| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES ● Basis of presentation These
consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States
of America (“U.S. GAAP”). These consolidated financial statements include the financial statements of the Company and its
subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation. The
consolidated financial information as of December 31, 2021 and 2020 and for the years ended December 31, 2021 and 2020 have been prepared,
pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote
disclosures, which are normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP, have been
omitted pursuant to those rules and regulations. The consolidated financial information should be read in conjunction with the consolidated
financial statements and the notes. ● Use of estimates The
preparation of the consolidated financial statements in conformity with the U.S. GAAP requires management to make estimates and judgments
that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the consolidated
financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and
judgments on historical experience and on various other assumptions and information that are believed to be reasonable under the circumstances.
Estimates and assumptions of future events and their effects cannot be perceived with certainty and, accordingly, these estimates may
change as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes.
Significant estimates and assumptions made by management include, among others, useful lives and impairment of long-lived assets, impairment
of goodwill, collectability of accounts receivable, advances to suppliers, allowance for doubtful accounts, reserve of inventory and
valuation of derivative liabilities. While the Company believes that the estimates and assumptions used in the preparation of the consolidated
financial statements are appropriate, actual results could differ from those estimates. Estimates and assumptions are periodically reviewed
and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. ● Business combination The
Company accounted for its business combination using the acquisition method of accounting in accordance with ASC 805 “Business
Combinations”. The cost of an acquisition is measured as the aggregate of the acquisition date fair values of the assets transferred
and liabilities incurred by the Company to the sellers and equity instruments issued. Transaction costs directly attributable to the
acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values
as of the acquisition date, irrespective of the extent of any non-controlling interests. The excess of (i) the total costs of acquisition,
fair value of the non-controlling interests and acquisition date fair value of any previously held equity interest in the acquiree over
(ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the
acquisition date amounts of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated income
statements. During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments
to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Subsequent to the conclusion of the measurement
period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any further adjustments
are recorded in the consolidated income statements. In
a business combination achieved in stages, the Company re-measures the previously held equity interest in the acquiree immediately before
obtaining control at its acquisition date fair value and the re-measurement gain or loss, if any, is recognized in the consolidated income
statements. When
there is a change in ownership interests or a change in contractual arrangements that results in a loss of control of a subsidiary, the
Company deconsolidates the subsidiary from the date control is lost. Any retained non-controlling investment in the former subsidiary
is measured at fair value and is included in the calculation of the gain or loss upon deconsolidation of the subsidiary. ● Cash Cash
consists primarily of cash on hand and cash in banks which is readily available in checking and saving accounts. The Company maintains
cash with various financial institutions in the PRC where its accounts are uninsured. The Company has not experienced any losses from
funds held in bank accounts and believes it is not exposed to any risk on its cash held in its bank accounts. ● Restricted cash Cash
that is restricted as to withdrawal or use under the terms of certain contractual agreements are recorded in restricted cash account
on the Company’s consolidated balance sheet. ● Accounts receivable and allowance for doubtful accounts Accounts
receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30
to 90 days from delivery. Credit is extended based on evaluation of a customer’s financial condition, the customer credit-worthiness
and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due
balances over 90 days and over a specified amount are reviewed individually for collectability. At the end of each period, the Company
specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor
the progress of the collection of accounts receivables. For the receivables that are past due or not being paid according to payment
terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account
balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered
remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of December 31, 2021 and 2020, the
allowance for doubtful accounts was $322,145 and $1,236,830, respectively. ● Advances to suppliers Advances
to suppliers consist of prepayments to the Company’s vendors, such as pharmaceutical manufacturers and medicine suppliers. The
Company typically prepays for the purchase of our merchandise, especially for those salable, scarce, personalized medicine or medical
devices. The Company typically receive products from vendors within three to nine months after making prepayments. The Company continuously
monitor delivery from, and payments to, the vendors while maintaining a provision for estimated credit losses based upon historical experience
and any specific supplier issues, such as discontinuing of inventory supply, that have been identified. If the Company has difficulty
receiving products from a vendor, the Company would cease purchasing products from such vendor, request return of our prepayment promptly,
and if necessary, take legal action. The Company has not taken such type of legal action during the reporting periods. If none of these
steps are successful, management will then determine whether the prepayments should be reserved or written off. As of December 31, 2021
and 2020, the allowance for doubtful accounts was $ Nil ● Inventories Inventories are stated at
the lower of cost or net realizable value. Costs include the purchase price of the inventories and freight, the cost is determined using
the weighted average method and net realizable value is the estimated selling price in the normal course of business less any costs to
complete and sell products. The Company carries out physical inventory counts on a monthly basis at each store and warehouse location.
