The accompanying
unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Item Regulation
S-X, Rule 10-01(c) Interim Financial Statements, and, therefore, do not include all information and footnotes necessary for a complete
presentation of financial position, results of operations, cash flows, and stockholders’ equity in conformity with generally
accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the
results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating
results for the nine months ended September 30, 2020 are not necessarily indicative of the results that can be expected for the
year ended December 31, 2020.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN USD)
NOTE
1. DESCRIPTION OF BUSINESS AND ORGANIZATION
JRSIS
Health Care Corporation (the “Company” or “JRSS”) was incorporated on November 20, 2013 under the laws
of the State of Florida. In December 2013 JRSS acquired 100% of the equity in JRSIS Health Care Limited (“JHCL”),
which is a Limited Liability Company registered in British Virgin Island (“BVI”) on February 25, 2013. JHCL owns 100%
of the equity in Runteng Medical Group Co., Ltd (“Runteng”), a limited liability company registered in Hong Kong on
September 17, 2012. Runteng owns 70% of the equity in Harbin Jiarun Hospital Co., Ltd (“Jiarun”), a for-profit hospital
incorporated in Harbin City of Heilongjiang, China in February 2006. The remaining 30% of the equity in Jiarun is owned by Junsheng
Zhang, who is the Chairman of the Board of JRSIS Health Care Corporation.
Jiarun
is a private hospital serving patients on a municipal and county level and providing both Western and Chinese medical practices
to the residents of Harbin. Jiarun also owns 100% of the equity in:
|
●
|
Harbin
Jiarun Hospital Co., Ltd Nanjing Road Branch (“NRB Hospital”), a hospital branch of Jiarun, incorporated in Harbin
city of Heilongjiang, China in October 2017. NRB hospital is a private hospital serving patients on a municipal and county
level and providing both Western and Chinese medical practices to the residents of Harbin.
|
|
●
|
Harbin
Jiarun Hospital Co., Ltd 2nd Branch (“2nd Branch Hospital”), a second hospital
branch of Jiarun, incorporated in Harbin city of Heilongjiang, China in November 2017. 2nd Branch Hospital
is a private hospital serving patients on a municipal and county level and providing both Western and Chinese medical practices
to the residents of Harbin.
|
30%
of the equity in Jiarun is held by Junsheng Zhang, and is therefore a non-controlling interest (“NCI”), accounted
for pursuant to ASC 810-10-45, which states that the ownership interest in the subsidiary that is held by owners other than the
parent is a non-controlling interest. According to the supplemental agreement signed between Junsheng Zhang and Runteng on June
1, 2013, the comprehensive income from Jiarun would be attributable to retained earnings and non-controlling interest for 70%
and 30% respectively, from July 1, 2013.
NOTE
2. SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES
A.
Basis of presentation
The
consolidated financial statements have been prepared in accordance with the United States generally accepted accounting principles
(“U.S. GAAP”).
B.
Principles of consolidation
The
consolidated financial statements include the accounts of the Company and its subsidiaries. All inter-company transactions and
balances have been eliminated in consolidation. Non-controlling interests represent the equity interest in Jiarun that is not
attributable to the Company. Non-controlling interest is reported in the consolidated financial position within equity, separate
from the Company’s equity. Net income or loss and comprehensive income or loss are attributed to the Company’s and
the non-controlling interest.
C.
Use of estimates
The
preparation of audited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenue 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
from those estimates. Significant items subject to such estimates and assumptions include valuation allowances for receivables
and recoverability of carrying amount and the estimated useful lives of long-lived assets. These estimates are often based on
complex judgments and assumptions that management believes to be reasonable but are inherently uncertain and unpredictable. Actual
results could differ from these estimates.
JRSIS
HEALTH CARE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN USD)
NOTE
2. SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
D.
Functional currency and foreign currency translation
JRSS
and JHCL’s functional currency is the United States dollar (“US$”). Runteng’s functional currency is the
Hong Kong dollar (“HK$”). The functional currency of Jiarun is the Renminbi (“RMB”).
The
Company’s reporting currency is US$. Assets and liabilities of Runteng and Jiarun are translated at the current exchange
rate at the balance sheet dates, revenues and expenses are translated at the average exchange rates during the reporting periods,
and equity accounts are translated at historical rates. Translation adjustments are reported in other comprehensive income.
The
exchange rates used for foreign currency translation are as follows:
|
|
|
|
For
nine months ended
September 30,
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
(USD
to RMB/
USD to HKD)
|
|
(USD
to RMB/
USD to HKD)
|
Assets
and liabilities
|
|
period
end exchange rate
|
|
6.8033
/ 7.7501
|
|
7.1383/
7.8399
|
Revenue
and expenses
|
|
period
average
|
|
6.9957
/ 7.7576
|
|
6.8633/
7.8384
|
E.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables
arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions.
The majority of sales are either cash receipt in advance or cash receipt upon delivery. For nine months ended September 30, 2020
and 2019, no customer accounted for more than 10% of net revenue. As of September 30, 2020 and December 31, 2019, three and three
customers accounted for more than 5% of net accounts receivable, respectively. For those credit sales, the Company routinely assesses
the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required,
for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance
is limited.
F.
Cash and cash equivalents
Cash
and cash equivalents include all cash, deposits in banks and other liquid investments with initial maturities of three months
or less.
G.
Accounts receivable
Accounts
receivable are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts
as needed. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in
the Company’s existing accounts receivable. The Company determines the allowance based on aging data, historical collection
experience, customer specific facts and economic conditions. Account balances are charged off against the allowance after all
means of collection have been exhausted and the potential for recovery is considered remote.
