Sleepaid Holding (SLPA) 10-Q 2017 Q1 Quarterly report

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 000-1643319

SLEEPAID HOLDING CO.

(Exact Name of Registrant as Specified in Its Charter)

Nevada	47-3785730
(State of Incorporation)	(IRS Employer Identification No.)
Rm 10, 1/F., Wellborne Commercial Centre, 8 Java Road, North Point Hong Kong
(Address of Principal Executive Offices)	(Zip Code)

(+852) 28062312

(Registrant’s Telephone Number, Including Country Code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated file, non-accelerated filer, or a smaller reporting company.

Large accelerated file	¨	Accelerated filed	¨
Non-accelerated filer	¨	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of May 18, 2017, the Registrant had 13,663,322 shares of common stock issued and outstanding.

SLEEPAID HOLDING CO.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statement (Unaudited)	3
	Unaudited Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016	3
	Unaudited Consolidated Statements of Operations for the Three Months Ended March 31, 2017 and 2016	4
	Unaudited Consolidated Statements of Cash Flows for the Three Months Ended, March 31, 2017 and 2016	5
	Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	22
Item 4.	Controls and Procedures	22
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity and Use of Proceeds	23
Item 3.	Default upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	23
SIGNATURES		24

2

PART I. FINANCIAL INFORMATION

ITEM: 1 FINANCIAL STATEMENT 

SLEEPAID HOLDING CO. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	Notes	March 31,  2017				December 31, 2016
ASSETS		(Unaudited)
Current assets:
Cash and cash equivalents		$	129,336			$	86,101
Trade receivable, net of allowance for doubtful accounts of $Nil for March 31, 2017 and $Nil for December 31, 2016			240,134				768,913
Short-term investments			-				14,377
Inventories, net			872,202				707,087
Advances to suppliers			271,023				79,921
Loans to related parties			-				-
Other receivables	7		53,423				59,517
Total current assets			1,566,118				1,715,916
Non-current assets:
Property, plant and equipment, net	4		19,755				21,059
Intangible assets	5		17,251				18,049
Total non-current assets			37,006				39,108
TOTAL ASSETS		$	1,603,124			$	1,755,024
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	6	$	610,403			$	725,976
Accrued expense			82,451				75,515
Advances from customer			82,807				54,112
Loans from related parties	13		795,484				761,101
Income tax payables			10,807		��		24,901
Other payables	8		226,954				177,636
Other tax payables			-				-
Total current liabilities			1,808,906				1,819,241
TOTAL LIABILITIES			1,808,906				1,819,241
Stockholders’ equity
Preferred stock, $0.001 par value, 10,000,000 authorized; none issued and outstanding			-				-
Common stock, $0.001 par value, 65,000,000 authorized; 13,663,322 and 10,000,000 shares issued and outstanding, at March 31, 2017 and December 31, 2016 respectively			13,663				13,663
Additional paid-in capital			155,883				155,883
Accumulated other comprehensive (loss) income			(178,474	)			(178,566	)
(Accumulated loss)/ retained earnings			(196,854	)			(55,197	)
TOTAL STOCKHOLDERS’ EQUITY			(205,782	)			(64,217	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	1,603,124			$	1,755,024

See accompanying notes to unaudited consolidated financial statements

3

SLEEPAID HOLDING CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

		(Unaudited)
		Three Months Ended March 31,
	Notes	2017			2016
Net revenue		$	580,387		$	632,572
Cost of sales			(451,024	)		(465,482	)
Gross profit			129,363			167,090
Operating expenses:
Selling expenses			89,525			59,190
General and administrative expenses			181,620			176,965
Total operating loss			271,145			236,155
Income (Loss) from operations			(141,782	)		(69,065	)
Non-operating income (expense):
Interest income			571			182
Interest expenses			-			-
Other income			9			-
Other expenses			(455	)		(389	)
Total non-operating income (expense)			125			(207	)
Income (Loss) before income taxes			(141,657	)		(69,272	)
Income taxes	9		-			-
Net income (loss)	12		(141,657	)		(69,272	)
Comprehensive income statement:
Net income (loss)			(141,657	)		(69,272	)
Foreign currency translation adjustment			92			3,463
Comprehensive Income (Loss)		$	(141,565	)	$	(65,809	)
Basic earnings (loss) per share of common stock	12	$	(0.01	)	$	(0.005	)
Diluted earnings (loss) per share	12	$	(0.01	)	$	(0.005	)
Weighted average shares used in calculating loss per common stock – basic			13,663,322			13,539,336
Weighted average shares used in calculating loss per common stock – diluted			13,663,322			13,539,336

