UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31,
2018
or
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ___________
to ____________
Commission File Number:
0-25765
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China
Senior Living Industry International Holding
Corporation
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(Exact Name of Registrant as
Specified in Its Charter)
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Nevada
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87-0429748
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(State of Other Jurisdiction
of Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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No.28, Xi Hua South Rd.,
High-Tech Zone,
Xian Yang City, Shaanxi
Province, PRC
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712000
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(Address of Principal
Executive Offices)
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(ZIP Code)
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(011) (86)
29-33257666
(Registrant’s Telephone
Number, Including Area Code)
Indicate by check mark whether the
registrant: (1) has filed all reports required to be filed by
Sections 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. Yes
¨ No x
Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during
the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes
¨ No x
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, a 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):
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Large accelerated filer
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¨
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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Smaller reporting company
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x
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Emerging growth company
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¨
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If an emerging growth company, indicate by
check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the
Exchange Act. ¨
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes ¨ No x
As of November 1, 2018, the Registrant had
56,560,007 shares of common stock outstanding.
TABLE OF CONTENTS
Throughout this
Quarterly Report on Form 10-Q, the “Company”, “we,” “us,” and
“our,” refer to China Senior Living Industry International Holding
Corporation, a Nevada corporation and all of its subsidiaries
unless otherwise indicated or the context otherwise requires.
FORWARD-LOOKING
STATEMENTS
This Quarterly Report on Form 10-Q contains
certain forward-looking statements. The statements herein which are
not historical reflect our current expectations and projections
about the Company’s future results, performance, liquidity,
financial condition, prospects and opportunities and are based upon
information currently available to us and our management and our
interpretation of what we believe to be significant factors
affecting our business, including many assumptions about future
events. Such forward-looking statements include statements
regarding, among other things:
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our ability to produce, market and generate
sales of our products and services;
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our ability to develop and/or introduce new
products and services;
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our projected future sales, profitability
and other financial metrics;
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our future financing plans;
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our anticipated needs for working
capital;
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the anticipated trends in our industry;
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our ability to expand our sales and
marketing capability;
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acquisitions of other companies or assets
that we might undertake in the future;
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competition existing today or that will
likely arise in the future; and
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other factors discussed elsewhere
herein.
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Forward-looking statements,
which involve assumptions and describe our future plans,
strategies, and expectations, are generally identifiable by use of
the words “may,” “should,” “will,” “plan,” “could,” “target,”
“contemplate,” “predict,” “potential,” “continue,” “expect,”
“anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project”
or the negative of these words or other variations on these or
similar words. Actual results, performance, liquidity, financial
condition and results of operations, prospects and opportunities
could differ materially from those expressed in, or implied by,
these forward-looking statements as a result of various risks,
uncertainties and other factors, including the ability to raise
sufficient capital to continue the Company’s operations. These
statements may be found under Part I, Item 2-“Management’s
Discussion and Analysis of Financial Condition and Results of
Operations,” as well as elsewhere in this Quarterly Report on Form
10-Q generally. Actual events or results may differ materially from
those discussed in forward-looking statements as a result of
various factors, including, without limitation, matters described
in this Quarterly Report on Form 10-Q.
In light of these risks and uncertainties,
there can be no assurance that the forward-looking statements
contained in this Quarterly Report on Form 10-Q will in fact
occur.
Potential investors should not place undue
reliance on any forward-looking statements. Except as expressly
required by the federal securities laws, there is no undertaking to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events, changed
circumstances or any other reason.
The forward-looking statements in this
Quarterly Report on Form 10-Q represent our views as of the date of
this Quarterly Report on Form 10-Q. Such statements are presented
only as a guide about future possibilities and do not represent
assured events, and we anticipate that subsequent events and
developments will cause our views to change. You should, therefore,
not rely on these forward-looking statements as representing our
views as of any date after the date of this Quarterly Report on
Form 10-Q.
This Quarterly Report on Form 10-Q also
contains estimates and other statistical data prepared by
independent parties and by us relating to market size and growth
and other data about our industry. These estimates and data involve
a number of assumptions and limitations, and potential investors
are cautioned not to give undue weight to these estimates and data.
We have not independently verified the statistical and other
industry data generated by independent parties and contained in
this Quarterly Report on Form 10-Q. In addition, projections,
assumptions and estimates of our future performance and the future
performance of the industries in which we operate are necessarily
subject to a high degree of uncertainty and risk.
Potential investors should not make an
investment decision based solely on our projections, estimates or
expectations.
PART I.
FINANCIAL
INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
China Senior Living Industry International
Holding Corporation
Unaudited Condensed
Consolidated Financial Statements
March 31, 2018 and December
31, 2017
(Stated in U.S. Dollars)
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
and Stockholders of
China Senior Living Industry
International Holding Corporation
Results of Review of
Financial Statements
We have reviewed the
accompanying condensed consolidated balance sheet of China Senior
Living Industry International Holding Corporation and its
subsidiaries (the Company) as of March 31, 2018, the related
condensed consolidated statements of operations and comprehensive
loss for the three months ended March 31, 2018 and 2017, and the
condensed consolidated statements of cash flows for the three
months ended March 31, 2018 and 2017, including the related notes
(collectively referred to as the “interim consolidated financial
statements”). Based on our reviews, we are not aware of any
material modifications that should be made to the accompanying
interim consolidated financial statements for them to be in
conformity with accounting principles generally accepted in the
United States of America.
We have previously audited, in accordance
with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheet of the
Company as of December 31, 2017, and the related statements of
operations, comprehensive loss, changes in shareholders’ equity and
cash flows for the year then ended (not presented herein), and in
our report dated October 4, 2018, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 2017 is fairly stated
in all material respects in relation to the consolidated financial
statements from which it has been derived.
The accompanying
consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note
15 to the consolidated financial statements, the Company had
incurred substantial accumulated deficit, which raises substantial
doubt about its ability to continue as a going concern.
Management’s plan in regards to these matters are described in Note
15. These consolidated financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
Basis for Review
Results
These interim consolidated
financial statements are the responsibility of the Company’s
management. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB. We conducted our review in accordance
with the standards of the PCAOB. A review of interim financial
information consists principally of applying analytical procedures
and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit
conducted in accordance with the standards of the PCAOB, the
objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not
express such an opinion.
WWC, P.C.
Certified Public
Accountants
San Mateo, CA
October 30, 2018
China Senior Living Industry International
Holding Corporation
Condensed Consolidated
Balance Sheets (Unaudited)
As of March 31, 2018 and
December 31, 2017
(Stated in U.S. Dollars)
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3/31/2018
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12/31/2017
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ASSETS
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Current assets
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Cash and cash equivalents
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$ |
23,630 |
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$ |
24,962 |
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Accounts receivable – related
party, net
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3,968 |
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2,936 |
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Related party receivable
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1,256,977 |
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1,159,477 |
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Total current assets
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1,284,575 |
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1,187,375 |
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Non-current asset
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Intangible asset, net
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147 |
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141 |
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TOTAL ASSETS
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$ |
1,284,722 |
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$ |
1,187,516 |
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LIABILITIES AND STOCKHOLDERS’
EQUITY
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Current
liabilities
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Accrued and other
liabilities
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$ |
173,315 |
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$ |
158,199 |
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Related party
advances
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1,111 |
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928 |
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Related party payable
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379,663 |
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378,390 |
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TOTAL
LIABILITIES
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$ |
554,089 |
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$ |
537,517 |
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COMMITMENTS AND
CONTINGENCIES
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Stockholders’
equity
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Preferred stock, $0.001
par value; 10,000,000 shares authorized; 0 shares issued and
outstanding
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$ |
- |
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$ |
- |
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Common stock, $0.001 par value;
200,000,000 shares authorized, 56,560,007 shares issued and
outstanding as of March 31, 2018 and December 31, 2017,
respectively
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56,560 |
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56,560 |
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Additional paid in
capital
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1,083,474 |
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1,083,474 |
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Statutory reserve
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69,967 |
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69,967 |
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Accumulated other
comprehensive income/(loss)
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37,180 |
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(4,872 |
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Accumulated deficit
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(516,548 |
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(555,130 |
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Total Stockholders’
equity
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$ |
730,633 |
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$ |
649,999 |
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TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY
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$ |
1,284,722 |
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$ |
1,187,516 |
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See Accompanying Notes to the
Financial Statements and Accountant’s Report
China Senior Living Industry International
Holding Corporation
Condensed Consolidated
Statements of Income and Comprehensive Income (Unaudited)
For the three-month period
ended March 31, 2018 and 2017
(Stated in U.S.
