UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
or
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 0-25765
China Senior Living Industry International Holding Corporation |
(Exact name of registrant as specified in its charter) |
Nevada |
| 87-0429748 |
(State or other jurisdiction of Incorporation or organization) |
| (I.R.S. Employer Identification No.) |
No. 28, Xi Hua South Rd., High-tech Zone, Xian Yang City, Shaanxi Province, China |
| 712000 |
(Address of principal executive offices) |
| (Zip Code) |
Registrant's telephone number, including area code: 011-86-29-33257666
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock, $0.001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the registrant (1) 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) has been subject to such filing requirements for the past 90 days. Yes ¨ No x
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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 ¨ No x
Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this From 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ |
Non-accelerated filer | ¨ | Smaller reporting company | x |
| (Do not check if a smaller reporting company) | Emerging growth company | x |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
The aggregate market value of the voting common stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $3,849,001.05.
As of September 21, 2018, the registrant had 56,560,007 shares of common stock outstanding.
As used in this Annual Report on Form 10-K, the terms "we," "us," "our," and words of like import, and the "Company" refers to China Senior Living Industry International Holding Corporation and all of our subsidiaries unless the context indicates otherwise.
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FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable laws, including the securities laws of the United States, we do not intend to update any of the forward-looking statements so as to conform these statements to actual results.
In addition, factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report on Form 10-K, and in particular, the risks discussed under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as those discussed in other documents we file with the SEC. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
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History of the Company
We were originally incorporated in Nevada on January 13, 1986. We had no active business operations and were considered a development stage company until 1993, when we entered into an agreement with Bradley S. Shepherd in which Mr. Shepherd agreed to become an officer and director and use his best efforts to organize and update our books and records and to seek business opportunities for acquisition or participation. The acquisition of the share capital of Hong Kong Jin Yuan was such an opportunity.
As a result of a share exchange, Hong Kong Jin Yuan became our wholly-owned subsidiary, Harbin SenRun (defined below) became our indirect wholly-owned subsidiary, and we succeeded to the business of Harbin SenRun Forestry Development Co., Ltd., a producer of forest products with approximately 1,561 hectares (approximately 3,857 acres) of state forest assets located mainly over the Small Xing An Mountains, Jin Yin County, and the Harbin Wu Chang District of Heilongjiang Province of Northern China ("Harbin SenRun").
Harbin SenRun was founded in 2004. Historically, it had a workforce of approximately 8 full time employees, mainly in sales, administration and in supporting services. It recruited temporary part-time workers to carry out felling, cutting and forestry plantation and protection. Its principal revenue was log sales. However, Harbin Senrun lost its wood-cutting quota for log sales from the Bureau of Forestry of China for the year ended December 31, 2007, and, as a result, did not have any revenues for that period. While Harbin Senrun has applied for a wood cutting quota in subsequent years, it has not yet been successful in acquiring one.
On December 14, 2010, we simultaneously entered into and closed the transactions contemplated by a Sale and Purchase Agreement with Land Synergy Limited (as Purchaser), a company incorporated in the British Virgin Islands ("Land Synergy") and sold to Land Synergy 100% of the share capital of Hong Kong Jin Yuan, including its wholly-owned subsidiary, Harbin SenRun, for $2,000. As a result, we no longer engage in the timber business operations.
On July 15, 2010, we entered into a share exchange with Financial International (Hong Kong) Holdings Company Limited ("FIHK"). As a result of a share exchange, FIHK became our wholly-owned subsidiary.
From April 1, 2010 to May 20, 2011, FIHK had a series of contractual arrangements with Hanzhong Hengtai Bio-Tech Limited ("Hengtai"), a company organized and existing under the laws of the People's Republic of China that is engaged in the plantation and sale of garden plants used for landscaping, including Chinese Yew, Aesculus, Dove Tree and Dendrobium.
On May 20, 2011, FIHK exercised its rights under the Exclusive Option Agreement to direct Xi'an Qi Ying Senior Living, Inc., a company organized and existing under the laws of the People's Republic of China (formerly known as Xi'an Qi Ying Bio-tech Limited, "Qi Ying"), the indirect wholly-owned subsidiary of FIHK, to acquire all of the equity capital of Hengtai. The Exclusive Option Agreement was exercised in a manner that the shareholders of Hengtai transferred all of their equity capital in Hengtai to Qi Ying. At or about the same time, Spone Limited, a company organized and existing under the laws of the Hong Kong SAR of the People's Republic of China ("Spone"), acquired all of the capital stock of Qi Ying, so that it became a direct wholly-owned subsidiary of Spone. FIHK then acquired all of the capital stock of Spone, so that it became a direct wholly-owned subsidiary of FIHK. As a result, Hengtai became an indirect wholly owned subsidiary of FIHK and also accordingly became our indirect wholly owned subsidiary.
On September 8, 2015, we changed our name from China Forestry Inc. to China Senior Living Industry International Holding Corporation.
On September 29, 2015, Qi Ying entered into a series of variable interest entity (or VIE) agreements (the "VIE Agreements") with Shaanxi Jinjiangshan Senior Living Management Co., Ltd. (formerly known as Shaanxi Yifuge Investments and Assets Co., Ltd., "Shaanxi Jinjiangshan"), a PRC-based company incorporated in November 2011, and Shaanxi Jinjiangshan became our affiliated operating company in China. As consideration for the entry of the VIE Agreements, we issued 33,600,000 shares of common stock to Jincao Wu, who is the control person and owner of Shaanxi Jinjiangshan.
On September 29, 2015, our board of directors (the "Board of Directors") also approved the transfer of Qi Ying's equity ownership in Hengtai to Zhenheng Shao, Zhenguo Shao and Yongli Yang. Upon the completion of this equity transfer, Hengtai is no longer our indirectly wholly-owned subsidiary in China.
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As the result, we ceased the business of plantation and sale of garden plants and became engaged in senior living and senior care business through Shaanxi Jinjiangshan.
On June 1, 2018, the Company became a majority owner in a PRC corporation, Shaanxi Jinjiangshan Da Jiankang Health Science Development Co., Ltd.
Our current corporate structure is as follows:
Business Overview
We engage in the business of managing senior living facility in Xianyang, a part of Xi'an metropolitan area in Shaanxi Province, China. Under a management services agreement with Xianyang Yifuge Elderly Apartment Co., Ltd., a Chinese company wholly-owned by our CEO and director Jincao Wu ("Yifuge Elderly Apartment"), dated as of December 1, 2012, as amended and supplemented by a memorandum of understanding dated December 30, 2015 (the "Management Services Agreement"), we manage Yifuge Elderly Apartment's existing elderly apartments and facilities with the ability to serve 200 residents (the "Legacy Senior Housing Project") and, we plan to manage the the New Senior Housing Project (as defined below) after the construction is completed. This agreement is effective for 30 years until December 31, 2045. We have been offering our services to Yifuge Elderly Apartment since the effective date of the Management Services Agreement, and in return, we are paid monthly a management fee generated from assisted living fees and caring fees from the residents of the senior housing projects. These residents are offered access to a full continuum of services across all sectors of the senior living industry. The fact that our management fee is generated from private customers limits our exposure to government reimbursement risk. We believe we are engaged in the attractive sectors of the senior living industry in China with significant opportunities to increase our revenues through effectively manage the elderly apartments and facilities by providing a combination of housing, hospitality services and health care services to the residents.
Since March 2012, Yifuge Elderly Apartment has engaged the Northwestern branch of China Construction Fourth Engineering Division Co., Ltd. as construction company to start a development project for a senior apartment housing complex (the "New Senior Housing Project") with anticipated total costs of RMB 630,000,000 (approximately $96,659,130) on a parcel of 101 mu (approximately 724,770 square feet) at Xianyang National High-tech Industrial Development Zone. This parcel of land was granted with rights to use, transfer, lease, and mortgage by the People's Municipal Government of Xianyang to Yifuge Elderly Apartment for the period from October 9, 2012 to June 2062 for the purposes of medical research, healthcare, and charity. The construction of the phase I project has been completed featuring a ten-story efficiency apartment building with 500 beds; an eighteen-story family-based apartment building with 144 households; and a seven-story multi-functional medical building; these buildings are under internal decoration, it is expected to become operational and generate revenues starting 2019.
Additionally, we offer free membership subscription for seniors. Currently, we have approximately 2,000 members, most of whom are those who have signed up to be residents of the New Senior Housing Project.
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We plan to grow our revenue and operating income through a combination of: (i) organic growth; (ii) expanding our business by acquiring operating companies and facilities; and (iii) the realization of economies of scale. Given the size and breadth of our basic platform, we believe that we are well positioned to invest in a broad spectrum of assets in the senior living industry.
We believe that the senior living industry is the preferred alternative to meet the growing demand for a cost-effective residential setting in which to care for the elderly who cannot, or as a lifestyle choice choose not to, live independently due to physical or cognitive frailties and who may, as a result, require assistance with some of the activities of daily living or the availability of nursing or other medical care. Housing alternatives for seniors include a broad spectrum of senior living service and care options, including independent living, assisted living, memory care and skilled nursing care. More specifically, senior living consists of a combination of housing and the availability of 24-hour a day personal support services and assistance with certain activities of daily living.
Our Market
China has now more than 177 million people aged 60 or above, and the number is predicted to reach 450 million by the middle of the century, according to the statistics from China's sixth national census. Marketing to the aging Chinese population is becoming more important today than ever before.
Among the aging Chinese population, about 23.6 million seniors are living alone at home without presence and care from their younger generations. Integrated into the Xi'an metropolitan area, one of the main urban agglomerations in inland China is inhabited by over 7.17 million people. Xianyang's built-up area (BUA) is made of 2 urban districts (Qindu and Weicheng), which house 945,420 inhabitants according to the 2010 census. Just as the rest of China, Xianyang has a rapidly growing senior population. Currently, 10% of Xianyang's population is composed of seniors.
Specialized housing for the elderly is not widespread in China. Facing a rapidly aging population and inadequate infrastructure to meet the projected needs, a few years ago, the Chinese government began encouraging the opening of senior-care facilities in the country. So far, there are only a handful of senior housing facilities operated by foreign companies in major metropolises such as Beijing and Shanghai. There are few comparable housing facilities operating in inland China. We expect a surging demand for service-based senior housing in Xianyang over the decades to come.
In addition, seniors become increasingly wealthier due to the rapid economic growth in China during recent years and have a significant amount of assets generated from savings, pensions and, due to strong national housing markets, the sale of private homes. Children of current seniors in China are the richest generation in China and they are willing to support their parents under the influence of traditional Chinese culture by outsourcing the service to senior care facilities. We believe seniors and their children will increasingly have the ability to afford senior living services.