See accompanying notes to unaudited consolidated financial statements

4

SLEEPAID HOLDING CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

		(Unaudited)
		Three Months Ended March 31,
	Notes	2017			2016
Cash flows provided by (used for) operating activities:
Net income (loss)	12	$	(141,657	)	$	(69,272	)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and Amortization			2,451			1,871
Consultancy fee			4,463			-
Changes in assets and liabilities:
Trade receivable			536,135			13,358
Inventories			(158,544	)		55,017
Advances to suppliers			(190,410	)		(15,095	)
Other receivables			3,106			(1,688	)
Prepaid expenses			(1,188	)		(41,787	)
Accounts payable			(122,404	)		(82,466	)
Other payables			47,223			(829	)
Advances from customer			28,196			(2,880	)
Tax payables			(14,331	)		(9,009	)
Accrued liabilities			7,016			(11,228	)
Net cash provided by (used for) operating activities			56			(164,008	)
Cash flows provided by (used for) investing activities:
Purchases of property, plant and equipment			-			(40,941	)
Short-term Investments			14,516			-
Net cash provided by (used for) investing activities			14,516			(40,941	)
Cash flows provided by (used for) financing activities:
Loans from related parties			27,961			229,301
Issuance of common stock			-			67,826
Net cash provided by (used for) financing activities			27,961			297,127
Net increase (decrease) in cash			42,533			92,178
Effect of foreign currency translation			702			1,917
Cash – beginning of period			86,101			184,010
Cash – end of period		$	129,336		$	278,105
Supplemental disclosures of cash flow information:
Interest paid		$	-		$	-
Issuance of 3,666,322 shares of common stock at $0.001 par value		$	-		$	67,826

See accompanying notes to unaudited consolidated financial statements

5

SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND PRINCIPAL ACTIVITY

Organization

Sleepaid Holding Co. (“Sleepaid”) and its subsidiaries are referred to herein collectively and on a consolidated basis as the “Company” or “we”, “us” or “our” or similar terminology.

Sleepaid, a Nevada Corporation, was incorporated under the laws of the State of Nevada on December 17, 2014. Yugosu Investment Limited (“Yugosu”) was incorporated in Hong Kong on March 28, 2007 and established a fiscal year end of December 31.

Guangzhou Smartfame Co., Ltd (“Guangzhou Smartfame”), the wholly owned subsidiary of the Yugosu, was incorporated under the laws of the PRC in Guangzhou, as a limited company on June 25, 2013. On May 11, 2016, Guangzhou Smartfame changed the name to Guangzhou Sleepaid Household Supplies Co., Ltd. (“Sleepaid Household”) and expanded the business activities to including the wholesale and manufacturing of household supplies and furniture.

Yuewin Trading Ltd (“Yuewin”), the wholly owned subsidiary of Sleepaid Household, was incorporated under the laws of the PRC as a limited company on March 24, 2008.

The Company and its subsidiaries (hereinafter, collectively referred to as the “Group”) are engaged in operating mattress and bedroom products retail outlets.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Method of Accounting

The Company maintains its general ledger and journals with the accrual method accounting for financial reporting purposes. The consolidated financial statements and notes are representations of management. Accounting policies adopted by the Company conform to generally accepted accounting principles in the United States of America and have been consistently applied in the presentation of consolidated financial statements.

(b) Principles of consolidation

The consolidated financial statements are presented in US Dollars and include the accounts of the Company and its subsidiary. All significant inter-company balances and transactions are eliminated in consolidation.

The following table depicts the identity of the subsidiary:

Name of Subsidiary	Place of Incorporation	Attributable Equity Interest %	Registered Capital
Yugosu Investment Limited (1)	Hong Kong	100	HKD 10,000
Guangzhou Sleepaid Household Supplies Co., Ltd (2)	PRC	100	RMB 3,000,000
Yuewin Trading Ltd (3)	PRC	100	RMB 500,000

_____________

Note:	(1) Wholly owned subsidiary of Sleepaid Holding Company
	(2) Wholly owned subsidiary of Yugosu Investment Limited
	(3) Wholly owned subsidiary of Sleepaid Household

6

SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c) Use of estimates

The preparation of consolidated financial statements that conform with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time, however, actual results could differ materially from those estimates.

(d) Economic and political risks

The Company’s operations are conducted in Hong Kong and China and a large number of customers are located in Southern China. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in Hong Kong and China, and by the general state of the economy in Hong Kong and China.

