Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 21, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | Tongji Healthcare Group, Inc. | |
Entity Central Index Key | 1,389,518 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 15,812,191 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,016 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Current Assets | ||
Cash | $ 43,507 | $ 10,300 |
Accounts receivable, net | 192,720 | 296,951 |
Due from related parties | 192,995 | 198,676 |
Medical supplies | 85,029 | 101,907 |
Prepaid expenses and other current assets | 13,626 | 9,157 |
Total Current Assets | 527,877 | 616,991 |
Equipment, net | 692,802 | 743,626 |
Construction in progress | 15,003,983 | 15,310,962 |
Deposits | 178,535 | 179,839 |
Intangible assets, net | 37,964 | 46,260 |
TOTAL ASSETS | 16,441,161 | 16,897,678 |
Current Liabilities | ||
Accounts payable and accrued expenses | 917,367 | 958,387 |
Due to related parties | 15,475,336 | 15,645,347 |
Other payable | 548,414 | 618,586 |
Settlement payable | 1,399,990 | 1,371,233 |
Short-term loan | 599,835 | 617,494 |
Current portion of capital lease payable | 543,887 | 559,898 |
Total Current Liabilities | 19,484,829 | 19,770,945 |
Total Liabilities | 19,484,829 | 19,770,945 |
STOCKHOLDERS' DEFICIT | ||
Preferred stock; $0.001 par value, 20,000,000 shares authorized and none issued and outstanding | 0 | 0 |
Common stock; $0.001 par value, 50,000,000 shares authorized and 15,812,191 shares issued and outstanding as of September 30, 2016 and December 31, 2015 respectively | 15,812 | 15,812 |
Additional paid in capital | 440,368 | 440,368 |
Accumulated deficit | (3,821,579) | (3,565,562) |
Accumulated other comprehensive income | 321,731 | 236,115 |
Total Stockholders' Deficit | (3,043,668) | (2,873,267) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ 16,441,161 | $ 16,897,678 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares | Sep. 30, 2016 | Dec. 31, 2015 |
Stockholders equity: | ||
Preferred stock, par value | $ 0.001 | $ .001 |
Preferred stock, authorized shares | 20,000,000 | 20,000,000 |
Preferred stock, issued shares | 0 | 0 |
Preferred stock, outstanding shares | 0 | 0 |
Common stock, par value | $ 0.001 | $ .001 |
Common stock, authorized shares | 50,000,000 | 50,000,000 |
Common stock, issued shares | 15,812,191 | 15,812,191 |
Common stock, outstanding shares | 15,812,191 | 15,812,191 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
OPERATING REVENUE | ||||
In-patient service revenue | $ 244,572 | $ 297,438 | $ 835,871 | $ 760,828 |
Out-patient service revenue | 184,844 | 268,936 | 654,471 | 1,004,620 |
Total operating revenue | 429,416 | 566,374 | 1,490,342 | 1,765,448 |
COST OF REVENUE | ||||
Medicine and supplies | 188,983 | 272,277 | 689,396 | 827,816 |
Salary and fringes | 142,944 | 158,926 | 463,918 | 481,389 |
Total cost of revenue | 331,927 | 431,203 | 1,153,314 | 1,309,205 |
GROSS PROFIT | 97,489 | 135,171 | 337,028 | 456,243 |
OPERATING EXPENSES | ||||
Administrative expenses | 45,868 | 73,167 | 146,404 | 239,880 |
Depreciation and amortization expenses | 15,962 | 21,613 | 52,231 | 66,229 |
Other operating expenses | 97,373 | 68,178 | 241,055 | 222,332 |
Salary and fringes | 15,883 | 17,658 | 51,546 | 53,488 |
Total operating expenses | 175,086 | 180,616 | 491,236 | 581,929 |
LOSS FROM OPERATIONS | (77,597) | (45,445) | (154,208) | (125,686) |
OTHER INCOME (EXPENSE) | ||||
Other income | 6,206 | 15,306 | 20,428 | 35,139 |
Interest expense, net | (31,849) | (71,381) | (122,237) | (169,051) |
Total Other Expense | (25,643) | (56,075) | (101,809) | (133,912) |
LOSS BEFORE INCOME TAXES | (103,240) | (101,520) | (256,017) | (259,598) |
Provision for income taxes | 0 | 0 | 0 | 0 |
NET LOSS | (103,240) | (101,520) | (256,017) | (259,598) |
OTHER COMPREHENSIVE INCOME | ||||
Foreign currency translation gain | 10,398 | 63,796 | 85,616 | 61,524 |
NET COMPREHENSIVE LOSS | $ (92,842) | $ (37,724) | $ (170,401) | $ (198,074) |
Net loss per common stock-Basic and Diluted | $ (0.030) | $ (0.006) | $ (0.011) | $ (0.016) |
Weighted average common stock outstanding | ||||
Basic and Diluted | 15,812,191 | 15,812,191 | 15,812,191 | 15,812,191 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Operating activities: | ||
Net Loss | $ (256,017) | $ (259,598) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization expense | 52,231 | 66,229 |
Increase/(decrease) in operating assets and liabilities: | ||
Accounts receivable | 97,049 | 60,673 |
Medical supplies | 14,155 | 50,206 |
Prepaid expense and other current assets | (4,798) | 2,567 |
Deposit | (3,890) | 27 |
Accounts payable and accrued expenses | (13,800) | 81,397 |
Other payables | (53,201) | (77,055) |
Contingent liability | 68,899 | 72,282 |
Net Cash Used in Operating Activities | (99,372) | (3,272) |
Investing activities: | ||
Acquisitions of fixed assets | (15,201) | 0 |
Construction in progress | (132,662) | (154,878) |
Due from related parties | 0 | 6,823 |
Net Cash Used in Investing Activities | (147,863) | (148,055) |
Financing activities: | ||
Due to related parties | 281,196 | 227,940 |
Net Cash Provided by Financing Activities | 281,196 | 227,940 |
Effects of foreign currency translation | (754) | (1,524) |
Net increase in Cash | 33,207 | 75,089 |
Cash-Beginning of Period | 10,300 | 9,606 |
Cash-Ending of Period | 43,507 | 84,695 |
Cash Paid During the Year for: | ||
Income taxes | 0 | 0 |
Interest paid | $ 6,876 | $ 28,957 |
1. ORGANIZATION
1. ORGANIZATION | 9 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NOTE 1 - ORGANIZATION | Nanning Tongji Hospital, Inc. ("NTH") was established in Nanning in the province of Guangxi of the People’s Republic of China ("PRC" or “China”) by the Nanning Tongji Medical Co. Ltd. and an individual on October 30, 2003. NTH is a designated hospital for medical insurance in the city of Nanning and Guangxi province. NTH specializes in the areas of internal medicine, surgery, gynecology, pediatrics, emergency medicine, ophthalmology, medical cosmetology, rehabilitation, dermatology, otolaryngology, traditional Chinese medicine, medical imaging, anesthesia, acupuncture, physical therapy, health examination, and prevention. On December 19, 2006, NTH filed the Articles of Incorporation in the State of Nevada to establish Tongji Healthcare Group, Inc. (the "Company"). On the same day, Tongji, Inc., a wholly owned subsidiary of the Company, was incorporated in the State of Colorado. Tongji Inc. was later dissolved on March 25, 2011. On December 27, 2006, Tongji Inc. acquired 100% of the equity in NTH pursuant to an Agreement and Plan of Merger, pursuant to which NTH became a wholly owned subsidiary of Tongji Inc. Pursuant to the Agreement and Plan of Merger, the Company issued 15,652,557 shares of common stock to the stockholders of NTH in exchange for 100% of the issued and outstanding shares of common stock of NTH. Thereafter and for purposes of these consolidated financial statements the "Company" and "NTH" are used to refer to the operations of NTH. The acquisition of NTH was accounted for as a reverse acquisition under the purchase method of accounting since the stockholders of NTH obtained control of the consolidated entity. Accordingly, the reorganization of the two companies was recorded as a recapitalization of NTH, with NTH being treated as the continuing operating entity. The Company is authorized to issue 50,000,000 shares of common stock, par value $0.001 per share and 20,000,000 shares of preferred stock, par value $0.001 per share. According to the PRC Regulation of Healthcare Institutions, hospitals are subject to registration with the health department of the local government to obtain business license for hospital services. We received our renewed business license from Nanning municipal government in November 2007, and this license is valid until November, 2020. Other existing regulations having material effects on our business include regulations dealing with physician's licensing, usage of medicine and injection, and public security in health and medical advertising. NTH must register with and maintain an operating license from the local health department, due to the fact that NTH currently maintains a facility with over 100 beds. NTH is subject to review by the local health department at least once every three years. If NTH fails to meet their standards, NTH’s business license may be revoked. NTH is also obligated to provide free services or dispatch our physicians or other employees in the event of a need for public assistance. NTH dedicates a very small percentage of its resources to providing free public services. |