H.
Inventories
Inventories,
consisting principally of medicines, are stated at the lower of cost or market using the first-in, first-out method (“FIFO”).
This policy requires the Company to make estimates regarding the market value of inventory, including an assessment of excess
or obsolete inventory. The Company determines excess or obsolete inventory based on an estimate of the future demand and estimated
selling prices for its products.
JRSIS
HEALTH CARE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN USD)
NOTE
2. SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
I.
Construction in progress
Construction
in progress represents the new hospital painting and decoration costs. All direct costs relating to the polishing and decoration
are capitalized as construction in progress. No depreciation is provided in respect of construction in progress.
J.
Property and equipment
Property
and equipment are stated at cost. Expenditures for maintenance and repairs are charged to operations when incurred, while additions
and betterments are capitalized. Depreciation is recorded on a straight-line basis reflective of the useful lives of the assets.
When assets are retired or disposed, the asset’s original cost and related accumulated depreciation are eliminated from
accounts and any gain or loss is reflected in income.
The
estimated useful lives for property and equipment categories are as follows:
Buildings
and improvement
|
|
10-40
years
|
Medical
equipment
|
|
5-15
years
|
Transportation
instrument
|
|
5-10
years
|
Office
equipment
|
|
5-10
years
|
Electronic
equipment
|
|
5-10
years
|
Software
|
|
5-10
years
|
K.
Leases
In
February 2016, the FASB issued ASU 2016-02–Leases (Topic 842), which increases transparency and comparability among organizations
by recognizing right-of-use (“ROU”) lease assets and lease liabilities on the balance sheet and disclosing key information
about leasing arrangements. The ASU maintains a distinction between finance leases and operating leases, which is substantially
similar to the classification criteria for distinguishing between capital leases and operating leases in the previous lease guidance.
Retaining this distinction allows the recognition, measurement and presentation of expenses and cash flows arising from a lease
to remain similar to the previous accounting treatment. A lessee is permitted to make an accounting policy election by class of
underlying asset to exclude from balance sheet recognition any lease assets and lease liabilities with a term of 12 months or
less, and instead to recognize lease expense on a straight-line basis over the lease term. For both financing and operating leases,
the ROU asset and lease liability is initially measured at the present value of the lease payments in the consolidated balance
sheet. In July 2018, the FASB issued ASU 2018-11 which provides entities with the option to initially apply the new lease standard
at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of
adoption, if necessary. As discussed in Note 8, we adopted ASU 2016-02–Leases (Topic 842) effective January 1, 2019 utilizing
the transition option provided by ASU 2018-11.
L.
Fair Value Measurement
The
Company applies the provisions of ASC Subtopic 820-10, Fair Value Measurements, for fair value measurements of financial assets
and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value
in the financial statements. ASC 820 also establishes a framework for measuring fair value and expands disclosures about fair
value measurements.
Fair
value is defined as the price that would be received when selling an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. In determining the fair value for the assets and liabilities required or
permitted to be recorded, the Company considers the principal or most advantageous market in which it would transact and it considers
assumptions that market participants would use when pricing the asset or liability.
ASC
820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level
1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The
three levels of the fair value hierarchy are as follows:
Level
1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or
liabilities;
Level
2: Quoted prices in markets that are not active, or inputs that is observable, either directly or indirectly, for substantially
the full term of the asset or liability;
Level
3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable
(supported by little or no market activity).
JRSIS
HEALTH CARE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN USD)
NOTE
2. SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The
following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for
at fair value on a recurring basis:
|
|
Carrying
Value at
September 30,
|
|
|
Fair Value Measurement at
September 30,
2020
|
|
|
|
2020
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Convertible Note
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Warrant liability
|
|
$
|
42,818
|
|
|
$
|
-
|
|
|
$
|
42,818
|
|
|
$
|
-
|
|
A
summary of changes in Warrant liability for the nine months ended September 30, 2020 was as follows:
Balance at January 1, 2020
|
|
$
|
110,840
|
|
Change in fair value of warrant liability
|
|
|
181,136
|
|
Exercise in January, 2020
|
|
|
(249,158
|
)
|
Balance at September 30, 2020
|
|
|
42,818
|
|
The
fair value of the outstanding warrants was calculated using the Binomial Option Pricing Model with the following assumptions at
inception and on subsequent valuation date:
|
|
September 30,
2020
|
|
Warrants
|
|
Auctus
|
|
Market price per share (USD/share)
|
|
$
|
0.56
|
|
Exercise price (USD/share)
|
|
|
0.60
|
|
Risk free rate
|
|
|
0.241
|
%
|
Dividend yield
|
|
|
-
|
|
Expected term/Contractual life (years)
|
|
|
1.83
|
|
Expected volatility
|
|
|
74.08
|
%
|
A
summary of changes in Convertible Note for the nine months ended September 30, 2020 was as follows:
Balance at January 1, 2020
|
|
$
|
774,567
|
|
Change in fair value of convertible notes
|
|
|
(332,363
|
)
|
Paid in February, 2020
|
|
|
(202,204
|
)
|
Paid in April, 2020
|
|
|
(250,000
|
)
|
Balance at September 30, 2020
|
|
|
-
|
|
In
May and July of 2019, the Company issued three convertible promissory notes, one each to Labrys Fund, LP, Auctus Fund, LLC and
Harbor Gates Capital, LLC. On October 31, 2019, the Company repaid the convertible promissory note issued to Labrys Fund, LP,
On February 11, 2020, the Company repaid the convertible promissory note issued to Harbor Gates Capital, LLC. On April 30, 2020,
the Company fully satisfied the Promissory Note that it issued to Auctus Fund, LLC in July 2019. Therefore, the Labrys’,
Harbor Gates’ and Auctus' Convertible Notes have no fair value as of each subsequent reporting date.