The Company’s operations and customers in Hong Kong and Southern China are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments, and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in Hong Kong and China, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.

(e) Property, plant and equipment

Plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method with 5% scrape value.

Estimated useful lives of the plant and equipment are as follows:

Furniture and fixtures	5 years
Office equipment	2 - 5 years
Motor vehicles	4 - 5 years

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of operation.

7

SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f) Accounting for the impairment of long-lived assets

The Company periodically evaluates the carrying value of long-lived assets to be held and used, including intangible assets subject to amortization, when events and circumstances warrant such a review, pursuant to the guidelines established in ASC No. 360. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair market values are reduced for the cost to dispose.

During the reporting periods, there was no impairment loss.

(g) Cash and concentration of risk

The Group considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Group maintains bank accounts in HK and the PRC.

(h) Income taxes

The Company accounts for income tax using an asset and liability approach and allows for recognition of deferred tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future realization is uncertain.

(i) Foreign currency translation

The accompanying consolidated financial statements are presented in United States dollars (USD). The functional currencies of the Company’s operating business based in Hong Kong and PRC are the Hong Kong Dollar (HKD) and Renminbi (RMB) respectively. The consolidated financial statements are translated into USD from HKD and RMB at period-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred..

The exchange rates used to translate amounts in HK$ and RMB into USD for the purposes of preparing the consolidated financial statements were as follows:

	2017		2016
Three months and Year end HKD: USD exchange rate		7.7707		7.7545
Average quarterly and yearly HKD : USD exchange rate		7.7606		7.7734

	2017		2016
Three months and Year end RMB: USD exchange rate		6.8912		6.4479
Average quarterly and yearly RMB: USD exchange rate		6.8891		6.5395

8

SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(i) Foreign currency translation (continued)

The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into USD at the rates used in translation. In addition, the current foreign exchange control policies applicable in PRC also restrict the transfer of assets or dividends outside the PRC.

(j) Comprehensive income

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other consolidated financial statements. The Company’s current component of comprehensive income is the net income and foreign currency translation adjustment.

(k) Recently implemented standards

The FASB has issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, clarifying the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business.

The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments provide a more robust framework to use in determining when a set of assets and activities is a business. They also provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable.

For public companies, the amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. For all other companies and organizations, the amendments are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019.

9

SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(l) Account receivable

Accounts receivable is recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance for doubtful accounts is maintained for all customers based on a variety of factors, including the length of time the receivables are past due, significant one-time events and historical experience.

Management reviews and adjusts this allowance periodically based on historical experience and its evaluation of the collectability of outstanding accounts receivable. The Company evaluates the credit risk of its customers utilizing historical data and estimates of future performance. Bad debts are written off as incurred. During the reporting years, there were no bad debts.

Outstanding accounts balances are reviewed individually for collectability. The Company does not charge any interest income on trade receivables. Accounts balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. To date, the Company has not charged off any balances as it has yet to exhaust all means of collection.

(m) Inventories

Inventories primarily consist of merchandise inventories and are stated at lower of cost or market and net realizable value. Cost of inventories is calculated on the weighted average basis which approximates cost.

Management regularly reviews inventories and records valuation reserves for damaged and defective returns, inventories with slow-moving or obsolescence exposure and inventories with carrying value that exceeds market value. Because of its product mix, the Company has not historically experienced significant occurrences of obsolescence.

Inventory shrinkage is accrued as a percentage of revenues based on historical inventory shrinkage trends. The Company performs physical inventory count of its stores once per quarter and cycle counts inventories at its distribution centers once per quarter throughout the year. The reserve for inventory shrinkage represents an estimate for inventory shrinkage for each store since the last physical inventory date through the reporting date.

These reserves are estimates, which could vary significantly, either favorably or unfavorably, from actual results if future economic conditions, consumer demand and competitive environments differ from expectations.

10

SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(n) Revenue recognition

The Company earns revenue by selling merchandise through self-managed retail stores inside shopping malls, franchise stores and wholesale agent.

Revenue from self-managed retail stores inside shopping malls is recognized when merchandise is purchased by and delivered to the customer, confirmed, fixed and reconciled with the shopping malls and collectability is reasonably assured.

Revenue from franchised stores is recognized after goods delivered and cash collected (normally cash on delivery) from the franchise retail stores.

Revenue from wholesale agent is recognized after goods delivered, amount fixed or determined and collectability is reasonably assured.

All revenues are shown net of estimated returns during the relevant period represented by estimated allowance for sales returns based upon historical experience.

