding
shares of Joway Health’s common stock (the “Merger Consideration”). As of November 20, 2020, Joway Health reported 20,054,000
shares of common stock outstanding.
As a result of the Merger Agreement, Joway Health needs to distribute
proportionately the Merger Consideration to the Company’s shareholders. In January 2021, Joway Health had received $119,070 from
Crystal Globe and distributed proportionately to the Company’s minority shareholders, other than Crystal Globe, which represents
2,646,000 shares of Joway Health’s common stock. Since the remaining 17,408,000 shares of Joway Health’s common stock is owned
by Crystal Globe, the $0.045 per share payment for the 17,408,000 shares is offset.
NOTE 8 – INCOME
TAXES
Upon the Company executed the Merger Agreement
on December 31, 2020, no provision was made for federal income taxes since the Company has significant net operating losses.
The Company’s income tax returns since inception
are subject to audit by regulatory authorities. Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities
in the future. Management is not aware of any such changes that would have a material effect on the Company’s results of operations,
cash flows or financial position. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex
tax laws and regulations. FASB ASC Topic 740, Income Taxes provides that a tax benefit from an uncertain tax position may be recognized
when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or
litigation processes, based on the technical merits. ASC Topic 740 also provides guidance on measurement, derecognition, classification,
interest and penalties, accounting in interim periods, disclosure and transition.
We recognize tax liabilities in accordance with ASC Topic 740 and we
adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Due to the
complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current
estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in
which they are determined.