JRSIS
HEALTH CARE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN USD)
NOTE
2. SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash
and cash equivalents, accounts receivable, accounts payable and accrued liabilities are reflected in the accompanying consolidated
financial statements at amounts that approximate fair value because of the short-term nature of these instruments. The fair value
of the Company’s capital lease obligations also approximates carrying value as they bear interest at current market rates.
M.
Segment and geographic information
The
Company is operating in one segment in accordance with the accounting guidance FASB ASC topic 280, “Segment Reporting”.
The Company’s revenues are from customers in People’s Republic of China (“PRC”). All assets of the company
are located in PRC.
N.
Revenue recognition
The
Company recognizes revenue when the amount of revenue can be reliably measured, it is probable that economic benefits will flow
to the entity, and specific criteria have been met for each of the Company’s activities as described below. See Note 11
for details.
Pharmaceutical
sales
Revenue
from the sale of pharmaceuticals is recognized when it is both earned and realized. The Company’s policy is to recognize
the sale of pharmaceuticals when the title of the pharmaceuticals, ownership and risk of loss have transferred to the purchasers,
and collection of the sales proceeds is reasonably assured, all of which generally occur when the patient receives the pharmaceuticals.
Given
the nature of this revenue source of the Company’s business and the applicable rules guiding revenue recognition, the revenue
recognition practices for the sale of pharmaceuticals do not contain estimates that materially affect results of operations nor
does the Company have any policy for return of products.
Patient
Services
In
accordance with the medical licenses under which Jiarun operates, the scope of its approved medical patient service includes medical
consulting, surgery, obstetrics and gynecology, pediatrics, anesthesia, clinic laboratory, medical imaging, and traditional Chinese
medicine.
Patient
service revenue is recognized when it is both earned and realized. The Company’s policy is to recognize patient service
revenue when the medical service has been provided to the patient and collection of the revenue is reasonably assured.
The
Company provides services to both patients covered by social insurance and patients who are not covered by social insurance. The
Company charges the same rates for patient services regardless of the coverage by social insurance.
Patients
who are not covered by social insurance are liable for the total cost of medical treatment.
|
●
|
For
out-patient medical services, revenue is recognized when the Company provides medical service to the patient. The Company
collects payment before the patient leaves the hospital.
|
|
●
|
For
in-patient medical services, when a patient checks into the hospital, the Company estimates the approximate fee the patient
will spend in the hospital based on patient’s symptoms. At that time, the Company collects the estimated fees from the
patient and records the payment as deposits received.
|
During
the in-patient services period, the Company recognizes revenue when the patient service is provided and deducts the cost of service
from the deposit received. The Company records these transactions based on daily reports generated by the respective medical department.
When medical services exceed patient deposits received the Company records revenue and accounts receivable when the patient services
are provided.
When
a patient checks out from the hospital, the Company calculates and determines the remaining deposit, if any, and refunds the unused
portion of the deposit to the patients. In the case where the patient has a balance in accounts receivable, accounts receivable
are required to be paid in full at checkout.
Patients
covered by social insurance will receive a portion or full medical services reimbursed or paid by the social insurance agencies
via prepaid cards or insurance claim settlement process.
JRSIS
HEALTH CARE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN USD)
NOTE
2. SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Settlement
process
The
Company is a registered medical service vendor under the state social insurance system for various social insurance agencies.
The insurance agencies include “Social Medical Insurance funded by PRC and Heilongjiang Province” and “Heilongjiang
Province New Rural Cooperative Medical Care System”. The Company utilizes an online system maintained by the social insurance
agencies for patients who are covered by social insurance agencies.
|
●
|
The
Company records patients’ information in the social insurance system at check in. The system determines the covered
portion and amounts based on the information input to the system.
|
|
●
|
At
the time of check out, the Company collects payment for services the patients are liable for and records accounts receivable
from the social insurance agencies for the portion of services covered by the social insurance. In the case that the patients
have made payment during the in-patient services period, the Company refunds any amount in excess of the portion they are
liable for.
|
|
●
|
The
Company is responsible for submitting supporting documents of patient services provided to the social insurance agencies for
their review. The Company is also required to reconcile its records with the social insurance agencies once a month. Once
the social insurance agencies approve the reconciliation, the insurance agencies will settle the accounts receivable balance
in the next month following the approval.
|
O.
Income taxes
The
Company has adopted FASB ASC Topic 740, “Income Taxes,” which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.
Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax
bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory
tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established,
when necessary, to reduce deferred tax assets to the amount expected to be realized.
In
July 2006, the FASB issued FIN 48(ASC 740-10), Accounting for Uncertainty in Income Taxes-An Interpretation of FASB Statement
No. 109 (ASC 740), which requires income tax positions to meet a more-likely-than-not recognition threshold to be recognized in
the financial statements. Under FIN 48 (ASC 740-10), tax positions that previously failed to meet the more-likely-than-not threshold
should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized
tax positions that no longer meet the more-likely-than-not threshold should be derecognized in the first subsequent financial
reporting period in which that threshold is no longer met.
The
application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and
regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of
regulations and court rulings. Therefore, the actual liability may be materially different from our estimates, which could result
in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities or deferred tax asset
valuation allowance.
As
a result of the implementation of FIN 48 (ASC 740-10), the Company made a comprehensive review of its portfolio of tax positions
in accordance with recognition standards established by FIN 48 (ASC 740-10). The Company recognized no material adjustments to
liabilities or shareholder’s equity as a result of the implementation. The adoption of FIN 48 did not have a material impact
on the Company’s unaudited consolidated financial statements.