Our Business Strategy and Business Plan
Our business strategy is provide senior care services utilizing traditional Chinese medicine ("TCM"). For our New Senior Housing Project, we plan to cooperate with the Affiliated Hospital of Shaanxi University of Traditional Chinese Medicine to found a Class III Grade-A (the highest grade according to China's hospital grading management guidelines) branch hospital featuring TCM medical and health care. This branch hospital will aim to provide TCM treatment to the elderly, including acupuncture, massage, and fumigation; to establish specialized outpatient department, and hospitalization and rehabilitation department; and to formulate and promote TCM diagnosis and clinical guidelines for common diseases, frequently-occurring diseases and severe illnesses of the elderly.
We seek to provide TCM services to the elderly by way of medical treatment, rehabilitation, nursing, health care, health management, health monitoring and clinical care. We endeavor to research and develop diversified TCM senior care service packages; establish senior health management database; and carry out onsite examinations, check-ups and health care advisory services.
We also seek to facilitate our senior care services plan by collaborating with public institutions. We intend to guide and help nursing homes and primary medical institutions, provide them with TCM senior care services and corresponding technical and business support, and set up a two-way referral system. We plan to extend professional TCM care training to medical and nursing personnel of rural and community medical clinics, as well as domestic services agencies. Additionally, we plan to educate the elderly for TCM health care knowledge and at-home TCM self-help skills.
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On June 1, 2018, the Company became a majority owner in a PRC corporation, Shaanxi Jinjiangshan Da Jiankang Health Science Development Co., which will build and operate a service platform, providing medical and health care information and integrating resources such as domestic service companies, community management companies, community and rural primary medical institutions, and nursing homes. With such integration, which is supported by innovative big data and cloud computing technologies, we believe that our platform will operate efficiently and will be able to serve as an "intangible and boundless nursing home" covering comprehensive bases, including life caring, domestic services, meal assistance, medical treatment, health care, rehabilitation, nursing, security assistance, psychological consultation and referral.-
Sales and Marketing
We carried out sale and marketing activities solely through our own sales and marketing departments. We do not use any broker or agency to carry out sales and marketing activities.
Our Client
Currently, our services are only offered to one client, Yifuge Elderly Apartment under the Management Services Agreement. Yifuge Elderly Apartment was founded in 2008 owning certain elderly apartments and facilities of approximately 10,000 square meters (approximately 107,639.1 square feet).
Pursuant to the Management Services Agreement, we manage Yifuge Elderly Apartment's Legacy Senior Housing and New Senior Housing Project. The scope of services we are to provide include: (1) suggesting appointment and dismissal of executive officers; (2) managing, training and assessing staff; (3) formulating and implementing various management guidelines; (4) promoting the brand and image of Yifuge Elderly Apartment; (5) establishing and maintaining high quality services to the residents of the elder apartments; and (6) other matters pertaining to the management and marketing of the elderly apartments and facilities.
The term of the Management Services Agreement is 30 years commencing on December 1, 2012 and ending on December 31, 2045, unless terminated by either party earlier. We have been providing our services to Yifuge Elderly Apartment since December 1, 2012, and in return, we are paid a monthly management fee generated from assisted-living fees and caring fees from Yifuge Elderly Apartment's residents. Our revenues from such management fee was $470,787 and $500,544 in the years ended December 31, 2016 and December 31, 2017, respectively. Typically, residents of the elder apartments are senior citizens aged 60 and above who desire or need a more supportive living environment. They generally are first accepted as residents of a retirement centers unit and may later move to an assisted living facility.
Since March 2012, Yifuge Elderly Apartment has engaged the Northwestern branch of China Construction Fourth Engineering Division Co., Ltd. as construction company to start the New Senior Housing Project with anticipated total costs of RMB 630,000,000 (approximately $96,659,130) in a parcel of 101 mu (approximately 724,770 square feet) at Xianyang National High-tech Industrial Development Zone. This parcel of land was granted with rights to use, transfer, lease, and mortgage by the People's Municipal Government of Xianyang to Yifuge Elderly Apartment for the period from October 9, 2012 to June 2062 for the purposes of medical research, healthcare, and charity. The phase I project has been completed featuring a ten-story efficiency apartment building with 500 beds; an eighteen-story family-based apartment building with 144 households; and a seven-story multi-functional medical building, and till now, these buildings are under internal decoration , it is expected to become operational and generate revenues by starting 2019.
Our Strengths
Our senior management team has extensive experience in acquiring, operating and managing a broad range of senior living assets, including experience in the senior living, healthcare, hospitality and real estate industries. Additionally, we are highly familiar with the management and operation of technology-enhanced senior care system and facilities, including VoIP, perimeter alert, area monitor and control network, electronic patrol network, parking management, intercom, smart furniture integration, and GPS paging system. We believe that we are one of the few companies in the senior living industry in inland China with this capability.
Research and Development
We are currently conducting research on senior living smart management system, which will cover VoIP, perimeter alert, area monitor and control network, electronic patrol network, parking management, intercom, smart furniture integration, and GPS paging system. The system incorporates a universal access card that serves as identification, access control, and integrated payment.
We are also developing a fixed emergency call button which will be installed in living rooms, bedrooms, bathrooms, balconies, and common areas. In the case of emergency, a resident will be able to reach and activate the emergency call button. Control room would be able to receive the message and pinpoint the location to initiate emergency assistance protocols.
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Properties
We entered into a lease agreement with Yifuge Elderly Apartment, dated January 4, 2013, as amended and supplemented by a memorandum of understanding between the parties dated December 30, 2015, for office space of 80 square meters (approximately 861 square feet). The term of this lease agreement is 30 years, effective until December 31, 2045. This office space is located at Xianyang, Shaanxi.
According to the arrangement under this lease agreement, the rent is paid yearly at RMB 19,200 per year (approximately $2,958 per year), subject to modifications by a separate agreement between the parties. We are responsible for all utilities including electricity, gas, water, telephone and water. We are also responsible for the maintenance, repair of the sidewalk in front of the demised premises.
Intellectual Property
Our patent application on smart senior servicing system is currently pending.
Government Regulation
Regulations on the Senior Living Industry
The Ministry of Civil Affairs of the People's Republic of China regulates the establishment and operation of senior care facilities, as required under the Law on the Protection of the Rights and Interests of the Elderly as amended in December, 2012. At the national level, China has yet to form a comprehensive legal framework governing retirement homes. Most legislation regulating retirement homes has been promulgated by local government.
Employees
We currently employ a total of 55 full-time employees.
In compliance with the Employment Contract Law of the PRC, we have written contracts with all our employees for various terms. The employment agreements include the positions, responsibilities and salaries of the respective employees, as well as the circumstances under which employment may be terminated in compliance with the Employment Contract Law of the PRC. None of our employees are covered by a collective bargaining agreement. We have not experienced any work stoppages and we consider our relations with our employees to be good.
Not required because we are a smaller reporting company.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable because we are a smaller reporting company.
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We have entered into a lease agreement with Yifuge Elderly Apartment, dated January 4, 2013, as amended and supplemented by a memorandum of understanding between the parties dated December 30, 2015, for office space of 80 square meters (approximately 861 square feet). The term of this lease agreement is 30 years, effective until December 31, 2045. This office space is located at Xianyang, Shaanxi.
According to the arrangement under this lease agreement, the rent is paid yearly at RMB 19,200 per year (approximately $2,958 per year), subject to modifications by a separate agreement between the parties. We are responsible for all utilities including electricity, gas, water, telephone and water. We are also responsible for the maintenance, repair of the sidewalk in front of the demised premises.
We believe that our current facilities are adequate and suitable for our operations.
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. To the knowledge of management, no federal, state or local governmental agency is presently contemplating any proceeding against the Company. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholders are an adverse party or have a material interest adverse to us.
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable.
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock is currently quoted on a limited basis on the Over-the-Counter Bulletin Board ("OTCQB") under the symbol "CHYL." The quotation of our common stock on the OTCQB does not assure that a meaningful, consistent and liquid trading market currently exists. We cannot predict whether a more active market for our common stock will develop in the future. In the absence of an active trading market:
| · | Investors may have difficulty buying and selling or obtaining market quotations; |
| · | Market visibility for our common stock may be limited; and |
| · | A lack of visibility of our common stock may have a depressive effect on the market price for our common stock. |
The following table sets forth the range of high and low prices of our common stock as quoted on the OTCQB during the periods indicated. The prices reported represent prices between dealers, do not include markups, markdowns or commissions and do not necessarily represent actual transactions.
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| High Bid |
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| Low Bid |
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Period ended December 31, 2017 |
| $ | 0.1346 |
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| $ | 0.1346 |
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Fiscal Year 2017 |
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First Quarter |
| $ | 0.13 |
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| $ | 0.13 |
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Second Quarter |
| $ | 0.27 |
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| $ | 0.16 |
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Third Quarter |
| $ | 0.19 |
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| $ | 0.13 |
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Fiscal Year 2016 |
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First Quarter |
| $ | 0.44 |
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| $ | 0.15 |
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Second Quarter |
| $ | 0.27 |
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| $ | 0.16 |
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Third Quarter |
| $ | 0.20 |
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| $ | 0.15 |
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Fourth Quarter |
| $ | 0.19 |
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| $ | 0.13 |
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Fiscal Year 2015 |
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First Quarter |
| $ | 0.40 |
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| $ | 0.17 |
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Second Quarter |
| $ | 0.30 |
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| $ | 0.17 |
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Third Quarter |
| $ | 0.30 |
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| $ | 0.30 |
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Fourth Quarter |
| $ | 0.30 |
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| $ | 0.17 |
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As of December 31, 2017, the closing bid quote for our common stock was $0.134 per share.
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Stockholders of Record
As of December 31, 2017, we had 240 record holders of our common stock. Interwest Transfer Co., Inc., 1981 East 4800 South, Ste 100, Salt Lake City, UT 84111, Attn Melinda Orth is the transfer agent for our common stock.
Dividends
Holders of our common stock are entitled to dividends if declared by the Board of Directors out of funds legally available therefore. As of December 31, 2017 no cash dividends have been declared.
Any future determination to pay dividends will be at the discretion of our Board of Directors and will depend on our results of operation, financial condition, contractual and legal restrictions and other factors the board of directors deem relevant.
Securities Authorized for Issuance under Equity Compensation Agreements
We do not have in effect any compensation plans under which our equity securities are authorized for issuance.
Recent Sales of Unregistered Securities
On December 16, 2016, the Company issued 560,000 unregistered shares to Hui Yuan Ventures Ltd., at the market value of $0.13 per share, in the total amount of US$72,800, for its services provided.
Recent Purchases of Equity Securities by us and our Affiliated Purchasers
We have not repurchased any of our common stock and have no publicly announced repurchase plans or programs as of December 31, 2017.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable because we are a smaller reporting company.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the results of our operations and financial condition should be read in conjunction with our consolidated financial statements and the related notes thereto, which appear elsewhere in this Annual Report on Form 10-K. Except for the historical information contained herein, the following discussion, as well as other information in this report, contain "forward-looking statements," which are based on information we have when those statements are made or management's good faith belief as of that time with respect to future events. Actual results and the timing of the events may differ materially from those contained in these forward looking statements due to a number of factors, including those discussed in the "Forward-Looking Statements" set forth elsewhere in this Annual Report on Form 10-K.
