The accompanying unaudited
consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Regulation S-X, Rule 10-01(c)
Interim Financial Statements, and, therefore, do not include all information and footnotes necessary for a complete presentation of financial
position, results of operations, cash flows, and stockholders’ equity in conformity with generally accepted accounting principles.
In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial
position have been included and all such adjustments are of a normal recurring nature. Operating results for the six months ended June
30, 2022 are not necessarily indicative of the results that can be expected for the year ended December 31, 2022.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(AMOUNTS IN USD)
NOTE 1. DESCRIPTION OF BUSINESS AND ORGANIZATION
JRSIS Health Care Corporation (the “Company”
or “JRSS”) was incorporated on November 20, 2013 under the laws of the State of Florida. In December 2013 JRSS acquired 100%
of the equity in JRSIS Health Care Limited (“JHCL”), which is a Limited Liability Company registered in British Virgin Island
(“BVI”) on February 25, 2013. JHCL owns 100% of the equity in Runteng Medical Group Co., Ltd (“Runteng”),
a limited liability company registered in Hong Kong on September 17, 2012. Until March 31, 2022 Runteng
owned 70% of the equity in Harbin Jiarun Hospital Co., Ltd (“Jiarun”), a for-profit hospital incorporated in Harbin
City of Heilongjiang, China in February 2006. The remaining 30% of the equity in Jiarun is owned by Junsheng Zhang, who is the Chairman
of the Board of JRSIS Health Care Corporation.
Jiarun
is a private hospital serving patients on a municipal and county level and providing both Western and Chinese medical practices to the
residents of Harbin. Jiarun also owns 100% of the equity in:
|
● |
Harbin
Jiarun Hospital Co., Ltd Nanjing Road Branch (“NRB Hospital”), a hospital branch of Jiarun, incorporated in Harbin City
of Heilongjiang, China in October 2017. NRB hospital is a private hospital serving patients on a municipal and county level and providing
both Western and Chinese medical practices to the residents of Harbin. |
|
● |
Harbin
Jiarun Hospital Co., Ltd 2nd Branch (“2nd Branch Hospital”), a second hospital branch
of Jiarun, incorporated in Harbin City of Heilongjiang, China in November 2017. 2nd Branch Hospital is a private
hospital serving patients on a municipal and county level and providing both Western and Chinese medical practices to the residents
of Harbin. |
|
● |
Harbin
Jiarun Hospital Co., Ltd Harbin New District Branch (“3rd Branch Hospital”), a third hospital branch
of Jiarun, incorporated in Harbin City of Heilongjiang, China in April 2021. 3rd Branch Hospital is a private hospital
serving patients on a municipal and county level and providing both Western and Chinese medical practices to the residents of Harbin. |
On April 12, 2022, Runteng has setup and owned
100% of the equity in Laidian Technology (Zhongshan) Co., Ltd (“Laidian”), a wholly foreign-owned enterprise (“WFOE”)
subsidiary to engage in the business of providing charging services to electric vehicles incorporated in Zhongshan City of Guangdong,
China.
Spin-Off of
Harbin Jiarun Hospital Co., Ltd.
On April 28, 2022
JRSIS Health Care Corporation completed the spin-off of its subsidiary Harbin Jiarun Hospital Co., Ltd. as JRSIS’s subsidiary
Runteng Medical Group Co., Ltd. transferred its 70% equity interest in Jiarun to Zhang Junsheng (the “Spin-Off”). In exchange
for the 70% interest in Jiarun, Zhang Junsheng transferred to Runteng 5,392,000 shares of JRSIS common stock.
After the Spin-Off,
JRSIS does not beneficially own any equity interest in Jiarun and will no longer consolidate Jiarun financial results with the financial
results of JRSIS as on April 1, 2022. According to spin-off agreement on April 28, 2022, the effective date of spin-off was April 1,
2022, Commencing on the second quarter of fiscal year 2022, Jiarun’s historical financial results for periods prior to April 1,
2022 will be reclassified and reflected in JRSIS’s consolidated financial statements as a discontinued operation for comparative
purposes.
NOTE 2. SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of presentation
The consolidated financial statements have been
prepared in accordance with the United States generally accepted accounting principles (“U.S. GAAP”).