The Company records sales tax collected from its customers on a net basis, and therefore excludes it from revenue as defined in ASC 605, Revenue Recognition.

(o) Cost of sales

Cost of sales includes the cost of merchandise, collecting and handling charges based on store sales deducted by landlord, related cost of packaging and shipping cost and the distribution center costs.

(p) Operating lease rental

The Company did not have a lease that met the criteria of a capital lease. Leases that do not qualify as a capital lease are classified as an operating lease. Operating lease rental expenses included in selling, general and administrative expenses for the three months ended March 31, 2017 and 2016 were $18,234 and $7,474, respectively

(q) Selling expenses

Selling expenses include store-related expense, other than store occupancy costs, as well as advertising, depreciation and amortization, and certain expenses associated with operating the Company’s corporate headquarters.

(r) Advertising costs

The Company expensed all advertising costs as incurred. Advertising expenses, net of reimbursement from suppliers, amounted to $7,544 and $21,871 for the three months ended March 31, 2017 and 2016 respectively. Advertising expense is included in selling expense in the accompanying consolidated statements of income.

11

 SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(s) Concentration of Credit Risk

The Company maintains cash in bank deposit accounts in Hong Kong and PRC. The Company performs ongoing evaluations of this institution to limit its concentration risk exposure.

The Company operates retail stores located in the PRC. Because of this, the Company is subject to regional risks, such as the economy, regional financial conditions and unemployment, weather conditions, power outages, and other natural disasters specific to the region in which the Company operates.

(t) Retirement Benefit Plans

Full time employees of the Company in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require the Company to make contributions to the government for these benefits based on certain percentages of the employees’ salaries. The Company accounts the mandated defined contribution plan under the vested benefit obligations approach based on the guidance of ASC 715, Compensation—Retirement Benefits.

The total amounts for such employee benefits which were expensed were $8,845 and $10,853 for the three months ended March 31, 2017 and 2016, respectively.

(u) Segment reporting

In accordance with ASC 280-10, Segment Reporting (“ASC 280-10”), the Company’s chief operating decision makers rely upon consolidated results of operations when making decisions about allocating resources and assessing performance of the Company. As a result of the assessment made by the chief operating decision makers, the Company has only one single operating and geographic segment. The Company does not distinguish between markets or segments for the purpose of internal reporting

(v) Product warranty

The company is the legal obligor for the warranties of the products sold to customers but believed that the likelihood that we would not recover all warranty costs from the manufacturer to be remote based on our past operating history, manufacturers’ cooperation and their reputation and history of honoring all their warranty obligations. Since our inception to present, we have not incurred any direct warranty expenses and accordingly, the accrual and associated expenses recognized in the financial statements has been recorded as zero.

(w) Basic and diluted earnings (loss) per share

In accordance with ASC No. 260 (formerly SFAS No. 128), “Earnings Per Share,” the basic earnings (loss) per common share is computed by dividing net earnings (loss) available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings (loss) per common share is computed similarly to basic earnings (loss) per common share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

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SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS

Financial instruments that potentially expose the company to concentrations of credit risk, consists of cash and accounts receivable as of March 31, 2017 and December 31, 2016. The Company performs ongoing evaluations of its cash position and credit evaluations to ensure sound collections and minimize credit losses exposure.

As of March 31, 2017 and December 31, 2016, the Company’s bank deposits conducted with banks in the PRC where there is currently no rule or regulation mandated on obligatory insurance of bank accounts.

For the three months ended March 31, 2017 and year ended December 31, 2016, all of the Company’s sales were generated from the PRC.

The maximum amount of loss exposure due to credit risk that the Company would bear if the counter parties of the financial instruments failed to perform represents the carrying amount of each financial asset on the balance sheet.

Normally, the Company does not require collateral from customers or debtors.

Accounts Receivable:

Customer	As at March 31, 2017				As at December 31, 2016
A	$	87,175	36	%	$	372,009	48	%
B		31,165	13	%		196,915	26	%
C		29,960	13	%		36,323	5	%
D		12,258	5	%		32,249	4	%
Total	$	160,558	67	%	$	637,596	83	%

Accounts Payable:

Supplier	As at March 31, 2017				As at December 31, 2016
A	$	168,639	28	%	$	167,075	23	%
B		156,544	26	%		155,093	21	%
C		47,205	8	%		118,124	16	%
D		45,707	7	%		64,696	9	%
E		34,699	6	%		46,768	6	%
Total	$	452,794	75	%	$	551,754	75	%

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SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4. PROPERTY, PLANT AND EQUIPMENT, NET

Details of property, plant and equipment are as follows:

	March 31, 2017			December 31, 2016
At cost
Furniture and fixtures	$	7,786		$	7,714
Office equipments		20,564			20,385
Motor vehicles		23,944			23,722
		52,294			51,821
Less: accumulated depreciation		(32,539	)		(30,762	)
	$	19,755		$	21,059

Depreciation expense included in the general and administrative expenses for the three months ended March 31, 2017 and 2016 were $1,501 and $1,871 respectively.