Dollars)
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3/31/2018
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3/31/2017
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Revenues – related party
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$ |
169,354 |
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$ |
118,397 |
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Cost of revenues
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117,018 |
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78,171 |
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Gross profit
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52,336 |
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40,226 |
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Operating expenses
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General and administrative expenses
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13,755 |
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4,108 |
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Operating income
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38,581 |
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36,118 |
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Other income
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Interest income
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1 |
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2 |
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Total other income
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1 |
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2 |
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Earnings before tax
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38,582 |
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36,120 |
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Income tax
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- |
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- |
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Net income
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$ |
38,582 |
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$ |
36,120 |
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Other comprehensive income:
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Foreign currency translation
gain
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42,052 |
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7,040 |
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Comprehensive income
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$ |
80,634 |
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$ |
43,160 |
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Earnings per share
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Basic
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$ |
0.00 |
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$ |
0.00 |
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Diluted
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$ |
0.00 |
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$ |
0.00 |
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Weighted average number of
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Common shares outstanding
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Basic
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56,560,007 |
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56,560,007 |
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Diluted
|
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|
56,560,007 |
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|
56,560,007 |
|
See Accompanying Notes to the
Financial Statements and Accountant’s Report
China Senior Living Industry International
Holding Corporation
Condensed Consolidated
Statements of Cash Flows (Unaudited)
For the three-month period
ended March 31, 2018 and 2017
(Stated in U.S. Dollars)
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3/31/2018
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3/31/2017
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Cash flows from operating activities
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Net income
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$ |
38,582 |
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$ |
36,120 |
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Increase in related party
receivable
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(55,976 |
) |
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(13,596 |
) |
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Increase in accrued
liabilities
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14,287 |
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|
81 |
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Increase/(decrease) in related
party advances
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|
148 |
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(2,903 |
) |
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Net cash (used in)/provided by
operating activities
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(2,959 |
) |
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19,702 |
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Cash flows from financing activities
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Increase in related party
payable
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|
755 |
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|
1,874 |
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Net cash provided by investing
activities
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|
755 |
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1,874 |
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Net (decrease)/increase of cash and cash
equivalents
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(2,204 |
) |
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21,576 |
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Effect of foreign currency translation on
cash and cash equivalents
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|
872 |
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6 |
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Cash and cash equivalents – beginning of
period
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24,962 |
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|
4,270 |
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Cash and cash equivalents – end of
period
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$ |
23,630 |
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$ |
25,852 |
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Supplementary cash flow information:
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Interest received
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$ |
1 |
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$ |
2 |
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Interest paid
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$ |
- |
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$ |
- |
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Income tax paid
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$ |
- |
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$ |
- |
|
See Accompanying Notes to the
Financial Statements and Accountant’s Report
China Senior Living Industry International
Holding Corporation
Notes to Condensed
Consolidated Financial Statements (Unaudited)
March 31, 2018 and December
31, 2017
(Stated in U.S. Dollars)
| 1. |
ORGANIZATION, BASIS OF PRESENTATION, AND
PRINCIPAL ACTIVITIES |
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(a) |
Organization history |
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China Senior Living Industry International
Holding Corporation (the “Company”), formerly known as China
Forestry, Inc., was incorporated under the laws of the State of
Nevada on January 13, 1986 under the name of Patriot Investment
Corporation. The Company engaged in the business of plantation and
sale of garden plants.
On July 15, 2010, the
Company entered into a Share Exchange with Financial International
(Hong Kong) Holdings Co. Limited (“FIHK”).
From April 1, 2010 to May
20, 2011, FIHK had a series of contractual arrangements with
Hanzhong Hengtai Bio-Tech Limited (“Hengtai”), a company organized
and existing under the laws of the People’s Republic of China that
is engaged in the plantation and sale of garden plants used for
landscaping, including Chinese Yew, Aesculus, Dove Tree and
Dendrobium.
On May 20, 2011, FIHK
exercised its rights under the Exclusive Option Agreement to direct
Xi’an Qi Ying Senior Living, Inc. (formerly known as Xi’an Qi Ying
Bio-Tech Limited), a company organized and existing under the laws
of the People’s Republic of China (“Qi Ying”), the indirect wholly
owned subsidiary of FIHK, to acquire all of the equity capital of
Hengtai. The Exclusive Option Agreement was exercised in a manner
that the shareholders of Hengtai transferred all of their equity
capital in Hengtai to Qi Ying. At or about the same time, Spone
Limited, a company organized and existing under the laws of the
Hong Kong SAR of the People’s Republic of China (“Spone”), acquired
all of the capital stock of Qi Ying, so that it became a direct
wholly owned subsidiary of Spone. FIHK then acquired all of the
capital stock of Spone, so that it became a direct wholly owned
subsidiary of FIHK. As a result, Hengtai became an indirect wholly
owned subsidiary of FIHK and also accordingly became the indirect
wholly owned subsidiary of us.
On June 15, 2012, the
Company effected a 1-for-10 reverse stock split of the Company’s
issued and outstanding shares of common stock. The par value and
number of authorized shares of the common stock remained unchanged.
All references to number of shares and per share amounts included
in these consolidated financial statements and the accompanying
notes have been adjusted to reflect the reverse stock split
retroactively.
On September 8, 2015, the
Company changed its name from China Forestry, Inc. to China Senor
Living Industry International Holding Corporation.
On September 29, 2015, Qi
Ying entered into a set of VIE Agreements with Shaanxi Yifuge
Investments and Assets Co, Ltd (“YFG”) and YFG became the Company’s
affiliated operating company in China. As consideration for the
entry of the VIE agreement, the Company issued 33,600,000 shares of
common stock to Jingcao Wu, a director of the Company. As a result,
YFG became a variable interest entity (“VIE”) and was included in
the consolidated group.
|
China Senior Living Industry
International Holding Corporation
Notes to Condensed
Consolidated Financial Statements (Unaudited)
March 31, 2018 and December
31, 2017
(Stated in U.S. Dollars)
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|
On September 29, 2015, the Board of Director
also approved the transfer of Qi Ying’s equity ownership in Hengtai
to Zhenheng Shao, Zhenzhong Shao, and Yongli Yang.
As a result, we ceased the
business of plantation and sale of garden plants and became engaged
in senior living and senior care business through YFG.
On December 31, 2015, YFG
changed its name from Shaanxi Yifuge Investments and Assets Co.,
Ltd to Shaanxi Jinjiangshan Senior Living Management Co. Ltd
(“JJS”).
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(b) |
Basis of presentation |
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The Company’s consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles in the United States of America (“US
GAAP”).
This basis of accounting
differs in certain material respects from that used for the
preparation of the books of account of the Company’s principal
subsidiaries, which are prepared in accordance with the accounting
principles and the relevant financial regulations applicable to
enterprises with limited liabilities established in the People’s
Republic of China (“PRC”) or in the accounting standards used in
the places of their domicile. The accompanying consolidated
financial statements reflect necessary adjustments not recorded in
the books of account of the Company’s subsidiaries to present them
in conformity with US GAAP.