Description of Business
The Company was incorporated in Nevada on January 13, 1986. On September 29, 2015, the Company’s indirectly wholly-owned subsidiary Xian Qi Ying Senior Living, Inc (formerly known as Xi’an Qi Ying Bio-Tech Limited) (“Qi Ying”) entered into a series of various interest entity (“VIE”) agreements with Shaanxi Yifuge Investments and Assets Co, Ltd (“Yifuge”), according to which Yifuge became our affiliated operating company in China. As consideration, we issued 33,600,000 shares of common stock to Jincao Wu, who was the control person and owner of Yifuge and the Company’s current chief executive officer. On September 29, 2015, our board of directors approved the transfer of Qi Ying’s equity ownership in Hanzhong Hengtai Bio-Tech Limited (“Hengtai”) to three individuals, Zhenheng Shao, Zhenguo Shao and Yongli Yang. Upon the completion of this equity transfer, Hengtai was no longer our indirectly wholly-owned subsidiary in China, and we ceased the business of plantation and sale of garden plants through Hengtai and became engaged in senior living and senior care business through Yifuge. On December 31, 2015, Yifuge changed its name from Shaanxi Yifuge Investments and Assets Co., Ltd to Shaanxi Jinjiangshan Senior Living Management Co, Ltd.
We engage in the business of operating senior living facility in Xianyang City, a part of Xi'an Metropolitan Area in Shaanxi Province, People's Republic of China (or "China" or "PRC"), out of our single location with the ability to serve 200 residents. We offer our residents access to a full continuum of services across all sectors of the senior living industry. We generate our revenues from private customers, which limits our exposure to government reimbursement risk. In addition, we control the operating economics of our facility through property ownership and long-term leases. We believe we operate in the attractive sectors of the senior living industry in China with significant opportunities to increase our revenues through providing a combination of housing, hospitality services and health care services.
We plan to grow our revenue and operating income through a combination of: (i) organic growth (ii) acquisitions of additional operating companies and facilities; and (iii) the realization of economies of scale. Once we generate positive and sufficient cash flow from our operations or attract additional investors, we intend to invest in a broad spectrum of assets in the senior living industry.
We believe that the senior living industry is the preferred alternative to meet the growing demand for a cost-effective residential setting in which to care for the elderly who cannot, or as a lifestyle choice choose not to, live independently due to physical or cognitive frailties and who may, as a result, require assistance with some of the activities of daily living or the availability of nursing or other medical care. Housing alternatives for seniors include a broad spectrum of senior living service and care options, including independent living, assisted living, memory care and skilled nursing care. More specifically, senior living consists of a combination of housing and the availability of 24-hour a day personal support services and assistance with certain activities of daily living.
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Results of Operations
Year Ended December 31, 2017 Compared to Year Ended December 31, 2016
The following table summarizes the results of our operations during the years ended December 31, 2017 and 2016, respectively and provides information regarding the dollar and percentage increase or (decrease) from the year ended December 31, 2017 compared to the year ended December 31, 2016.
(All amounts, other than percentages, stated in U.S. dollars)
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| Years ended December 31, |
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| Increase/ |
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| Increase/ |
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| 2017 |
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| 2016 |
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| (Decrease) ($) |
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| (Decrease) (%) |
| ||||
Net revenues |
|
| 500,544 |
|
|
| 470,787 |
|
|
| 29,757 |
|
|
| 6 | % |
Cost of revenues |
|
| 327,447 |
|
|
| 335,998 |
|
|
| (8,551 | ) |
|
| (3 | )% |
Gross profit |
|
| 173,097 |
|
|
| 134,789 |
|
|
| 38,308 |
|
|
| 28 | % |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
General and administrative expenses |
|
| 47,162 |
|
|
| 213,176 |
|
|
| (166,014 | ) |
|
| (78 | )% |
Operating income/(loss) |
|
| 125,935 |
|
|
| (78,387 | ) |
|
| 204,322 |
|
|
| 261 | % |
Net income/(loss) |
|
| 125,939 |
|
|
| (78,362 | ) |
|
| 204,301 |
|
|
| 261 | % |
Revenue
Net revenues. Our net revenue for the year ended December 31, 2017 amounted to $500,544, which represents an increase of approximately $29,757, or 6%, from the year ended on December 31, 2016, in which our net revenue was $470,787.
Cost of Revenues. Our cost of revenue for the year ended December 31, 2017 amounted to $327,447, which represents a decrease of approximately $8,551, or 3%, from the year ended December 31, 2016, in which our cost of revenue was $335,998.
Gross Profit. Our gross profit for the year ended December 31, 2017 amounted to $173,097, which represents an increase of approximately 38,308, or 28%, from the year ended on December 31, 2016, in which our gross profit was $134,789.
Operating Expenses
Selling Expenses. There were no selling expenses incurred in 2017 and 2016.
General and Administrative Expenses. We experienced a decrease in general and administrative expense of $166,014 from $213,176 to $47,162 for the year ended December 31, 2017, compared to the same period in 2016. The decrease was mainly due to the decreases in professional fees incurred as compared to 2016, when the Company reorganized its structure and changed its business.
| 13 |
| Table of Contents |
Operating Income
Operating income increased by $204,322, or 261%, to operating income of $125,935 in 2017 from operating loss of $(78,387) in 2016 as a result of the increase of general and administrative expenses.
Income Taxes
There were no income tax expenses incurred in 2017 and 2016.
Net Income
��
Net income increased by $204,301, or 261%, to net income of $125,939 in 2017 from net loss of $(78,362) in 2016 as a result of the decreases in general and administrative expenses.
Liquidity and Capital Resources General
As of December 31, 2017 and December 31, 2016, cash and cash equivalents were $24,962 and $4,270, respectively.
Based upon our present plans, we believe that cash on hand, cash flows from operations and funds available under our bank facilities will be sufficient to fund our capital needs for the next twelve months. However, if available liquidity is not sufficient to meet our operating and loan obligations as they come due, our plans include pursuing alternative financing arrangements or reducing expenditures as necessary to meet our cash requirements. There is no assurance that we will be able to raise additional capital or reduce discretionary spending to provide liquidity, if needed. Currently, the capital markets for small capitalization companies are difficult. Thus we cannot be sure of the availability or terms of any alternative financing arrangements.
The following table provides detailed information about our net cash flow for all financial statement periods presented in this report.
|
| For the years ended December 31, |
| |||||
(Stated in U.S. dollars) |
| 2017 |
|
| 2016 |
| ||
Net cash flows used in operating activities |
|
| (14,553 | ) |
|
| (176,752 | ) |
Net cash flows used in investing activities |
|
| - |
|
|
| - |
|
Net cash flows provided by financing activities |
|
| 33,184 |
|
|
| 138,174 |
|
Effect of foreign currency translation on cash and cash equivalents |
|
| 2,061 |
|
|
| 682 |
|
Operating Activities
Net cash used in operating activities for the year ended December 31, 2017 was $14,553 and net cash used in operating activities for the year ended December 31, 2016 was $176,752.
| 14 |
| Table of Contents |
Investing Activity
There were no investing activities in 2017 and 2016.
Financing Activities
Net cash provided from financing activities for the year ended December 31, 2017 was $33,184, and net cash provided from financing activities for the year ended December 31, 2016 was $138,174. The decrease is primarily due to decreases in funding provided by the related party to support the Company’s operations.
Subsequent Events
The Company has evaluated subsequent events through the issuance of the consolidated financial statements. On June 1, 2018, the Company became a majority owner in a PRC corporation, Shaanxi Jinjiangshan Da Jiankang Health Science Development Co., Ltd.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable because we are a smaller reporting company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The audited financial statements of the Company for the fiscal year ended December 31, 2017 and the notes thereto are set forth on page F-1 through F-19 of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
As of the end of the period covered by this Annual Report, our Chief Executive Officer and Principal Accounting Officer (the "Certifying Officers"), conducted an evaluation of our disclosure controls and procedures. Based on this evaluation, the Certifying Officers have concluded that our disclosure controls and procedures were not effective to ensure that material information is recorded, processed, summarized and reported by our management on a timely basis in order to comply with our disclosure obligations under the Exchange Act and the rules and regulations promulgated thereunder.
| 15 |
| Table of Contents |
Management’s Annual Report on Internal Controls Over Financial Reporting
Our management is also responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Our internal control over financial reporting includes those policies and procedures that:
| · | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
| · | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of the Company's management and directors; and |
| · | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
As of December 31, 2017, we carried out an assessment of the effectiveness of our internal control over financial reporting based on the framework in "Internal Control-Integrated Framework (2013)" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2017. Management has specifically observed that our accounting systems and current staffing resources in our finance department are currently insufficient to support the complexity of our financial reporting requirements. We currently do not have adequate staff members in our accounting and finance department who have experience or specialized training in preparing financial statements in the form and format required by the SEC. We have also experienced difficulty in applying complex accounting and financial reporting disclosure rules as required under various aspects of GAAP and SEC reporting regulations including those relating to accounting for business combinations, intangible assets, derivatives and income taxes.
We have instituted certain procedures to mitigate our internal control risks. Our Chief Executive Officer and our Controller based in China review and approve substantially all of our major transactions to ensure the completeness and fair presentation of our consolidated financial statements. We have, when needed, hired outside experts to assist us with implementing complex accounting principles. Management and the Board of Directors believe that the Company must allocate additional human and financial resources to address these matters.
Changes in Internal Control over Financial Reporting.
During the period ended December 31, 2017, there was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
None.
| 16 |
| Table of Contents |
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table presents information with respect to our officers, directors (2):
Name |
| Age |
| Position(s) |
| Position Since |
Jincao Wu |
| 46 |
| Director and chief executive officer of the Company; president and chief executive officer of Shaanxi Jinjiangshan |
| September 2015 |
Zhongyang Shang (1) |
| 64 |
| Director and chairman of the board of directors, and president of the Company; director and vice president of Shaanxi Jinjiangshan |
| December 2015/ January 2016 |
Meng Wu |
| 28 |
| Director of the Company; assistant to the manager of Shaanxi Shaanxi Jinjiangshan |
| December 2015 |
Xiaobin Chen |
| 46 |
| Director of the Company |
| March 2016 |
Zhenghua Peng |
| 74 |
| Director of the Company |
| March 2016 |
Liping Cui |
| 46 |
| Chief financial officer and treasurer |
| September 2015 |
_________
(1) Mr. Shang passed away on April 14, 2017. As of the date of this filing, the Board continues to search for his replacement.
