| NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | BASIS OF PRESENTATION AND CONSOLIDATION The accompanying consolidated financial statements
have been prepared in accordance with generally accepted accounting principles (“GAAP”) as promulgated in the United
States of America. The consolidated financial statements include Tongji Healthcare, Inc. 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 and all variable interest entities to which we had a variable interest and effectively control
the entity. 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.
All 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 $47,597 as of December 31, 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. As of December
31, 2016 and 2015, we have no cash equivalents. 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 equipment, valuation of medical supplies, accounts receivable,
stock based compensation, accrued expense, construction in progress, intangibles, and deposits, 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:
December 31, 2016
Balance sheet RMB 6.94 to US $1.00
Statement of income and other comprehensive income RMB 6.64 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 REVENUE RECOGNITION The Company's revenue recognition policies are
in compliance with Staff Accounting Bulletin 104 (ASC 605). Service revenue is recognized once all of the following have occurred
and services were rendered: a formal arrangement exists, the price is fixed or determinable and collection 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 charge rates. 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 billed to the government Medicare
funds and the amounts collected. Any other revenue recognition criteria, as described above, have been met 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 as hospital staff verifies patient coverage prior to examinations and/or procedures. For any Medicare patient who visits the hospital
and are 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 $28,000 and $30,000 as of December 31, 2016 and 2015, respectively. 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 December
31, 2016 and 2015 the fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, related
party receivable and payable, capital lease payable, and other payables approximated carrying value due to the short maturity of
the instruments, quoted market prices or interest rates which fluctuate with market rates. 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 will be 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 Equipments are 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. ADVERTISING COSTS The Company expenses the costs associated with
advertising as incurred. Advertising expenses for the twelve month periods ended December 31, 2016 and 2015 of approximately $2,000
and $5,000 are included in selling expenses in the consolidated statements of operations. Advertising costs include marketing brochures
and a public advertising campaign. 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 Company considers 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. No impairment loss recorded in 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 year ended December 31, 2016. During the year ended December 31, 2016, the average
market price of the common stock during the year 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 The Company adopts FASB ASC Topic 740, "Income
Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of
events that have been included in the consolidated 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. 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 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 — Stock Compensation,” 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 consolidated financial statement that is displayed with the same prominence as other consolidated
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 loss equals net loss plus
or minus adjustments for currency translation. Total comprehensive loss represents the activity for a period net of related tax
and was a loss of $3,289,461 and $469,452 for the years ended December 31, 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 $587,508 and $236,115 as of December
31, 2016 and 2015, respectively. RECENT ACCOUNTING PRONOUNCEMENTS In May 2014, the FASB issued Accounting Standards
Update No. 2014-09, Revenue from Contracts with Customers (ASU2014-09), ASU2014-09 ASU2014-09 ASU2014-09 In August 2014, the FASB issued Accounting Standards
Update No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about
an Entities Ability to Continue as a Going Concern (ASU 2014-15). The guidance in ASU 2014-15 sets forth management's
responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern as well
as required disclosures. ASU 2014-15 indicates that, when preparing financial statements for interim and annual financial statements,
management should evaluate whether conditions or events, in the aggregate, raise substantial doubt about the entity's ability to
continue as a going concern for one year from the date the financial statements are issued or are available to be issued. This
evaluation should include consideration of conditions and events that are either known or are reasonably knowable at the date the
financial statements are issued or are available to be issued, as well as whether it is probable that management's plans to address
the substantial doubt will be implemented and, if so, whether it is probable that the plans will alleviate the substantial doubt.
ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods and annual periods thereafter.
Early application is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s
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 $6,745,663, an accumulated deficit of $7,206,416, and shareholders’
deficit of $6,162,728 as of December 31, 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) disposal of the construction-in-progress
new hospital. 2) plan to convert existed related parties’ loans into equity, 3) plan to increase sales revenue with additional
medical equipment, No assurances can be given that the steps taken will provide necessary capital for the Company to continue its
operations. |