B. Principles of consolidation
The consolidated financial statements include
the accounts of the Company and its subsidiaries. All inter-company transactions and balances have been eliminated in consolidation.
C. Use of estimates
The preparation of audited consolidated financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts
of revenue 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 from those estimates. Significant items subject to such estimates and assumptions
include valuation allowances for receivables and recoverability of carrying amount and the estimated useful lives of long-lived assets.
These estimates are often based on complex judgments and assumptions that management believes to be reasonable but are inherently uncertain
and unpredictable. Actual results could differ from these estimates.
JRSIS HEALTH CARE
CORPORATION
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(AMOUNTS IN USD)
NOTE 2. SUMMARIES OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. Functional currency and foreign currency
translation
JRSS and JHCL’s functional currency is
the United States dollar (“US$”). Runteng’s functional currency is the Hong Kong dollar (“HK$”). The functional
currency of Laidian and Jiarun is the Renminbi (“RMB”).
The Company’s reporting currency is US$.
Assets and liabilities of Runteng, Laidian and Jiarun are translated at the current exchange rate at the balance sheet dates, revenues
and expenses are translated at the average exchange rates during the reporting periods, and equity accounts are translated at historical
rates. Translation adjustments are reported in other comprehensive income.
The exchange rates used for foreign currency
translation are as follows:
| |
| |
| For
six months ended June 30, | |
| |
| |
| 2022 | | |
| 2021 | |
| |
| |
| (USD
to RMB/ USD to HKD) | | |
| (USD
to RMB/ USD to HKD) | |
Assets and liabilities | |
period end exchange rate | |
| 6.6977 / 7.8467 | | |
| 6.4579 / 7.7652 | |
Revenue and expenses | |
period average | |
| 6.4787 / 7.8257 | | |
| 6.4717 / 7.7614 | |
E. Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities.
The Company places its cash in what it believes to be credit-worthy financial institutions. The majority of sales are either cash receipt
in advance or cash receipt upon delivery. For six months ended June 30, 2022 and 2021, no customer accounted for more than 10% of
net revenue. As of June 30, 2022 and December 31, 2021, no customer accounted for more than 5% of net accounts receivable, respectively.
For those credit sales, the Company routinely assesses the financial strength of its customers and, based upon factors surrounding the
credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable
credit risk exposure beyond such allowance is limited.
F. Cash and cash equivalents
Cash and cash equivalents include all cash, deposits
in banks and other liquid investments with initial maturities of three months or less.
JRSIS HEALTH CARE
CORPORATION
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(AMOUNTS IN USD)
NOTE 2. SUMMARIES OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
G. Property and equipment
Property and equipment are stated at cost. Expenditures
for maintenance and repairs are charged to operations when incurred, while additions and betterments are capitalized. Depreciation is
recorded on a straight-line basis reflective of the useful lives of the assets. When assets are retired or disposed, the asset’s
original cost and related accumulated depreciation are eliminated from accounts and any gain or loss is reflected in income.
The estimated useful lives for property and equipment
categories are as follows:
Transportation instrument | |
5 years |
Office equipment | |
5 years |
H. Leases
In February 2016, the FASB issued ASU 2016-02
Leases (Topic 842), which increases transparency and comparability among organizations by recognizing right-of-use (“ROU”)
lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The ASU maintains
a distinction between finance leases and operating leases, which is substantially similar to the classification criteria for distinguishing
between capital leases and operating leases in the previous lease guidance. Retaining this distinction allows the recognition, measurement
and presentation of expenses and cash flows arising from a lease to remain similar to the previous accounting treatment. A lessee is
permitted to make an accounting policy election by class of underlying asset to exclude from balance sheet recognition any lease assets
and lease liabilities with a term of 12 months or less, and instead to recognize lease expense on a straight-line basis over the lease
term. For both financing and operating leases, the ROU asset and lease liability is initially measured at the present value of the lease
payments in the consolidated balance sheet. In July 2018, the FASB issued ASU 2018-11 which provides entities with the option to initially
apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings
in the period of adoption, if necessary. As discussed in Note 8, we adopted ASU 2016-02–Leases (Topic 842) effective January 1,
2019 utilizing the transition option provided by ASU 2018-11.
