UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 10-Q

 

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2018  

 

or

 

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to ____________

 

Commission File Number: 0-25765

 

China Senior Living Industry International Holding Corporation

(Exact Name of Registrant as Specified in Its Charter)

 

Nevada		87-0429748
(State of Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
No.28, Xi Hua South Rd., High-Tech Zone, Xian Yang City, Shaanxi Province, PRC		712000
(Address of Principal Executive Offices)		(ZIP Code)

 

(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):

 

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

 

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 6, 2018, the Registrant had 56,560,007 shares of common stock outstanding.

 

 

TABLE OF CONTENTS

 

			Page
PART I - FINANCIAL INFORMATION
Item 1.	FINANCIAL STATEMENTS		4
Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		23
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		27
Item 4.	CONTROLS AND PROCEDURES		27
PART II - OTHER INFORMATION
Item 1.	LEGAL PROCEEDINGS		28
Item 1A.	RISK FACTORS		28
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		28
Item 3.	DEFAULTS UPON SENIOR SECURITIES		28
Item 4.	MINE SAFETY DISCLOSURE		28
Item 5.	OTHER INFORMATION		28
Item 6.	EXHIBITS		29

 

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.

 

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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:

 

	·	our ability to produce, market and generate sales of our products and services;
	·	our ability to develop and/or introduce new products and services;
	·	our projected future sales, profitability and other financial metrics;
	·	our future financing plans;
	·	our anticipated needs for working capital;
	·	the anticipated trends in our industry;
	·	our ability to expand our sales and marketing capability;
	·	acquisitions of other companies or assets that we might undertake in the future;
	·	competition existing today or that will likely arise in the future; and
	·	other factors discussed elsewhere herein.

 

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.

 

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PART I.

FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

China Senior Living Industry International Holding Corporation

Unaudited Condensed Consolidated Financial Statements

June 30, 2018 and December 31, 2017

(Stated in U.S. Dollars)

 

Content		Page
Report of Independent Registered Public Accounting Firm			5
Unaudited Condensed Consolidated Balance Sheets			6
Unaudited Condensed Consolidated Statements of Income and Comprehensive Income			7
Unaudited Condensed Consolidated Statements of Cash Flows			8
Notes to Condensed Consolidated Financial Statements			9

 

4

 

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 June 30, 2018, the related condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2018 and 2017, and the condensed consolidated statements of cash flows for the six months ended June 30, 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 16 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 16. 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

November 7, 2018

 

 

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China Senior Living Industry International Holding Corporation

Condensed Consolidated Balance Sheets (Unaudited)

As of June 30, 2018 and December 31, 2017

(Stated in U.S. Dollars)

 

 

ASSETS		6/30/2018				12/31/2017
Current assets
Cash and cash equivalents		$	80,276			$	24,962
Accounts receivable – related party, net			1,221				2,936
Prepayments			43,963				-
Related party receivable			1,159,746				1,159,477
Total current assets			1,285,206				1,187,375
Non-current asset
Intangible asset, net			140				141
TOTAL ASSETS		$	1,285,346			$	1,187,516
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accrued and other liabilities		$	81,424			$	158,199
Related party advances			2,429				928
Related party payable			484,219				378,390
TOTAL LIABILITIES		$	568,072			$	537,517
COMMITMENTS AND CONTINGENCIES
Stockholders’ equity
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding		$	-			$	-
Common stock, $0.001 par value; 200,000,000 shares authorized, 56,560,007 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively			56,560				56,560
Additional paid in capital			1,083,474				1,083,474
Statutory reserve			69,967				69,967
Accumulated other comprehensive loss			(25,555	)			(4,872	)
Accumulated deficit			(478,453	)			(555,130	)
Total Stockholders’ equity		$	705,993			$	649,999
Noncontrolling interests			11,281				-
Total Equity		$	717,274			$	649,999
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	1,285,346			$	1,187,516

  

See Accompanying Notes to the Financial Statements and Accountant’s Report

 

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China Senior Living Industry International Holding Corporation

Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)