2. SUMMARY OF SIGNIFICANT ACCOU
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | The accompanying unaudited condensed consolidated financial statements have been prepared by management without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements include all of the adjustments, which, in the opinion of management, are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. The condensed consolidated balance sheet information as of December 31, 2015 was derived from the audited consolidated financial statements included in the Form 10-K. These condensed consolidated financial statements should be read in conjunction with the audited financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended on December 31, 2015 (“Form 10-K”), filed with the Commission on April 16, 2016. This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s consolidated financial statements. The consolidated financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the condensed consolidated financial statements and the Form 10-K. BASIS OF PRESENTATION AND CONSOLIDATION These financial statements present the Company’s results of operations, financial position and cash flows on a consolidated basis. The consolidated financial statements include the Company and its wholly owned subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation. Our policy is to consolidate all subsidiaries in which a greater than 50% voting interest is owned. The Company operates in one segment in accordance with the accounting guidance FASB ASC topic 280, “Segment Reporting”. CASH AND CASH EQUIVALENTS For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. A substantial amount of the Company’s cash is held in bank accounts in the PRC and is not protected by Federal Deposit Insurance Corporation (FDIC) insurance or any other similar insurance. Cash held in China amounted to $43,507 as of September 30, 2016. Given the current economic environment and the financial condition of the banking industry, there is a risk that the deposits may not be readily available or covered by such insurance. The Company has had no loss of cash in domestic or foreign banks in past years. USE OF ESTIMATES The preparation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported assets and liabilities, disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of net revenues and expenses during the reporting period. Actual results may differ from those estimates and such differences may be material. The more significant estimates and assumptions by management include, among others, useful lives and residual values of fixed assets, valuation of inventories, accounts receivable, stock based compensation, and allowance for bad debt. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. TRANSLATION ADJUSTMENT The Company's functional currency is the Chinese Renminbi (RMB). The reporting currency is that of the US Dollar. Capital accounts of the consolidated financial statements are translated into United States dollars from RMB at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of the balance sheet date. Income and expenditures are translated at the average exchange rate of the year. The RMB is not freely convertible into foreign currency and all foreign currency 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 dollar at the rates used in translation. The exchange rates used to translate amounts in RMB into USD for the purposes of preparing the financial statements were as follows: September 30, 2016 Balance sheet RMB 6.67 to US $1.00 Statement of income and other comprehensive income RMB 6.58 to US $1.00 December 31, 2015 Balance sheet RMB 6.48 to US $1.00 Statement of income and other comprehensive income RMB 6.28 to US $1.00 September 30, 2015 Statement of income and other comprehensive income RMB 6.25 to US $1.00 RECLASSIFICATIONS Certain items previously reported under specific financial statement captions have been reclassified to conform to the current year presentation. REVENUE RECOGNITION The Company's revenue recognition policies are in compliance with Staff Accounting Bulletin 104 (ASC 605). Service revenue is recognized on the dates services were rendered. When a formal arrangement exists, the price is fixed or determinable. When the service is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. The Company generates revenue from individual patients as well as third-party payers, including PRC government programs and insurance providers, under which the hospital is paid based upon government established charges. Revenues for pharmaceutical drug sales are recognized upon the drug being administered to a patient. Patient revenues are recorded based on pre-established rates set by the local government. The Company bills for services provided to Medicare patients through a medical card (the US equivalent of an insurance card). There have not been significant differences between the amounts the Company has billed the government Medicare funds and the amounts collected from the Medicare funds. ACCOUNTS RECEIVABLE Accounts receivable are recorded at the estimated net realizable amounts from government fund, insurance companies and patients. Collections have not been considered an area that exposes the Company to additional risk. Hospital staff verifies patient coverage prior to examinations and/or procedures. For any Medicare patient who visits the hospital and is qualified for acceptance, the hospital will only include the portion that the social insurance organization will pay in the accounts receivable and collects the self-pay portion in cash at the time of service. Management continues to estimate the likelihood of bad debt on an ongoing basis. The Company has estimated a bad debt allowance of approximately $29,000 and $30,000 as of September 30, 2016 and December 31, 2015. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company applies the provisions of FASB ASC Topic 825, which requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of September 30, 2016 and December 31, 2015 the fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, notes payable and other payables approximated the carrying value due to the short maturity of the instruments, quoted market prices or interest rates which fluctuate with market rates except for related party debt or receivables for which it is not practicable to estimate fair value. FAIR VALUE MEASUREMENTS FASB ASC Topic 820, “Fair Value Measurements and Disclosures”, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. Various inputs are considered when determining the fair value of the Company’s investments, and long-term debt. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in these securities. These inputs are summarized in the three broad levels listed below. ● Level 1 – observable market inputs that are unadjusted quoted prices for identical assets or liabilities in active markets. ● Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.). ● Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments). The carrying value of financial assets and liabilities recorded at fair value is measured on a recurring or non-recurring basis. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. The Company had no financial assets or liabilities carried and measured on a nonrecurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. The Company had no financial assets and liabilities carried at fair value on a recurring basis. The availability of inputs observable in the market varies from instrument to instrument and depends on a variety of factors including the type of instrument, whether the instrument is actively traded, and other characteristics particular to the transaction. For many financial instruments, pricing inputs are readily observable in the market, the valuation methodology used is widely accepted by market participants, and the valuation does not require significant management discretion. For other financial instruments, pricing inputs are less observable in the market and may require management judgment. CONCENTRATIONS, RISKS, AND UNCERTAINTIES All of the Company’s operations are located in the PRC. There can be no assurance that the Company will be able to successfully continue to operate and failure to do so would have a material adverse effect on the Company’s financial position, results of operations and cash flows. In addition, the success of the Company’s operations is subject to numerous contingencies, some of which are beyond management’s control. These contingencies include general economic conditions, the price of medicine, competition, governmental and political conditions, and changes in regulations. Because the Company is dependent on the domestic market of the PRC, the Company is subject to various additional political, economic and other uncertainties. Among other risks, the Company’s operations will be subject to risk of restrictions on the transfer of funds, domestic policy changes, changing taxation policies, foreign exchange restrictions, and political and governmental regulations. CONTINGENCIES Certain conditions may exist as of the date the consolidated financial statements are issued. These conditions may result in a future 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. 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. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed. MEDICAL SUPPLIES Medical supplies include both western and traditional Chinese medicine, are valued on the lower of weighted average cost or market basis. Inventory includes product cost and inbound freight. Management compares the cost of medical supplies with the market value and allowance is made for writing down their inventories to market value, if such value is lower. EQUIPMENT Equipment is recorded at cost. Depreciation is computed over the estimated useful lives of the related asset type using the straight-line method. Maintenance and repairs are expensed as incurred and the costs of additions and betterments that increase the useful lives of the assets are capitalized. When equipment is disposed, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in other income or expenses. CONSTRUCTION-IN-PROGRESS A hospital facility currently under development is accounted for as construction-in-progress. Construction-in-progress is recorded at acquisition cost, including land rights cost, development expenditure, and professional fees capitalized during the course of construction for the purpose of financing the project. Upon completion of the project, the cost of construction-in-progress will be transferred to fixed assets, at which time depreciation will commence. CAPITALIZATION OF INTEREST Interest cost is capitalized for qualifying assets when the portion of the interest cost incurred during the assets' acquisition periods could have been avoided if expenditures for the assets had not been made. The amount capitalized in an accounting period is determined by applying the capitalization rate to the average amount of accumulated expenditures for the asset during the period. The capitalization rates used in an accounting period is based on the rates applicable to borrowings outstanding during the period (also see Note 4). Capitalization period covers the duration of the activities required to get the asset ready for its intended use, provided that expenditures for the asset have been made and interest cost is being incurred. Interest capitalization continues as long as those activities and the incurrence of interest cost continue. IMPAIRMENT OF LONG-LIVED ASSETS The Company’s long-lived assets are reviewed for impairment in accordance with the guidance of FASB Topic ASC 360, “Property, Plant, and Equipment”, and FASB ASC Topic 205 “Presentation of Financial Statements”. The Company tests for impairment losses on long-lived assets used in operations whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. The Company tests long-lived assets for recoverability at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the net carrying amount is greater than its fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Companyconsiders historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows at the rate the Company utilizes to evaluate potential investments. The Company estimates fair value based on the information available in making whatever estimates, judgments and projections are considered necessary. There were no impairment losses for the nine months ended September 30, 2016. BASIC AND DILUTED EARNINGS PER SHARE Earnings per share (EPS) is calculated in accordance with the FASB ASC Topic 260, “Earnings Per Share.” Basic net income (loss) per share is based upon the weighted average number of common shares outstanding. Diluted net income (loss) per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. 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. Potentially dilutive securities to purchase 100,000 shares of common stock were not included in the calculation of the diluted earnings per share as their effect would be anti-dilutive for the nine months ended September 30, 2016. During the nine month period ended September 30, 2016, the average market price of the common stock was less than the exercise price of the stock options and the Company was in net loss position. Accordingly, the stock options were anti-dilutive and have not been included in the calculation of diluted earnings per share. INCOME TAXES FASB ASC Topic 740, "Income Taxes” 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 accordance with ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB ASC Topic 740” , 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. The Company has made a comprehensive review of its portfolio of tax positions in accordance with recognition standards established by ASC 740-10 and has not recognized any material uncertain tax positions. In addition, companies in the PRC are required to pay business taxes consisting of 5% of income they derive from providing medical treatment, as well as city construction taxes and educational taxes which are 7% and 3%, respectively, of the business taxes. In April 2010, the Company was granted an exemption from these taxes until further notice from the tax bureau. The Company had accrued approximately $40,000 for failure to file US tax returns and Form 5472 between the years 2006 to 2009. The Company is current with its required filings. In addition, the Company does not accrue United States income taxes on unremitted earnings from foreign operations, as it is the Company’s intention to invest these earnings in the foreign operations indefinitely. STATEMENT OF CASH FLOWS In accordance with FASB ASC Topic 230, "Statement of Cash Flows," cash flows from the Company's operations is calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. EMPLOYEE BENEFIT COSTS The Company contributes to a defined contribution retirement plan organized by the municipal government in the province in which the Company’s subsidiary is registered. The Company makes contributes for qualified employees that are eligible to participate in the plan. Contributions to the plan are calculated at 30% of the employees’ salaries above a fixed threshold amount; employees contribute 8% and the Company’s subsidiary contributes the balance of 22%. The Chinese government is responsible for the benefit liability to retired employees. The Company has no other material obligation for the payment of retirement beyond the annual contribution. STOCK-BASED COMPENSATION For purposes of determining the variables used in the calculation of stock compensation expense under the provisions of FASB ASC Topic 505, “Equity” and FASB ASC Topic 718, “Compensation — Stock Compensation,” Stock-based compensation costs that have been included in operating expenses amounted to $0 and $0, for the nine month periods ended September 30, 2016 and 2015, respectively. COMPREHENSIVE INCOME The Company reports comprehensive income in accordance with FASB ASC Topic 220 “Comprehensive Income," which established standards for reporting and displaying comprehensive income and its components in a financial statement that is displayed with the same prominence as other financial statements. Total comprehensive income is defined as all changes in stockholders' equity during a period, other than those resulting from investments by and distributions to stockholders (i.e., issuance of equity securities and dividends). Generally, for the Company, total comprehensive income (loss) equals net income (loss) plus or minus adjustments for currency