Enterprise
income tax is determined under the Provisional Regulations of PRC Concerning Income Tax on Enterprises promulgated by the PRC,
income tax is payable by enterprises at a rate of 25% of their taxable income.
JRSIS
HEALTH CARE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN USD)
NOTE
2. SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
P.
Earnings per share
Basic
earnings per common share is computed by using net income divided by the weighted average number of shares of common stock outstanding
for the periods presented. Diluted earnings per share is computed by dividing net income by the weighted average number of shares
of common stock, common stock equivalents and potentially dilutive securities outstanding for the periods presented.
Q.
Reclassification
The
comparative figures have been reclassified to conform to current year presentation.
R.
Recently adopted accounting pronouncements
The
FASB has issued Accounting Standards Update (ASU) No. 2019-01, Leases (Topic 842): Codification Improvements. The new ASU aligns
the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in Topic 842 with that of
existing guidance. As a result, the fair value of the underlying asset at lease commencement is its cost, reflecting any volume
or trade discounts that may apply. However, if there has been a significant lapse of time between when the underlying asset is
acquired and when the lease commences, the definition of fair value (in Topic 820, Fair Value Measurement) should be applied.
The
ASU also requires lessors within the scope of Topic 942, Financial Services—Depository and Lending, to present all “principal
payments received under leases” within investing activities.
Finally,
the ASU exempts both lessees and lessors from having to provide certain interim disclosures in the fiscal year in which a company
adopts the new leases standard.
We
do not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect
on the consolidated financial position, statements of operations and cash flows.
NOTE
3. ACCOUNTS RECEIVABLE, NET
|
|
September 30
|
|
|
December 31
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Accounts receivable
|
|
$
|
5,723,965
|
|
|
$
|
7,308,224
|
|
Less: allowance for doubtful debts
|
|
|
2,790,343
|
|
|
|
2,724,389
|
|
|
|
$
|
2,933,622
|
|
|
$
|
4,583,835
|
|
The
Company experienced $ nil bad debts during three and nine months ended September 30, 2020 and 2019. The allowance for doubtful
debts as of September 30, 2020 and December 31, 2019 was derived from two years old insurance claims in excess of reimbursable
limits submitted by the Company to the Harbin Medical Insurance Management Centre.
NOTE
4. INVENTORIES
At
September 30, 2020 and December 31, 2019, inventories consist of the following:
|
|
September 30
|
|
|
December 31
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Western pharmaceuticals
|
|
$
|
755,730
|
|
|
$
|
554,414
|
|
Chinese herbal medicine
|
|
|
32,153
|
|
|
|
37,621
|
|
Medical consumables
|
|
|
629,942
|
|
|
|
475,916
|
|
Other material
|
|
|
7,857
|
|
|
|
4,790
|
|
|
|
$
|
1,425,682
|
|
|
$
|
1,072,741
|
|
JRSIS
HEALTH CARE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN USD)
NOTE
5. PREPAYMENT
At
September 30, 2020 and December 31, 2019 prepayment consists of the following:
|
|
September 30
|
|
|
December 31
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Deposits on medical equipment
|
|
$
|
517,329
|
|
|
$
|
744,569
|
|
Heating fees
|
|
|
-
|
|
|
|
175,736
|
|
Others
|
|
|
266,768
|
|
|
|
381,046
|
|
|
|
$
|
784,097
|
|
|
$
|
1,301,351
|
|
NOTE
6. PROPERTY AND EQUIPMENT
At
September 30, 2020 and December 31, 2019, property and equipment, at cost, consist of:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Transportation equipment
|
|
$
|
1,213,581
|
|
|
$
|
1,184,896
|
|
Medical equipment
|
|
|
22,541,264
|
|
|
|
17,291,984
|
|
Electrical equipment
|
|
|
2,197,208
|
|
|
|
1,842,552
|
|
Office equipment and others
|
|
|
1,102,580
|
|
|
|
964,669
|
|
Buildings
|
|
|
24,274,045
|
|
|
|
23,700,288
|
|
Software
|
|
|
189,522
|
|
|
|
185,043
|
|
Total fixed assets at cost
|
|
|
51,518,200
|
|
|
|
45,169,432
|
|
Accumulated depreciation
|
|
|
(9,050,875
|
)
|
|
|
(7,021,013
|
)
|
Total fixed assets before reclassification
|
|
$
|
42,467,325
|
|
|
$
|
38,148,419
|
|
Reclass to Right-of-use assets
|
|
|
(13,803,342
|
)
|
|
|
(15,309,797
|
)
|
Total fixed assets, net
|
|
|
28,663,983
|
|
|
|
22,838,622
|
|
The
Company recorded depreciation expense of $649,726 and $551,810, $1,808,738 and $1,644,389 for the three and nine months ended
September 30, 2020 and 2019, respectively.
NOTE
7. LONG TERM DEFERRED EXPENSES
On
May 7, 2015, July 3, 2015 and October 16, 2015, Jiarun entered into three lease agreements to lease medical equipment from Hair
Finance Leasing (China) Co., Ltd. (“Hair”), a third party, for a five-year period, in which Jiarun is required to
pay a consulting fee to Hair for the services provided over the five years.
During
the year ended December 31, 2018, the Company paid approximately $1.6 million for the decoration of its outpatient building and
the two Branch Hospitals. The consulting and decoration fees paid but attributable to the current and subsequent accounting periods
were accounted for as deferred expenses and long-term deferred expenses.