I. Fair Value Measurement
The Company applies the provisions of ASC Subtopic
820-10, Fair Value Measurements, for fair value measurements of financial assets and financial liabilities and for fair value measurements
of nonfinancial items that are recognized or disclosed at fair value in the financial statements. ASC 820 also establishes a framework
for measuring fair value and expands disclosures about fair value measurements.
Fair value is defined as the price that would
be received when selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. In determining the fair value for the assets and liabilities required or permitted to be recorded, the Company considers the principal
or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the
asset or liability.
ASC 820 establishes a fair value hierarchy that
requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC
820 establishes three levels of inputs that may be used to measure fair value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving
significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1: Unadjusted quoted prices
in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices in markets
that are not active, or inputs that is observable, either directly or indirectly, for substantially the full term of the asset or liability;
Level 3: Prices or valuation techniques
that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
JRSIS HEALTH CARE
CORPORATION
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(AMOUNTS IN USD)
NOTE 2. SUMMARIES OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
The following table sets forth by level within
the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis:
| |
| Carrying
Value at June 30, | | |
Fair
Value Measurement at June 30, 2022 | |
| |
| 2022 | | |
| Level 1
| | |
| Level 2
| | |
| Level 3
| |
Warrant liability | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
A summary of changes in Warrant liability for six
months ended June 30, 2022 was as follows:
Balance at January 1, 2022 | |
$ | 7 | |
Change in fair value of warrant liability | |
| (7 | ) |
Balance at June 30, 2022 | |
| - | |
The fair value of the outstanding warrants was
calculated using the Binomial Option Pricing Model, as of the date of filling this report, there was no outstanding warrants.
Cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities are reflected in the accompanying consolidated financial statements at amounts that approximate
fair value because of the short-term nature of these instruments. The fair value of the Company’s capital lease obligations also
approximates carrying value as they bear interest at current market rates.
J. Segment and geographic information
The Company is operating in one segment in accordance
with the accounting guidance FASB ASC topic 280, “Segment Reporting”. The Company’s revenues are from customers in
People’s Republic of China (“PRC”). All assets of the company are located in PRC.
K. Revenue recognition
The Company recognizes revenue when the contract
and performance obligations are identified with a customer, the transaction price are determined and allocated to the performance obligations
in the contract for which the amount of revenue can be reliably measured. The Company will recognize revenue when the entity satisfies
a performance obligation, it is probable that economic benefits will flow to the entity, and specific criteria have been met for each
of the Company’s activities.
L. Share Issued for Officer’s Compensation
The Company accounts for stock-based compensation
in accordance with ASC 718-10 “Compensation-Stock Compensation” which requires the measurement and recognition of compensation
expense for all share-based payment awards made to employees and directors including employee stock options, restricted stock units,
and stock appreciation rights are based on estimated fair values. Stock-based compensation expense recognized during the period is based
on the value of the portion of share-based payment awards that is ultimately expected to vest during the period.
The Company accounts for non-employee stock-based
awards at fair value in accordance with the measurement and recognition criteria of ASC 505-50 “Equity-Based Payments to Non-Employees.
Share-based payment awards granted to a customer
shall be measured and classified according to the terms of award. A share-based payment transaction shall be measured based on the fair
value. On May 5, 2022, the Company issued 39,130,000 shares of its common stock as officer compensation to Zhong Zhuowei upon the initiation
of operations of Laidian. These shares had a negotiated value of $1,056,510, of which $74,652 was obligation for Laidian’s paid
in capital, remains $981,858 was the expense of the company for 3 years since April of 2022. During the six months ended June 30, 2022
the company record $81,822 compensation expenses.
JRSIS HEALTH CARE
CORPORATION
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(AMOUNTS IN USD)
NOTE 2. SUMMARIES OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
M. Income taxes
The Company has adopted FASB ASC Topic 740, “Income
Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at
each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to
be realized.