NOTE 5. INTANGIBLE ASSETS

Intangible assets, net comprise the following:

	March 31, 2017			December 31, 2016
At cost
Trademark	$	1,544		$	1,548
Computer software		19,987			19,801
		21,531			21,349
Less: accumulated depreciation		(4,280	)		(3,300	)
	$	17,251		$	18,049

Amortization expense included in the general and administrative expenses for the three months ended March 31, 2017 and 2016 were $950 and $Nil respectively.

NOTE 6. ACCOUNT PAYABLES

Account payables were comprised of the following:

	March 31, 2017		December 31, 2016
Trade payables	$	610,403	$	725,976

NOTE 7. OTHER RECEIVABLES

Other receivables were comprised of the following:

	March 31, 2017		December 31, 2016
Disbursement and advances to employees	$	9,548	$	12,536
Deposit paid		43,875		46,981
	$	53,423	$	59,517

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SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8. OTHER PAYABLES

Other payables were comprised of the following:

	March 31, 2017		December 31, 2016
Loan advances from unrelated parties	$	207,136	$	170,712
Deposit received		19,789		6,644
Sundries		29		280
	$	226,954	$	177,636

NOTE 9. INCOME TAXES

The Company is subject to the Federal Income tax rate of 34% and Hong Kong profits tax rate of 16.5%. No provision for income taxes in the United States and Hong Kong or elsewhere has been made as the Company had no taxable income for the quarter ended March 31, 2017 and year ended December 31, 2016.

A reconciliation of the provision for income taxes with amount determined by applying the statutory Federal income tax rate of 34% to income before income taxes is as follow:

	March 31, 2017			December 31, 2016
Profit (Loss) before income tax	$	(7,463	)	$	(50,915	)
Temporary Difference		-			-
Permanent Difference		-			-
Taxable income	$	(7,463	)	$	(50,915	)
Federal Income Tax rate		34	%		34	%
Current tax credit	$	2,537		$	17,311
Less: Valuation allowance		(2,537	)		(17,311	)
Income tax expenses	$	-		$	-

A reconciliation of the provision for income taxes with amounts determined by applying the Hong Kong profit rate of 16.5% to income before income taxes is as follows:

	March 31, 2017			December 31, 2016
Profit (Loss) before income tax	$	(8,858	)	$	(55,135	)
Temporary Difference		-			-
Permanent Difference		-			-
Taxable income	$	(8,858	)	$	(55,135	)
Hong Kong Profit Tax rate		16.5	%		16.5	%
Current tax credit	$	1,462		$	9,100
Less: Valuation allowance		(1,462	)		(9,100	)
Income tax expenses	$	-		$	-

Sleepaid Household and Yuewin were incorporated in the PRC and are subjected to income taxes under the current laws of the PRC. The EIT rate of PRC was 25% for the quarter and year ended March 31, 2017 and December 31, 2016.

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SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9. INCOME TAXES (CONTINUED)

Profit (Loss) before income tax of $(125,336) and $(58,295) for the quarter and year ended March 31, 2017 and December 31, 2016, respectively, were attributed to operations in China. The income tax expenses consisted of the following:

	March 31, 2017			December 31, 2016
Profit (Loss) before income tax	$	(125,336	)	$	(58,295	)
Temporary Difference		-			69,312
Permanent Difference		-			(6,609	)
Taxable income	$	(125,336	)	$	4,408
China Enterprise Income Tax rate		25	%		25	%
Current tax expenses	$	31,334		$	1,102
Less: Valuation allowance		(31,334	)		-
Income tax expenses	$	-		$	1,102

No deferred tax has been provided for the quarter and year ended March 31, 2017 and December 31, 2016.

NOTE 10. COMMITMENTS AND CONTINGENCIES

The Company has operating lease agreements for office premises, which expiring through December 31, 2017. Future minimum rental payments under agreements classified as operating leases with non-cancellable terms for the next one year and thereafter as follows:

Period ending March 31,	2017		2016
2017		-		34,406
2018 and thereafter		30,048		84,410
	$	30,048	$	118,816

Rental expense paid for the three months ended March 31, 2017 and 2016 were $18,234 and $7,474 respectively.