(2) All directors hold office for one-year terms until the election and qualification of their successors. Officers are elected annually by the board of directors and serve at the discretion of the board. The board intends to seek to appoint one or more additional directors who will be independent directors with suitable professional backgrounds.
Jincao Wu has ample experience in senior citizen service and managerial background. She has served as our director and chief executive officer since September 2015. She has also served as the president and chief executive officer of Shaanxi Jinjiangshan, a PRC-based senior living facilities management company, since she founded the company in November 2011. She is also the founder of Yifuge Elderly Apartment, a PRC-based retirement home providing services to the elderly, and has served as its managing director since November 2008. Ms. Wu holds a B.A. in finance from Shaanxi Institute of Finance and Economics.
Zhongyang Shang has ample experience in senior citizen service and business consulting background. He has served as the chairman of our board and director since December 2015, and our president since January 2016. He has also served as director and vice manager of Shaanxi Jinjiangshan since December 2012. From November 2008 to December 2012, Mr. Shang served as the consultant of Yifuge Elderly Apartment. Mr. Shang holds a B.A. in economic management from the Central Party School of the Communist Party of China. Mr. Shang passed away on April 14, 2017.
Meng Wu has acute business sense and entrepreneurial mindset. He has served as our director since December 2015. He has also served as an assistant to the manager of Shaanxi Jinjiangshan since July 2012. Mr. Wu holds a B.A. in administrative management from Shaanxi Normal University.
Xiaobin Chen has 20 years of working experience in finance. He has served as our director since March 22, 2016. He has served as managing partner and accountant of Guangzhou Zhuocheng Certified Public Accountants Co., Ltd., a PRC-based accounting firm. Mr. Chen holds a B.A. in Accounting from Guangzhou University. He is also a certified public accountant, certified practicing valuer, and certified enterprise risk manager in China.
Zhenghua Peng is an expert in finance and was a professor at the Economics and Finance College of Xi'an Jiaotong University (formerly known as Shaanxi Economics Collage) before he retired. He has served as our director since March 22, 2016. Since September 1992, he has served as financial consultant for more than 10 Chinese companies in their join-stock system restructuring and financing, as well as financial consultant for 9 Chinese companies in listing on the OTC markets in the U.S. via reverse merger. Mr. Peng holds a B.A. in Operations and Management from Beijing Jiaotong University.
Liping Cui has almost 20 years of experience in accounting management. She has served as our chief financial director and treasurer since September 2015. She has also served as the chief financial officer of Shaanxi Jinjiangshan since January 2012. From January 2010 to December 2011, Ms. Cui served as the general manager of Xianyang Forestry Supply Co., Ltd., a PRC-based company focuses on the sale of rosin and forest seedling. Ms. Cui holds a B.A. in financial management from Shaanxi University of Science and Technology, and a certificate of intermediate accountant.
| 17 |
| Table of Contents |
Committees and Meetings
We do not have a standing audit committee of the Board of Directors. However, the board intends to seek to form audit committee, compensation committee, and other supervising committees. We do not have a financial expert serving on the Board of Directors or employed as an officer based on management's belief that the cost of obtaining the services of a person who meets the criteria for a financial expert under Item 407(d) of Regulation S-K is beyond its limited financial resources and the financial skills of such an expert are simply not required or necessary for us to maintain effective internal controls and procedures for financial reporting in light of the limited scope and simplicity of accounting issues raised in its financial statements at this stage of its development.
Code of Ethics
The Company adopted a Code of Ethics that applies to the Company's principal chief executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, as well as other employees (the "Code of Ethics"), a copy of which is attached as Exhibit 10.1 to our Form 8-K filed on December 19, 2008. The Code of Ethics is designed with the intent to deter wrongdoing, and to promote the following:
| · | Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships |
| · | Full, fair, accurate, timely and understandable disclosure in reports and documents that a small business issuer files with, or submits to, the Commission and in other public communications made by the small business issuer |
| · | Compliance with applicable governmental laws, rules and regulations |
| · | The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code |
| · | Accountability for adherence to the code |
Family Relationships
Jincao Wu, our director and chief executive officer is married to Zhongyang Shang, the former chairman of our board of directors and our president who passed away on April 14, 2017.
None of the other directors or executive officers have a family relationship as defined in Item 401 of Regulation S-K.
Committees of the Board of Directors
We do not have any committees of our board of directors.
Directors' Compensation
The Company has not compensated any of its directors for service on the Board of Directors. Management directors are not compensated for their service as directors; however, they may receive compensation for their services as employees of the Company.
| 18 |
| Table of Contents |
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
| · | been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| · | had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; |
| · | been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; |
| · | been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
| · | been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
| · | been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
None of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the Commission.
Corporate Governance
The business and affairs of the company are managed under the direction of our board. In addition to the contact information in this annual report, each stockholder will be given specific information on how he/she can direct communications to the officers and directors of the corporation at our annual stockholders meetings. All communications from stockholders are relayed to the members of the board of directors.
Role in Risk Oversight
Our board of directors is primarily responsible for overseeing our risk management processes. The board of directors receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company's assessment of risks. The board of directors focuses on the most significant risks facing our company and our company's general risk management strategy, and also ensures that risks undertaken by our company are consistent with the board's appetite for risk. While the board oversees our company's risk management, management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company and that our board leadership structure supports this approach.
| 19 |
| Table of Contents |
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of the our common stock and other equity securities, on Form 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the Securities and Exchange Commission regulations to furnish our company with copies of all Section 16(a) reports they file.
Based solely on our review of the copies of such reports received by us, and on written representations by our officers and directors regarding their compliance with the applicable reporting requirements under Section 16(a) of the Exchange Act, we believe that, with respect to the period ended December 31, 2017, our officers and directors, and all of the persons known to us to own more than 10% of our common stock, have not filed all required reports on a timely basis.
ITEM 11. EXECUTIVE COMPENSATION.
No current or prior officer or director has received any remuneration or compensation from the Company in the past three years, nor has any member of the Company’s management been granted any option or stock appreciation right. Accordingly, no tables relating to such items have been included within this Item. None of our employees is subject to a written employment agreement nor has any officer received a cash salary since our founding. The Company has no agreement or understanding, express or implied, with any director, officer or principal stockholder, or their affiliates or associates, regarding compensation in the form of salary, bonuses, stocks, options, warrants or any other form of remuneration, for services performed on behalf of the Company. Nor are there compensatory plans or arrangements, including payments to any officer in relation to resignation, retirement, or other termination of employment, or any change in control of the Company, or a change in the officer’s responsibilities following a change in control of the Company
Option Grants in Last Fiscal Year
There were no options granted to any of the named executive officers during the year ended December 31, 2017.
During the year ended December 31, 2017, none of the named executive officers exercised any stock options.
Pension, Retirement or Similar Benefit Plan
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.
Employment Agreements
The Company has no employment agreements with any of its employees.
| 20 |
| Table of Contents |
Equity Compensation Plan
The Company currently does not have any equity compensation plans; however, the Company is currently deliberating on implementing an equity compensation plan.
Directors' and Officers' Liability Insurance
The Company currently does not have insurance insuring directors and officers against liability; however, the Company is in the process of investigating the availability of such insurance.
Compensation Committee
We currently do not have a compensation committee of the Board of Directors. The Board of Directors as a whole determines executive compensation.
The following table sets forth certain information regarding the ownership of our capital stock, as of December 31, 2017 held by: (i) each person known by us to be the beneficial owner of 5% or more of the outstanding common stock, (ii) each executive officer and director of the Company, and (iii) all of our executive officers and directors as a group. As of December 31, 2017, the Company has 56,560,007 shares of Common Stock outstanding.
Unless otherwise indicated, the Company believes that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them.
Unless otherwise specified, the address of each of the persons set forth below is in care of the Company, c/o Li Su, 7F, No. 247, No. 28, Xi Hua South Rd., High-tech Zone, Xian Yang City, Shaanxi Province, P.R.C. 712000.
Name and Address of Beneficial Owner |
| Amount and Nature of Beneficial |
|
| % of Class |
| ||
Director and Officers |
|
|
|
|
|
| ||
Jincao Wu, director, chief executive officer |
|
| 30,830,000 |
|
|
| 54.51 | % |
Meng Wu, director |
|
| 50,000 |
|
| * |
| |
Liping Cui, chief financial officer |
|
| 20,000 |
|
| * |
| |
Xiaobin Chen, director |
|
| - |
|
|
| - |
|
Zhenghua Peng, director |
|
| - |
|
|
| - |
|
Zhongyang Shang, Director and chairman of the board of directors, and president of the Company(1) |
|
| - |
|
|
| - |
|
All officers and directors as a group (6 persons) |
|
| 30,900,000 |
|
|
| 54.63 | % |
|
|
|
|
|
|
|
|
|
5% Holders |
|
| 30,830,000 |
|
|
| 54.51 | % |
Jincao Wu, director, chief executive officer |
|
|
|
|
|
|
|
|
All 5% holders as a group (1 person) |
|
|
|
|
|
|
|
|
__________
* less than 1%.
(1) Mr. Shang passed away on April 14, 2017. As of the date of this filing, the Board continues to search for his replacement.
| 21 |
| Table of Contents |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Related Transactions
Related Party Receivables
Related party receivables consisted of the following as of December 31, 2017 and 2016:
|
| 12/31/2017 |
|
| 12/31/2016 |
| ||
Wu, Jingmeng (1) |
| $ | 1,159,477 |
|
| $ | 945,317 |
|
Xianyang Yifuge Elderly Apartment Co., Ltd. (“Xianyang”) (2) |
|
| 2,936 |
|
|
| 1,141 |
|
|
| $ | 1,162,413 |
|
| $ | 946,458 |
|
(1) Advances made by the Company to Mr. Wu, Jingmeng. Mr. Wu is the deputy general manager of the Company. The funds was used by Mr. Wu to pay for construction of a second senior home in Xianyang City, Shaanxi Province. The Company will provide management services to this new senior home after the construction is completed. The receivable had no impact on earnings. This balance of related party receivables is unsecured, interest-free and has no fixed terms of repayment. It is neither past due nor impaired. Management believes the amounts are recoverable.
(2) Service fees earned that the Company has not collected as of balance sheet date in connection with the services rendered to Xianyang during the period. The balance of related party receivables is unsecured, interest-free and has no fixed terms of repayment. It is neither past due nor impaired. Management believes that the amount will be repaid in the next billing cycle. Xianyang is controlled by the management of the Company.
Related Party Advances
Related party advances as of December 31, 2017 and 2016:
|
| 12/31/2017 |
|
| 12/31/2016 |
| ||
Xianyang Yifuge Elderly Apartment Co., Ltd. (“Xianyang”) |
| $ | 928 |
|
| $ | 3,263 |
|
Related party advances represented advances received in connection with services that have not yet been rendered to Xianyang but are expected to be in the future. Xianyang is controlled by the management of the Company.