In July 2006, the FASB issued FIN 48(ASC 740-10),
Accounting for Uncertainty in Income Taxes-An Interpretation of FASB Statement No. 109 (ASC 740), which requires income tax positions
to meet a more-likely-than-not recognition threshold to be recognized in the financial statements. Under FIN 48 (ASC 740-10), tax positions
that previously failed to meet the more-likely-than-not threshold should be recognized in the first subsequent financial reporting period
in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold should be
derecognized in the first subsequent financial reporting period in which that threshold is no longer met.
The application of tax laws and regulations is
subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations themselves are subject to change as a
result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings. Therefore, the actual liability
may be materially different from our estimates, which could result in the need to record additional tax liabilities or potentially reverse
previously recorded tax liabilities or deferred tax asset valuation allowance.
As a result of the implementation of FIN 48 (ASC
740-10), the Company made a comprehensive review of its portfolio of tax positions in accordance with recognition standards established
by FIN 48 (ASC 740-10). The Company recognized no material adjustments to liabilities or shareholder’s equity as a result of the
implementation. The adoption of FIN 48 did not have a material impact on the Company’s unaudited consolidated financial statements.
Enterprise income tax is determined under the
Provisional Regulations of PRC Concerning Income Tax on Enterprises promulgated by the PRC, income tax is payable by enterprises at a
rate of 25% of their taxable income.
N. Earnings per share
Basic earnings per common share is computed by
using net income divided by the weighted average number of shares of common stock outstanding for the periods presented. Diluted earnings
per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially
dilutive securities outstanding for the periods presented. The dilutive earnings per share will not be computed if the effect would be
anti-dilutive.
O. Reclassification
The comparative figures before April 1, 2022
have been reclassified to conform to current year presentation to reflect the disposal of a component of business derived from the recognition
of a spin-off transaction on April 28, 2022.
P. Recently adopted accounting pronouncements
The FASB has issued Accounting Standards Update
(ASU) No. 2019-01, Leases (Topic 842): Codification Improvements. The new ASU aligns the guidance for fair value of the underlying asset
by lessors that are not manufacturers or dealers in Topic 842 with that of existing guidance. As a result, the fair value of the underlying
asset at lease commencement is its cost, reflecting any volume or trade discounts that may apply. However, if there has been a significant
lapse of time between when the underlying asset is acquired and when the lease commences, the definition of fair value (in Topic 820,
Fair Value Measurement) should be applied.
The ASU also requires lessors within the scope
of Topic 942, Financial Services—Depository and Lending, to present all “principal payments received under leases”
within investing activities.
Finally, the ASU exempts both lessees and lessors
from having to provide certain interim disclosures in the fiscal year in which a company adopts the new leases standard.
We do not believe other recently issued but not
yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements
of operations and cash flows.
JRSIS HEALTH CARE
CORPORATION
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(AMOUNTS IN USD)
NOTE 3. DISCONTINUED OPERATIONS
At the beginning of 2022, the board of directors
of the Company committed to a plan to dispose of Jiarun. On April 28, 2022 the subsidiary of JRSS, Runteng Medical Group Co., Ltd., entered
into an Agreement Regarding a Transfer of Harbin Jiarun Hospital Co., Ltd.’s Equity with Zhang Junsheng, who was the Chairman of
JRSS until April 28, 2022. Pursuant to the Transfer Agreement, Runteng transferred to Mr. Zhang equity in Harbin Jiarun Hospital Co.,
Ltd. representing 70% of the total equity in Jiarun Hospital and Mr. Zhang transferred to Runteng 5,392,000 shares of the Registrant’s
common stock.
After the Spin-Off, JRSIS does not beneficially
own any equity in Jiarun and will no longer consolidate Jiarun financial results with financial results of JRSS. Commencing on the second
quarter of fiscal year 2022, Jiarun hospital’s historical financial results for periods prior to April 1, 2022 will be reclassified
and reflected in JRSS’s consolidated financial statements as a discontinued operation.
Since this transaction required certain authoritative approval before
effective, the publication of these transactions were delay so as to obtain all parties consent and advance authoritative approval.