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(c)
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Principal activities
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|
|
|
|
The Company is engaged in rendering
management services to senior homes by providing healthcare,
medical staff, meal preparation, and general care for the elderly
in Xianyang City, Shaanxi Province, People’s Republic of China.
|
| 2. |
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES |
|
|
(a) |
Method of Accounting |
|
|
|
|
|
|
|
The Company maintains its general ledger and
journals with the accrual method accounting for financial reporting
purposes. The financial statements and notes are representations of
management. Accounting policies adopted by the Company conform to
generally accepted accounting principles in the United States of
America and have been consistently applied in the presentation of
financial statements, which are compiled on the accrual basis of
accounting.
|
China Senior Living Industry
International Holding Corporation
Notes to Condensed
Consolidated Financial Statements (Unaudited)
March 31, 2018 and December
31, 2017
(Stated in U.S. Dollars)
|
|
(b) |
Principles of consolidation |
|
|
|
|
|
|
|
The accompanying consolidated financial
statements which include the Company, its wholly owned
subsidiaries, FIHK, Spone, Qi Ying, and its variable interest
entity, JJS, are compiled in accordance with generally accepted
accounting principles in the United States of America. All
significant inter-company accounts and transactions have been
eliminated in consolidation. In accordance with FASB ASC 810,
Consolidation of Variable Interest Entities, variable interest
entities, or VIEs, are generally entity that lack sufficient equity
to finance their activities without additional financial support
from other parties or whose equity holders lack adequate decision
making ability. All VIEs with which the Company is involved must be
evaluated to determine the primary beneficiary of the risks and
rewards of the VIE. The primary beneficiary is required to
consolidate the VIE for financial reporting purposes. In connection
with the adoption of this ASC 810, the Company concludes that JJS
is a VIE and Qi Ying is the primary beneficiary. The financial
statements of JJS are then consolidated with Qi Ying’s financial
statements.
As of March 31, 2018, the
detailed identities of the consolidating subsidiaries are as
follows:
|
|
|
Place of
|
|
Attributable
|
|
Registered
|
|
Name
of Company
|
|
incorporation
|
|
equity interest
%
|
|
capital
|
|
Financial International (Hong Kong)
|
|
Hong Kong
|
|
100%
|
|
HKD
|
|
Holdings Company Limited
|
|
|
|
|
|
10,000,000
|
|
|
|
|
|
|
|
|
Spone Limited
|
|
Hong Kong
|
|
100%
|
|
HKD 1
|
|
|
|
|
|
|
|
|
Xi’an Qi Ying Senior Living, Inc
|
|
PRC
|
|
100%
|
|
RMB 50,000
|
|
(“Qi Ying”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shaanxi Jinjiangshan Senior Living
|
|
PRC
|
|
Variable Interest Entity,
with Qi
|
|
RMB
|
|
Management Co. Ltd
|
|
|
|
Ying as the primary
beneficiary
|
|
3,000,000
|
|
|
(c) |
Use of estimates |
|
|
|
|
|
|
|
The preparation of the financial statements
in conformity with generally accepted accounting principles in the
United States of America 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 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; however, actual results could differ
materially from those estimates.
|
|
|
(d) |
Cash and cash equivalents |
|
|
|
|
|
|
|
The Company considers all highly liquid
investments purchased with original maturities of three months or
less to be cash equivalents.
|
|
|
(e) |
Accounts r eceivable |
|
|
|
|
|
|
|
Accounts receivable are recognized and
carried at the original invoice amount less allowance for any
uncollectible amounts. An estimate for doubtful accounts is made
when collection of the full amount is no longer probable. Bad debts
are written off as incurred.
|
China Senior Living Industry
International Holding Corporation
Notes to Condensed
Consolidated Financial Statements (Unaudited)
March 31, 2018 and December
31, 2017
(Stated in U.S. Dollars)
|
|
(f) |
Revenue recognition |
|
|
|
|
|
|
|
The Company records revenue when persuasive
evidence of an arrangement exists, services have been rendered, the
sales price to the customer is fixed or determinable, and
collectability is reasonably assured.
The Company's revenue
consists of management services rendered to senior homes. Service
revenue is recognized when the service is performed.
|
|
|
(g) |
Cost of revenue |
|
|
|
|
|
|
|
The cost for providing management services
is comprised of direct labor wages and purchasing cost of food for
preparing meals for the seniors.
|
|
|
(h) |
General & administrative expenses |
|
|
|
|
|
|
|
General and administrative expenses include
general overhead such as the office rental and utilities.
|
|
|
(i) |
Advertising |
|
|
|
|
|
|
|
All advertising costs are expensed as
incurred. For the three-month period ended March 31, 2018 and 2017,
there was no advertising costs incurred.
|
|
|
(j) |
Income taxes |
|
|
|
|
|
|
|
The Company accounts for income tax using an
asset and liability approach and allows for recognition of deferred
tax benefits in future years. Under the asset and liability
approach, deferred taxes are provided for the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes. A valuation allowance is provided for
deferred tax assets if it is more likely than not these items will
either expire before the Company is able to realize their benefits,
or that future realization is uncertain.
The Company has implemented
ASC Topic 740, “Accounting for Income Taxes.” Income tax
liabilities computed according to the People’s Republic of China
(PRC) tax laws are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently
due plus deferred taxes related primarily to differences between
the basis of fixed assets and intangible assets for financial and
tax reporting. The deferred tax assets and liabilities represent
the future tax return consequences of those differences, which will
be either taxable or deductible when the assets and liabilities are
recovered or settled. Deferred taxes also are recognized for
operating losses that are available to offset future income taxes.
A valuation allowance is created to evaluate deferred tax assets if
it is more likely than not that these items will either expire
before the Company is able to realize that tax benefit, or that
future realization is uncertain.
Effective January 1, 2008,
the PRC government implemented a new 25% tax rate across the board
for all enterprises regardless of whether domestic or foreign
enterprise without any tax holiday which is defined as "two-year
exemption followed by three-year half exemption" hitherto enjoyed
by tax payers. As a result of the new tax law of a standard 25% tax
rate, tax holidays terminated as of December 31, 2007. However, the
PRC government has established a set of transition rules to allow
enterprises that were already participating in tax holidays before
January 1, 2008, to continue enjoying the tax holidays until they
had been fully utilized.
In order to encourage enterprises to operate
senior homes, the PRC tax law provides a tax holiday by waiving the
income tax for entities operating in this industry. According to
the Minfa (2015) No. 33 “Advice to Encourage Private Capital to
Participate in the Development of Pension Services”, jointly issued
by ten ministries which include the Ministry of Civil Affairs and
the Ministry of Finance of the People’s Republic of China, the
Company is entitled to benefit from the sales tax exemption and
business tax exemption policy. As such, the Company is not subject
to income tax as of March 31, 2018.
|
China Senior Living Industry
International Holding Corporation
Notes to Condensed
Consolidated Financial Statements (Unaudited)
March 31, 2018 and December
31, 2017
(Stated in U.S. Dollars)
|
|
(k) |
Stock-based compensation |
|
|
|
|
|
|
|
We recognize compensation expense for
stock-based compensation in accordance with ASC Topic 718. For
employee stock-based awards, we calculate the fair value of the
award on the date of grant using the Black-Scholes method for stock
options and the quoted price of our common stock. The expense is
recognized over the service period for awards expected to vest. For
nonemployee stock-based awards, we calculate the fair value of the
award on the date of grant in the same manner as employee awards.
However, the awards are revalued at the end of each reporting
period and the pro rata compensation expense is adjusted
accordingly until such time the nonemployee award is fully vested,
at which time the total compensation recognized to date equals the
fair value of the stock-based award as calculated on the
measurement date, which is the date at which the award recipient’s
performance is complete. The estimation of stock-based awards that
will ultimately vest requires judgment, and to the extent actual
results or updated estimates differ from original estimates, such
amounts are recorded as a cumulative adjustment in the period
estimates are revised. We consider many factors when estimating
expected forfeitures, including types of awards, employee class,
and historical experience.
The Black-Scholes option
valuation model is used to estimate the fair value of the warrants
or options granted. The model includes subjective input assumptions
that can materially affect the fair value estimates. The model was
developed for use in estimating the fair value of traded options or
warrants. The expected volatility is estimated based on the most
recent historical period of time equal to the weighted average life
of the warrants or options granted.
|
|
|
(l) |
Earnings per share |
|
|
|
|
|
|
|
Basic earnings per share is computed on the
basis of the weighted average number of common stock outstanding
during the period. Diluted earnings per share is computed on the
basis of the weighted average number of common stock and common
stock equivalents outstanding. Dilutive securities having an
anti-dilutive effect on diluted earnings per share are excluded
from the calculation.