Related Party Payable
Related party payable as of December 31, 2017 and 2016:
|
| 12/31/2017 |
|
| 12/31/2016 |
| ||
Liu, Shengli |
| $ | 210,178 |
|
| $ | 210,178 |
|
Xianyang Yifuge Elderly Apartment Co., Ltd. (“Xianyang”) |
|
| 168,212 |
|
|
| 148,189 |
|
|
|
| 378,390 |
|
|
| 358,367 |
|
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| Table of Contents |
Mr. Liu, Shengli is the former Chairman, President, and Director of the company. Mr. Liu had paid some necessary overseas consulting and advising fees, lawyer fees, and accounting fees on behalf of the company. The loan is unsecured and have no fixed terms of repayment, and are therefore deemed payable on demand.
Xianyang is controlled by the management of the Company. Xianyang from time to time paid some of the professional fees on behalf of the company. The loan is unsecured and have no fixed terms of repayment, and are therefore deemed payable on demand.
Director Independence
Xiaobin Chen and Zhenghua Peng are independent directors based on the definition of independence in the listing standards of the NYSE.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees — This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.
For the Company's fiscal years ended December 31, 2017 and 2016, we were billed approximately $38,000 and $54,000 for professional services rendered for the audit and review of our financial statements.
Audit Related Fees — This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the Securities and Exchange Commission and other accounting consulting.
There were no fees for audit related services for the years ended December 31, 2017 and 2016.
Tax Fees— This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
For the Company's fiscal years ended December 31, 2017 and 2016, we were billed Nil and $5,200 for professional services rendered for tax compliance.
All Other Fees — This category consists of fees for other miscellaneous items.
The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal years ended December 31, 2017 and 2016.
We do not have an audit committee. Our entire board of directors preapproves all services provided by our independent auditors. Our board of directors does not have records of what percentage of the above fees was preapproved. However, all of the above services and fees were reviewed and approved by the entire board of directors either before or after the respective services were rendered.
| 23 |
| Table of Contents |
(a) The following documents are filed as part of this report:
(1) Financial Statements and Report of Independent Registered Public Accounting Firm, which are set forth in the index to Consolidated Financial Statements on pages F-1 through F-19 of this report.
Report of Independent Registered Public Accounting Firm |
| F-1 |
|
Consolidated Balance Sheets |
| F-2 |
|
Consolidated Statements of Income and Comprehensive Income |
| F-3 |
|
Consolidated Statements of Cash Flows |
| F-4 |
|
Consolidated Statements of Shareholders' Equity |
| F-5 |
|
Notes to Consolidated Financial Statements |
| F-6 |
(2) Financial Statement Schedule: None.
(3) Exhibits
Exhibit No. |
| Description |
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
|
| ||
| Certification by Chief Executive Officer pursuant to Sarbanes Oxley Section 302 | |
| Certification by Chief Financial Officer pursuant to Sarbanes Oxley Section 302 | |
| Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350 | |
| Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350 | |
101.INS |
| XBRL Instance Document |
101.SCH |
| XBRL Taxonomy Extension Schema Document |
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document XBRL |
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document |
____________
(1) | Incorporated by reference to the Registrant's Form 8-K, filed on October 13, 2015. |
* Previously filed
** Filed herewith
*** Furnished herewith
None
| 24 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| China Senior Living Industry International Holding Corporation | ||
| |||
Date: October 4, 2018 | By: | /s/ Jincao Wu | |
| Name: | Jincao Wu | |
| Title: | Chief Executive Officer | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Each person whose signature appears below hereby authorizes Jincao Wu as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments to this report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission.
Signature |
| Title |
| Date |
| ||||
/s/ Jincao Wu |
| Director, chief executive officer (principal executive officer) |
| October 4, 2018 |
Jincao Wu | ||||
| ||||
/s/ Liping Cui |
| Chief financial officer (principal financial officer) |
| October 4, 2018 |
Liping Cui | ||||
| ||||
/s/ Meng Wu |
| Director |
| October 4, 2018 |
Meng Wu |
/s/ Xiaobin Chen |
| Director |
| October 4, 2018 |
Xiaobin Chen |
/s/ Zhenghua Peng |
| Director |
| October 4, 2018 |
Zhenghua Peng |
| 25 |
| Table of Contents |
China Senior Living Industry International Holding Corporation
Audited Consolidated Financial Statements
December 31, 2017 and 2016
(Stated in U.S. Dollars)
Content |
| Page | |
| |||
| F-1 | ||
| |||
| F-2 | ||
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| F-3 | ||
| |||
| F-4 | ||
| |||
| F-5 | ||
| |||
| F-6 |
26 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
China Senior Living Industry International Holding Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of China Senior Living Industry International Holding Corporation and its subsidiaries (the Company) as of December 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2017, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 15 to the financial statements, the Company had incurred substantial accumulated deficit, which raises substantial doubt about its ability to continue as a going concern. Management’s plan in regards to these matters are described in Note 15. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
WWC, P.C.
Certified Public Accountants
San Mateo, CA
October 4, 2018
We have served as the Company’s auditor since September 8, 2015
| F-1 |
| Table of Contents |
China Senior Living Industry International Holding Corporation
Audited Consolidated Balance Sheets
As of December 31, 2017 and 2016
(Stated in U.S. Dollars)
|
| 12/31/2017 |
|
| 12/31/2016 |
| ||
|
|
|
|
|
|
| ||
ASSETS |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Current assets |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 24,962 |
|
| $ | 4,270 |
|
Accounts receivable – related party, net |
|
| 2,936 |
|
|
| 1,141 |
|
Related party receivable |
|
| 1,159,477 |
|
|
| 945,317 |
|
Total current assets |
|
| 1,187,375 |
|
|
| 950,728 |
|
Non-current asset |
|
|
|
|
|
|
|
|
Intangible asset, net |
|
| 141 |
|
|
| 199 |
|
TOTAL ASSETS |
| $ | 1,187,516 |
|
| $ | 950,927 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accrued and other liabilities |
| $ | 158,199 |
|
| $ | 133,248 |
|
Related party advances |
|
| 928 |
|
|
| 3,263 |
|
Related party payable |
|
| 378,390 |
|
|
| 358,367 |
|
TOTAL LIABILITIES |
| $ | 537,517 |
|
| $ | 494,878 |
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value; 10,000,000 |
|
|
|
|
|
|
|
|
shares authorized; 0 shares issued and outstanding |
| $ | - |
|
| $ | - |
|
Common stock, $0.001 par value; 200,000,000 |
|
|
|
|
|
|
|
|
shares authorized, 56,560,007 shares |
|
|
|
|
|
|
|
|
issued and outstanding as of December 31, 2017 |
|
|
|
|
|
|
|
|
and 2016, respectively |
|
| 56,560 |
|
|
| 56,560 |
|
Additional paid in capital |
|
| 1,083,474 |
|
|
| 1,083,474 |
|
Statutory reserve |
|
| 69,967 |
|
|
| 53,594 |
|
Accumulated other comprehensive loss |
|
| (4,872 | ) |
|
| (72,883 | ) |
Accumulated deficit |
|
| (555,130 | ) |
|
| (664,696 | ) |
Total Stockholders’ equity |
| $ | 649,999 |
|
| $ | 456,049 |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND |
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
| $ | 1,187,516 |
|
| $ | 950,927 |
|
See Accompanying Notes to the Consolidated Financial Statements and Accountant’s Report
| F-2 |
| Table of Contents |
China Senior Living Industry International Holding Corporation
Audited Consolidated Statements of Operations and Comprehensive Income/ (Loss)
For the years ended December 31, 2017 and 2016
(Stated in U.S. Dollars)
|
| 12/31/2017 |
|
| 12/31/2016 |
| ||
|
|
|
|
|
|
| ||
Revenues – related party |
| $ | 500,544 |
|
| $ | 470,787 |
|
Cost of revenues |
|
| 327,447 |
|
|
| 335,998 |
|
Gross profit |
|
| 173,097 |
|
|
| 134,789 |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
General and administrative expenses |
|
| 47,162 |
|
|
| 213,176 |
|
|
|
|
|
|
|
|
|
|
Operating income/(loss) |
|
| 125,935 |
|
|
| (78,387 | ) |
|
|
|
|
|
|
|
|
|
Other income |
|
|
|
|
|
|
|
|
Interest income |
|
| 4 |
|
|
| 25 |
|
Total other income |
|
| 4 |
|
|
| 25 |
|
|
|
|
|
|
|
|
|
|
Earnings/(loss) before tax |
|
| 125,939 |
|
|
| (78,362 | ) |
|
|
|
|
|
|
|
|
|
Income tax |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Net income/(loss) |
| $ | 125,939 |
|
| $ | (78,362 | ) |
|
|
|
|
|
|
|
|
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
Foreign currency translation gain/(loss) |
|
| 68,011 |
|
|
| (61,131 | ) |
Comprehensive income/(loss) |
| $ | 193,950 |
|
| $ | (139,493 | ) |
|
|
|
|
|
|
|
|
|
Earnings/(loss) per share |
|
|
|
|
|
|
|
|
Basic |
| $ | 0.00 |
|
| $ | (0.00 | ) |
Diluted |
| $ | 0.00 |
|
| $ | (0.00 | ) |
|
|
|
|
|
|
|
|
|
Weighted average number of |
|
|
|
|
|
|
|
|
Common shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
| 56,560,007 |
|
|
| 56,023,021 |
|
Diluted |
|
| 56,560,007 |
|
|
| 56,023,021 |
|
See Accompanying Notes to the Consolidated Financial Statements and Accountant’s Report
| F-3 |
| Table of Contents |
China Senior Living Industry International Holding Corporation
Audited Consolidated Statements of Cash Flows
For the years ended December 31, 2017 and 2016
(Stated in U.S. Dollars)
|
| 12/31/2017 |
|
| 12/31/2016 |
| ||
|
|
|
|
|
|
| ||
Cash flows from operating activities |
|
|
|
|
|
| ||
Net income/(loss) |
| $ | 125,939 |
|
| $ | (78,362 | ) |
Depreciation and amortization |
|
| 68 |
|
|
| 69 |
|
Stock based compensation |
|
| - |
|
|
| 72,800 |
|
Increase in related party receivable |
|
| (146,689 | ) |
|
| (165,604 | ) |
Increase/(decrease) in accrued liabilities |
|
| 8,588 |
|
|
| (7,775 | ) |
(Decrease)/increase in related party advances |
|
| (2,460 | ) |
|
| 2,120 |
|
Net cash used in operating activities |
|
| (14,553 | ) |
|
| (176,752 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Increase in related party payable |
|
| 33,184 |
|
|
| 138,174 |
|
Net cash provided by financing activities |
|
| 33,184 |
|
|
| 138,174 |
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) of cash and cash equivalents |
|
| 18,631 |
|
|
| (38,578 | ) |
|
|
|
|
|
|
|
|
|
Effect of foreign currency translation on cash and cash equivalents cashceequivalents |
|
| 2,061 |
|
|
| 682 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents – beginning of period |
|
| 4,270 |
|
|
| 42,166 |
|
Cash and cash equivalents – end of period |
| $ | 24,962 |
|
| $ | 4,270 |
|
|
|
|
|
|
|
|
|
|
Supplementary cash flow information: |
|
|
|
|
|
|
|
|
Interest received |
| $ | 4 |
|
| $ | 25 |
|
Interest paid |
| $ | - |
|
| $ | - |
|
Income tax paid |
| $ | - |
|
| $ | - |
|
See Accompanying Notes to the Consolidated Financial Statements and Accountant’s Report
| F-4 |
| Table of Contents |
China Senior Living Industry International Holding Corporation
Audited Consolidated Statements of Stockholder’s Equity