The following table presents the components of
discontinued operations in relation to Jiarun hospital reported in the consolidated statements of operations:
| |
Three Months Ended
June 30, | | |
Six Months Ended
June 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
| | |
| | |
| | |
| |
Net Sales | |
| - | | |
| 11,740,600 | | |
| 15,619,411 | | |
| 19,066,834 | |
Operating costs and expenses | |
| - | | |
| 10,306,450 | | |
| 12,023,149 | | |
| 16,895,867 | |
Earnings from operations before other income and income taxes | |
| - | | |
| 1,434,150 | | |
| 3,596,262 | | |
| 2,170,967 | |
Other income(loss) | |
| (36,054,805 | ) | |
| (32,825 | ) | |
| (36,061,556 | ) | |
| (36,601 | ) |
Loss from operations before income taxes | |
| (36,054,805 | ) | |
| 1,401,325 | | |
| (32,465,294 | ) | |
| 2,134,366 | |
Income tax | |
| - | | |
| 376,723 | | |
| 928,376 | | |
| 583,307 | |
Net income from discontinued operations | |
| (36,054,805 | ) | |
| 1,024,602 | | |
| (33,393,670 | ) | |
| 1,551,059 | |
The following table presents the major classes
of assets and liabilities of discontinued operations of Jiarun hospital reported in the consolidated balance sheets:
| |
June 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Cash and cash equivalents | |
$ | - | | |
$ | 826,124 | |
Accounts receivable, net | |
| - | | |
| 7,544,033 | |
Inventories | |
| - | | |
| 1,771,158 | |
Other receivables | |
| - | | |
| 83,685 | |
Prepayments | |
| - | | |
| 2,812,156 | |
Amount due from related parties | |
| - | | |
| 337,597 | |
Deferred expenses | |
| - | | |
| 461,331 | |
Current assets of
discontinued operations | |
| - | | |
| 13,836,084 | |
| |
| | | |
| | |
Construction in progress | |
| - | | |
| 3,240,774 | |
Property and equipment, net | |
| - | | |
| 33,162,817 | |
Long term deferred expenses | |
| - | | |
| 2,117,763 | |
Deposits for capital leases | |
| - | | |
| 967,950 | |
Right-of-use assets | |
| - | | |
| 22,337,517 | |
Non-current assets
of discontinued operations | |
| - | | |
| 61,826,821 | |
| |
| | | |
| | |
Accounts payable | |
$ | - | | |
$ | 12,366,017 | |
Notes payable | |
| - | | |
| 629,050 | |
Deposits received | |
| - | | |
| 3,894 | |
Amount due to related parties | |
| - | | |
| (1,455,677 | ) |
Other payable | |
| - | | |
| 68,425 | |
Deferred tax payable | |
| - | | |
| 308,491 | |
Tax payable | |
| - | | |
| 420,796 | |
Payroll payable | |
| - | | |
| 1,058,618 | |
Lease obligations - current portion | |
| - | | |
| 2,676,956 | |
Current liabilities of discontinued
operations | |
| - | | |
| 16,076,570 | |
| |
| | | |
| | |
Lease obligations | |
| - | | |
| 20,380,899 | |
Deferred tax payable | |
| - | | |
| 3,993,209 | |
Other capital lease payable | |
| - | | |
| 616,955 | |
Non-current liabilities of discontinued
operations | |
| - | | |
| 24,991,063 | |
JRSIS HEALTH CARE
CORPORATION
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(AMOUNTS IN USD)
NOTE 4. PROPERTY AND EQUIPMENT
At June 30, 2022 and December 31, 2021, property
and equipment, at cost, consist of:
| |
June 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
| |
(Unaudited) | | |
| |
Transportation equipment | |
$ | 45,180 | | |
$ | - | |
Office equipment and others | |
| 794 | | |
| - | |
Total fixed assets at cost | |
| 45,974 | | |
| - | |
Accumulated depreciation | |
| (1,456 | ) | |
| - | |
Total fixed assets, net | |
$ | 44,518 | | |
$ | - | |
The Company recorded depreciation expense of
$1,505 and $nil for the three and six months ended June 30, 2022 and 2021, respectively.
NOTE 5. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
On January 1, 2019, the Company adopted Accounting
Standards Codification (“ASC”) Topic 842, “Leases” (“new lease standard”). The new lease standard
was adopted using the optional transition method approach that allows for the cumulative effect adjustment to be recorded without restating
prior periods. The Company has elected the practical expedient package related to the identification, classification and accounting for
initial direct costs whereby prior conclusions do not have to be reassessed for leases that commenced before the effective date. As the
Company will not reassess such conclusions, the Company has not adopted the practical expedient to use hindsight to determine the likelihood
of whether a lease will be extended or terminated or whether a purchase option will be exercised.