The Company reviews historical sales activity quarterly to determine excess, slow moving items and potentially obsolete items. The Company
provides inventory reserve based on the excess quantities on hand equal to the difference, if any, between the cost of the inventory
and its estimated market value, or obsolescence of inventories determined principally by customer demand. As of December 31, 2021 and
2020, the Company recorded allowance for obsolete inventories (the Pharmacy Group’s expired medicine) of $103,178 and $9,825, respectively. ● Property, Plant and Equipment Property,
Plant and Equipment are stated at cost less accumulated depreciation and impairment, if any. Depreciation is calculated on the straight-line
basis over the following expected useful lives from the date on which they become fully operational and after taking into account their
estimated residual values:
Items Expected useful
lives Residual
Building 20 years 5 %
Office
equipment 3 years 5 %
Electronic
equipment 3 years 5 %
Furniture 5 years 5 %
Medical
equipment 10 years 5 %
Vehicles 4 years 5 %
Leasehold
Improvement Shorter of lease term or useful life 5 % Expenditures
for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation
are removed from the accounts and any resulting gain or loss is recognized in the results of operations. ● Leases On
January 1, 2020 the Company adopted Accounting Standards Update (“ASU”) 2016-02. For all leases that were entered into prior
to the effective date of ASC 842, we elected to apply the package of practical expedients. Based on this guidance, the Company did not
reassess the following: (1) whether any expired or existing contracts are or contain leases; (2) the lease classification for any expired
or existing leases; and (3) initial direct costs for any existing leases. The
Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”)
assets, current portion of obligations under operating leases, and obligations under operating leases, non-current on the Company’s
consolidated balance sheets. Finance leases are included in property and equipment, net, current portion of obligations under capital
leases, and obligations under capital leases, non-current on our consolidated balance sheets. Operating
lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over
the lease term at commencement date, adjusted by the deferred rent liabilities at the adoption date. As most of the Company’s leases
do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date
in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes
lease incentives and initial direct costs incurred. The Company’s terms may include options to extend or terminate the lease when
it is reasonably certain that the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over
the lease term. ● Goodwill Goodwill
represents the excess of the consideration paid of an acquisition over the fair value of the net identifiable assets of the acquired
subsidiary at the date of acquisition. Goodwill is not amortized , The
Company reviews the carrying value of intangible assets not subject to amortization, including goodwill, to determine whether impairment
may exist annually or more frequently if events and circumstances indicate that it is more likely than not that an impairment has occurred.