The
current portion of the prepaid consulting and decoration fees were recorded as deferred expenses of $435,881 and $257,203 as
of September 30, 2020 and December 31, 2019. The long-term deferred expenses were $2,519,141 and $2,978,936 as of September
30, 2020 and December 31, 2019.
The
Company recorded consulting fee of $ 5,012 and $16,049 for the three months ended September 30, 2020 and 2019, and decoration
fees of $106,715 and $49,303 for the three months ended September 30, 2020 and 2019, respectively. The Company recorded
consulting fee of $32,869 and $55,169 for the nine months ended September 30, 2020 and 2019, and decoration fees of $316,705
and $169,477 for the nine months ended September 30, 2020 and 2019, respectively.
JRSIS
HEALTH CARE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN USD)
NOTE
8. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
On
January 1, 2019, the Company adopted Accounting Standards Codification (“ASC”) Topic 842, “Leases” (“new
lease standard”). The new lease standard was adopted using the optional transition method approach that allows for the cumulative
effect adjustment to be recorded without restating prior periods. The Company has elected the practical expedient package related
to the identification, classification and accounting for initial direct costs whereby prior conclusions do not have to be reassessed
for leases that commenced before the effective date. As the Company will not reassess such conclusions, the Company has not adopted
the practical expedient to use hindsight to determine the likelihood of whether a lease will be extended or terminated or whether
a purchase option will be exercised.
Finance
lease
On
June 5, 2013, Jiarun entered into a lease agreement to lease its hospital building from Harbin Baiyi Real Estate Development Co.,
Ltd (“the Lessor”), which is owned by Junsheng Zhang, a related party. The Lease has a term of 30 years, requiring
annual prepayments of a rent of RMB7,000,000. The first payment was made on September 1, 2014. At the end of the leasing period,
a final payment will be made to settle the total leasing amount. Both parties agreed for Jiarun to pay RMB3,000,000 as deposit
at the execution of the Leasing agreement, which will be deducted from the final rental settlement. In accordance to accounting
principles and treatment, this payment was booked as deposit in our accounts. The Lessor shall return the premium for lease to
Jiarun at expiration of the Contract or pledge the deposit as part of rents for the last period or periods in 2043. The implicit
interest rate, which determined the rental fee after fair value was amortized, was calculated at 6.55%, which is the benchmark
interest rate announced from The People’s Bank of China. After the completion of all payments, the ownership of the lease
item will be transferred to Jiarun.
The
leasing agreement for our hospital building contains the following provisions:
|
●
|
Rental
payments of RMB7,000,000 (equivalent to $1,004,593) per year, payable at the beginning of September.
|
|
●
|
An
option allowing the lessor to extend the lease for thirty years beyond the last renewal option exercised by the Company.
|
|
●
|
A
guarantee by the Company that the lessor will realize $nil from selling the asset at the expiration of the lease This lease
is a capital lease because its term (30 years) exceeds 75% of the building’s estimated economic life. In addition, the
present value ($15,185,032) of the minimum lease payments exceeds 90% of the fair value of the building ($15,721,295).
|
|
●
|
Accumulated
annual amounts resulting from applying an interest rate of 6.55% to the balance of the lease obligation at the beginning of
each year. The lease obligation is increased by the amount of the prior year’s interest, the amount of the net rental
payment at the beginning of each year; and this amount represents the guaranteed residual value at the end of the lease term.
|
On
May 7, 2015, July 3, 2015, October 16, 2015, April 6, 2016, November 25, 2016, April 5 2017 and May 25, 2019 Jiarun entered into
several lease agreements to lease medical equipment and an elevator from three lease finance companies, which are all unrelated
third parties, for three to five-year periods, in which Jiarun is required to make monthly or quarterly payments toward the leases.
The Company was also required to pay deposits up front, which deposits will later be offset against the last quarterly payment.
The medical equipment and elevator will be transferred to Jiarun upon the completion of the agreement.
On
March 25, 2019 Jiarun entered into a sale and leaseback agreement for the sale-leaseback of properties from Haitong Hengxin International
Leasing Company Limited, with a collective net value of $2,609,047.
JRSIS
HEALTH CARE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN USD)
NOTE
8. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (Continued)
Operating
lease
In
August 2017 JHCC leased office space under non-cancellable operating lease agreements. Under terms of the lease agreement, from
August 2017, JHCC is committed to make lease payments of approximately $36,881 per year for 5 years. This office is used for outpatient
services by 2nd Branch Hospital.
In
December 2017 JHCC leased office space under non-cancellable operating lease agreements. Under terms of the lease agreement, from
December 2017, JHCC is committed to make lease payments of approximately $68,128 per year for 5 years. This office is used by
1st Branch Company.
The
Company’s adoption of the new lease standard included new processes and controls regarding asset financing transactions,
financial reporting and a system-related implementation required for the new lease standard. The impact of the adoption of the
new lease standard included the recognition of right-of-use (“ROU”) assets and lease liabilities. The adoption of
the new lease standard resulted in additional net lease assets and net lease liabilities of approximately $14.06 million and $14.14
million, respectively, as of September 30, 2020.