Operating lease
In March 2022 Laidian leased office space under
non-cancellable operating lease agreements. Under terms of the lease agreement, from April 2022, Laidian is committed to make lease payments
of approximately $1,528 per month for 23 months. This office is used as office for Laidian.
The Company’s adoption of the new lease
standard included new processes and controls regarding asset financing transactions, financial reporting and a system-related implementation
required for the new lease standard. The Company’s accounting for finance leases (formerly referred to as capital leases prior
to the adoption of the new lease standard) remained substantially unchanged. The impact of the adoption of the new lease standard included
the recognition of right-of-use (“ROU”) assets and lease liabilities. The adoption of the new lease standard resulted in
additional net lease assets and net lease liabilities of $26,970 and $26,970, respectively, as of June 30, 2022.
As of June 30, 2022, the Company has the following
amounts recorded on the Company’s unaudited condensed consolidated balance sheet:
| |
June 30,
2022 | |
| |
(Unaudited) | |
Assets | |
| |
Operating lease assets | |
$ | 26,970 | |
Total | |
$ | 26,970 | |
Liabilities | |
| | |
Operating lease liabilities- Current | |
| 16,790 | |
Operating lease liabilities- Long-term | |
| 10,180 | |
Total | |
$ | 26,970 | |
Future annual minimum lease payments, for non-cancellable
operating leases are as follows:
Year ending June 30 | |
Amount $ | |
2022 | |
| 8,292 | |
2023 | |
| 17,205 | |
2024 | |
| 1,473 | |
Total | |
| 26,970 | |
The company has recorded operating lease expense
of $6,112 and $280,523 ($nil for the Company, $280,523 for discontinued operations) for three months ended June 30, 2022 and
2021, and recorded operating lease expense of $6,122 and $549,727 ($nil for the Company, $549,727 for discontinued operations)
for six months ended June 30, 2022 and 2021, respectively.
JRSIS HEALTH CARE
CORPORATION
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(AMOUNTS IN USD)
NOTE
5. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (Continued)
At June 30, 2022 right-of-use assets, consist of:
| |
June
30,
2022
(Unaudited) | |
Lease assets | |
$ | 33,082 | |
Accumulated amortization | |
| (6,112 | ) |
Total right-of-use assets, net | |
$ | 26,970 | |
NOTE 6. DERIVATIVE FINANCIAL INSTRUMENTS
Derivative Financial Instruments
The Company has adopted the provisions of ASC
subtopic 825-10, Financial Instruments (“ASC 825-10”). ASC 825-10 defines fair value as the price that would be received
from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company
considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would
use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes
a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when
measuring fair value.
Warrant liability – In 2019 the Company
issued a common stock purchase warrant (the “warrant”) to purchase 21,000 shares of the registrant’s common
stock to Auctus Fund, LLC. The warrant contains certain reset provisions. The accounting treatment of derivative financial instruments
requires that the Company record fair value of the derivative as of the inception date (issuance date) and to record changes in fair
value as of each subsequent reporting date. As of the date of filling this report, there were no outstanding warrants.
NOTE
7. INCOME TAX EXPENSE
The Company uses the asset-liability method of
accounting for income taxes prescribed by ASC 740 Income Taxes. The Company and its subsidiaries each file their taxes individually.
United States
JRSS is subject to the United States of America
tax at a tax rate of 21%. No provision for the US federal income taxes has been made as the Company had no US taxable income for
the periods presented, and its earnings are planned to be reinvested indefinitely into the operations of the Company in the PRC.
The following table shows the components of the
allowance for US income tax recorded for six months ended June 30, 2022:
| |
Amounts | |
Loss before income tax | |
$ | 792,193 | |
Tax rate at 21% | |
| 166,361 | |
Disallowed tax losses | |
| (166,361 | ) |
Income tax expense | |
$ | - | |
BVI
JHCL was incorporated in the BVI and, under the
current laws of the BVI, it is not subject to income tax.