The Company has the opinion to assess qualitative factors to determine whether it is necessary to perform the two-step in accordance
with ASC 350-20. If the Company believes, as a result of the qualitative carrying amount, the two-step quantities impairment test described
below is required. The
first step compares the fair values of each reporting unit to its carrying amount, including goodwill. If the fair value of each reporting
unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If
the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying
value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a
business acquisition with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the
reporting unit . . . Management
evaluated the recoverability of goodwill by performing a qualitative assessment before using a two-step impairment test approach at the
reporting unit level. If the Company reorganizes its reporting structure in a manner that changes the composition of one or more of its
reporting units, goodwill will be reassigned based on the relative fair value of each of the affected reporting units. As of December
31, 2021 and 2020, the Company recorded impairment for goodwill of $26,128,171 and $ Nil At the date of the most recent annual goodwill impairment test, all
the reporting units’ fair value were either equal to or slightly higher than their carrying values. None of the reporting units’
fair values were substantially in excess of their carrying values. The fair value of the goodwill associated with each of the Guanzan
Group (which covers the wholesale pharmaceutical, wholesale medical devices and the Lijiantang Pharmacies segments) and the medical services
segment (consisting of Guoyitang, Zhongshan and the Qiangsheng, Eurasia and Minkang hospitals), were equal to their carrying value after
their last impairment test and the fair value of the goodwill for Zhuoda only exceeded its carrying value by approximately 5.62%. Accordingly,
the goodwill associated with Zhuoda, Guanzan Group, Guoyitang, Zhongshan and Qiangsheng, Eurasia and Minkang are considered at risk for
impairment in future periods. The fair value of a reporting unit is based on discounted
estimated future income statement. The assumptions used to estimate fair value include management’s estimates of future growth
rates, operating revenue, and discount rates. We disclose the methodology used to determine the fair values of our reporting units for
our annual impairment review as using the income approach. All of our reporting units share similar characteristics
due to the nature of their businesses and operating model. As a result, the methodology used to determine fair value and the key estimates
and assumptions used in our annual goodwill review are consistent for all of our reporting units. Our key assumptions used includes revenue growth,
profit margins, terminal value growth rates, capital expenditures projections, assumed tax rates, discount rates, other assumptions deemed
reasonable by the management and relevant comparable to similar industry. We believe that the estimates and assumptions made are reasonable,
but they are susceptible to change from period to period. Actual results of operations, cash flows and other factors will likely differ
from the estimates used in our valuation, and it is possible that differences and changes could be material. A deterioration in profitability,
adverse market conditions, changes in regulatory developments, changes in category growth rates as a result of changing consumer preferences,
loss of key personnel, the disposition of a significant portion of a reporting unit and competitive activity or a slower or weaker economic
recovery than currently estimated by management could have a significant impact on the assumption and estimation in calculating the fair
value of our reporting units and could result in an impairment charge in the future. Potential events and changes in circumstances that
could reasonably be expected to negatively affect the key assumptions are general economic conditions, regulatory developments, changes
in category growth rates as a result of changing consumer preferences, loss of key personnel, the disposition of a significant portion
of a reporting unit and competitive activity. ● Impairment of long-lived assets and intangible assets In
accordance with the provisions of ASC Topic 360, “ Impairment or Disposal of Long-Lived Assets ● Revenue recognition We
adopted Accounting Standard Codification (“ASC”) Topic 606, Revenues from Contract with Customers (“ASC 606”)
for all periods presented. Under ASC 606, revenue is recognized when control of the promised goods and services is transferred to the
Company’s customers, in an amount that reflects the consideration that the Company expects to be entitled to in exchange for those
goods and services, net of value-added tax. The Company determines revenue recognition through the following steps:
● Identify
the contract with a customer;
● Identify
the performance obligations in the contract;
● Determine
the transaction price;
● Allocate
the transaction price to the performance obligations in the contract; and
● Recognize
revenue when (or as) the entity satisfies a performance obligation. The
transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated
to each performance obligation is recognized when that performance obligation is satisfied by the control of the promised goods and services
is transferred to the customers, which at a point in time or over time as appropriate. The Company’s revenues
are net of value added tax (“VAT”) collected on behalf of PRC tax authorities in respect to the sales of products and services.
VAT collected from customers, net of VAT paid for purchases, is recorded as a liability in the accompanying consolidated balance sheets
until it is paid to the relevant PRC tax authorities. The primary sources of the Company’s revenues are as follows:
(1) Pharmacy retail sales The physical pharmacies sell prescription drugs,
over-the-counter (“OTC”) drugs, nutritional supplements, health foods, sundry products and medical devices. Revenue from
sales of prescription medicine at drugstores is recognized when the prescription is filled and the customer picks up and pays for the
prescription. Revenue from sales of other merchandise at drugstores is recognized at the point of sale, which is when a customer pays
for and receives the merchandise. Usually the majority merchandise, such as prescription and OTC drugs, are not refundable after the
customers leave the counter. Returns of other products, such as sundry products, are minimal. Sales of drugs reimbursed by the local
government medical insurance agency and receivables from the agency are recognized when a customer pays for the drugs at a store. The
Company based on historical experience, a reserve for potential losses from denial of reimbursement on certain unqualified drugs is made
to the receivables from the government agency.