NOTE 11. SEGMENT INFORMATION

FASB Accounting Standard Codification Topic 280 (ASC 280) “Segment Reporting” establishes standards for reporting information about operating segments in financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.

In 2017, the Company is regarded as a single operating segment, being engaged in the operating of mattress and bedroom products retail outlets. This principal activity and geographical market are substantially based in Hong Kong and the Mainland China, accordingly, no operating or geographical segment information are presented.

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SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12. NET INCOME (LOSS) PER SHARE

A reconciliation of the numerator and denominator of basic and diluted net income (loss) per share (“EPS”) is provided as follows:

	March 31, 2017			March 31, 2016
Numerator
Net (loss)/income	$	(141,657	)	$	(69,272	)
Denominator
Weighted average shares – Basic EPS		13,663,322			13,539,336
Weighted average shares – Diluted EPS		13,663,322			13,539,336
Net income (loss) per share – Basic and Diluted
EPS - basic and diluted	$	(0.010	)	$	(0.005	)

NOTE 13. RELATED PARTY TRANSACTIONS

Related party transactions comprised of loans from related parties and from director by director current account. As of March 31, 2017 and December 31, 2016, the loans from related parties were $795,484 and $761,101. All of these loans were provided for the Company’s working capital, did not have collateral, bear no interest and repayable on demand.

Detailed loans from related parties are listed as below:

	March 31, 2017		December 31, 2016
Cheung, Kuen Harry (a)	$	495,367	$	460,306
Cheung, Hang Dennis (b)		47,887		48,104
Yugosu International Limited (c)		252,230		252,691
Total loans from related parties	$	795,484	$	761,101

(a)	Major shareholders of Amax Deluxe Ltd (major shareholder of Sleepaid Holding Co.)
(b)	Close family member of Cheung Kuen, Harry.
(c)	With common shareholder Cheung Kuen, Harry

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SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14. GOING CONCERN

As of March 31, 2017, the Company has accumulated deficits of $196,854, and its current liabilities exceed its current assets resulting in negative working capital of $242,788. In view of the matters described above, recoverability of a major portion of the recorded asset amounts and realization of the portion of current liabilities into revenue shown in the accompanying balance sheets are dependent upon continued operations of the Company, which in turn are dependent upon the Company's ability to raise additional financing and to succeed in its future operations. The Company may need additional cash resources to operate during the upcoming 12 months, and the continuation of the Company may be dependent upon the continuing financial support of investors, directors and/or stockholders of the Company. However, there is no assurance that equity or debt offerings will be successful in raising sufficient funds to assure the eventual profitability of the Company. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Management has taken the following steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern. The Company is actively pursuing additional funding which would enhance capital employed and strategic partners which would increase revenue bases or reduce operation expenses. Management believes that the above actions will allow the Company to continue its operations throughout this fiscal year.

NOTE 15. SUBSEQUENT EVENTS

The Company has evaluated all other subsequent events through May 15, 2017, the date these financial statements were issued, and determined that there were no other subsequent events or transactions that require recognition or disclosures in the financial statements.

Subsequent the period ended 31 March, 2017, the Company (“the defendant”) has a lawsuit with Zhangjiagang Coolist Life Technology Co., Ltd. (“the plaintiff”) regarding the unpaid amount for the goods purchased from the plaintiff. No provision has been made for any material loss that is probable from the lawsuit currently pending (Case No. (2017) 粵0113民初字683號).

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ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERTIONS

This report contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. The Company’s actual results could differ materially from those set forth on the forward looking statements as a result of the risks set forth in our filings with the Securities and Exchange Commission, general economic conditions, and changes in the assumptions used in making such forward looking statements.

Unless indicated otherwise, or the context otherwise requires, references in this report to “Sleepaid Holdings,” the “Company,” “we,” “us” and “our” or similar terms are to Sleepaid Holding Co..

Overview

Our principle line of business is developing, producing and selling our mattress, pillow, and bedding products. In the three months ended March 31, 2017, the retail industry in China had not yet recovered and competition was furious. Traditional retail share has been eaten by E-commerce platform trading and O2O business. We are continuous in restructuring and modifying our business by rearrangement of our marketing resources to our brand and widen our products range and sourcing for new health enhancement products, and also involving more trading via the E-Commerce channel.