Hong Kong
Runteng was incorporated in Hong Kong and
is subject to Hong Kong profits tax. Runteng is subject to Hong Kong taxation on its activities conducted in Hong Kong and income arising
in or derived from Hong Kong. The applicable statutory tax rate is 16.5%.
JRSIS
HEALTH CARE CORPORATION
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(AMOUNTS IN USD)
NOTE
7. INCOME TAX EXPENSE (Continued)
The following table shows the components of the
allowance for Hong Kong income tax recorded for six months ended June 30, 2022:
| |
| Amounts | |
Loss before income tax | |
$ | - | |
Tax rate at 16.5% | |
| - | |
Disallowed tax losses | |
| - | |
Income tax expense | |
$ | - | |
PRC
Corporate Income Tax (CIT) is determined under
the Provisional Regulations of PRC Concerning Income Tax on Enterprises promulgated by the PRC. Income tax is payable by enterprises
at a rate of 25% of their taxable income.
The following table shows the components of the
allowance for PRC income tax recorded for six months ended June 30, 2022:
| |
| Amounts | |
Income tax expense | |
$ | - | |
Income tax: 2022 deferred | |
| - | |
Tax expense from continuing operation | |
$ | - | |
Reconciliation:
|
|
Amounts |
|
Income
tax at statutory rate |
|
$ |
- |
|
Tax
expense from continuing operation |
|
$ |
- |
|
NOTE
8. RELATED PARTY TRANSACTIONS
The following is the list of the related parties
with which the Group has had transactions:
Amount due from related parties
Amount due to related parties consisted of the
following as of the periods indicated:
Name of related parties | |
June 30, 2022 | | |
December 31, 2021 | |
Zhuowei Zhong | |
| 13,649 | | |
| - | |
| |
$ | 13,649 | | |
$ | - | |
Amounts due from Zhuowei Zhong, the Chairman
of the Company, represented amounts paid by Mr. Zhong for the daily operation of the company, the balance was more than repay the amount
owed, has been settled until the second quarter of 2022.
JRSIS HEALTH CARE
CORPORATION
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(AMOUNTS IN USD)
NOTE
8. RELATED PARTY TRANSACTIONS (Continued)
Related parties’ transactions
Payment for the Company’s operating expenses
by related parties consisted of the following for the periods indicated:
Related party transaction
| |
For six months ended | |
| |
June 30, | |
| |
2022 | | |
2021 | |
Stock-based compensation paid to: | |
| | |
| |
Zhong Zhuowei (#1) | |
$ | 81,822 | | |
$ | - | |
(#1) Zhong Zhuowei (“Zhong”)
is major shareholder holding 80.7% and 0% of the Company’s issued and outstanding common stock as of June 30, 2022 and June 30,
2021, respectively. On May 5, 2022, the company issued 39,130,000 shares of its common stock to Zhong Zhuowei. Under “Agreement
on the establishment of Laidian technology (Zhongshan) Co., Ltd.” to serve as a management and setup the Laidian. As Mr. Zhong
had previously acquired 8,000,000 shares in private transactions, he owned 47,130,000 shares (80.7%) of the Company’s common stock
as on May 5, 2022.
NOTE 9. BASIC
AND DILUTED EARNINGS PER SHARE
Basic net income per share is computed using
the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted
average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares comprise
shares issuable upon the exercise of share-based awards, using the treasury stock method. The reconciliation of the numerators and denominators
of the basic and diluted earnings per share computations for income from continuing operations is shown as follows:
| |
Six Months Ended June 30, | |
| |
2022 | | |
2021 | |
| |
(Unaudited) | | |
(Unaudited) | |
Numerator: | |
| | |
| |
Net income(loss) available to common stockholders | |
$ | (33,543,279 | ) | |
$ | 1,519,009 | |
Net income(loss) from continued operations | |
| (149,609 | ) | |
| (32,050 | ) |
Net income(loss) from discontinued operations | |
| (33,393,670 | ) | |
| 1,551,059 | |
Denominator: | |
| | | |
| | |
Basic weighted-average number of shares outstanding | |
| 31,250,525 | | |
| 18,271,814 | |
Diluted weighted-average number of shares outstanding | |
| 31,250,525 | | |
| 18,481,814 | |
Net income(loss) per share: | |
| | | |
| | |
Net income(loss) per share of common stock | |
| | | |
| | |
Basic EPS | |
| (1.0734 | ) | |
| 0.0831 | |
Diluted EPS | |
| (1.0734 | ) | |
| 0.0822 | |
Net income(loss) from continuing operations per share of common stock | |
| | | |
| | |
Basic EPS | |
| (0.0048 | ) | |
| (0.0018 | ) |
Diluted EPS | |
| (0.0048 | ) | |
| (0.0017 | ) |
Net income(loss) from discontinuing operations per share of common stock | |
| | | |
| | |
Basic EPS | |
$ | (1.0686 | ) | |
$ | 0.0849 | |
Diluted EPS | |
$ | (1.0686 | ) | |
$ | 0.0839 | |
The dilutive earnings per
share will not be computed if the effect would be anti-dilutive.