For the years ended December 31, 2017 and 2016
(Stated in U.S. Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| |||||||
|
| Number |
|
|
|
|
| Additional |
|
|
|
|
| Other |
|
|
|
|
|
|
| |||||||
|
| Of |
|
| Common |
|
| Paid-in |
|
| Statutory |
|
| Comprehensive |
|
| Accumulated |
|
|
|
| |||||||
|
| Shares |
|
| Stock |
|
| Capital |
|
| Reserves |
|
| Loss |
|
| Deficit |
|
| Total |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance, January 1, 2016 |
|
| 56,000,007 |
|
|
| 56,000 |
|
|
| 1,011,234 |
|
|
| 41,208 |
|
|
| (11,752 | ) |
|
| (573,948 | ) |
|
| 522,742 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (78,362 | ) |
|
| (78,362 | ) |
Issuance of shares – consulting expense |
|
| 560,000 |
|
|
| 560 |
|
|
| 72,240 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 72,800 |
|
Appropriations to statutory reserves |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 12,386 |
|
|
| - |
|
|
| (12,386 | ) |
|
| - |
|
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (61,131 | ) |
|
| - |
|
|
| (61,131 | ) |
Balance, December 31, 2016 |
|
| 56,560,007 |
|
|
| 56,560 |
|
|
| 1,083,474 |
|
|
| 53,594 |
|
|
| (72,883 | ) |
|
| (664,696 | ) |
|
| 456,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2017 |
|
| 56,560,007 |
|
|
| 56,560 |
|
|
| 1,083,474 |
|
|
| 53,594 |
|
|
| (72,883 | ) |
|
| (664,696 | ) |
|
| 456,049 |
|
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 125,939 |
|
|
| 125,939 |
|
Appropriations to statutory reserves |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 16,373 |
|
|
| - |
|
|
| (16,373 | ) |
|
| - |
|
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 68,011 |
|
|
| - |
|
|
| 68,011 |
|
Balance, December 31, 2017 |
|
| 56,560,007 |
|
|
| 56,560 |
|
|
| 1,083,474 |
|
|
| 69,967 |
|
|
| (4,872 | ) |
|
| (555,130 | ) |
|
| 649,999 |
|
See Accompanying Notes to the Consolidated Financial Statements and Accountant’s Report
| F-5 |
| Table of Contents |
China Senior Living Industry International Holding Corporation
Notes to Audited Consolidated Financial Statements
December 31, 2017 and 2016
(Stated in U.S. Dollars)
1. ORGANIZATION, BASIS OF PRESENTATION, AND PRINCIPAL ACTIVITIES
(a) Organization history
China Senior Living Industry International Holding Corporation (the “Company”), formerly known as China Forestry, Inc., was incorporated under the laws of the State of Nevada on January 13, 1986 under the name of Patriot Investment Corporation. The Company engaged in the business of plantation and sale of garden plants.
On July 15, 2010, the Company entered into a Share Exchange with Financial International (Hong Kong) Holdings Co. Limited (“FIHK”).
From April 1, 2010 to May 20, 2011, FIHK had a series of contractual arrangements with Hanzhong Hengtai Bio-Tech Limited (“Hengtai”), a company organized and existing under the laws of the People’s Republic of China that is engaged in the plantation and sale of garden plants used for landscaping, including Chinese Yew, Aesculus, Dove Tree and Dendrobium.
On May 20, 2011, FIHK exercised its rights under the Exclusive Option Agreement to direct Xi’an Qi Ying Senior Living, Inc. (formerly known as Xi’an Qi Ying Bio-Tech Limited), a company organized and existing under the laws of the People’s Republic of China (“Qi Ying”), the indirect wholly owned subsidiary of FIHK, to acquire all of the equity capital of Hengtai. The Exclusive Option Agreement was exercised in a manner that the shareholders of Hengtai transferred all of their equity capital in Hengtai to Qi Ying. At or about the same time, Spone Limited, a company organized and existing under the laws of the Hong Kong SAR of the People’s Republic of China (“Spone”), acquired all of the capital stock of Qi Ying, so that it became a direct wholly owned subsidiary of Spone. FIHK then acquired all of the capital stock of Spone, so that it became a direct wholly owned subsidiary of FIHK. As a result, Hengtai became an indirect wholly owned subsidiary of FIHK and also accordingly became the indirect wholly owned subsidiary of us.
On June 15, 2012, the Company effected a 1-for-10 reverse stock split of the Company’s issued and outstanding shares of common stock. The par value and number of authorized shares of the common stock remained unchanged. All references to number of shares and per share amounts included in these consolidated financial statements and the accompanying notes have been adjusted to reflect the reverse stock split retroactively.
On September 8, 2015, the Company changed its name from China Forestry, Inc. to China Senor Living Industry International Holding Corporation.
On September 29, 2015, Qi Ying entered into a set of VIE Agreements with Shaanxi Yifuge Investments and Assets Co, Ltd (“YFG”) and YFG became the Company’s affiliated operating company in China. As consideration for the entry of the VIE agreement, the Company will issue 33,600,000 shares of common stock to Jingcao Wu, a director of the Company. As a result, YFG became a variable interest entity (“VIE”) and was included in the consolidated group.
The transaction between Qi Ying and YFG has been accounted for as a recapitalization of YFG where the Company (the legal acquirer) is considered the accounting acquiree and YFG (the legal acquiree) is considered the accounting acquirer. As a result of this transaction, the Company is deemed to be a continuation of the business of YFG. Accordingly, the financial data included in the accompanying consolidated financial statements for all periods prior to September 29, 2015 is that of the accounting acquirer, YFG. The historical stockholders’ equity of the accounting acquirer prior to the share exchange has been retroactively restated as if the transaction occurred as of the beginning of the first period presented.
| F-6 |
| Table of Contents |
China Senior Living Industry International Holding Corporation
Notes to Audited Consolidated Financial Statements
December 31, 2017 and 2016
(Stated in U.S. Dollars)
On September 29, 2015, the Board of Director also approved the transfer of Qi Ying’s equity ownership in Hengtai to Zhenheng Shao, Zhenzhong Shao, and Yongli Yang.
As a result, we ceased the business of plantation and sale of garden plants and became engaged in senior living and senior care business through YFG.
On December 31, 2015, YFG changed its name from Shaanxi Yifuge Investments and Assets Co., Ltd to Shaanxi Jinjiangshan Senior Living Management Co. Ltd (“JJS”).
(b) Basis of presentation
The Company’s consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
This basis of accounting differs in certain material respects from that used for the preparation of the books of account of the Company’s principal subsidiaries, which are prepared in accordance with the accounting principles and the relevant financial regulations applicable to enterprises with limited liabilities established in the People’s Republic of China (“PRC”) or in the accounting standards used in the places of their domicile. The accompanying consolidated financial statements reflect necessary adjustments not recorded in the books of account of the Company’s subsidiaries to present them in conformity with US GAAP.
(c) Principal activities
The Company is engaged in rendering management services to senior homes by providing healthcare, medical staff, meal preparation, and general care for the elderly in Xianyang City, Shaanxi Province, People’s Republic of China.
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 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 financial statements, which are compiled on the accrual basis of accounting.
| F-7 |
| Table of Contents |
China Senior Living Industry International Holding Corporation
Notes to Audited Consolidated Financial Statements
December 31, 2017 and 2016
(Stated in U.S. Dollars)
(b) Principles of consolidation
The accompanying consolidated financial statements which include the Company, its wholly owned subsidiaries, FIHK, Spone, Qi Ying, and its variable interest entity, JJS, are compiled in accordance with generally accepted accounting principles in the United States of America. All significant inter-company accounts and transactions have been eliminated in consolidation. In accordance with FASB ASC 810, Consolidation of Variable Interest Entities, variable interest entities, or VIEs, are generally entity that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. All VIEs with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes. In connection with the adoption of this ASC 810, the Company concludes that JJS is a VIE and Qi Ying is the primary beneficiary. The financial statements of JJS are then consolidated with Qi Ying’s financial statements.
As of December 31, 2017, the detailed identities of the consolidating subsidiaries are as follows:
| Place of |
| Attributable |
| Registered | |
Name of Company |
| incorporation |
| equity interest % |
| capital |
Financial International (Hong Kong) |
| Hong Kong |
| 100% |
| HKD |
Holdings Company Limited |
| 10,000,000 | ||||
| ||||||
Spone Limited |
| Hong Kong |
| 100% |
| HKD 1 |
| ||||||
Xi’an Qi Ying Senior Living, Inc |
| PRC |
| 100% |
| RMB 50,000 |
(“Qi Ying”) | ||||||
| ||||||
Shaanxi Jinjiangshan Senior Living |
| PRC |
| Variable Interest Entity, with Qi Ying as the primary beneficiary |
| RMB |
Management Co. Ltd |
| 3,000,000 |
(c) Use of estimates
The preparation of the financial statements in conformity 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 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 the estimates are made; however, actual results could differ materially from those estimates.
(d) Cash and cash equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.
(e) Accounts receivable
Accounts receivable are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.
| F-8 |
| Table of Contents |
China Senior Living Industry International Holding Corporation
Notes to Audited Consolidated Financial Statements
December 31, 2017 and 2016
(Stated in U.S. Dollars)
(f) Revenue recognition
The Company records revenue when persuasive evidence of an arrangement exists, services have been rendered, the sales price to the customer is fixed or determinable, and collectability is reasonably assured.
The Company's revenue consists of management services rendered to senior homes. Service revenue is recognized when the service is performed.
(g) Cost of revenue
The cost for providing management services is comprised of direct labor wages and purchasing cost of food for preparing meals for the seniors.
(h) General & administrative expenses
General and administrative expenses include general overhead such as the office rental and utilities.
(i) Advertising
All advertising costs are expensed as incurred. For the years ended December 31, 2017 and 2016, there was no advertising costs incurred.
(j) 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.
The Company has implemented ASC Topic 740, “Accounting for Income Taxes.” Income tax liabilities computed according to the People’s Republic of China (PRC) tax laws are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the basis of fixed assets and intangible assets for financial and tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will be either taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future income taxes. A valuation allowance is created to evaluate deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize that tax benefit, or that future realization is uncertain.