For the three and six-month periods ended June 30, 2018 and 2017

(Stated in U.S. Dollars)

  

		For the three months ended								For the six months ended
		6/30/2018				6/30/2017				6/30/2018				6/30/2017
Revenues – related party		$	169,618			$	116,509			$	338,972			$	234,906
Cost of revenues			103,804				77,972				220,822				156,144
Gross profit			65,814				38,537				118,150				78,762
Operating expenses
General and administrative expenses			52,298				28,477				66,053				32,584
Operating income			13,516				10,060				52,097				46,178
Other income
Other income			27,354				-				27,354				-
Interest income			150				1				151				3
Total other income			27,504				1				27,505				3
Earnings before tax			41,020				10,061				79,602				46,181
Income tax			-				-				-				-
Net income		$	41,020			$	10,061			$	79,602			$	46,181
Net loss attributable to noncontrolling interests			(1,462	)			-				(1,462	)			-
Net income attributable to ordinary shareholders		$	42,482			$	10,061			$	81,064			$	46,181
Other comprehensive income (loss) :
Foreign currency translation (loss)/gain			(62,734	)			16,640				(20,683	)			23,680
Comprehensive (loss)/income		$	(21,715	)		$	26,701			$	58,919			$	69,861
Total comprehensive loss attributable to noncontrolling interests			(2,177	)			-				(2,177	)			-
Total comprehensive loss attributable to ordinary shareholders		$	(19,538	)		$	26,701			$	61,096			$	69,861
Earnings per share
Basic		$	0.00			$	0.00			$	0.00			$	0.00
Diluted		$	0.00			$	0.00			$	0.00			$	0.00
Weighted average number of Common shares outstanding
Basic			56,560,007				56,560,007				56,560,007				56,560,007
Diluted			56,560,007				56,560,007				56,560,007				56,560,007

 

See Accompanying Notes to the Financial Statements and Accountant’s Report

 

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China Senior Living Industry International Holding Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the six-month period ended June 30, 2018 and 2017

(Stated in U.S. Dollars)

 

 

		6/30/2018				6/30/2017
Cash flows from operating activities
Net income		$	79,602			$	46,181
Gain on bargain purchase			(27,365	)			-
Increase in prepayments			(22,854	)
Increase in related party receivable			(19,068	)			(54,219	)
Decrease in accrued liabilities			(76,342	)			(1,973	)
Increase/(decrease) in related party advances			1,577				(3,296	)
Net cash used in operating activities			(64,450	)			(13,307	)
Cash flows from financing activities
Paid in capital			16,239				-
Increase in related party payable			106,161				30,547
Net cash provided by financing activities			122,400				30,547
Net increase of cash and cash equivalents			57,950				17,240
Effect of foreign currency translation on cash and cash equivalents			(2,636	)			1,387
Cash and cash equivalents – beginning of period			24,962				4,270
Cash and cash equivalents – end of period		$	80,276			$	22,897
Supplementary cash flow information:
Interest received		$	151			$	3
Interest paid		$	-			$	-
Income tax paid		$	-			$	-

 

See Accompanying Notes to the Financial Statements and Accountant’s Report

 

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China Senior Living Industry International Holding Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 30, 2018 and December 31, 2017

(Stated in U.S. Dollars)

 

1. ORGANIZATION, BASIS OF PRESENTATION, AND PRINCIPAL ACTIVITIES

 

(a) Organization history

 

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.

  

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China Senior Living Industry International Holding Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 30, 2018 and December 31, 2017

(Stated in U.S. Dollars)

 

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”).

 

On June 1, 2018, the Company acquired a total of 70% of Shaanxi Jinjiangshan Health Technology Development Co.Ltd (“Shaanxi Health Technology”)’s equity interest by entering into two share purchase agreements with two individual shareholders of Shaanxi Health Technology. In connection with the transaction, the Company is committed to contribute 7,000,000RMB (approximately US$1,008,965) to Shaanxi Health Technology, pursuant to Shaanxi Health Technology’s shareholders resolution passed unanimously on June 1, 2018. As of June 30, 2018, the Company has contributed 145,500RMB (approximately US$20,972). In connection with the acquisition, the Company recognized a one-time bargain purchase gain of $27,365.