Adapting to the current market situation, our company changed the sales strategy, doing more promotion and kicked started to our O2O marketing channel, so that we can still control the decline of our sales volume. In the three months ended March 31, 2017, our total revenue was $580,387. Of this total revenue, the revenue generated by our self-managed store was $377,370, the revenue generated by the franchised stores totaled $4,291, and the revenue generated by direct sales was totaled $198,726. Our revenues by brand for the three months ended March 31, 2017 were as follows: Revenue of SleepAid was $198,950, and BEMCO was $381,437.

Net Revenue

In the three months ended March 31, 2017, our revenue was $580,387, compared to $632,572 the same period in 2016. In three months ended, the revenue decreased by 8.25% from the same period in 2016. The revenue generated by our self-managed store was $377,370, by the franchised stores was $$4,291, and by direct sales was totaled $198,726. Our revenues by brand for the three months ended March 31, 2017 were as follows: Revenue of SleepAid was $198,950, and BEMCO was $381,437.

Cost of Sales

In the three months ended March 31, 2017, the cost was $451,024 compared to the same period in 2016 decreased 3.11% from $465,482. The change of cost of sales reflects a decrease rate much lesser than that of the decrease rate in revenue. This was caused by the continuous slowed down of retail business in China, and resulted that the profit margin was reduced to maintain the sales volume.

Selling expense

In the three months ended March 31, 2017 and 2016, the selling expense was $89,525 and $59,190 respectively. The increase of 51.25% which was resulted of the management increased in spending on using various trade platform and promotion activities to stimulate the sales volume.

General and administrative expense

General and administrative expense for the three months ended March 31, 2017 was $181,620 compared to the same period in 2016 increased 2.63% from $176,965, the increase was attributed to the increase in consultancy fee and business development and general increase of expenses on general inflation.

Income Tax

During the three months ended March 31, 2017 and 2016, the company incurred no tax and its subsidiary has paid $Nil and $Nil tax respectively as a foreign corporation.

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Net Income

The Company recorded a net loss of $141,657 for the three months ended March 31, 2017 compared to the net loss of $69,272 for the same period in 2016. The net income decreased $72,385 or by 104.49%. The cause of expanded losses was due to the increase in Selling and G&A expenses, as well as the result of lowered profit margin due to poor retail market in bedding products.

Interest expenses

In the three months ended March 31, 2017 and 2016, the interest expenses was $Nil and $Nil respectively.

Liquidity and Capital Resources

The Company’s liquidity and capital is dependent on the company continuing to increase its revenues and the capital it can raise to continue the Company’s development and expansion of its product lines. The Company estimates that its current and available capital resources are sufficient to fund its planned operations through the second quarter of 2017.

The operation had been financed by the current beneficiary shareholders through not only the injection of capital, but also by loans to the Company. The loans are unsecured, non-interest bearing and repayable at demand. Going forward, the current beneficiary shareholders will continue to finance the company’s operations by various means, including additional capital injection or conversion of debts to stock and we also plan to secure additional financing through private placements of equity and short-term borrowings from banks.

Working capital

As at December 31, 2016, the company had negative working capital of ($103,325) with current assets of $1,715,916 and current liabilities of $1,819,241. The current assets consisted cash and cash equivalents of $86,101, short-term investment of $14,377, inventory of $707,087, trade receivables of $768,913, advance to supplies of $79,921, and other receivables of $59,517. The current liabilities of the Company at December 31, 2016 are composed of loans from related parties of $761,101, accounts payable of $725,976, advances from customers of $54,112, accrued expenses of $75,515, income tax payable of $24,901, and other payable of $177,636.

At March 31, 2017, the Company had negative working capital of ($242,788) with current assets of $1,566,118 and current liabilities of $1,808,906. The current assets consisted cash and cash equivalents of $129,336, inventory of $872,202, trade receivables of $240,134, advance to supplies of $271,023, and other receivables of $53,423. The current liabilities of the Company as at March 31, 2017 were composed of accounts payable of $610,403, accrued expenses of $82,451, loans from related parties of $795,484, advances from customer of $82,807, tax payable of $10,807, and other payable of $226,954.

Our business generates revenue in the currency of the PRC, Renminbi (“RMB”). RMB is still not a freely exchangeable currency. Since 1998, the State Administration of Foreign Exchange of China has promulgated a series of circulars and rules in order to enhance verification of foreign exchange payments under a Chinese entity’s current account items, and has imposed strict requirements on borrowing and repayments of foreign exchange debts from and to foreign creditors under the capital account items and on the creation of foreign security in favor of foreign creditors.