Dilution is computed by
applying the treasury stock method for options and warrants. Under
this method, options and warrants are assumed to be exercised at
the beginning of the period (or at the time of issuance, if later),
and as if funds obtained thereby were used to purchase common stock
at the average market price during the period.
|
|
|
(m) |
Statutory reserves |
|
|
|
|
|
|
|
Statutory reserves are referring to the
amount appropriated from the net income in accordance with laws or
regulations, which can be used to recover losses and increase
capital, as approved, and are to be used to expand production or
operations. The Company transferred $- and $16,373 from retained
earnings to statutory reserves for the three-month period ended
March 31, 2018 and for the year ended December 31, 2017,
respectively. PRC laws prescribe that an enterprise operating at a
profit, must appropriate, on an annual basis, an amount equal to
10% of its profit. Such an appropriation is necessary until the
reserve reaches a maximum that is equal to 50% of the enterprise’s
PRC registered capital. The amount is not available for payment of
dividends.
|
China Senior Living Industry
International Holding Corporation
Notes to Condensed
Consolidated Financial Statements (Unaudited)
March 31, 2018 and December
31, 2017
(Stated in U.S. Dollars)
|
|
(n) |
Foreign currency translation |
|
|
|
|
|
|
|
The accompanying financial statements are
presented in United States dollars. The functional currencies of
the Company are the Renminbi (RMB) and the Hong Kong Dollars (HKD).
The financial statements are translated into United States dollars
from the functional currencies at year-end exchange rates as to
assets and liabilities and average exchange rates as to revenues
and expenses. Capital accounts are translated at their historical
exchange rates when the capital transactions occurred.
|
|
|
|
3/31/2018
|
|
|
12/31/2017
|
|
|
3/31/2017
|
|
|
Period end/Year end RMB:
|
|
|
6.2802 |
|
|
|
6.5064 |
|
|
|
6.8905 |
|
|
US$ exchange rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average period/yearly RMB:
|
|
|
6.3566 |
|
|
|
6.7570 |
|
|
|
6.8882 |
|
|
US$ exchange rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period end/Year end HKD:
|
|
|
7.8480 |
|
|
|
7.8144 |
|
|
|
7.7705 |
|
|
US$ exchange rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average period/yearly HKD:
|
|
|
7.8276 |
|
|
|
7.7925 |
|
|
|
7.7602 |
|
|
US$ exchange rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
US Dollars at the rates used in translation.
|
|
|
|
|
|
|
(o) |
Financial Instruments |
|
|
|
|
|
|
|
The Company’s financial instruments,
including cash and equivalents, accounts and other receivables,
accounts and other payables, accrued liabilities and short-term
debt, have carrying amounts that approximate their fair values due
to their short maturities. ASC Topic 820, “Fair Value Measurements
and Disclosures,” requires disclosure of the fair value of
financial instruments held by the Company. ASC Topic 825,
“Financial Instruments,” defines fair value, and establishes a
three-level valuation hierarchy for disclosures of fair value
measurement that enhances disclosure requirements for fair value
measures. The carrying amounts reported in the consolidated balance
sheets for receivables and current liabilities each qualify as
financial instruments and are a reasonable estimate of their fair
values because of the short period of time between the origination
of such instruments and their expected realization and their
current market rate of interest. The three levels of valuation
hierarchy are defined as follows:
|
|
|
·
|
Level 1 inputs to the valuation methodology are
quoted prices for identical assets or liabilities in active
markets. |
|
|
|
|
|
|
·
|
Level 2 inputs to the valuation methodology
include quoted prices for similar assets and liabilities in active
markets, and inputs that are observable for the asset or liability,
either directly or indirectly, for substantially the full term of
the financial instrument. |
|
|
|
|
|
|
·
|
Level 3 inputs to the valuation methodology are
unobservable and significant to the fair value measurement. |
China Senior Living Industry
International Holding Corporation
Notes to Condensed
Consolidated Financial Statements (Unaudited)
March 31, 2018 and December
31, 2017
(Stated in U.S. Dollars)
|
|
|
The Company analyzes all financial
instruments with features of both liabilities and equity under ASC
480, “Distinguishing Liabilities from Equity,” and ASC 815.
As of March 31, 2018 and
December 31, 2017, the Company did not identify any assets and
liabilities whose carrying amounts were required to be adjusted in
order to present them at fair value.
|
|
|
|
|
|
|
(p) |
Commitments and contingencies |
|
|
|
|
|
|
|
Liabilities for loss contingencies arising
from claims, assessments, litigation, fines and penalties and other
sources are recorded when it is probable that a liability has been
incurred and the amount of the assessment can be reasonably
estimated.
|
|
|
(q) |
Comprehensive income |
|
|
|
|
|
|
|
Comprehensive income is defined to include
all changes in equity except those resulting from investments by
owners and distributions to owners. Among other disclosures, all
items that are required to be recognized under current accounting
standards as components of comprehensive income are required to be
reported in a financial statement that is presented with the same
prominence as other financial statements. The Company’s current
component of other comprehensive income includes the foreign
currency translation adjustment and unrealized gain or loss.
The Company uses FASB ASC
Topic 220, “Reporting Comprehensive Income”. Comprehensive income
is comprised of net income and all changes to the statements of
stockholders’ equity, except the changes in paid-in capital and
distributions to stockholders due to investments by stockholders.
Comprehensive income for the three-month period ended March 31,
2018 and 2017 included net income and foreign currency translation
adjustments.
|
|
|
(r) |
Subsequent events |
|
|
|
|
|
|
|
The Company evaluated for subsequent events
through the issuance date of the Company’s financial
statements.
|
|
|
(s) |
Unaudited interim financial
information |
|
|
|
|
|
|
|
These unaudited interim condensed
consolidated financial statements have been prepared in accordance
with GAAP for interim financial reporting and the rules and
regulations of the Securities and Exchange Commission that permit
reduced disclosure for interim periods. Therefore, certain
information and footnote disclosures normally included in financial
statements prepared in accordance with GAAP have been condensed or
omitted. In the opinion of management, all adjustments of a normal
recurring nature necessary for a fair presentation of the financial
position, results of operations and cash flows for the periods
presented have been made. The results of operations for the interim
periods presented are not necessarily indicative of the results to
be expected for the year ending December 31, 2018.
The consolidated balance
sheets and certain comparative information as of December 31, 2017
are derived from the audited consolidated financial statements and
related notes for the year ended December 31, 2017 (“2017 Annual
Financial Statements”), included in the Company’s 2017 Annual
Report on Form 10-K. These unaudited interim condensed consolidated
financial statements should be read in conjunction with the 2017
Annual Financial Statements.
|
China Senior Living Industry
International Holding Corporation
Notes to Condensed
Consolidated Financial Statements (Unaudited)
March 31, 2018 and December
31, 2017
(Stated in U.S. Dollars)
|
|
(t) |
Recent accounting pronouncements |
|
|
|
|
|
|
|
On February 25, 2016, the FASB issued ASU
2016-02 “Leases (Topic 842)”, its new standard on accounting for
leases. ASU 2016-02 introduces a lessee model that brings most
leases on the balance sheet. The new standard also aligns many of
the underlying principles of the new lessor model with those in ASC
606, the FASB’s new revenue recognition standard (e.g., those
related to evaluating when profit can be recognized).