translation. Total comprehensive income (loss) represents the activity for a period net of related tax and was a loss of $92,842 and $37,724 for the three month periods ended September 30, 2016 and 2015, respectively. While total comprehensive income is the activity in a period and is largely driven by net earnings in that period, accumulated other comprehensive income or loss (“AOCI”) represents the cumulative balance of other comprehensive income as of the balance sheet date. For the Company, AOCI is primarily the cumulative balance related to the currency adjustments and increased overall equity by $321,731 and $236,115 as of September 30, 2016 and December 31, 2015, respectively. RECENT ACCOUNTING PRONOUNCEMENTS Recent accounting pronouncements issued by the FASB, the AICPA and the SEC did not, or are not believed by management to, have a material effect on the Company’s present or future consolidated financial statements. GOING CONCERN The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, the Company has negative working capital of $18,956,952, an accumulated deficit of $3,821,579, and a stockholders’ deficit of $3,043,668 as of September 30, 2016. The Company’s ability to continue as a going concern ultimately is dependent on the management’s ability to obtain equity or debt financing, attain further operating efficiencies, and achieve profitable operations. The consolidated 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 not be able to continue as a going concern. Management has taken certain restructuring steps to provide the necessary capital to continue its operations. These steps included: 1) plan to convert existing related party loans into equity, 2) plan to complete construction of the new hospital and begin generating revenue by 2017, 3) plan to increase sales revenue with additional medical equipment, 4) plan to obtain more funding from related party entity, that is controlled by the CEO to complete the construction of the new hospital. No assurances can be given that the steps taken will provide necessary capital for the Company to continue its operations. |
3. EQUIPMENT
3. EQUIPMENT | 9 Months Ended |
Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
NOTE 3 - EQUIPMENT | Equipment as of September 30, 2016 and December 31, 2015 comprised the following: Estimated Useful Lives (Years) September 30, 2016 December 31, 2015 Office equipment 5-10 $ 80,781 $ 83,098 Medical equipment 5 1,291,074 1,313,818 Capital lease equipment 1,687,706 1,737,392 Fixtures 10 106,250 109,297 Vehicles 5 41,755 42,952 Total equipment 3,207,566 3,286,557 Less accumulated depreciation (1,434,830 ) (1,431,205 ) Less impairment of the equipment (1,079,934 ) (1,111,726 ) Property and equipment, net $ 692,802 $ 743,626 Depreciation expense charged to operations was $15,962 and $21,613 for the three months periods ended September 30, 2016 and 2015. Depreciation expense charged to operations was $52,231 and $66,229 for the nine months periods ended September 30, 2016 and 2015 |
4. CONSTRUCTION IN PROGRESS
4. CONSTRUCTION IN PROGRESS | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
NOTE 4 - CONSTRUCTION IN PROGRESS | The Company is constructing a new hospital building on leased land. The hospital building is being constructed by Guangxi Construction Engineering Corporation Langdong 8th Group (“Langdong 8th Group”). Costs capitalized primarily consists of payments for construction costs, acquisition cost, land rights cost, development expenditure, professional fees, and capitalized interest. The Company is required to make payments for construction costs of approximately $7,870,000 and any excess construction cost payments incurred during the construction phase. As of September 30, 2016, the Company had paid approximately $15,003,983 for the construction of the hospital. In addition to what it had paid for the hospital construction, we estimate the additional costs to complete the project to be $29,000,000. The land lease term will start upon completion of the new hospital construction. The new hospital is expected to be completed by 2017. The Construction in progress was funded by the related parties (also see Not 10). The Company will amortize the cost of the hospital building over the life of the land lease of twenty years. Capitalized interest was approximately $698,028 as of September 30, 2016. |
5. LAWSUIT SETTLEMENT PAYABLE
5. LAWSUIT SETTLEMENT PAYABLE | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
NOTE 5- LAWSUIT SETTLEMENT PAYABLE | In September 2009, Guangxi Nanning Tingyouyuxiang Commercial Co., Ltd. (“Tingyouyuxiang”) filed a civil suit against NTH in the People’s Court. In the complaint, Tingyouyuxiang asserted a breach of contract claim against NTH, alleging that NTH had failed to make timely and total payment of RMB 5,050,000 (approximately $800,000) under certain Supplement Agreement by and among NTH, Tingyouyuxiang and the Eighth Group of Langdong Village Committee, Nanhu Community Office, Qingxiu District, Nanning City (the “Village Committee”). On December 30, 2009, the People’s Court ruled that NTH shall pay to Tingyouyuxiang damages of RMB 5,050,000 (approximately $800,000) plus interest and the court hearing fee approximately $320,000. On March 9, 2013, NTH appealed to the Intermediate Court, alleging, among other things, that NTH was never served. On September 6, 2013, the Intermediate Court remanded the case to the People’s Court. On April 16, 2014, the Intermediate Court dismissed Tingyouyuxiang’s appeal and affirmed the decision of the People’s Court. Upon settlement of the lawsuit, the Company had accrued approximately $1,399,990 in settlement payable as of September 30, 2016. |
6. MAJOR SUPPLIERS AND CUSTOMER
6. MAJOR SUPPLIERS AND CUSTOMERS | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
NOTE 6 - MAJOR SUPPLIERS AND CUSTOMERS | The Company purchases the majority of its medicine supplies from Liuzhou Guangxi Medicine Co., Ltd. Medicine purchased from them accounted for 45% and 0% of all medicine purchases for nine month periods ended September 30, 2016 and 2015. The rest are from around 12 different suppliers, which include Sinopharm Medicine Holding Nanning Co., Ltd.,accounted for 21%, Shanghai Shirui Medical Equipment Co., Ltd, accounted for 13%, Shenzhen Songzhi Health Technology Co. Ltd., accounted for 8%, Quanlikang Medical Equipment Guangxi Nanning Co., Ltd., accounted for 6%, Nanning Aoya Technology Co., Ltd., accounted for 5%, Jiangsu Lianxin Medical Equipment Co., Ltd., accounted for 2%, and the rest 6 vendors accounted for a total of 1% for the nine month periods ended September 30, 2016. The Company had two major customers for the nine month periods ended September 30, 2016 and 2015. Nanning Social Insurance Center accounted for 14% and 19% of revenue for the nine month periods ended September 30, 2016 and 2015, respectively. Guangxi Province Social Insurance Center accounted for 3% and 2% of revenue for the nine month periods ended September 30, 2016 and 2015, respectively. As of September 30, 2016, accounts receivable due from Nanning Social Insurance Center and Guangxi Province Social Insurance Center were approximately $193,076 and $27,354, respectively. |
7. CAPITAL LEASE OBLIGATIONS
7. CAPITAL LEASE OBLIGATIONS | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
NOTE 7 - CAPITAL LEASE OBLIGATIONS | Sale and Lease Back On March 25, 2011, the Company completed a financing arrangement with an independent third party to sell and leaseback certain machinery and equipment. The net carrying value of the machinery and equipment sold was $262,683. The machinery and equipment was sold for $371,517, of which $334,365 was received in cash and $37,152 was held as refundable deposit. The transaction has been accounted for as a financing arrangement, wherein the property remains on the Company’s books and will continue to be depreciated. A financing obligation in the amount of $371,517, representing the proceeds, has been recorded under “Capital Lease Payable” in the Company’s Balance Sheet, and is being reduced based on payments under the lease. The lease was completed in 2016. The lease does not contain an option to renew. There is also no contingent rent or concessions, or any leasehold improvement incentives. In October 2011, the Company entered into an agreement to lease certain machinery and equipment that are classified as capital leases. The cost of equipment under capital leases of approximately $1,430,000 is included in the Balance Sheet as property, plant, and equipment at December 31, 2015. Those equipment are to be placed in service upon usage approval from the Chinese government and hiring qualified personnel. As of September 30, 2016, the Company still has not received the approval. Accumulated impairment loss of the leased equipment at September 30, 2016 was approximately $1,079,934 Capital Lease Payable was approximately $543,887 |