This may complicate foreign exchange payments to foreign creditors under the current account items and thus may affect the ability to borrow under international commercial loans, the creation of foreign security, and the borrowing of RMB under guarantees in foreign currencies. Moreover, the value of RMB may become subject to supply and demand, which could be largely impacted by international economic and political environments. Any fluctuations in the exchange rate of RMB could have an adverse effect on the operational and financial condition of the Company and its subsidiaries in China.

In an effort to eliminate concerns over the ability to transfer cash between entities, cross border and to U.S. investor, Guangzhou Sleepaid Household Suppliers Co., Ltd. (“Sleepaid Household”), our subsidiary and parent company to Yuewin Trading. (“Yuewin”), is incorporated in China as a wholly-owned foreign enterprise (“WOFE”). Because of such WOFE status, and profit (after tax) distribution received by Guangzhou Smartfame from Yuewin can be freely transferred back to YIL in Hong Kong Dollars, which is not subject and restriction on its conversion into any foreign currency.

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Operating activities

Net cash provided by operating activities during the three months period ended March 31, 2017, was $56 compared to net cash used by operation of $164,008 for the same period in 2016. This represents an increase of $164,064.

During the three months period ended March 31, 2017, the $56 cash provided was mainly resulted of cash used by net loss of $141,657, increased inventories of $158,544, increased advances to suppliers of $190,410, and decreased accounts payable of $122,404 while offset against cash provided by decreased trade receivables of $536,135 and increased other payables of $47,223.

During the three months period ended March 31, 2016, the $164,008 cash used was mainly resulted by net loss of $69,272, increased prepaid expenses of $41,787, decreased accounts payable of $82,466, while provided by decreased inventory of $55,017.

Investing Activities

Net cash provided by investing activities was $14,516 for the three month period ended March 31, 2017 as compared to the cash used by investing activities of $40,941 for the same period in 2016. Net cash used in investing activities increased was the result of disposal of short-term investment in this quarter.

Financing Activities:

Net cash provided by financing activities was $27,961 for the three month period ended March 31, 2017 compared to net cash provided of $297,127 for the same period in 2016. This change was primarily comprised of the increase in loans from related parties of $27,961 in the first quarter of 2017.

As of March 31, 2017, the Company had total assets of $1,603,124 and total liabilities of $1,808,906. Stockholder’s equity as of March 31, 2017 was negative $205,782 compared to a negative equity of $64,217 at December 31, 2016.

Off-Balance Sheet Arrangements and Contractual Obligations

As at March 31, 2017, our material off-balance sheet arrangements are operating lease obligations. We excluded these items from the balance sheet in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Operating lease commitments consist principally of leases for our office and warehouse. These leases frequently include options which permit us to extend the terms beyond the initial fixed lease term. With respect to most of those leases, we intend to renegotiate those leases as they expire.

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ITEM 3: QUANTITATIVE AND QUALITAIVE DISCLOSURE ABOUT MARKET RISK

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

ITEM 4: CONTROLS AND PROCEDURES

Under the supervision and the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation as of March 31, 2017 of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our CEO and our CFO concluded that our disclosure controls and procedures were not effective as of March 31, 2017. Such conclusion reflects the identification of material weakness as follows: (1) lack of accounting proficiency of our chief financial officer which has resulted in a reliance on part-time outside consultants to perform substantially all of our accounting functions, (2) a lack of adequate segregation of duties and necessary corporate accounting resources in our financial reporting process and accounting function, and (3) lack of control procedures that include multiple levels of review. Until we are able to remedy these material weaknesses, we have engaged third party consultants and accounting firm to assist with financial reporting.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

None

ITEM 1A: RISK FACTORS

There have been no material changes to Sleepaid Holdings’ risk factors as previously disclosed in our most recent Form 10-K filing on March 31, 2017.

ITEM 2: SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None

ITEM 3: DEFAULTS UPON SENIOR SECURITIES.

None

ITEM 4: MINE SAFETY DISCLOSURES

None

ITEM 5: OTHER INFORMATION

None

ITEM 6: EXHIBITS

Exhibit No.	Description
31.1	Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	Interactive data files pursuant to Rule 405 of Regulation S-T

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SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SLEEPAID HOLDING CO.
Date: May 18, 2017	By:	/s/ Tao Wang
		Tao Wang
		Chief Executive Officer
Date: May 18, 2017	By:	/s/ Riggs Cheung
		Riggs Cheung
		Chief Financial Officer
		and Chief Accounting Officer

24