Furthermore, the ASU
addresses other concerns related to the current leases model. For
example, the ASU eliminates the requirement in current U.S. GAAP
for an entity to use bright-line tests in determining lease
classification. The standard also requires lessors to increase the
transparency of their exposure to changes in value of their
residual assets and how they manage that exposure. The new model
represents a wholesale change to lease accounting. As a result,
entities will face significant implementation challenges during the
transition period and beyond, such as those related to:
|
|
|
· |
Applying judgment and estimating. |
|
|
|
|
|
|
· |
Managing the complexities of data collection,
storage, and maintenance. |
|
|
|
|
|
|
· |
Enhancing information technology systems to ensure
their ability to perform the calculations necessary for compliance
with reporting requirements. |
|
|
|
|
|
|
· |
Refining internal controls and other business
processes related to leases. |
|
|
|
|
|
|
|
Determining whether debt covenants are
likely to be affected and, if so, working with lenders to avoid
violations.
|
|
|
· |
Addressing any income tax implications. |
|
|
|
The new guidance will be effective for public
business entities for annual periods beginning after December 15,
2018 (e.g., calendar periods beginning on January 1, 2019), and
interim periods therein. |
|
|
|
|
|
|
|
On March 17, 2016, the FASB issued ASU
2016-08 “Revenue from Contracts with Customers (Topic 606):
Principal versus Agent Considerations (Reporting Revenue Gross
versus Net)”, which amends the principal-versus-agent
implementation guidance and illustrations in the Board’s new
revenue standard (ASU 2014-09). The FASB issued the ASU in response
to concerns identified by stakeholders, including those related to
(1) determining the appropriate unit of account under the revenue
standard’s principal-versus-agent guidance and (2) applying the
indicators of whether an entity is a principal or an agent in
accordance with the revenue standard’s control principle. Among
other things, the ASU clarifies that an entity should evaluate
whether it is the principal or the agent for each specified good or
service promised in a contract with a customer. As defined in the
ASU, a specified good or service is “a distinct good or service (or
a distinct bundle of goods or services) to be provided to the
customer.” Therefore, for contracts involving more than one
specified good or service, the entity may be the principal for one
or more specified goods or services and the agent for others.
The ASU has the same
effective date as the new revenue standard (as amended by the
one-year deferral and the early adoption provisions in ASU
2015-14). In addition, entities are required to adopt the ASU by
using the same transition method they used to adopt the new revenue
standard.
Unless otherwise indicated,
the Company is currently evaluating the impact that the
pronouncements will have on the Company’s consolidated financial
statements.
As of March 31, 2018, there
are no other recently issued accounting standards not yet adopted
that would or could have a material effect on the Company’s
consolidated financial statements.
|
China Senior Living Industry
International Holding Corporation
Notes to Condensed
Consolidated Financial Statements (Unaudited)
March 31, 2018 and December
31, 2017
(Stated in U.S. Dollars)
| 3. |
(LOSS)/EARNINGS PER SHARE |
|
|
|
For the three-month
ended
|
|
|
|
|
3/31/2018 |
|
|
3/31/2017
|
|
|
Basic (Loss)/Earnings Per
Share:
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
Net income used in computing basic
|
|
|
|
|
|
|
|
earnings per share
|
|
$ |
38,582 |
|
|
$ |
36,120 |
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
|
|
|
|
|
|
|
|
|
|
outstanding
|
|
|
56,560,007 |
|
|
|
56,560,007 |
|
|
Basic earnings per share:
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per
Share:
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Net income used in computing diluted
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
$ |
38,582 |
|
|
$ |
36,120 |
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
|
|
|
|
|
|
|
|
|
|
outstanding
|
|
|
56,560,007 |
|
|
|
56,560,007 |
|
|
Diluted (loss)/earnings per share
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
| 4. |
ACCOUNTS RECEIVABLE - RELATED PARTY |
|
|
|
|
|
Accounts receivable - related party
consisted of the following as of March 31, 2018 and December 31,
2017:
|
|
|
|
3/31/2018
|
|
|
12/31/2017
|
|
|
Xianyang Yifuge Elderly Apartment Co., Ltd.
(“Xianyang”)
|
|
|
3,968 |
|
|
|
2,936 |
|
|
The balance represents service fees earned that
the Company has not collected as of balance sheet date in
connection with the services rendered to Xianyang during the
period. The balance of the receivable is unsecured, interest-free
and has no fixed terms of repayment. It is neither past due nor
impaired. Management believes that the amount will be repaid in the
next billing cycle, and, therefore, did not provide any allowances
for bad debts during the three-month period ended March 31, 2018
and 2017 Xianyang is controlled by the management of the
Company. |
China Senior Living Industry
International Holding Corporation
Notes to Condensed
Consolidated Financial Statements (Unaudited)
March 31, 2018 and December
31, 2017
(Stated in U.S. Dollars)
| 5. |
RELATED PARTY RECEIVABLES |
|
|
|
|
|
Related party receivables consisted of the
following as of March 31, 2018 and December 31, 2017:
|
|
|
|
3/31/2018
|
|
|
12/31/2017
|
|
|
Wu, Jingmeng
|
|
$ |
1,256,977 |
|
|
$ |
1,159,477 |
|
|
Related party receivable represented the
following: |
|
|
|
|
|
Advances made by the Company to Mr. Wu,
Jingmeng. Mr. Wu is the deputy general manager of the Company. The
funds will be used by Mr. Wu to pay for construction of a second
senior home in Xianyang City, Shaanxi Province. The Company will
provide management services to this new senior home after the
construction is completed. The receivable had no impact on
earnings. The balance of related party receivables is unsecured,
interest-free and has no fixed terms of repayment. It is neither
past due nor impaired. Management believes the amounts are
recoverable.
|
|
|
|
|
6 .
|
INTANGIBLE ASSETS, NET
|
|
|
|
|
|
Intangible assets consisted of the following
as of March 31, 2018 and December 31, 2017:
|
|
|
|
3/31/2018
|
|
|
12/31/2017
|
|
|
Software, at cost
|
|
$ |
366 |
|
|
$ |
353 |
|
|
Less accumulated amortization
|
|
|
(219 |
) |
|
|
(212 |
) |
|
|
|
$ |
147 |
|
|
$ |
141 |
|
|
Amortization expense was not charged for the
three-month period ended March 31, 2018 and 2017. |
|
|
|
|
7 .
|
ACCRUED AND OTHER LIABLITIES
|
|
|
|
|
|
Accrued and other liabilities consisted of
the following as of March 31, 2018 and December 31, 2017:
|
|
|
|
3/31/2018
|
|
|
12/31/2017
|
|
|
Wages payable
|
|
$ |
24,682 |
|
|
$ |
22,566 |
|
|
Accrued professional and consulting fees
|
|
|
148,633 |
|
|
|
135,633 |
|
|
|
|
$ |
173,315 |
|
|
$ |
158,199 |
|
China Senior Living Industry
International Holding Corporation
Notes to Condensed
Consolidated Financial Statements (Unaudited)
March 31, 2018 and December
31, 2017
(Stated in U.S. Dollars)
| 8. |
RELATED PARTY ADVANCES |
|
|
|
|
|
Related party advances consisted of the
following as of March 31, 2018 and December 31, 2017:
|
|
|
|
|
|
|
3/31/2018
|
|
|
12/31/2017
|
|
|
Xianyang Yifuge Elderly Apartment Co., Ltd.
(“Xianyang”)
|
|
$ |
1,111 |
|
|
$ |
928 |
|
|
Related party advances represented advances
received in connection with services that have not yet been
rendered to Xianyang but are expected to be in the future. Xianyang
is controlled by the management of the Company. |
|
|
|
|
9 .
|
RELATED PARTY PAYABLE
|
|
|
|
|
|
Related party payable consisted of the
following as of March 31, 2018 and December 31, 2017:
|
|
|
|
3/31/2018
|
|
|
12/31/2017
|
|
|
Liu, Shengli
|
|
$ |
210,178 |
|
|
$ |
210,178 |
|
|
Xianyang Yifuge Elderly Apartment Co., Ltd.