As
of September 30, 2020, the Company has the following amounts recorded on the Company’s unaudited condensed consolidated
balance sheet:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Operating
lease assets
|
|
$
|
255,646
|
|
|
$
|
331,693
|
|
Finance
lease assets
|
|
|
13,803,342
|
|
|
|
15,309,796
|
|
Total
|
|
$
|
14,058,988
|
|
|
$
|
15,641,489
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
Operating
lease liabilities
|
|
|
117,681
|
|
|
|
111,414
|
|
Finance
lease liabilities
|
|
|
1,635,519
|
|
|
|
2,569,007
|
|
Long-term
|
|
|
|
|
|
|
|
|
Operating
lease liabilities
|
|
|
137,965
|
|
|
|
220,279
|
|
Finance
lease liabilities
|
|
|
12,253,566
|
|
|
|
13,075,654
|
|
Total
|
|
$
|
14,144,731
|
|
|
$
|
15,976,354
|
|
The
future minimum lease payments for annual capital lease obligation as of September 30, 2020 are as follows:
Year
|
|
Amounts
|
|
2020
|
|
$
|
1,263,151
|
|
2021
|
|
|
2,155,864
|
|
2022
|
|
|
1,134,231
|
|
Thereafter
|
|
|
9,335,839
|
|
Total
|
|
$
|
13,889,085
|
|
The
Company recorded finance interest lease fees of $275,126 and $231,063 for the three months ended September 30, 2020 and 2019,
and recorded finance interest lease fees of $816,509 and $812,057 for the nine months ended September 30, 2020 and 2019, respectively.
JRSIS
HEALTH CARE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN USD)
NOTE
8. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (Continued)
Future
annual minimum lease payments, for non-cancellable operating leases are as follows:
Year
ending December 31
|
|
Amount
$
|
|
2020
|
|
|
30,034
|
|
2021
|
|
|
124,992
|
|
2022
|
|
|
100,620
|
|
|
|
|
255,646
|
|
The
company has recorded operating lease expense of $27,900 and $24,112 for three months ended September 30, 2020 and 2019, and recorded
operating lease expense of $81,764 and $80,864 for nine months ended September 30, 2020 and 2019 respectively
At
September 30, 2020 right-of-use assets, consist of:
|
|
September
30, 2020
(Unaudited)
|
|
|
December
31, 2019
|
|
|
|
Operating
lease
|
|
|
Finance
lease
|
|
|
Total
|
|
|
Operating
lease
|
|
|
Finance
lease
|
|
|
Total
|
|
Lease assets
|
|
$
|
337,410
|
|
|
$
|
14,619,851
|
|
|
$
|
14,957,261
|
|
|
$
|
432,892
|
|
|
$
|
16,390,259
|
|
|
$
|
16,823,151
|
|
Accumulated
amortization
|
|
|
(81,764
|
)
|
|
|
(816,509
|
)
|
|
|
(898,273
|
)
|
|
|
(101,199
|
)
|
|
|
(1,080,463
|
)
|
|
|
(1,181,662
|
)
|
Total
right-of-use assets, net
|
|
$
|
255,646
|
|
|
$
|
13,803,342
|
|
|
$
|
14,058,988
|
|
|
$
|
331,693
|
|
|
$
|
15,309,796
|
|
|
$
|
15,641,489
|
|
The
Company recorded finance lease amortization expense of $275,126 and $391,314 in depreciation and amortization for the three months
ended September 30, 2020 and 2019, respectively, and recorded finance lease amortization expense of $816,509 and $929,538 in depreciation
and amortization for the nine months ended September 30, 2020 and 2019, respectively. For the three and nine months ended September
30, 2020, the amount of depreciation and amortization was $649,726 and $1,808,738, also included general property and equipment
depreciation of $374,600 and $992,229.
The
Company recorded operating lease expense of $73,174 and $24,112 for the three months ended September 30, 2020 and 2019, and recorded
operating lease expense of $159,782 and $80,864 for the nine months ended September 30, 2020 and 2019, including operating lease
amortization expense of $27,900 and $24,573 for the three months ended September 30, 2020 and 2019, and $81,764 and $75,003 for
the nine months ended September 30, 2020 and 2019, respectively.
JRSIS
HEALTH CARE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN USD)
NOTE
9. DERIVATIVE FINANCIAL INSTRUMENTS
Derivative
Financial Instruments
The
Company has adopted the provisions of ASC subtopic 825-10, Financial Instruments (“ASC 825-10”).
ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets
and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market
in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such
as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires
an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
Debt
derivatives – In May and July of 2019, the Company issued three convertible promissory notes to Labrys Fund, LP.
Auctus Fund, LLC and Harbor Gates Capital, LLC The Notes were convertible into common stock, at holders’ option, at a discount
to the market price of the Company’s common stock. The Company has identified the embedded derivatives relating to certain
anti-dilutive (reset) provisions in the Notes. These embedded derivatives included certain conversion features. The accounting
treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception
date of debenture and record the change in fair value as of each subsequent reporting date.
During
2019 and the first nine months of 2020, the Company satisfied the Notes issued to Labrys Fund, LP, Harbor Gates Capital, LLC and
Auctus Fund, LLC.
Warrant
liabilities – The Company issued two common stock purchase warrants (the “warrants”) to purchase 28,200
shares and 21,000 shares of the registrant’s common stock to Labrys Fund, LP and Auctus Fund, LLC. These warrants contain
certain reset provisions. The accounting treatment of derivative financial instruments requires that the Company record fair value
of the derivatives as of the inception date (issuance date) and to fair value as of each subsequent reporting date.
In
January 2020 the Company issued 38,322 shares of common stock to Labrys Fund, LP in full satisfaction of its warrant. At September
30, 2020, the Company marked to market the fair value of the Auctus Fund warrant liability and determined a fair value of $42,818.
The Company recorded a loss from issuance expense and change in fair value of warrant liability of $(263,953) and $181,136 for
three and nine months ended September 30, 2020. The fair value of the warrant liability was determined using Binomial Option Pricing
Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 70.08%, (3) weighted average risk-free
interest rate of 0.241%, (4) expected life of 1.83 years, and (5) the quoted market price of the Company’s common stock
at each valuation date.