 

(b) Basis of presentation

 

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.

 

(c) Principal activities

 

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.

 

(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.

 

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China Senior Living Industry International Holding Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 30, 2018 and December 31, 2017

(Stated in U.S. Dollars)

 

As of June 30, 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) Holdings Company Limited		Hong Kong			100	%			HKD 10,000,000
Spone Limited		Hong Kong			100	%			HKD 1
Xi’an Qi Ying Senior Living, Inc (“Qi Ying”)		PRC			100	%			RMB 50,000
Shaanxi Jinjiangshan Senior Living Management Co. Ltd (“JJS”)		PRC			Variable Interest Entity, with Qi Ying as the primary beneficiary				RMB 3,000,000
Shaanxi Jinjiangshan Health Technology Development Co.Ltd (“Shaanxi Health Technology”)		PRC			70	%			RMB 10,000,000

  

(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.

 

(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.

 

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China Senior Living Industry International Holding Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 30, 2018 and December 31, 2017

(Stated in U.S. Dollars)

 

(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 six-month period ended June 30, 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, 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 June 30, 2018.

 

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China Senior Living Industry International Holding Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 30, 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 six-month period ended June 30, 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.

 

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China Senior Living Industry International Holding Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 30, 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.

 

		6/30/2018				12/31/2017				6/30/2017
Period end/Year end RMB:			6.6191				6.5064				6.7769
US$ exchange rate
Average period/yearly RMB:			6.3666				6.7570				6.8743
US$ exchange rate
Period end/Year end HKD:			7.8474				7.8144				7.8057
US$ exchange rate
Average period/yearly HKD:			7.8380				7.7925				7.7731
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.

 

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China Senior Living Industry International Holding Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 30, 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 June 30, 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 and six-month periods ended June 30, 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.

 

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China Senior Living Industry International Holding Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 30, 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 June 30, 2018, there are no other recently issued accounting standards not yet adopted that would or could have a material effect on the Company’s financial statements.

 

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China Senior Living Industry International Holding Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 30, 2018 and December 31, 2017

(Stated in U.S. Dollars)

 

3. EARNINGS PER SHARE

 

		6/30/2018				6/30/2017
Basic Earnings Per Share:
Numerator:
Net income used in computing basic earnings per share		$	81,064			$	46,181
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		$	81,064			$	46,181
Denominator:
Weighted average common shares outstanding			56,560,007				56,560,007
Diluted earnings per share		$	0.00			$	0.00

  

4 . ACCOUNTS RECEIVABLE - RELATED PARTY

 

Accounts receivable - related party consisted of the following as of June 30, 2018 and December 31, 2017:

 

		6/30/2018				12/31/2017
Xianyang Yifuge Elderly Apartment Co., Ltd. (“Xianyang”)			1,221				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 six-month period ended June 30, 2018 and 2017. Xianyang is controlled by the management of the Company.

 

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China Senior Living Industry International Holding Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 30, 2018 and December 31, 2017

(Stated in U.S. Dollars)

 

5. PREPAYMENTS

 

Prepayments consisted of the following as of June 30, 2018 and December 31, 2017:

 

		6/30/2018				12/31/2017
Advances paid to service provider		$	43,963			$	-

 

In 2017, Shaanxi Health Technology entered into a service agreement with a software developer to develop an electronic platform. The outstanding amount represents advances paid to the service provider. The project is expected to be completed in 2018.

 

6 . RELATED PARTY RECEIVABLES

 

Related party receivables consisted of the following as of June 30, 2018 and December 31, 2017:

 

		6/30/2018				12/31/2017
Wu, Jingmeng		$	1,159,746			$	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.

 

7 . INTANGIBLE ASSETS, NET

 

Intangible assets consisted of the following as of June 30, 2018 and December 31, 2017:

 

		6/30/2018				12/31/2017
Software, at cost		$	348			$	353
Less accumulated amortization			(208	)			(212	)
		$	140			$	141

 

Amortization expense was not charged for the six-month period ended June 30, 2018 and 2017.