8. OTHER PAYABLE
8. OTHER PAYABLE | 9 Months Ended |
Sep. 30, 2016 | |
Payables and Accruals [Abstract] | |
NOTE 8 - OTHER PAYABLE | Other payable as of September 30, 2016 and December 31, 2015 consists of the following: September 30, 2016 December 31, 2015 Advance from customers $ 3,460 $ 0 Capital lease deposits paid by third party 341,073 351,114 Other payables 203,881 267,472 Total $ 548,414 $ 618,586 |
9. STOCKHOLDERS' EQUITY
9. STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
NOTE 9 - STOCKHOLDERS' EQUITY | Preferred Stock As of September 30, 2016 and December 31, 2015, the Company has 20,000,000 shares of preferred stock authorized with a par value of $0.001. There are no shares issued and outstanding as of September 30, 2016. Common Stock As of September 30, 2016 and December 31, 2015, the Company has 50,000,000 shares of common stock authorized with a par value of $0.001. Statutory Reserves As stipulated by the Company Law of the PRC, net income after taxation can only be distributed as dividends after appropriation has been made for the following: i. Making up cumulative prior years’ losses, if any; ii. Allocations to the “Statutory surplus reserve” of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company’s registered capital; iii. Allocations to the discretionary surplus reserve, if approved in the stockholders’ general meeting. As of September 30, 2016, the Company had accumulated deficit of $3,821,579. Therefore, the Company did not appropriate any fund for the statutory surplus reserve for the nine month period ended September 30, 2016. There was no share issued during the nine months ended September 30, 2016. There were 15,812,191 shares issued and outstanding as of September 30, 2016. Stock Option Stock-based compensation amounted to $0 and $0 for the nine month periods ended September 30, 2016 and 2015, respectively. The following table summarizes stock option activity in the Company's stock-based compensation plans for the nine month period ended September 30, 2016. Number of Shares Weighted Average Exercise Price Aggregate Intrinsic Value (in thousands) Outstanding at January 1, 2016 100,000 $ 0.24 $ - Granted - - - Exercised - - - Cancelled/expired - - - Exercisable at September 30, 2016 100,000 $ 0.24 $ - Vested at September 30, 2016 100,000 $ 0.24 $ - Outstanding at September 30, 2016 100,000 $ 0.24 $ - There were no options granted, exercised or cancelled/expired during the nine month period ended September 30, 2016. |
10. RELATED PARTY TRANSACTIONS
10. RELATED PARTY TRANSACTIONS AND COMMITMENTS | 9 Months Ended |
Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
NOTE 10 - RELATED PARTY TRANSACTIONS AND COMMITMENTS | Due from/to Related Parties The Company has entered into agreements with Nanning Tongji Chain Pharmacy Co. Ltd., Guangxi Tongji Medicine Co. Ltd., and Nanning Switch Factory whereby the Company from time to time will advance funds to assist them with their operations. The three companies have common major stockholders. The advanced amounts accrue interest at a rate of 1.5% per annum. The amount receivable as of September 30, 2016 and December 31, 2015 was $41,482 and $43,524, respectively. Interest income for the three month periods ended September 30, 2016 and 2015 was approximately $158 and $332, respectively. The Company has entered into an agreement with the Chairman and a stockholder of the Company, Nanning Tongji Chain Pharmacy Co. Ltd., Guangxi Tongji Medicine Co. Ltd., and Nanning Tongji Electric Coating Factory, whereby the Company from time to time will be advanced funds to for its operations. The advanced amounts accrue interest at a rate of 1.5% per annum. As of September 30, 2016 and December 31, 2015, $12,121,849 and $12,412,841 were payable to these related parties, respectively. Interest expense for the three month periods ended September 30, 2016 and 2015 was $52,828 and $ respectively. Rental Commitments On March 1, 2015, the Company renewed the lease agreement for their hospital with Guangxi Tongji Medicine Co. Ltd that expired in December 2014. Monthly lease payment under the new lease is approximately $4,800. The lease will expire on February 28, 2018. The Company is also in the process of building a new 600-bed hospital in Nanning, China. It expects the new hospital to be completed by 2017. The hospital is being constructed by Guangxi Construction Engineering Corporation Langdong 8th Group and, when completed, the land on which the hospital is located will be leased by the Company for a twenty-year term. The annual lease payments will gradually increase each year. Based on the exchange rate at September 30, 2016, minimum future lease payments are as follows: Related Party Non-Related Party Total 1-5 years $ 76,479 $ 2,021,944 $ 2,098,423 6-10 years - 2,864,837 2,864,837 11-15 years - 3,239,734 3,239,734 16-20 years - 2,046,937 2,046,937 Total $ 76,479 $ 10,173,452 $ 10,249,931 |
2. SUMMARY OF SIGNIFICANT ACC16
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
BASIS OF PRESENTATION AND CONSOLIDATION | These financial statements present the Company’s results of operations, financial position and cash flows on a consolidated basis. The consolidated financial statements include the Company and its wholly owned subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation. Our policy is to consolidate all subsidiaries in which a greater than 50% voting interest is owned. The Company operates in one segment in accordance with the accounting guidance FASB ASC topic 280, “Segment Reporting”. |
CASH AND CASH EQUIVALENTS | For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. A substantial amount of the Company’s cash is held in bank accounts in the PRC and is not protected by Federal Deposit Insurance Corporation (FDIC) insurance or any other similar insurance. Cash held in China amounted to $43,507 as of September 30, 2016. Given the current economic environment and the financial condition of the banking industry, there is a risk that the deposits may not be readily available or covered by such insurance. The Company has had no loss of cash in domestic or foreign banks in past years. |
USE OF ESTIMATES | The preparation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported assets and liabilities, disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of net revenues and expenses during the reporting period. Actual results may differ from those estimates and such differences may be material. The more significant estimates and assumptions by management include, among others, useful lives and residual values of fixed assets, valuation of inventories, accounts receivable, stock based compensation, and allowance for bad debt. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. |
TRANSLATION ADJUSTMENT | The Company's functional currency is the Chinese Renminbi (RMB). The reporting currency is that of the US Dollar. Capital accounts of the consolidated financial statements are translated into United States dollars from RMB at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of the balance sheet date. Income and expenditures are translated at the average exchange rate of the year. The RMB is not freely convertible into foreign currency and all foreign currency 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 dollar at the rates used in translation. The exchange rates used to translate amounts in RMB into USD for the purposes of preparing the financial statements were as follows: September 30, 2016 Balance sheet RMB 6.67 to US $1.00 Statement of income and other comprehensive income RMB 6.58 to US $1.00 December 31, 2015 Balance sheet RMB 6.48 to US $1.00 Statement of income and other comprehensive income RMB 6.28 to US $1.00 September 30, 2015 Statement of income and other comprehensive income RMB 6.25 to US $1.00 |