NOTE
10. NON-CONTROLLING INTERESTS
Jiarun
is the Company’s majority-owned subsidiary which is consolidated in the Company’s financial statements with a non-controlling
interest recognized. The Company holds a 70% equity interest in Jiarun as of September 30, 2020 and December 31, 2019.
As
of September 30, 2020 and December 31, 2019, NCI on the consolidated balance sheet was $8,885,529 and $8,168,613, respectively,
representing the 30% of Jiarun that is owned by Junsheng Zhang.
For
the three months ended September 30, 2020, the comprehensive income attributable to shareholders’ equity and NCI is $1,414,844
and $565,116 respectively. For the nine months ended September 30, 2020, the comprehensive income attributable to shareholders’
equity and NCI is $1,574,442 and $716,916, respectively.
For
the three months ended September 30, 2019, the comprehensive income attributable to shareholders’ equity and NCI is $(211,130)
and $74,257 respectively. For the nine months ended September 30, 2019, the comprehensive income attributable to shareholders
‘equity and NCI is $1,085,897 and $808,118, respectively.
JRSIS
HEALTH CARE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN USD)
NOTE
11. Revenue
The
Company’s revenue consists of pharmaceuticals sales and patient care revenue.
|
|
Three
Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Pharmaceuticals:
|
|
|
|
|
|
|
Western pharmaceuticals
|
|
$
|
1,869,252
|
|
|
$
|
1,989,732
|
|
Chinese medicine
|
|
|
235,613
|
|
|
|
296,327
|
|
Herbal
medicine
|
|
|
358,086
|
|
|
|
257,971
|
|
Total
pharmaceuticals
|
|
$
|
2,462,951
|
|
|
$
|
2,544,030
|
|
|
|
|
|
|
|
|
|
|
Patient services:
|
|
|
|
|
|
|
|
|
Medical consulting
|
|
$
|
3,509,366
|
|
|
$
|
2,732,914
|
|
Medical treatment
|
|
|
3,496,691
|
|
|
|
2,215,895
|
|
Others
|
|
|
547,077
|
|
|
|
270,361
|
|
Total
patient services
|
|
$
|
7,553,134
|
|
|
$
|
5,219,170
|
|
|
|
$
|
10,016,085
|
|
|
$
|
7,763,200
|
|
|
|
Nine
Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Pharmaceuticals:
|
|
|
|
|
|
|
Western pharmaceuticals
|
|
$
|
4,682,550
|
|
|
$
|
6,229,016
|
|
Chinese medicine
|
|
|
558,715
|
|
|
|
989,317
|
|
Herbal
medicine
|
|
|
812,883
|
|
|
|
728,587
|
|
Total
pharmaceuticals
|
|
$
|
6,054,148
|
|
|
$
|
7,946,920
|
|
|
|
|
|
|
|
|
|
|
Patient services:
|
|
|
|
|
|
|
|
|
Medical consulting
|
|
$
|
7,607,046
|
|
|
$
|
7,197,523
|
|
Medical treatment
|
|
|
8,586,527
|
|
|
|
7,078,626
|
|
Others
|
|
|
772,734
|
|
|
|
683,904
|
|
Total
patient services
|
|
$
|
16,966,307
|
|
|
$
|
14,960,053
|
|
|
|
$
|
23,020,455
|
|
|
$
|
22,906,973
|
|
JRSIS
HEALTH CARE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN USD)
NOTE
12. INCOME TAX EXPENSE
The
Company uses the asset-liability method of accounting for income taxes prescribed by ASC 740 Income Taxes. The Company and its
subsidiaries each file their taxes individually.
United
States
JRSS
is subject to the United States of America tax at a tax rate of 21%. No provision for the US federal income taxes has been made
as the Company had no US taxable income for the periods presented, and its earnings are planned to be reinvested indefinitely
into the operations of the Company in the PRC.
BVI
JHCL
was incorporated in the BVI and, under the current laws of the BVI, it is not subject to income tax.
Hong
Kong
Runteng was
incorporated in Hong Kong and is subject to Hong Kong profits tax. Runteng is subject to Hong Kong taxation on its activities
conducted in Hong Kong and income arising in or derived from Hong Kong. The applicable statutory tax rate is 16.5%.
PRC
Corporate
Income Tax (CIT) is determined under the Provisional Regulations of PRC Concerning Income Tax on Enterprises promulgated by the
PRC. Income tax is payable by enterprises at a rate of 25% of their taxable income.
According
to the PRC “Notice on Preferential Corporate Income Tax (CIT) Treatment for Eligible Equipment or Machinery (Cai Shui [2018]
No. 54)”, a 100% immediate tax deduction for CIT purposes is allowed on the condition that the unit price of each item of
equipment or machinery is individually less than RMB5 million. Depreciation for tax purposes is not required. Basis differences
between tax and GAAP for depreciation of property and equipment exist because in 2020 the Company purchased Eligible Equipment
for RMB 35.8 million, with $1.1 million deferred income tax, creating differences between the tax treatment mandated by the Chinese
government and GAAP tax treatment.