Effective January 1, 2008, PRC government implemented a new 25% tax rate across the board for all enterprises regardless of whether domestic or foreign enterprise without any tax holiday which is defined as "two-year exemption followed by three-year half exemption" hitherto enjoyed by tax payers. As a result of the new tax law of a standard 25% tax rate, tax holidays terminated as of December 31, 2007. However, PRC government has established a set of transition rules to allow enterprises that were already participating in tax holidays before January 1, 2008, to continue enjoying the tax holidays until they had been fully utilized.
| F-9 |
| Table of Contents |
China Senior Living Industry International Holding Corporation
Notes to Audited Consolidated Financial Statements
December 31, 2017 and 2016
(Stated in U.S. Dollars)
In order to encourage enterprises to operate senior homes, PRC tax law provides a tax holiday by waiving the income tax for entities operating in this industry. According to the Minfa (2015) No. 33 “Advice to Encourage Private Capital to Participate in the Development of Pension Services”, jointly issued by ten ministries which include the Ministry of Civil Affairs and the Ministry of Finance of the People’s Republic of China, the Company is entitled to benefit from the sales tax exemption and business tax exemption policy. As such, the Company is not subject to income tax as of December 31, 2017.
(k) Stock-based compensation
We recognize compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, we calculate the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock. The expense is recognized over the service period for awards expected to vest. For nonemployee stock-based awards, we calculate the fair value of the award on the date of grant in the same manner as employee awards. However, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience.
The Black-Scholes option valuation model is used to estimate the fair value of the warrants or options granted. The model includes subjective input assumptions that can materially affect the fair value estimates. The model was developed for use in estimating the fair value of traded options or warrants. The expected volatility is estimated based on the most recent historical period of time equal to the weighted average life of the warrants or options granted.
(l) Earnings per share
Basic earnings per share is computed on the basis of the weighted average number of common stock outstanding during the period. Diluted earnings per share is computed on the basis of the weighted average number of common stock and common stock equivalents outstanding. Dilutive securities having an anti-dilutive effect on diluted earnings per share are excluded from the calculation.
Dilution is computed by applying the treasury stock method for options and warrants. 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.
(m) Statutory reserves
Statutory reserves are referring to the amount appropriated from the net income in accordance with laws or regulations, which can be used to recover losses and increase capital, as approved, and are to be used to expand production or operations. The Company transferred $16,373 and $12,386 from retained earnings to statutory reserves for the years ended December 31, 2017 and 2016, respectively. PRC laws prescribe that an enterprise operating at a profit, must appropriate, on an annual basis, an amount equal to 10% of its profit. Such an appropriation is necessary until the reserve reaches a maximum that is equal to 50% of the enterprise’s PRC registered capital. The amount is not available for payment of dividends.
| F-10 |
| Table of Contents |
China Senior Living Industry International Holding Corporation
Notes to Audited Consolidated Financial Statements
December 31, 2017 and 2016
(Stated in U.S. Dollars)
(n) Foreign currency translation
The accompanying financial statements are presented in United States dollars. The functional currencies of the Company are the Renminbi (RMB) and the Hong Kong Dollars (HKD). The financial statements are translated into United States dollars from the functional currencies at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.
|
| 12/31/2017 |
|
| 12/31/2016 |
| ||
Period end/Year end RMB: |
|
| 6.5064 |
|
|
| 6.9437 |
|
US$ exchange rate |
|
|
|
|
|
|
|
|
Average period/yearly RMB: |
|
| 6.7570 |
|
|
| 6.6430 |
|
US$ exchange rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period end/Year end HKD: |
|
| 7.8144 |
|
|
| 7.7543 |
|
US$ exchange rate |
|
|
|
|
|
|
|
|
Average period/yearly HKD: |
|
| 7.7925 |
|
|
| 7.7617 |
|
US$ exchange rate |
|
|
|
|
|
|
|
|
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 US Dollars at the rates used in translation.
(o) Financial Instruments
The Company’s financial instruments, including cash and equivalents, accounts and other receivables, accounts and other payables, accrued liabilities and short-term debt, have carrying amounts that approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
| · | Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. |
|
|
|
| · | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
|
|
|
| · | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
| F-11 |
| Table of Contents |
China Senior Living Industry International Holding Corporation
Notes to Audited Consolidated Financial Statements
December 31, 2017 and 2016
(Stated in U.S. Dollars)
The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.
As of December 31, 2017 and 2016, the Company did not identify any assets and liabilities whose carrying amounts were required to be adjusted in order to present them at fair value.
(p) Commitments and contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
(q) 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 financial statements. The Company’s current component of other comprehensive income includes the foreign currency translation adjustment and unrealized gain or loss.
The Company uses FASB ASC Topic 220, “Reporting Comprehensive Income”. Comprehensive income is comprised of net income and all changes to the statements of stockholders’ equity, except the changes in paid-in capital and distributions to stockholders due to investments by stockholders. Comprehensive income for the years ended December 31, 2017 and 2016 included net income and foreign currency translation adjustments.
(r) Subsequent events
The Company evaluated for subsequent events through the issuance date of the Company’s financial statements.
(s) Recent accounting pronouncements
On February 25, 2016, the FASB issued ASU 2016-02 “Leases (Topic 842)”, its new standard on accounting for leases. ASU 2016-02 introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in ASC 606, the FASB’s new revenue recognition standard (e.g., those related to evaluating when profit can be recognized).
| F-12 |
| Table of Contents |
China Senior Living Industry International Holding Corporation
Notes to Audited Consolidated Financial Statements
December 31, 2017 and 2016
(Stated in U.S. Dollars)
Furthermore, the ASU addresses other concerns related to the current leases model. For example, the ASU eliminates the requirement in current U.S. GAAP for an entity to use bright-line tests in determining lease classification. The standard also requires lessors to increase the transparency of their exposure to changes in value of their residual assets and how they manage that exposure. The new model represents a wholesale change to lease accounting. As a result, entities will face significant implementation challenges during the transition period and beyond, such as those related to:
| · | Applying judgment and estimating. |
| · | Managing the complexities of data collection, storage, and maintenance. |
| · | Enhancing information technology systems to ensure their ability to perform the calculations necessary for compliance with reporting requirements. |
| · | Refining internal controls and other business processes related to leases. |
|
| Determining whether debt covenants are likely to be affected and, if so, working with lenders to avoid violations. |
| · | Addressing any income tax implications. |
The new guidance will be effective for public business entities for annual periods beginning after December 15, 2018 (e.g., calendar periods beginning on January 1, 2019), and interim periods therein.
On March 17, 2016, the FASB issued ASU 2016-08 “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”, which amends the principal-versus-agent implementation guidance and illustrations in the Board’s new revenue standard (ASU 2014-09). The FASB issued the ASU in response to concerns identified by stakeholders, including those related to (1) determining the appropriate unit of account under the revenue standard’s principal-versus-agent guidance and (2) applying the indicators of whether an entity is a principal or an agent in accordance with the revenue standard’s control principle. Among other things, the ASU clarifies that an entity should evaluate whether it is the principal or the agent for each specified good or service promised in a contract with a customer. As defined in the ASU, a specified good or service is “a distinct good or service (or a distinct bundle of goods or services) to be provided to the customer.” Therefore, for contracts involving more than one specified good or service, the entity may be the principal for one or more specified goods or services and the agent for others.
The ASU has the same effective date as the new revenue standard (as amended by the one-year deferral and the early adoption provisions in ASU 2015-14). In addition, entities are required to adopt the ASU by using the same transition method they used to adopt the new revenue standard.
In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”), which clarify 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 amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted so long as the transaction has not been reported in financial statements that have been issued or made available for issuance. The Company does not expect the adoption of ASU 2017-01 to have a material impact on its consolidated financial statements.
In May 2017, the FASB issued ASU No. 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”), which provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company does not expect the adoption of ASU 2017-09 to have a material impact on its consolidated financial statements.
Unless otherwise indicated, the Company is currently evaluating the impact that the pronouncements will have on the Company’s consolidated financial statements.
As of December 31, 2017, there are no other recently issued accounting standards not yet adopted that would or could have a material effect on the Company’s financial statements.
| F-13 |
| Table of Contents |
China Senior Living Industry International Holding Corporation
Notes to Audited Consolidated Financial Statements
December 31, 2017 and 2016
(Stated in U.S. Dollars)
3. EARNINGS/(LOSS) PER SHARE
|
| 12/31/2017 |
|
| 12/31/2016 |
| ||
Basic (Loss)/Earnings Per Share: |
|
|
|
|
|
| ||
Numerator: |
|
|
|
|
|
| ||
Net income/(loss) used in computing basic |
|
|
|
|
|
| ||
Earnings/(loss) per share |
| $ | 125,939 |
|
| $ | (78,362 | ) |
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
Weighted average common shares |
|
|
|
|
|
|
|
|
outstanding |
|
| 56,560,007 |
|
|
| 56,023,021 |
|
Basic earnings/(loss) per share: |
| $ | 0.00 |
|
| $ | (0.00 | ) |
|
|
|
|
|
|
|
|
|
Diluted Earnings/(loss) Per Share: |
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
Net income/(loss) used in computing diluted |
|
|
|
|
|
|
|
|
Earnings/(loss) per share |
| $ | 125,939 |
|
| $ | (78,362 | ) |
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
Weighted average common shares |
|
|
|
|
|
|
|
|
Outstanding |
|
| 56,560,007 |
|
|
| 56,023,021 |
|
Diluted earnings/(loss) per share |
| $ | 0.00 |
|
| $ | (0.00 | ) |
4. ACCOUNTS RECEIVABLE - RELATED PARTY
Accounts receivable - related party consisted of the following as of December 31, 2017 and 2016:
|
| 12/31/2017 |
|
| 12/31/2016 |
| ||
Xianyang Yifuge Elderly Apartment Co., Ltd. (“Xianyang”) |
|
| 2,936 |
|
|
| 1,141 |
|
The balance represents service fees earned that the Company has not collected as of balance sheet date in connection with the services rendered to Xianyang during the period. The balance of the receivable is unsecured, interest-free and has no fixed terms of repayment. It is neither past due nor impaired. Management believes that the amount will be repaid in the next billing cycle, and, therefore, did not provide any allowances for bad debts during the years ended December 31, 2017 and 2016. Xianyang is controlled by the management of the Company.
| F-14 |
| Table of Contents |
China Senior Living Industry International Holding Corporation
Notes to Audited Consolidated Financial Statements
December 31, 2017 and 2016
(Stated in U.S. Dollars)
5. RELATED PARTY RECEIVABLES
Related party receivables consisted of the following as of December 31, 2017 and 2016:
|
| 12/31/2017 |
|
| 12/31/2016 |
| ||
Wu, Jingmeng |
| $ | 1,159,477 |
|
| $ | 945,317 |
|
Related party receivable represented the following:
Advances made by the Company to Mr. Wu, Jingmeng. Mr. Wu is the deputy general manager of the Company. The funds will be used by Mr. Wu to pay for construction of a second senior home in Xianyang City, Shaanxi Province. The Company will provide management services to this new senior home after the construction is completed. The receivable had no impact on earnings. The balance of related party receivables is unsecured, interest-free and has no fixed terms of repayment. It is neither past due nor impaired. Management believes the amounts are recoverable.