RECLASSIFICATIONS | Certain items previously reported under specific financial statement captions have been reclassified to conform to the current year presentation. |
REVENUE RECOGNITION | The Company's revenue recognition policies are in compliance with Staff Accounting Bulletin 104 (ASC 605). Service revenue is recognized on the dates services were rendered. When a formal arrangement exists, the price is fixed or determinable. When the service is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. The Company generates revenue from individual patients as well as third-party payers, including PRC government programs and insurance providers, under which the hospital is paid based upon government established charges. Revenues for pharmaceutical drug sales are recognized upon the drug being administered to a patient. Patient revenues are recorded based on pre-established rates set by the local government. The Company bills for services provided to Medicare patients through a medical card (the US equivalent of an insurance card). There have not been significant differences between the amounts the Company has billed the government Medicare funds and the amounts collected from the Medicare funds. |
ACCOUNTS RECEIVABLE | Accounts receivable are recorded at the estimated net realizable amounts from government fund, insurance companies and patients. Collections have not been considered an area that exposes the Company to additional risk. Hospital staff verifies patient coverage prior to examinations and/or procedures. For any Medicare patient who visits the hospital and is qualified for acceptance, the hospital will only include the portion that the social insurance organization will pay in the accounts receivable and collects the self-pay portion in cash at the time of service. Management continues to estimate the likelihood of bad debt on an ongoing basis. The Company has estimated a bad debt allowance of approximately $29,000 and $30,000 as of September 30, 2016 and December 31, 2015. |
FAIR VALUE OF FINANCIAL INSTRUMENTS | The Company applies the provisions of FASB ASC Topic 825, which requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of September 30, 2016 and December 31, 2015 the fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, notes payable and other payables approximated the carrying value due to the short maturity of the instruments, quoted market prices or interest rates which fluctuate with market rates except for related party debt or receivables for which it is not practicable to estimate fair value. |
FAIR VALUE MEASUREMENTS | FASB ASC Topic 820, “Fair Value Measurements and Disclosures”, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. Various inputs are considered when determining the fair value of the Company’s investments, and long-term debt. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in these securities. These inputs are summarized in the three broad levels listed below. ● Level 1 – observable market inputs that are unadjusted quoted prices for identical assets or liabilities in active markets. ● Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.). ● Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments). The carrying value of financial assets and liabilities recorded at fair value is measured on a recurring or non-recurring basis. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. The Company had no financial assets or liabilities carried and measured on a nonrecurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. The Company had no financial assets and liabilities carried at fair value on a recurring basis. The availability of inputs observable in the market varies from instrument to instrument and depends on a variety of factors including the type of instrument, whether the instrument is actively traded, and other characteristics particular to the transaction. For many financial instruments, pricing inputs are readily observable in the market, the valuation methodology used is widely accepted by market participants, and the valuation does not require significant management discretion. For other financial instruments, pricing inputs are less observable in the market and may require management judgment. |
CONCENTRATIONS, RISKS, AND UNCERTAINTIES | All of the Company’s operations are located in the PRC. There can be no assurance that the Company will be able to successfully continue to operate and failure to do so would have a material adverse effect on the Company’s financial position, results of operations and cash flows. In addition, the success of the Company’s operations is subject to numerous contingencies, some of which are beyond management’s control. These contingencies include general economic conditions, the price of medicine, competition, governmental and political conditions, and changes in regulations. Because the Company is dependent on the domestic market of the PRC, the Company is subject to various additional political, economic and other uncertainties. Among other risks, the Company’s operations will be subject to risk of restrictions on the transfer of funds, domestic policy changes, changing taxation policies, foreign exchange restrictions, and political and governmental regulations. |
CONTINGENCIES | Certain conditions may exist as of the date the consolidated financial statements are issued. These conditions may result in a future 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. 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. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed. |
MEDICAL SUPPLIES | Medical supplies include both western and traditional Chinese medicine, are valued on the lower of weighted average cost or market basis. Inventory includes product cost and inbound freight. Management compares the cost of medical supplies with the market value and allowance is made for writing down their inventories to market value, if such value is lower. |
EQUIPMENT | Equipment is recorded at cost. Depreciation is computed over the estimated useful lives of the related asset type using the straight-line method. Maintenance and repairs are expensed as incurred and the costs of additions and betterments that increase the useful lives of the assets are capitalized. When equipment is disposed, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in other income or expenses. |
CONSTRUCTION-IN-PROGRESS | A hospital facility currently under development is accounted for as construction-in-progress. Construction-in-progress is recorded at acquisition cost, including land rights cost, development expenditure, and professional fees capitalized during the course of construction for the purpose of financing the project. Upon completion of the project, the cost of construction-in-progress will be transferred to fixed assets, at which time depreciation will commence. |
CAPITALIZATION OF INTEREST | Interest cost is capitalized for qualifying assets when the portion of the interest cost incurred during the assets' acquisition periods could have been avoided if expenditures for the assets had not been made. The amount capitalized in an accounting period is determined by applying the capitalization rate to the average amount of accumulated expenditures for the asset during the period. The capitalization rates used in an accounting period is based on the rates applicable to borrowings outstanding during the period (also see Note 4). Capitalization period covers the duration of the activities required to get the asset ready for its intended use, provided that expenditures for the asset have been made and interest cost is being incurred. Interest capitalization continues as long as those activities and the incurrence of interest cost continue. |
IMPAIRMENT OF LONG-LIVED ASSETS | The Company’s long-lived assets are reviewed for impairment in accordance with the guidance of FASB Topic ASC 360, “Property, Plant, and Equipment”, and FASB ASC Topic 205 “Presentation of Financial Statements”. The Company tests for impairment losses on long-lived assets used in operations whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. The Company tests long-lived assets for recoverability at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the net carrying amount is greater than its fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Companyconsiders historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows at the rate the Company utilizes to evaluate potential investments. The Company estimates fair value based on the information available in making whatever estimates, judgments and projections are considered necessary. There were no impairment losses for the nine months ended September 30, 2016. |