 

8 . ACCRUED AND OTHER LIABLITIES

 

Accrued and other liabilities consisted of the following as of June 30, 2018 and December 31, 2017:

 

		6/30/2018				12/31/2017
Wages payable		$	23,424			$	22,566
Accrued professional and consulting fees			58,000				135,633
		$	81,424			$	158,199

 

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China Senior Living Industry International Holding Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 30, 2018 and December 31, 2017

(Stated in U.S. Dollars)

 

9 . RELATED PARTY ADVANCES

 

Related party advances consisted of the following as of June 30, 2018 and December 31, 2017:

 

		6/30/2018				12/31/2017
Xianyang Yifuge Elderly Apartment Co., Ltd. (“Xianyang”)		$	2,429			$	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.

 

10 . RELATED PARTY PAYABLE

 

Related party payable consisted of the following as of June 30, 2018 and December 31, 2017:

 

		6/30/2018				12/31/2017
Liu, Shengli		$	210,178			$	210,178
Xianyang Yifuge Elderly Apartment Co., Ltd. (“Xianyang”)			274,041				168,212
			484,219				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.

 

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China Senior Living Industry International Holding Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 30, 2018 and December 31, 2017

(Stated in U.S. Dollars)

 

11 . 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 June 30, 2018 and December 31, 2017, the Company had commitments for future minimum lease payments under a non-cancelable operating lease as follows:

 

Period		6/30/2018				12/31/2017
Year 1		$	2,901			$	2,951
Year 2			2,901				2,951
Year 3			2,901				2,951
Year 4			2,901				2,951
Year 5			2,901				2,951
Thereafter			60,722				62,202
Total		$	75,227			$	76,957

 

Rental expenses for the six-month period ended June 30, 2018 and 2017 were $1,522 and $1,396, respectively. Rental expenses are recognized on a straight line basis.

 

12. 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 June 30, 2018. 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%.

 

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China Senior Living Industry International Holding Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 30, 2018 and December 31, 2017

(Stated in U.S. Dollars)

  

The following tables provide the reconciliation of the differences between the statutory and effective tax expenses for the six-month period ended June 30, 2018 and 2017: 

  

		6/30/2018				6/30/2017
Income attributed to PRC operations		$	106,622			$	74,350
Loss attributed to US and HK entities			(27,020	)			(28,169	)
Income/(loss) before tax		$	79,602			$	46,181
PRC Statutory Tax at 25% Rate			26,655				11,545
Effect of tax exemption granted			(26,655	)			(11,545	)
Income tax			-				-

  

Per Share Effect of Tax Exemption

 

		6/30/2018				6/30/2017
Effect of tax exemption granted		$	26,655			$	11,545
Weighted-Average Shares Outstanding Basic			56,560,007				56,560,007
Per share effect		$	0.00				0.00

 

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 June 30, 2018 and 2017:

 

		6/30/2018				6/30/2017
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	%

 

13. RELATED PARTY TRANSACTION

 

For the six-month period ended June 30, 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 six-month period ended
		6/30/2018				6/30/2017
Xianyang Yifuge Elderly Apartment Co., Ltd. (“Xianyang”)		$	338,972			$	234,906

 

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China Senior Living Industry International Holding Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 30, 2018 and December 31, 2017

(Stated in U.S. Dollars)

 

14. CONCENTRATIONS AND RISKS

 

A. Concentration

 

As of June 30, 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 June 30, 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 $75,539). 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.

 

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.

 

15. SEGMENT INFORMATION

 

As of and for the six-month period ended June 30, 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.

 

16. 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 June 30, 2018, the Company had accumulated deficits of 478,453 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.

 

17. SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events through the issuance of the consolidated financial statements and no subsequent events were identified that required adjustment to a disclosure in the consolidated financial statements.

 

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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. On June 1, 2018, the Company became a majority owner in a PRC corporation, Shaanxi Jinjiangshan Health Technology Development Co., Ltd (“Shaanxi Health Technology”).