(2) Wholesale Medical Device and wholesale pharmaceuticals The Group sales of wholesale medical device mainly through Guanzan,
the group sales of wholesale pharmaceuticals mainly through Shude,Pusheng and Zhuoda. The medical device and wholesale pharmaceuticals
businesses primarily involve purchasing wholesale medical device and wholesale pharmaceuticals from the suppliers and then selling to
customers. Upon obtaining purchase orders, the Company instructs warehouse agent to transfer ownership of products to customers. The
transaction is normally completed within a short period of time, ranging from a few days to a month. The Company recognizes revenue from
product sales when obligations under the terms of a contract with the customer are satisfied; generally, this occurs with the transfer
of control of the goods to customers.
(3) Medical service The medical services segment conducts its hospital business through
Guoyitang hospital, Zhongshan hospital, Qiangsheng hospital, Eurasia hospital and Mingkang hospital. Revenue from ancillary medical services
is recognized when the related services have been rendered and includes outpatient and inpatient services.. For outpatient services, the patient normally receives
outpatient treatment which contains various treatment components. Outpatient services contain more than one performance obligations,
including (i) provision of consultation services and (ii) sale of pharmaceutical products. The Group allocates the transaction price
to each performance obligation on relative stand-alone selling price basis. Both (i) provision of consultation services and (ii) sale
of pharmaceutical products for which the control of services or pharmaceutical products is transferred at a point in time, revenue is
recognized when the customer obtains the control of the completed services or pharmaceutical products and the Group has satisfied its
performance obligations with present right to payment and the collection of the consideration is probable. For inpatient services, the customers normally receive inpatient treatment
which contains various treatment components. Inpatient services contain more than one performance obligations, including (i) sale of
pharmaceutical products and (ii) provision of inpatient healthcare services. The Group allocates the transaction price to each performance
obligation on a relative stand-alone selling price basis. For revenue from (i) sale of pharmaceutical products
for which control of services or pharmaceutical products is transferred at a point in time, revenue is recognized when the customer obtains
the control of the completed services or pharmaceutical products and the Group has satisfied its performance obligations with present
right to payment and the collection of the consideration is probable. For revenue from (ii) provision of inpatient healthcare
services, the corresponding revenue is recognized over the service period when customers simultaneously receive the services and consumes
the benefits provided by the Group’s performance as the Group performs. ● Cost of revenue Cost
of revenues consists primarily of cost of goods purchased from suppliers plus direct material costs for packaging and storage, direct
labor, which are directly attributable to the acquisition and maintaining of products for sales. Cost of revenues also include impairment
loss of our products which are obsolete or expired for sale, if any. Shipping and handling costs, associated with the distribution of
finished products to customers, are borne by the customers. ● Comprehensive income ASC
Topic 220, “Comprehensive Income”, ● Beneficial conversion feature The
Company evaluates the conversion feature to determine whether it was beneficial as described in ASC 470-20. The intrinsic value of a
beneficial conversion feature inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible
notes payable and may not be settled in cash upon conversion, is treated as a discount to the convertible notes payable. This discount
is amortized over the period from the date of issuance to the date the notes is due using the effective interest method. If the notes
payable are retired prior to the end of their contractual term, the unamortized discount is expensed in the period of retirement to interest
expense. In general, the beneficial conversion feature is measured by comparing the effective conversion price, after considering the
relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the shares of common
stock at the commitment date to be received upon conversion. ● Income taxes Income
taxes are determined in accordance with the provisions of ASC Topic 740, “ Income Taxes ASC
740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements
uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the
financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax
positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of
being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. For
the years ended December 31, 2021 and 2020, the Company did not have any interest and penalties associated with tax positions. As of
December 31, 2021, the Company did not have any significant unrecognized uncertain tax positions. The
Company conducts the majority of its businesses in the PRC and is subject to tax in this jurisdiction. As a result of its business activities,
the Company files tax returns that are subject to examination by the PRC. ● Value added tax Sales
revenue represents the invoiced value of goods, net of VAT. All of the Company’s products are sold in the PRC and are subject to
a VAT on the gross sales price. The VAT rates range up to 13%, depending on the type of products sold. The VAT may be offset by VAT paid
by the Company on raw materials and other materials included in the cost of producing or acquiring its finished products. The Company
records a VAT payable net of payments if the VAT payable on the gross sales is larger than VAT paid by the Company on purchase of materials
or finished goods; on the other hand, the Company records a VAT deductible in the accompanying financial statements net of any VAT payable
at the end of reporting period. ● Convertible promissory notes The
Company records debt net of debt discount for beneficial conversion features and warrants, on a relative fair value basis. Beneficial
conversion features are recorded pursuant to the Beneficial Conversion and Debt Topics of the FASB Accounting Standards Codification.