BASIC AND DILUTED EARNINGS PER SHARE | Earnings per share (EPS) is calculated in accordance with the FASB ASC Topic 260, “Earnings Per Share.” Basic net income (loss) per share is based upon the weighted average number of common shares outstanding. Diluted net income (loss) per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. 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. Potentially dilutive securities to purchase 100,000 shares of common stock were not included in the calculation of the diluted earnings per share as their effect would be anti-dilutive for the nine months ended September 30, 2016. During the nine month period ended September 30, 2016, the average market price of the common stock was less than the exercise price of the stock options and the Company was in net loss position. Accordingly, the stock options were anti-dilutive and have not been included in the calculation of diluted earnings per share. |
INCOME TAXES | FASB ASC Topic 740, "Income Taxes” 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 accordance with ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB ASC Topic 740” , 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. The Company has made a comprehensive review of its portfolio of tax positions in accordance with recognition standards established by ASC 740-10 and has not recognized any material uncertain tax positions. In addition, companies in the PRC are required to pay business taxes consisting of 5% of income they derive from providing medical treatment, as well as city construction taxes and educational taxes which are 7% and 3%, respectively, of the business taxes. In April 2010, the Company was granted an exemption from these taxes until further notice from the tax bureau. The Company had accrued approximately $40,000 for failure to file US tax returns and Form 5472 between the years 2006 to 2009. The Company is current with its required filings. In addition, the Company does not accrue United States income taxes on unremitted earnings from foreign operations, as it is the Company’s intention to invest these earnings in the foreign operations indefinitely. |
STATEMENT OF CASH FLOWS | In accordance with FASB ASC Topic 230, "Statement of Cash Flows," cash flows from the Company's operations is calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. |
EMPLOYEE BENEFIT COSTS | The Company contributes to a defined contribution retirement plan organized by the municipal government in the province in which the Company’s subsidiary is registered. The Company makes contributes for qualified employees that are eligible to participate in the plan. Contributions to the plan are calculated at 30% of the employees’ salaries above a fixed threshold amount; employees contribute 8% and the Company’s subsidiary contributes the balance of 22%. The Chinese government is responsible for the benefit liability to retired employees. The Company has no other material obligation for the payment of retirement beyond the annual contribution. |
STOCK-BASED COMPENSATION | For purposes of determining the variables used in the calculation of stock compensation expense under the provisions of FASB ASC Topic 505, “Equity” and FASB ASC Topic 718, “Compensation — Stock Compensation,” Stock-based compensation costs that have been included in operating expenses amounted to $0 and $0, for the nine month periods ended September 30, 2016 and 2015, respectively. |
COMPREHENSIVE INCOME | The Company reports comprehensive income in accordance with FASB ASC Topic 220 “Comprehensive Income," which established standards for reporting and displaying comprehensive income and its components in a financial statement that is displayed with the same prominence as other financial statements. Total comprehensive income is defined as all changes in stockholders' equity during a period, other than those resulting from investments by and distributions to stockholders (i.e., issuance of equity securities and dividends). Generally, for the Company, total comprehensive income (loss) equals net income (loss) plus or minus adjustments for currency translation. Total comprehensive income (loss) represents the activity for a period net of related tax and was a loss of $92,842 and $37,724 for the three month periods ended September 30, 2016 and 2015, respectively. While total comprehensive income is the activity in a period and is largely driven by net earnings in that period, accumulated other comprehensive income or loss (“AOCI”) represents the cumulative balance of other comprehensive income as of the balance sheet date. For the Company, AOCI is primarily the cumulative balance related to the currency adjustments and increased overall equity by $321,731 and $236,115 as of September 30, 2016 and December 31, 2015, respectively. |
RECENT ACCOUNTING PRONOUNCEMENTS | Recent accounting pronouncements issued by the FASB, the AICPA and the SEC did not, or are not believed by management to, have a material effect on the Company’s present or future consolidated financial statements. |
GOING CONCERN | The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, the Company has negative working capital of $18,956,952, an accumulated deficit of $3,821,579, and a stockholders’ deficit of $3,043,668 as of September 30, 2016. The Company’s ability to continue as a going concern ultimately is dependent on the management’s ability to obtain equity or debt financing, attain further operating efficiencies, and achieve profitable operations. The consolidated 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 not be able to continue as a going concern. Management has taken certain restructuring steps to provide the necessary capital to continue its operations. These steps included: 1) plan to convert existing related party loans into equity, 2) plan to complete construction of the new hospital and begin generating revenue by 2017, 3) plan to increase sales revenue with additional medical equipment, 4) plan to obtain more funding from related party entity, that is controlled by the CEO to complete the construction of the new hospital. No assurances can be given that the steps taken will provide necessary capital for the Company to continue its operations. |
2. SUMMARY OF SIGNIFICANT ACC17
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Summary Of Significant Accounting Policies Tables | |
Schedule of Translation Adjustments | The exchange rates used to translate amounts in RMB into USD for the purposes of preparing the financial statements were as follows: September 30, 2016 Balance sheet RMB 6.67 to US $1.00 Statement of income and other comprehensive income RMB 6.58 to US $1.00 December 31, 2015 Balance sheet RMB 6.48 to US $1.00 Statement of income and other comprehensive income RMB 6.28 to US $1.00 September 30, 2015 Statement of income and other comprehensive income RMB 6.25 to US $1.00 |
3. EQUIPMENT (Tables)
3. EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Equipment Tables | |
Schedule of Equipment | Equipment as of September 30, 2016 and December 31, 2015 comprised the following: Estimated Useful Lives (Years) September 30, 2016 December 31, 2015 Office equipment 5-10 $ 80,781 $ 83,098 Medical equipment 5 1,291,074 1,313,818 Capital lease equipment 1,687,706 1,737,392 Fixtures 10 106,250 109,297 Vehicles 5 41,755 42,952 Total equipment 3,207,566 3,286,557 Less accumulated depreciation (1,434,830 ) (1,431,205 ) Less impairment of the equipment (1,079,934 ) (1,111,726 ) Property and equipment, net $ 692,802 $ 743,626 |
8. OTHER PAYABLES (Tables)
8. OTHER PAYABLES (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Other Payables Tables | |
Schedule of Other Payables | Other payable as of September 30, 2016 and December 31, 2015 consists of the following: September 30, 2016 December 31, 2015 Advance from customers $ 3,460 $ 0 Capital lease deposits paid by third party 341,073 351,114 Other payables 203,881 267,472 Total $ 548,414 $ 618,586 |
9. STOCKHOLDERS' EQUITY (Tables