 

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 (or “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 we operate in the attractive sectors of the senior living industry in China which offers significant opportunities to the Company to increase our 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.

 

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Results of Operations

 

Three-month Period Ended June 30, 2018 Compared to Three-month Period Ended June 30, 2017

 

The following table summarizes the results of our operations during the three-month period ended June 30, 2018 and 2017, respectively and provides information regarding the dollar and percentage increase or (decrease) from the three-month period ended June 30, 2018 compared to the three-month period ended June 30, 2017.

 

(All amounts, other than percentages, stated in U.S. dollars)

 

		Three-month period ended  June 30,								Increase/ (Decrease)				Increase/ (Decrease)
		2018				2017				($)				(%)
Net revenues			169,618				116,509				53,109				46	%
Cost of revenues			103,804				77,972				25,832				33	%
Gross profit			65,814				38,537				27,277				71	%
Operating expenses
Selling and marketing expenses			-				-				-				-
General and administrative expenses			52,298				28,477				23,821				84	%
Operating income			13,516				10,060				3,456				34	%
Net income			41,020				10,061				30,959				308	%

 

Revenues

 

Net revenues . Our net revenues for the three-month period ended June 30, 2018 amounted to $169,918, which represents an increase of approximately $53,109, or 46%, from the three-month period ended on June 30, 2017, in which our net revenues were $116,509.

 

Cost of Revenues.  Our cost of revenues for the three-month period ended June 30, 2018 amounted to $103,804, which represents an increase of approximately $25,832, or 33%, from the three-month period ended June 30, 2017, in which our cost of revenues was $77,972.

 

Gross Profit . Our gross profit for the three-month period ended June 30, 2018 amounted to $65,814, which represents an increase of approximately $27,277, or 71%, from the three-month period ended on June 30, 2017, in which our gross profit was $38,537.

 

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 $23,821 from $28,477 to $52,298 for the three-month period ended June 30, 2018, compared to the same period in 2017. The increase was mainly due to the increases in professional fees incurred as compared to 2017.

 

Operating Income

 

Operating income increased by $3,456, or 34%, to operating income of $13,516 in 2018 from operating income of $10,060 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 $30,959, or 308%, to net income of $41,020 in 2018 from net income of $10,061 in 2017 as a result of the increases in net revenues and a one-time recognition of bargain purchase gain.

 

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Six-month Period Ended June 30, 2018 Compared to Six-month Period Ended June 30, 2017

 

The following table summarizes the results of our operations during the six-month period ended June 30, 2018 and 2017, respectively and provides information regarding the dollar and percentage increase or (decrease) from the six-month period ended June 30, 2018 compared to the six-month period ended June 30, 2017.

 

(All amounts, other than percentages, stated in U.S. dollars)

  

		Six-month period ended  June 30,								Increase/ (Decrease)				Increase/ (Decrease)
		2018				2017				($)				(%)
Net revenues			338,972				234,906				104,066				44	%
Cost of revenues			220,822				156,144				64,678				41	%
Gross profit			118,150				78,762				39,388				50	%
Operating expenses
Selling and marketing expenses			-				-				-				-
General and administrative expenses			66,053				32,584				33,469				103	%
Operating income			52,097				46,178				5,919				13	%
Net income			79,602				46,181				33,421				72	%

  

Revenues

 

Net revenues . Our net revenues for the six-month period ended June 30, 2018 amounted to $338,972, which represents an increase of approximately $104,066, or 44%, from the six-month period ended on June 30, 2017, in which our net revenues were $234,906.

 

Cost of Revenues.  Our cost of revenue for the six-month period ended June 30, 2018 amounted to $220,822, which represents an increase of approximately $64,678, or 41%, from the six-month period ended June 30, 2017, in which our cost of revenue was $156,144.

 

Gross Profit . Our gross profit for the six-month period ended June 30, 2018 amounted to $118,150, which represents an increase of approximately $39,388, or 50%, from the six-month period ended on June 30, 2017, in which our gross profit was $78,762.

