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.
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.
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.
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.
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 $16,373 from retained earnings to statutory reserves for the six-month period ended June 30, 2018 and for the year ended December 31, 2017, respectively. PRC laws prescribe that an enterprise operating at a profit, must appropriate, on an annual basis, an amount equal to 10% of its profit. Such an appropriation is necessary until the reserve reaches a maximum that is equal to 50% of the enterprise’s PRC registered capital. The amount is not available for payment of dividends.
China Senior Living Industry International Holding Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2018 and December 31, 2017
(Stated in U.S. Dollars)
(n)
Foreign currency translation
The accompanying financial statements are presented in United States dollars. The functional currencies of the Company are the Renminbi (RMB) and the Hong Kong Dollars (HKD). The financial statements are translated into United States dollars from the functional currencies at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.
|
|
6/30/2018
|
|
|
12/31/2017
|
|
|
6/30/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period end/Year end RMB:
|
|
|
6.6191
|
|
|
|
6.5064
|
|
|
|
6.7769
|
|
US$ 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.
|
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.
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.
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.
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
|
|
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.
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%.
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
|
|
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.