JRSIS
HEALTH CARE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN USD)
NOTE
13. RELATED PARTY TRANSACTIONS
The
following is the list of the related parties with which the Group has had transactions:
(a)
Junsheng Zhang, the Chairman of the Company
(b)
Harbin Baiyi Real Estate Development Co., Ltd., owned by Junsheng Zhang
(c)
Harbin Jiarun Pharmacy Co., Ltd., owned by Junsheng Zhang
(d)
Heilongjiang Province Runjia Medical Equipment Company Limited, owned by Junsheng Zhang
(e)
Jiarun Super Market Co., Ltd., owned by Junsheng Zhang
(f)
Harbin Qi-run Pharmacy Limited, owned by Junsheng Zhang
(g)
Yanhua Xing and Weiguang Song, the former shareholders of JHCL
Amount
due from related parties
The
amount due from related parties became $ Nil in 2020 and 2019.
Amount
due to related parties
Amount
due to related parties consisted of the following as of the periods indicated:
|
|
September 30,
|
|
|
December 31,
|
|
Name of related parties
|
|
2020
|
|
|
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Harbin Jiarun Pharmacy Co., Ltd
|
|
$
|
22,876
|
|
|
$
|
-
|
|
Heilongjiang Province Runjia Medical Equipment Co., Ltd
|
|
|
2,132
|
|
|
|
4,306
|
|
Harbin Baiyi Real Estate Development Co., Ltd,
|
|
|
-
|
|
|
|
1,043,131
|
|
Junsheng Zhang
|
|
|
413,238
|
|
|
|
747,103
|
|
|
|
$
|
438,246
|
|
|
$
|
1,794,540
|
|
Amount
due to Harbin Jiarun Pharmacy Co., Ltd., and Heilongjiang Province Runjia Medical Equipment Company Limited were mainly for
the balance for purchase of pharmaceuticals and medical material from these companies.
Amount
due to Baiyi mainly represented the debt for the inpatient and outpatient building extension decoration and beauty center decoration.
Amounts
due to Junsheng Zhang represented the balance paid by Mr. Zhang for the daily operation of the Company.
Related
parties’ transactions
Purchase
of pharmaceuticals and medical material from related parties consisted of the following for the periods indicated:
|
|
For nine months ended
September 30,
|
|
Name of related parties
|
|
2020
|
|
|
2019
|
|
Harbin Jiarun Pharmacy Co., Ltd
|
|
$
|
22,876
|
|
|
$
|
69,583
|
|
Heilongjiang Province Runjia Medical Equipment Co., Ltd
|
|
|
2,278
|
|
|
|
7,201
|
|
|
|
$
|
25,.154
|
|
|
$
|
76,784
|
|
Deposits
for capital leases and capital lease obligations
On
June 5, 2013, Jiarun entered into a Lease Agreement to lease a new hospital building from Harbin Baiyi Real Estate Development
Co., Ltd, which is owned by Junsheng Zhang, a related party. As of September 30, 2020, the Company has balance of deposits for
capital leases and capital lease obligations of $440,963 and $11,541,555, respectively. As of December 31, 2019, the Company has
balance of deposits for capital leases and capital lease obligations of $447,021 and $13,148,213, respectively.
JRSIS
HEALTH CARE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN USD)
NOTE
14. BASIC AND DILUTED EARNINGS PER SHARE
Basic
net income per share is computed using the weighted average number of common shares outstanding during the period. Diluted net
income per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding
during the period. Potential common shares comprise shares issuable upon the exercise of share-based awards, using the treasury
stock method. The reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for
income from continuing operations is shown as follows:
|
|
Nine
Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Numerator:
|
|
|
|
|
|
|
Net
income available to common stockholders
|
|
$
|
1,212,681
|
|
|
$
|
1,798,663
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Basic weighted-average
number of shares outstanding
|
|
|
18,021,848
|
|
|
|
16,380,863
|
|
Diluted
weighted-average number of shares outstanding
|
|
|
18,059,240
|
|
|
|
16,398,532
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
Basic
EPS
|
|
$
|
0.0673
|
|
|
$
|
0.1098
|
|
Diluted
EPS
|
|
$
|
0.0672
|
|
|
$
|
0.1097
|
|
NOTE
15. CONTINGENCIES AND COMMITMENT
Certain
conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company
but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and legal
counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss
contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings,
the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the
perceived merits of the amount of relief sought or expected to be sought.
If
the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability
can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment
indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be
estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable
and material would be disclosed. There was no probable or reasonably possible loss contingency as of September 30, 2020 and December
31, 2019.
Loss
contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case
the guarantee would be disclosed.
JRSIS
HEALTH CARE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN USD)
NOTE
16. COMMON STOCK
During
the first quarter of 2020, the Company issued 38,332 shares to Labrys Fund, LP in full satisfaction of a common stock purchase
warrant that the Company had sold to Labrys Fund, LP during 2019, On February 27, 2020, Auctus Fund, LLC converted into 2,000
shares of the Company’s common stock with $2,400 in accrued interest and fees arising under the Promissory Note it had purchase
from the Company in July 2019. On August 4, 2020, the Company issued 40,000 shares to StockVest for advertising, promotional and
marketing services.
NOTE
17. GOING CONCERN
As
reflected in the accompanying consolidated financial statements, the Company had a $5,575,971 negative retained earnings or accumulated
deficit as of September 30, 2020; in addition, the Company’s total current liabilities exceeded its current assets by $2,950,924.
These factors raised substantial doubt about its ability to continue as a going concern. In view of the matters described above,
recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued
operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing
and succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company
be unable to continue as a going concern.
To
continue as a going concern, the Company is actively pursuing additional funding and strategic partners to enable it to implement
its business plan. In addition, the Company is also working to devote more efforts to improve its operation and generate more
profits. Management believes that these actions will allow the Company to continue its operations through the next fiscal year.
NOTE
18. SUBSEQUENT EVENTS
The
Management of the Company determined that there were no material reportable subsequent events required to be disclosed.