JRSIS HEALTH CARE
CORPORATION
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(AMOUNTS IN USD)
NOTE
10. CONTINGENCIES AND COMMITMENT
Certain conditions may exist as of the date the
consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more
future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, and such assessment
inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the
Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of
any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. There
was no contingency of this type as of June 30, 2022 and December 31, 2021.
If the assessment of a contingency indicates
that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability
would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency
is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together
with an estimate of the range of possible loss if determinable and material would be disclosed. There was no contingency of this type
as of June 30, 2022 and December 31, 2021.
Loss contingencies considered to be remote by
management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
NOTE 11. COMMON STOCK
On March 17, 2022, the company entered into an
Agreement on the Establishment of Laidian Technology (Zhongshan) Co., Ltd. (“Laidian”) with Zhong Zhuowei. The agreement
contains a covenant by Zhong Zhuowei to fund the operations of Laidian which is 100% owned by Runteng Medical, in consideration of Mr.
Zhong’s financial commitment and commitment to provide management services, the company agreed to issue 39,130,000 shares of its
common stock to Zhong Zhuowei upon the initiation of operations of Laidian. On May 5, 2022, the company issued 39,130,000 shares of its
common stock to Zhong Zhuowei. As Mr. Zhong had previously acquired 8,000,000 shares in private transactions, he owned 47,130,000 shares
(80.7%) of the Company’s common stock as on May 5, 2022.
On May 17, 2022, the Company issued a total of 6,000,000 share
of common stock for US$60,000 at US$0.01 per share to six non-US shareholders.
On April 28, 2022, Runteng entered into an agreement
regarding a transfer of Harbin Jiarun Hospital Co., Ltd.’s Equity (the “Transfer Agreement”) with Zhang Junsheng. Pursuant
to the Transfer Agreement, Runteng transferred to Mr. Zhang equity in Harbin Jiarun Hospital Co., Ltd. (“Jiarun Hospital”)
representing 70% of the total equity in Jiarun Hospital and Mr. Zhang transferred to Runteng 5,392,000 shares of the Company’s
common stock. On May 27, 2022, the company cancelled 5,392,000 shares of its common stock from Zhang Junsheng. Since this transaction
required certain authoritative approval before effective, the publication of these transactions were delay so as to obtain all parties
consent and advance authoritative approval. As of May 27, 2022, the issued share balance of the company was 58,366,569, the balance of
the number of shares of Mr. Zhang and Mr. Zhong were nil (0%) and 4,7130,000(80.7%), respectively.
There were 58,366,569 and 18,628,569 common
shares issued and outstanding at June 30, 2022 and December 31, 2021 respectively.
NOTE 12. SUBSEQUENT
EVENTS
The COVID-19 pandemic has had a significant adverse
impact and created many uncertainties related to our business, and we expect that it will continue to do so. The Company is experiencing
challenges in sales and has suffered a significant decrease in revenues which has increased financial uncertainty. Our future business
outlook and expectations are very uncertain due to the impact of the COVID-19 pandemic and are very difficult to quantify. It is difficult
to assess or predict the impact of this unprecedented event on our business, financial results or financial condition.
Except for the above matter, the Management
of the Company determined that there were no material reportable subsequent events required to be disclosed or because of which
adjustments are needed.