The amounts allocated to warrants and beneficial conversion rights are recorded as debt discount and as additional paid-in-capital. Debt
discount is amortized to interest expense over the life of the debt. ● Debt issuance costs and debt discounts The
Company may record debt issuance costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs
may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense through the maturity of
the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately
expensed. ● Discontinued operation In
accordance with ASC 205-20, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal of
a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal
represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components
of an entity meets the criteria in paragraph 205-20-45-1E to be classified as held for sale. When all of the criteria to be classified
as held for sale are met, including management, having the authority to approve the action, commits to a plan to sell the entity, the
major current assets, other assets, current liabilities, and non-current liabilities shall be reported as components of total assets
and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations,
less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the net income (loss) of continuing
operations in accordance with ASC 205-20-45. ● Derivative instruments The
Company enters into financing arrangements that consist of freestanding derivative instruments or are hybrid instruments that contain
embedded derivative features. The Company accounts for these arrangements in accordance with Accounting Standards Codification topic
815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”) as well as related interpretation
of this standard. In accordance with this standard, derivative instruments are recognized as either assets or liabilities in the balance
sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely
related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or
loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data
using appropriate valuation models, giving consideration to all of the rights and obligations of each instrument. The
Company estimates fair values of derivative financial instruments using various techniques (and combinations thereof) that are considered
to be consistent with the objective measuring fair values. In selecting the appropriate technique, we consider, among other factors,
the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex derivative instruments,
such as free-standing warrants, we generally use the Black-Scholes model, adjusted for the effect of dilution, because it embodies all
of the requisite assumptions (including trading volatility, estimated terms, dilution and risk free rates) necessary to fair value these
instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates
that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors.
In addition, option-based techniques (such as Black-Scholes model) are highly volatile and sensitive to changes in the trading market
price of our Common Stock. Since derivative financial instruments are initially and subsequently carried at fair values, our income (expense)
going forward will reflect the volatility in these estimate and assumption changes. Under the terms of the new accounting standard,
increases in the trading price of the Common Stock and increases in fair value during a given financial quarter result in the application
of non-cash derivative expense. Conversely, decreases in the trading price of the Common Stock and decreases in trading fair value during
a given financial quarter result in the application of non-cash derivative income. ● Net loss per share The
Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” ● Foreign currencies translation Transactions
denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing
at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated
into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded
in the statement of operations. The
reporting currency of the Company is the United States Dollar (“$”). The Company’s subsidiaries in the PRC maintain
their books and records in their local currency, the Renminbi Yuan (“RMB”), which is the functional currency as being the
primary currency of the economic environment in which these entities operate. In
general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not the $ are translated
into $, in accordance with ASC Topic 830-30, “ Translation of Financial Statement”, Translation
of amounts from RMB into $ has been made at the following exchange rates for the respective year: December 31, December 31, Year-end RMB: $1 exchange rate 6.3757 6.5249 Annual average RMB: $1 exchange rate 6.4515 6.8976 ● Related parties Parties,
which can be a corporation or individuals, are considered to be related if the Company has the ability, directly or indirectly, to control
the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also
considered to be related if th |