(“Xianyang”)
|
|
|
169,485 |
|
|
|
168,212 |
|
|
|
|
|
379,663 |
|
|
|
378,390 |
|
|
Mr. Liu, Shengli is the former Chairman,
President, and Director of the company. Mr. Liu had paid some
necessary overseas consulting and advising fees, lawyer fees, and
accounting fees on behalf of the company. The loan is unsecured and
have no fixed terms of repayment, and are therefore deemed payable
on demand. |
|
|
|
|
|
Xianyang is controlled by the management of
the Company. Xianyang from time to time paid some of the
professional fees on behalf of the company. The loan is unsecured
and have no fixed terms of repayment, and are therefore deemed
payable on demand.
|
|
|
|
|
10 .
|
LEASE COMMITMENTS
|
|
|
|
|
|
On January 4, 2013, the Company entered into
an operating lease agreement with a related party leasing for
office space located in Xianyang City, Shaanxi Province. The lease
expires on December 31, 2045. No deposit is paid with this lease.
As of March 31, 2018 and December 31, 2017, the Company had
commitments for future minimum lease payments under a
non-cancelable operating lease as follows:
|
|
Period
|
|
3/31/2018
|
|
|
12/31/2017
|
|
|
Year 1
|
|
$ |
3,057 |
|
|
$ |
2,951 |
|
|
Year 2
|
|
|
3,057 |
|
|
|
2,951 |
|
|
Year 3
|
|
|
3,057 |
|
|
|
2,951 |
|
|
Year 4
|
|
|
3,057 |
|
|
|
2,951 |
|
|
Year 5
|
|
|
3,057 |
|
|
|
2,951 |
|
|
Thereafter
|
|
|
61,447 |
|
|
|
62,202 |
|
|
Total
|
|
$ |
76,732 |
|
|
$ |
76,957 |
|
|
Rental expenses for the three-month period
ended March 31, 2018 and 2017 were $755 and $697, respectively.
Rental expenses are recognized on a straight line basis.
|
China Senior Living Industry
International Holding Corporation
Notes to Condensed
Consolidated Financial Statements (Unaudited)
March 31, 2018 and December
31, 2017
(Stated in U.S. Dollars)
| 11. |
INCOME TAX |
|
|
|
|
|
All of the Company’s operations are in the
PRC, and in accordance with the relevant tax laws and regulations.
The corporate income tax rate in China is 25%.
In order to encourage
enterprises to operate senior homes, PRC tax law provides a tax
holiday by waiving the income tax for entities operating in this
industry. According to the Minfa (2015) No. 33 “Advice to Encourage
Private Capital to Participate in the Development of Pension
Services”, jointly issued by ten ministries which include the
Ministry of Civil Affairs and the Ministry of Finance of the
People’s Republic of China, the Company is entitled to benefit from
the sales tax exemption and business tax exemption policy. As such,
the Company was not subject to income tax as of December 31, 2016.
As of the date of this report, the Company does not expect that
this tax exemption policy will terminate in the near future.
The Company is subject to US
Federal tax laws. The Company has not recognized an income tax
benefit for its operating losses in the United States because the
Company does not expect to commence active operations in the United
States. The tax benefit for the periods presented is offset by a
valuation allowance established against deferred tax assets arising
from the net operating losses and other temporary differences, the
realization of which could not be considered more likely than not.
Deferred tax asset is calculated based on the statutory average
rate of 34%.
FIHK and Spone are
incorporated in Hong Kong and are subject to Hong Kong profits tax
at a tax rate of 16.5%. No provision for Hong Kong profits tax has
been made as FIHK and Spone had no taxable income during the
reporting period. The Company has not recognized an income tax
benefit for its operating losses in Hong Kong because the Company
does not expect to commence active operations in Hong Kong. The tax
benefit for the periods presented is offset by a valuation
allowance established against deferred tax assets arising from the
net operating losses and other temporary differences, the
realization of which could not be considered more likely than not.
Deferred tax asset is calculated based on the statutory average
rate of 16.5%.
The following tables provide
the reconciliation of the differences between the statutory and
effective tax expenses for the three-month period ended March 31,
2018 and 2017:
|
|
|
|
3/31/2018
|
|
|
3/31/2017
|
|
|
Income attributed to PRC operations
|
|
$ |
51,582 |
|
|
$ |
37,366 |
|
|
Loss attributed to US and HK entities
|
|
|
(13,000 |
) |
|
|
(1,246 |
) |
|
Income/(loss) before tax
|
|
$ |
38,582 |
|
|
$ |
36,120 |
|
|
|
|
|
|
|
|
|
|
|
|
PRC Statutory Tax at 25% Rate
|
|
|
12,895 |
|
|
|
9,030 |
|
|
Effect of tax exemption granted
|
|
|
(12,895 |
) |
|
|
(9,030 |
) |
|
Income tax
|
|
|
- |
|
|
|
- |
|
|
Per Share Effect of Tax Exemption |
|
|
|
3/31/2018
|
|
|
3/31/2017
|
|
|
Effect of tax exemption granted
|
|
$ |
12,895 |
|
|
$ |
9,030 |
|
|
Weighted-Average Shares Outstanding
Basic
|
|
|
56,560,007 |
|
|
|
56,560,007 |
|
|
Per share effect
|
|
$ |
0.00 |
|
|
|
0.00 |
|
China Senior Living Industry
International Holding Corporation
Notes to Condensed
Consolidated Financial Statements (Unaudited)
March 31, 2018 and December
31, 2017
(Stated in U.S. Dollars)
|
The difference between the U.S. federal statutory
income tax rate and the Company’s effective tax rate was as follows
for the periods ended March 31, 2018 and 2017: |
|
|
|
3/31/2018
|
|
|
3/31/2017
|
|
|
U.S. federal statutory income tax rate
|
|
|
34 |
% |
|
|
34 |
% |
|
Lower rates in PRC, net
|
|
|
(9 |
%) |
|
|
(9 |
%) |
|
Tax holiday for senior care industry
|
|
|
(25 |
%) |
|
|
(25 |
%) |
|
The Company’s effective tax rate
|
|
|
0 |
% |
|
|
0 |
% |
|
|
On December 22, 2017, the United States
enacted the Tax Cuts and Jobs Act (the “Act”) resulting in
significant modifications to existing law. The Company has
considered the accounting impact of the effects of the Act during
the year ended December 31, 2017 including a reduction in the
corporate tax rate from 34% to 21% among other changes.
|
|
|
|
| 12. |
RELATED PARTY TRANSACTION |
|
|
|
|
|
For the three-month period ended March 31,
2018 and 2017, the Company had one client which represented 100% of
the revenue. The client is a related party. The related party is
controlled by the management of the Company:
|
|
|
|
For the
three-month
period ended
|
|
|
|
|
3/31/2018
|
|
|
3/31/2017
|
|
|
Xianyang Yifuge Elderly Apartment Co., Ltd.
(“Xianyang”)
|
|
$ |
169,354 |
|
|
$ |
118,397 |
|
| 13. |
CONCENTRATIONS AND RISKS |
|
|
|
|
|
A. Concentration
As of March 31, 2018, the
Company had one client which represented 100% of the revenue. The
client is a related party. The related party is controlled by the
management of the Company.
As of March 31, 2018, the
Company has a material balance due from a related party. There is a
concentration risk if the balance is not repaid and would create a
material impact in the Company’s financial position and
liquidity.
Cash deposits with banks are
held in financial institutions in China, which are insured with
deposit protection up to RMB500,000 (approximately $79,615).
Accordingly, the Company does not have a concentration of credit
risk related to bank deposits. The Company has not experienced any
losses in such accounts and believes it is not exposed to
significant credit risk.
|
China Senior Living Industry
International Holding Corporation
Notes to Condensed
Consolidated Financial Statements (Unaudited)
March 31, 2018 and December
31, 2017
(Stated in U.S. Dollars)
|
|
B. Economic and Political Risks
The Company’s operations are
mainly conducted in the PRC. Accordingly, the Company’s business,
financial condition, and results of operations may be influenced by
changes in the political, economic, and legal environments in the
PRC.