 

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 $33,469 from $32,584 to $66,053 for the six-month period ended June 30, 2018, compared to the same period in 2017. The increase was mainly due to the increases in professional fees incurred as compared to 2017.

 

Operating Income

 

Operating income increased $5,919, or 13%, to operating income of $52,097 in 2018 from operating income of $46,178 in 2017 as a result of the increase of net revenue.

 

Income Taxes

 

There were no income tax expenses incurred in 2018 and 2017.

 

Net Income

 

Net income increased $33,421, or 72%, to net income of $79,602 in 2018 from net income of $46,181 in 2017 as a result of the increase of net revenue and a one-time recognition of bargain purchase gain.

 

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Liquidity and Capital Resources General

 

As of June 30, 2018 and December 31, 2017, cash and cash equivalents were $80,276 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 six-month period ended June 30 ,
(Stated in U.S. dollars)		2018				2017
Net cash flows used in operating activities			(64,450	)			(13,307	)
Net cash flows used in investing activities			-				-
Net cash flows provided by financing activities			122,400				30,547
Effect of foreign currency translation on cash and cash equivalents			(2,636	)			1,387

  

Operating Activities

 

Net cash used in operating activities for the six-month period ended June 30, 2018 was $(64,450) and net cash used in operating activities for the six-month period ended June 30, 2017 was $(13,307).

 

Investing Activity

 

There were no investing activities in 2018 and 2017.

 

Financing Activities

 

Net cash provided from financing activities for the six-month period ended June 30, 2018 was $122,400, and net cash provided from financing activities for the six-month period ended June 30, 2017 was $30,547. The increase is primarily due to increases 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 unaudited consolidated condensed financial statements and no subsequent events were identified that required adjustment to a disclosure in the unaudited condensed consolidated financial statements.

 

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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 June 30, 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.

 

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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.

 

On June 1, 2018, the Company acquired a total of 70% of Shaanxi Health Technology’s outstanding shares by entering into two share purchase agreements with two individual shareholders of Shaanxi Health Technology. In connection with the transaction, pursuant to a shareholders resolution passed unanimously on June 1, 2018,  the Company committed a capital contribution to Shaanxi Health Technology, in the amount of 7,000,000RMB (approximately US$1,008,965), which will be paid in by November 13, 2037.

 

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ITEM 6. EXHIBITS

 

Exhibit No.		Description
3.1*		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)
3.2*		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)
3.3*		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 Form 10-K filed on May 15, 2017)
10.1*		Securities Issuance Agreement, dated September 29, 2015, by and between Jincao Wu and the Registrant (1)
10.2*		Exclusive Business Cooperation and Management Agreement, dated September 29, 2015, by and between Qi Ying and Shaanxi Jinjiangshan (1)
10.3*		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)
10.4*		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)
10.5*		Two Power of Attorney, dated September 29, 2015, between Jincao Wu and Qi Ying, and Zhongyang Shang and Qi Ying, respectively (1)
10.6*		Promissory Note Conversion Agreement, dated September 29, 2015, between the Registrant and eight note holders (1)
10.7*		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)
10.8**		Shaanxi Health Technology Share Transfer Agreement, by and between Shaanxi Jinjiangshan Senior Living Service Management Co., Ltd. and Wu Yidian, dated June 1, 2018
10.9**		Shaanxi Health Technology Share Transfer Agreement, by and between Shaanxi Jinjiangshan Senior Living Service Management Co., Ltd. and Yang Miao, dated June 1, 2018
10.10**		Shaanxi Health Technology Shareholder’s Resolution passed on June 1, 2018
31.1**		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
31.2**		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32.1***		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
32.2***		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
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

_________ 

* Previously filed

** Filed herewith

*** Furnished herewith

 

(1)	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.

 

	China Senior Living Industry International Holding Corporation
Date: November 6, 2018	By:	/s/ Jincao Wu
		Jincao Wu
		Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/ Liping Cui
		Liping Cui
		Chief Financial Officer
		(Principal Financial Officer)

 

 

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