6. INTANGIBLE ASSETS, NET
Intangible assets consisted of the following as of December 31, 2017 and 2016:
|
| 12/31/2017 |
|
| 12/31/2016 |
| ||
Software, at cost |
| $ | 353 |
|
| $ | 331 |
|
Less accumulated amortization |
|
| (212 | ) |
|
| (132 | ) |
|
| $ | 141 |
|
| $ | 199 |
|
Amortization expense for the years ended December 31, 2017 and 2016 were $69 and $69, respectively.
7. ACCRUED AND OTHER LIABLITIES
Accrued and other liabilities consisted of the following as of December 31, 2017 and 2016:
|
| 12/31/2017 |
|
| 12/31/2016 |
| ||
Wages payable |
| $ | 22,566 |
|
| $ | 19,048 |
|
Accrued professional and consulting fees |
|
| 135,633 |
|
|
| 114,200 |
|
|
| $ | 158,199 |
|
| $ | 133,248 |
|
| F-15 |
| Table of Contents |
China Senior Living Industry International Holding Corporation
Notes to Audited Consolidated Financial Statements
December 31, 2017 and 2016
(Stated in U.S. Dollars)
8. RELATED PARTY ADVANCES
Related party advances consisted of the following as of December 31, 2017 and 2016:
|
| 12/31/2017 |
|
| 12/31/2016 |
| ||
Xianyang Yifuge Elderly Apartment Co., Ltd. (“Xianyang”) |
| $ | 928 |
|
| $ | 3,263 |
|
Related party advances represented advances received in connection with services that have not yet been rendered to Xianyang but are expected to be in the future. Xianyang is controlled by the management of the Company.
9. RELATED PARTY PAYABLE
Related party payable consisted of the following as of December 31, 2017 and 2016:
|
| 12/31/2017 |
|
| 12/31/2016 |
| ||
Liu, Shengli |
| $ | 210,178 |
|
| $ | 210,178 |
|
Xianyang Yifuge Elderly Apartment Co., Ltd. (“Xianyang”) |
|
| 168,212 |
|
|
| 148,189 |
|
|
|
| 378,390 |
|
|
| 358,367 |
|
Mr. Liu, Shengli is the former Chairman, President, and Director of the company. Mr. Liu had paid some necessary overseas consulting and advising fees, lawyer fees, and accounting fees on behalf of the company. The loan is unsecured and have no fixed terms of repayment, and are therefore deemed payable on demand.
Xianyang is controlled by the management of the Company. Xianyang from time to time paid some of the professional fees on behalf of the company. The loan is unsecured and have no fixed terms of repayment, and are therefore deemed payable on demand.
10. LEASE COMMITMENTS
On January 4, 2013, the Company entered into an operating lease agreement with a related party leasing for office space located in Xianyang City, Shaanxi Province. The lease expires on December 31, 2045. No deposit is paid with this lease. As of December 31, 2017 and 2016, the Company had commitments for future minimum lease payments under a non-cancelable operating lease as follows:
Period |
| 12/31/2017 |
|
| 12/31/2016 |
| ||
Year 1 |
| $ | 2,951 |
|
| $ | 2,765 |
|
Year 2 |
|
| 2,951 |
|
|
| 2,765 |
|
Year 3 |
|
| 2,951 |
|
|
| 2,765 |
|
Year 4 |
|
| 2,951 |
|
|
| 2,765 |
|
Year 5 |
|
| 2,951 |
|
|
| 2,765 |
|
Thereafter |
|
| 62,202 |
|
|
| 66,362 |
|
Total |
| $ | 76,957 |
|
| $ | 80,187 |
|
Rental expenses for the years ended December 31, 2017 and 2016 were $2,841 and $2,890, respectively. Rental expenses are recognized on a straight-line basis.
| F-16 |
| Table of Contents |
China Senior Living Industry International Holding Corporation
Notes to Audited Consolidated Financial Statements
December 31, 2017 and 2016
(Stated in U.S. Dollars)
11. INCOME TAX
All of the Company’s operations are in the PRC, and in accordance with the relevant tax laws and regulations. The corporate income tax rate in China is 25%.
In order to encourage enterprises to operate senior homes, PRC tax law provides a tax holiday by waiving the income tax for entities operating in this industry. According to the Minfa (2015) No. 33 “Advice to Encourage Private Capital to Participate in the Development of Pension Services”, jointly issued by ten ministries which include the Ministry of Civil Affairs and the Ministry of Finance of the People’s Republic of China, the Company is entitled to benefit from the sales tax exemption and business tax exemption policy. As such, the Company is not subject to income tax as of December 31, 2017. As of the date of this report, the Company does not expect that this tax exemption policy will terminate in the near future.
The Company is subject to US Federal tax laws. The Company has not recognized an income tax benefit for its operating losses in the United States because the Company does not expect to commence active operations in the United States. The tax benefit for the periods presented is offset by a valuation allowance established against deferred tax assets arising from the net operating losses and other temporary differences, the realization of which could not be considered more likely than not. Deferred tax asset is calculated based on the statutory average rate of 34%.
FIHK and Spone are incorporated in Hong Kong and are subject to Hong Kong profits tax at a tax rate of 16.5%. No provision for Hong Kong profits tax has been made as FIHK and Spone had no taxable income during the reporting period. The Company has not recognized an income tax benefit for its operating losses in Hong Kong because the Company does not expect to commence active operations in Hong Kong. The tax benefit for the periods presented is offset by a valuation allowance established against deferred tax assets arising from the net operating losses and other temporary differences, the realization of which could not be considered more likely than not. Deferred tax asset is calculated based on the statutory average rate of 16.5%.
The following tables provide the reconciliation of the differences between the statutory and effective tax expenses for the years ended December 31, 2017 and 2016:
|
| 12/31/2017 |
|
| 12/31/2016 |
| ||
Income attributed to PRC operations |
| $ | 163,732 |
|
| $ | 123,859 |
|
Loss attributed to US and HK entities |
|
| (37,793 | ) |
|
| (202,221 | ) |
Income/(loss) before tax |
| $ | 125,939 |
|
| $ | (78,362 | ) |
|
|
|
|
|
|
|
|
|
PRC Statutory Tax at 25% Rate |
|
| 40,933 |
|
|
| 30,965 |
|
Effect of tax exemption granted |
|
| (40,933 | ) |
|
| (30,965 | ) |
Income tax |
|
| - |
|
|
| - |
|
| F-17 |
| Table of Contents |
China Senior Living Industry International Holding Corporation
Notes to Audited Consolidated Financial Statements
December 31, 2017 and 2016
(Stated in U.S. Dollars)
Per Share Effect of Tax Exemption
|
| 12/31/2017 |
|
| 12/31/2016 |
| ||
Effect of tax exemption granted |
| $ | 40,933 |
|
| $ | 30,965 |
|
Weighted-Average Shares Outstanding Basic |
|
| 56,560,007 |
|
|
| 56,023,021 |
|
Per share effect |
| $ | 0.00 |
|
|
| 0.00 |
|
The difference between the U.S. federal statutory income tax rate and the Company’s effective tax rate was as follows for the years ended December 31, 2017 and 2016:
|
| 12/31/2017 |
|
| 12/31/2016 |
| ||
U.S. federal statutory income tax rate |
|
| 34 | % |
|
| 34 | % |
Lower rates in PRC, net |
|
| (9 | %) |
|
| (9 | %) |
Tax holiday for senior care industry |
|
| (25 | %) |
|
| (25 | %) |
The Company’s effective tax rate |
|
| 0 | % |
|
| 0 | % |
On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Act”) resulting in significant modifications to existing law. The Company has considered the accounting impact of the effects of the Act during the year ended December 31, 2017 including a reduction in the corporate tax rate from 34% to 21% among other changes.
12. RELATED PARTY TRANSACTION
For the years ended December 31, 2017 and 2016, the Company had one client which represented 100% of the revenue. The client is a related party. The related party is controlled by the management of the Company:
|
| For the years ended |
| |||||
|
| 12/31/2017 |
|
| 12/31/2016 |
| ||
Xianyang Yifuge Elderly Apartment Co., Ltd. (“Xianyang”) |
| $ | 500,544 |
|
| $ | 470,787 |
|
13. CONCENTRATIONS AND RISKS
A. Concentration
As of December 31, 2017, the Company had one client which represented 100% of the revenue. The client is a related party. The related party is controlled by the management of the Company.
As of December 31, 2017, the Company has a material balance due from a related party. There is a concentration risk if the balance is not repaid and would create a material impact in the Company’s financial position and liquidity.
| F-18 |
| Table of Contents |
China Senior Living Industry International Holding Corporation
Notes to Audited Consolidated Financial Statements
December 31, 2017 and 2016
(Stated in U.S. Dollars)
Cash deposits with banks are held in financial institutions in China, which are insured with deposit protection up to RMB500,000 (approximately $73,780). Accordingly, the Company does not have a concentration of credit risk related to bank deposits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk.
B. Economic and Political Risks
The Company’s operations are mainly conducted in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by changes in the political, economic, and legal environments in the PRC.
The Company’s operations in the PRC 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 environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, 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.
14. SEGMENT INFORMATION
As of and for the years ended December 31, 2017 and 2016, all revenues of the Company represented the provision of management services to senior homes. No financial information by business segment is presented. Furthermore, as all revenues are derived from the PRC, no geographic information by geographical segment is presented.
15. GOING CONCERN UNCERTAINTIES
These financial statements have been prepared assuming that Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
As of December 31, 2017, the Company had accumulated deficits of $555,130 due to the substantial losses in operations in prior years, and a related party owed a significant balance to the Company that has not been repaid, which has limited the Company’s liquidity. Management’s plan to support the Company in operations and to maintain its business strategy is to raise funds through public and private offerings and to rely on officers and directors to perform essential functions with minimal compensation. If we do not raise all of the money we need from public or private offerings, we will have to find alternative sources, such as loans or advances from our officers, directors or others. Such additional financing may not become available on acceptable terms and there can be no assurance that any additional financing that the Company does obtain will be sufficient to meet its needs in the long term. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing. If we require additional cash and cannot raise it, we will either have to suspend operations or cease business entirely.
The accompanying financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
16. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the issuance of the consolidated financial statements. On June 1, 2018, the Company became a majority owner in a PRC corporation, Shaanxi Jinjiangshan Da Jiankang Health Science Development Co., Ltd.
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