The Company’s operations in
the PRC are subject to special considerations and significant risks
not typically associated with companies in North America and
Western Europe. These include risks associated with, among others,
the political, economic and legal environment and foreign currency
exchange. The Company’s results may be adversely affected by
changes in the political and social conditions in the PRC, and by
changes in governmental policies with respect to laws and
regulations, anti-inflationary measures, currency conversion,
remittances abroad, and rates and methods of taxation, among other
things.
|
|
|
|
| 14. |
SEGMENT INFORMATION |
|
|
|
|
|
As of and for the three-month period ended
March 31, 2018 and 2017, all revenues of the Company represented
the provision of management services to senior homes. No financial
information by business segment is presented. Furthermore, as all
revenues are derived from the PRC, no geographic information by
geographical segment is presented.
|
|
|
|
|
15.
|
GOING CONCERN UNCERTAINTIES
|
|
|
|
|
|
These financial statements have been
prepared assuming that 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 of March 31, 2018, the
Company had accumulated deficits of $516,548 due to the substantial
losses in operations in prior years, and a related party owed a
significant balance to the Company that has not been repaid, which
has limited the Company’s liquidity. Management’s plan to support
the Company in operations and to maintain its business strategy is
to raise funds through public and private offerings and to rely on
officers and directors to perform essential functions with minimal
compensation. If we do not raise all of the money we need from
public or private offerings, we will have to find alternative
sources, such as loans or advances from our officers, directors or
others. Such additional financing may not become available on
acceptable terms and there can be no assurance that any additional
financing that the Company does obtain will be sufficient to meet
its needs in the long term. Even if the Company is able to obtain
additional financing, it may contain undue restrictions on our
operations, in the case of debt financing, or cause substantial
dilution for our stockholders, in the case of equity financing. If
we require additional cash and cannot raise it, we will either have
to suspend operations or cease business entirely.
The accompanying financial
statements do not include any adjustments related to the
recoverability and classification of assets or the amounts and
classifications of liabilities that might be necessary should the
Company be unable to continue as a going concern.
|
|
|
|
|
16.
|
SUBSEQUENT EVENTS
|
|
|
|
|
|
The Company has evaluated subsequent events
through the issuance of the consolidated financial statements. On
June 1, 2018, the Company became a majority owner in a PRC
corporation, Shaanxi Jinjiangshan Da Jiankang Health Science
Development Co., Ltd.
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Except for the historical information
contained herein, the following discussion, as well as other
information in this report, contain “forward-looking statements,”
which are based on information we have when those statements are
made or management’s good faith belief as of that time with respect
to future events. Actual results and the timing of the events may
differ materially from those contained in these forward looking
statements due to a number of factors, including those discussed in
the “Forward-Looking Statements” set forth elsewhere in this
Quarterly Report on Form 10-Q.
Description of Business
The Company was incorporated in Nevada on
January 13, 1986.
On September 29, 2015, the Company’s
indirectly wholly-owned subsidiary Xian Qi Ying Senior Living, Inc
(formerly known as Xi’an Qi Ying Bio-Tech Limited) (“Qi Ying”)
entered into a series of variable interest entity (“VIE”)
agreements with Shaanxi Yifuge Investments and Assets Co, Ltd
(“Yifuge”) according to which Yifuge became our affiliated
operating company in China. As consideration, we issued 33,600,000
shares of common stock to Jincao Wu, who was the control person and
owner of Yifuge and the Company’s current chief executive
officer.
On September 29, 2015, our board of
directors approved the transfer of Qi Ying’s equity ownership in
Hanzhong Hengtai Bio-Tech Limited (“Hengtai”) to three individuals,
Zhenheng Shao, Zhenguo Shao and Yongli Yang. Upon the completion of
this equity transfer, Hengtai was no longer our indirectly
wholly-owned subsidiary in China, and we ceased the business of
plantation and sale of garden plants through Hengtai and became
engaged in senior living and senior care business through
Yifuge.
On December 31, 2015, Yifuge changed its
name from Shaanxi Yifuge Investments and Assets Co., Ltd to Shaanxi
Jinjiangshan Senior Living Management Co, Ltd.
We engage in the business of operating a
senior living facility in Xianyang City, a part of Xi’an
Metropolitan Area in Shaanxi Province, People’s Republic of China (
“China” or “PRC”), with the ability to serve 200 residents. We
offer our residents access to a full continuum of services across
all sectors of the senior living industry. We generate our revenues
from private customers, which limits our exposure to government
reimbursement risk. We believe the senior living industry in China
offers significant opportunities to the Company to increase its
revenues through providing a combination of housing, hospitality
services and health care services.
We plan to grow our revenue and operating
income through a combination of: (i) organic growth (ii)
acquisitions of additional operating companies and facilities; and
(iii) the realization of economies of scale. Once we generate
sufficient cash flow from our operations or attract additional
investors, we intend to invest in a broad spectrum of assets in the
senior living industry.
We believe that the senior living industry
is the preferred alternative to meet the growing demand for a
cost-effective residential setting in which to care for the elderly
who cannot, or as a lifestyle choice choose not to, live
independently due to physical or cognitive frailties and who may,
as a result, require assistance with some of the activities of
daily living or the availability of nursing or other medical care.
Housing alternatives for seniors include a broad spectrum of senior
living service and care options, including independent living,
assisted living, memory care and skilled nursing care. More
specifically, senior living consists of a combination of housing
and the availability of 24-hour a day personal support services and
assistance with certain activities of daily living.
Results of
Operations
Three-month
Period Ended March 31, 2018 Compared
to Three-month Period Ended March 31,
2017
The following table
summarizes the results of our operations during
the three-month period ended March 31, 2018 and
2017, respectively and provides information regarding the
dollar and percentage increase or (decrease) from
the three-month period ended March 31, 2018 compared to
the three-month period ended March 31, 2017.
(All amounts, other than
percentages, stated in U.S. dollars)
|
|
|
Three-month period
ended
March 31,
|
|
|
Increase/
(Decrease)
|
|
|
Increase/
(Decrease)
|
|
|
|
|
2018
|
|
|
2017
|
|
|
($)
|
|
|
(%)
|
|
|
Net revenues
|
|
|
169,354 |
|
|
|
118,397 |
|
|
|
50,957 |
|
|
|
43 |
% |
|
Cost of revenues
|
|
|
117,018 |
|
|
|
78,171 |
|
|
|
38,847 |
|
|
|
50 |
% |
|
Gross profit
|
|
|
52,336 |
|
|
|
40,226 |
|
|
|
12,110 |
|
|
|
30 |
% |
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing
expenses
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
General and administrative
expenses
|
|
|
13,755 |
|
|
|
4,108 |
|
|
|
9,647 |
|
|
|
235 |
% |
|
Operating income
|
|
|
38,581 |
|
|
|
36,118 |
|
|
|
2,463 |
|
|
|
7 |
% |
|
Net income
|
|
|
38,582 |
|
|
|
36,120 |
|
|
|
2,462 |
|
|
|
7 |
% |
Revenues
Net revenues . Our
net revenues for the three-month period ended March
31, 2018 amounted to $169,354, which represents an increase of
approximately $50,957, or 43%, from the three-month period
ended on March 31, 2017, in which our net revenues were
$118,397.
Cost of
Revenues. Our cost of revenues for the three-month
period ended March 31, 2018 amounted to $117,018,
which represents an increase of approximately $38,847, or 50%,
from the three-month period ended March
31, 2017, in which our cost of revenues was $78,171.
Gross Profit . Our
gross profit for the three-month period ended March
31, 2018 amounted to $52,336, which represents an increase of
approximately $12,110, or 30%, from the three-month
period ended on March 31, 2017, in which our gross profit
was $40,226.
Operating
Expenses
Selling
Expenses. There were no selling expenses incurred in 2018
and 2017.
General and
Administrative Expenses. We experienced an increase in
general and administrative expense of $9,647 from
$4,108 to $13,755 for the three-month
period ended March 31, 2018, compared to the same period
in 2017. The increase was mainly due to the increase in
professional fees incurred as compared to 2017.
Operating
Income
Operating
income increased by $2,463, or 7%, to operating income of
$38,581 in 2018 from operating income of $36,118 in 2017 as a
result of the increase of net revenues.
Income
Taxes
There were no income tax
expenses incurred in 2018 and 2017.
Net Income
Net income increased
$2,462, or 7%, to net income of $38,582 in 2018 from net
income of $36,120 in 2017 as a result of the increase of net
revenues.