9. STOCKHOLDERS' EQUITY (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Stock option activity | The following table summarizes stock option activity in the Company's stock-based compensation plans for the nine month period ended September 30, 2016. Number of Shares Weighted Average Exercise Price Aggregate Intrinsic Value (in thousands) Outstanding at January 1, 2016 100,000 $ 0.24 $ - Granted - - - Exercised - - - Cancelled/expired - - - Exercisable at September 30, 2016 100,000 $ 0.24 $ - Vested at September 30, 2016 100,000 $ 0.24 $ - Outstanding at September 30, 2016 100,000 $ 0.24 $ - |
10. RELATED PARTY TRANSACTION21
10. RELATED PARTY TRANSACTIONS AND COMMITMENTS (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Related Party Transactions And Commitments Tables | |
Minimum future lease payments | Based on the exchange rate at September 30, 2016, minimum future lease payments are as follows: Related Party Non-Related Party Total 1-5 years $ 76,479 $ 2,021,944 $ 2,098,423 6-10 years - 2,864,837 2,864,837 11-15 years - 3,239,734 3,239,734 16-20 years - 2,046,937 2,046,937 Total $ 76,479 $ 10,173,452 $ 10,249,931 |
2. SUMMARY OF SIGNIFICANT ACC22
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | Sep. 30, 2016 | Dec. 31, 2015 | Sep. 30, 2015 |
BalanceSheetMember | RMBMember | |||
Exchange rates used to translate amounts in RMB into USD for the purposes of preparing the financial statements | 6.67 | 6.48 | |
BalanceSheetMember | USDollarMember | |||
Exchange rates used to translate amounts in RMB into USD for the purposes of preparing the financial statements | 1 | 1 | |
StatementOfIncomeAndOtherComprehensiveIncomeMember | RMBMember | |||
Exchange rates used to translate amounts in RMB into USD for the purposes of preparing the financial statements | 6.58 | 6.28 | 6.25 |
StatementOfIncomeAndOtherComprehensiveIncomeMember | USDollarMember | |||
Exchange rates used to translate amounts in RMB into USD for the purposes of preparing the financial statements | 1 | 1 | 1 |
2. SUMMARY OF SIGNIFICANT ACC23
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | |
Accounting Policies [Abstract] | ||||||
Cash and cash equivalents | $ 43,507 | $ 84,695 | $ 43,507 | $ 84,695 | $ 10,300 | $ 9,606 |
Estimated bad debt allowance | 29,000 | $ 29,000 | 30,000 | |||
Dilutive securities not included in the calculation of the diluted earnings per share | 100,000 | |||||
Stock-based compensation costs | $ 0 | 0 | ||||
Comprehensive Income Loss | 92,842 | $ 37,724 | 170,401 | $ 198,074 | ||
Accumulated other comprehensive income | 321,731 | 321,731 | 236,115 | |||
Working capital | (15,956,952) | (15,956,952) | ||||
Accumulated deficit | (3,821,579) | (3,821,579) | (3,565,562) | |||
Stockholders deficit | $ (3,043,668) | $ (3,043,668) | $ (2,873,267) |
3. EQUIPMENT (Details)
3. EQUIPMENT (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Dec. 31, 2015 | |
Office equipment | $ 80,781 | $ 83,098 |
Medical equipment | 1,291,074 | 1,313,818 |
Capital lease equipment | 1,687,706 | 1,737,392 |
Fixtures | 106,250 | 109,297 |
Vehicles | 41,755 | 42,952 |
Total equipment | 3,207,566 | 3,286,557 |
Less accumulated depreciation | (1,434,830) | (1,431,205) |
Less impairment of the equipment | (1,079,934) | (1,111,726) |
Property and equipment, net | $ 692,802 | $ 743,626 |
Office Equipment | ||
Estimated Useful Lives, minimum | 5 years | |
Estimated Useful Lives, maximum | 10 years | |
Medical equipment | ||
Estimated Useful Lives | 5 years | |
Fixtures | ||
Estimated Useful Lives | 10 years | |
Vehicles | ||
Estimated Useful Lives | 5 years |
3. EQUIPMENT (Details Narrative
3. EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expenses | $ 15,962 | $ 21,613 | $ 52,231 | $ 66,229 |
4. CONSTRUCTION IN PROGRESS (De
4. CONSTRUCTION IN PROGRESS (Details Narrative) | Sep. 30, 2016USD ($) |
Construction In Progress Details Narrative | |
Construction cost paid | $ 15,003,983 |
Capitalized interest | $ 698,028 |
5. LAWSUIT SETTLEMENT PAYABLE (
5. LAWSUIT SETTLEMENT PAYABLE (Details Narrative) | Sep. 30, 2016USD ($) |
Lawsuit Details Narrative | |
Accrued settlement payable | $ 1,399,990 |
6. MAJOR SUPPLIERS AND CUSTOM28
6. MAJOR SUPPLIERS AND CUSTOMERS (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Nanning Social Insurance Center | ||
Percentage of Revenue from major customers | 14.00% | 19.00% |
Accounts receivable from major cutomers | $ 193,076 | |
Guangxi Province Social Insurance Center | ||
Percentage of Revenue from major customers | 3.00% | 2.00% |
Accounts receivable from major cutomers | $ 27,354 | |
Liuzhou Guangxi Medicine Co. | ||
Percentage of medicine purchases | 45% | 0% |
Sinopharm Medicine Holding Nanning Co., Ltd | ||
Percentage of medicine purchases | 21% | |
Shanghai Shirui Medical Equipment Co., Ltd | ||
Percentage of medicine purchases | 13% | |
Shenzhen Songzhi Health Technology Co. Ltd. | ||
Percentage of medicine purchases | 8% | |
Quanlikang Medical Equipment Guangxi Nanning Co., Ltd. | ||
Percentage of medicine purchases | 6% | |
Nanning Aoya Technology Co., Ltd. | ||
Percentage of medicine purchases | 5% | |
Jiangsu Lianxin Medical Equipment Co., Ltd. | ||
Percentage of medicine purchases | 2% |
7. CAPITAL LEASE OBLIGATION (De
7. CAPITAL LEASE OBLIGATION (Details Narrative) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Capital Lease Obligation Details Narrative | ||
Cost of equipment under capital leases | $ 1,430,000 | |
Impairment loss to equipment under lease | $ 1,079,934 | |
Capital lease payable | $ 543,887 |
8. OTHER PAYABLES (Details)
8. OTHER PAYABLES (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Other Payables Details | ||
Advance from customers | $ 3,460 | $ 0 |
Capital lease deposits paid by third party | 341,073 | 351,114 |
Other payables | 203,881 | 267,472 |
Total | $ 548,414 | $ 618,586 |
9. STOCKHOLDERS' EQUITY (Detail
9. STOCKHOLDERS' EQUITY (Details) | 9 Months Ended |
Sep. 30, 2016USD ($)$ / sharesshares | |
Number of Shares | |
Outstanding at beginning of period | shares | 100,000 |
Granted | shares | 0 |
Exercised | shares | 0 |
Cancelled/expired | shares | 0 |
Exercisable at September 30, 2016 | shares | 100,000 |
Expected to vest at September 30, 2016 | shares | 100,000 |
Outstanding at end of the period | shares | 100,000 |
Weighted Average Exercise Price | |
Outstanding at beginning of period | $ / shares | $ 0.24 |
Granted | $ / shares | 0 |
Exercised | $ / shares | 0 |
Cancelled/expired | $ / shares | 0 |
Exercisable at September 30, 2016 | $ / shares | 0.24 |
Expected to vest at September 30, 2016 | $ / shares | 0.24 |
Outstanding at end of the period | $ / shares | $ 0.24 |
Aggregate Intrinsic Value | |
Outstanding at beginning of period | $ | $ 0 |
Granted | $ | 0 |
Exercised | $ | 0 |
Cancelled/expired | $ | 0 |
Exercisable at September 30, 2016 | $ | 0 |
Expected to vest at September 30, 2016 | $ | 0 |
Outstanding at end of the period | $ | $ 0 |
9. STOCKHOLDERS' EQUITY (Deta32
9. STOCKHOLDERS' EQUITY (Details Narrative) - USD ($) | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Stockholders Equity Details Narrative | |||
Preferred stock authorized | 20,000,000 | 20,000,000 | |
Preferred stock par value | $ 0.001 | $ .001 | |
Preferred stock shares issued | 0 | 0 | |
Preferred stock shares outstanding | 0 | 0 | |
Common Stock shares Authorized | 50,000,000 | 50,000,000 | |
Common Stock par value | $ 0.001 | $ .001 | |
Accumulated deficits | $ 3,821,579 | $ 3,565,562 | |
Stock-based compensation costs | $ 0 | $ 0 |
10. RELATED PARTY TRANSACTION33
10. RELATED PARTY TRANSACTIONS AND COMMITMENTS (Details) | Sep. 30, 2016USD ($) |
1-5 years | $ 2,098,423 |
6-10 years | 2,864,837 |
11-15 years | 3,239,734 |
16-20 years | 2,046,937 |
Total | 10,249,931 |
Related Party [Member] | |
1-5 years | 76,479 |
6-10 years | 0 |
11-15 years | 0 |
16-20 years | 0 |
Total | 76,479 |
Non Related Party [Member] | |
1-5 years | 2,021,944 |
6-10 years | 2,864,837 |
11-15 years | 3,239,734 |
16-20 years | 2,046,937 |
Total | $ 10,173,452 |
10. RELATED PARTY TRANSACTION34
10. RELATED PARTY TRANSACTIONS AND COMMITMENTS (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Related Party Transactions And Commitments Details Narrative | |||||
Amount receivable | $ 41,482 | $ 41,482 | $ 43,524 | ||
Interest income | 158 | $ 332 | 473 | $ 498 | |
Due from related parties | 192,720 | 192,720 | 198,676 | ||
Amount payable to related parties | 12,121,849 | 12,121,849 | 12,412,841 | ||
Interest expenses | 52,828 | $ 123,481 | 179,160 | $ 184,426 | |
Due to related parties | $ 15,475,336 | $ 15,475,336 | $ 15,645,347 |