Liquidity and Capital
Resources General
As of March 31, 2018
and December 31, 2017, cash and cash equivalents were
$23,630 and $24,962, respectively.
Based upon our present
plans, we believe that cash on hand, cash flows from operations and
funds available under our bank facilities will be sufficient to
fund our capital needs for the next twelve months. However, if
available liquidity is not sufficient to meet our operating and
loan obligations as they come due, our plans include pursuing
alternative financing arrangements or reducing expenditures as
necessary to meet our cash requirements. There is no assurance
that we will be able to raise additional capital or reduce
discretionary spending to provide liquidity, if needed. Currently,
the capital markets for small capitalization companies are
difficult. Thus we cannot be sure of the availability or
terms of any alternative financing arrangements.
The following table provides
detailed information about our net cash flow for all financial
statement periods presented in this report.
|
|
|
For the three-month period
ended
March 31 ,
|
|
|
(Stated in U.S.
dollars)
|
|
2018
|
|
|
2017
|
|
|
Net cash flows (used
in)/provided by operating activities
|
|
|
(2,959 |
) |
|
|
19,702 |
|
|
Net cash flows used in
investing activity
|
|
|
- |
|
|
|
- |
|
|
Net cash flows provided by
financing activities
|
|
|
755 |
|
|
|
1,874 |
|
|
Effect of foreign currency
translation on cash and cash equivalents
|
|
|
872 |
|
|
|
6 |
|
Operating
Activities
Net cash used in operating
activities for the three-month
period ended March 31, 2018 was $(2,959) and net
cash provided by operating activities for
the three-month period ended March 31, 2017 was
$19,702.
Investing
Activity
There were no investing
activities in 2018 and 2017.
Financing
Activities
Net cash provided from
financing activities for the three-month
period ended March 31, 2018 was $755, and net cash
provided from financing activities for the three-month
period ended December 31, 2017 was $1,874. The decrease
is primarily due to decreases in funding provided by the related
party to support the Company’s operations.
Subsequent Events
The Company has evaluated subsequent events
through the issuance of the consolidated financial statements. On
June 1, 2018, the Company became a majority owner in a PRC
corporation, Shaanxi Jinjiangshan Da Jiankang Health Science
Development Co., Ltd.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
Not applicable to a smaller reporting
company.
ITEM 4. CONTROLS AND
PROCEDURES
Evaluation of Disclosure Controls and
Procedures
The Company maintains disclosure controls
and procedures as required under Rule 13a-15(e) and Rule 15d-15(e)
promulgated under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), that are designed to ensure that information
required to be disclosed in the Company’s Exchange Act reports is
recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission’s rules
and forms, and that such information is accumulated and
communicated to the Company’s management, including its chief
executive officer and chief financial officer, as appropriate, to
allow timely decisions regarding required disclosure.
The Company’s management carried out an
evaluation, under the supervision and with the participation of the
Company’s chief executive officer and chief financial officer, of
the effectiveness of its disclosure controls and procedures. Based
on the foregoing, its chief executive officer and chief financial
officer concluded that the Company’s disclosure controls and
procedures were not effective as of March 31, 2018. The Company
does not have a chief financial officer that is familiar with the
accounting and reporting requirements of a U.S. publicly-listed
company, nor does it have a financial staff with accounting and
financial expertise in U.S. generally accepted accounting
principles (“US GAAP”) reporting. In addition, the Company does not
believe it has sufficient documentation concerning its existing
financial processes, risk assessment and internal controls. There
are also certain deficiencies in the design or operation of the
Company’s internal control over financial reporting that has
adversely affected its disclosure controls that may be considered
to be “material weaknesses.”
We plan to designate individuals responsible
for identifying reportable developments and to implement procedures
designed to remediate the material weakness by focusing additional
attention and resources on our internal accounting functions.
However, the material weakness will not be considered remediated
until the applicable remedial controls operate for a sufficient
period of time and management has concluded, through testing, that
these controls are operating effectively.
Changes in Internal Control over
Financial Reporting
There were no changes in the Company’s
internal control over financial reporting that occurred during the
period covered by this report that have materially affected, or are
reasonably likely to materially affect, the Company’s internal
control over financial reporting.
PART II
OTHER INFORMATION
ITEM 1. LEGAL
PROCEEDINGS
From time to time, we may become involved in
various lawsuits and legal proceedings, which arise in the ordinary
course of business. However, litigation is subject to inherent
uncertainties, and an adverse result in these or other matters may
arise from time to time that may harm business. We are currently
not aware of any such legal proceedings or claims that will have,
individually or in the aggregate, a material adverse effect on our
business, financial condition or operating results.
ITEM 1A. RISK
FACTORS
Not applicable to a smaller reporting
company.
ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF
PROCEEDS.
None.
ITEM 3.
DEFAULT UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY
DISCLOSURE.
Not applicable.
ITEM 5. OTHER
INFORMATION.
None.
ITEM 6. EXHIBITS
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Exhibit No.
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Description
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3.1*
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Articles of Incorporation of the Company (Incorporated by reference
from Exhibit 3 to Patriot Investment Corporation’s Form 10-SB12G
filed with the Commission on April 13, 1999)
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3.2*
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Bylaws of the Company (Incorporated by reference from Exhibit 3 to
Patriot Investment Corporation’s Form 10-SB12G filed with the
Commission on April 13, 1999)
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3.3*
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Amendment of Articles of Incorporation filed with the Nevada
Secretary of State on September 8, 2015 (Incorporated by reference
from Exhibit 3.3 to our annual report Form10-K filed on May 15,
2017)
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10.1*
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Securities Issuance Agreement, dated September 29, 2015, by and
between Jincao Wu and the Registrant (1)
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10.2*
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Exclusive Business Cooperation and Management Agreement, dated
September 29, 2015, by and between Qi Ying
and Shaanxi Jinjiangshan (1)
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10.3*
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Exclusive Option Agreement, dated September 29, 2015, by and among
Qi Ying, Shaanxi Jinjiangshan,
and Shaanxi Jinjiangshan's shareholders, Jincao Wu and
Zhongyang Shang (1)
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10.4*
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Equity Interest Pledge Agreement, dated September 29, 2015 by and
among Qi Ying, Shaanxi Jinjiangshan,
and Shaanxi Jinjiangshan's shareholders, Jincao Wu and
Zhongyang Shang (1)
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10.5*
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Two Power of Attorney, dated September 29, 2015, between Jincao Wu
and Qi Ying, and Zhongyang Shang and Qi Ying, respectively
(1)
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10.7*
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Entrustment Management Contract, dated December 01, 2015, between
Xianyang Yifuge Elderly Apartment Co., Ltd. and Shaanxi
Jinjiangshan Elderly Care Service Management Co., Ltd.
(incorporated by reference to Exhibit 10.6 to our Form 10-K filed
on October 5, 2018)
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31.1**
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Certification of
Chief Executive Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934
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31.2**
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Certification of
Chief Financial Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934
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32.1***
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Certification of
Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
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32.2***
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Certification of
Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
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101.INS
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XBRL Instance Document
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101.SCH
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XBRL Taxonomy Extension Schema Document
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101.CAL
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XBRL Taxonomy Extension
Calculation Linkbase Document
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase
Document
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101.LAB
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XBRL Taxonomy Extension
Label Linkbase Document
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101.PRE
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XBRL Taxonomy Extension
Presentation Linkbase Document
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*
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Previously filed
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**
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Filed herewith
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***
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Furnished herewith
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|
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(1)
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Incorporated by reference to
the Registrant's Form 8-K, filed on October 13, 2015.
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SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
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China Senior Living Industry
International Holding Corporation
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Date: November 1, 2018
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By:
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/s/ Jincao Wu
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Jincao Wu
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Chief Executive Officer
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(Principal Executive Officer)
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By:
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/s/ Liping Cui
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Liping Cui
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Chief Financial Officer
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(Principal Financial Officer)
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China Senior Living Indu... (PK) (USOTC:CHYL)
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