JRSIS HEALTH CARE Corp 10-Q for FY2023 Q3
JRSIS HEALTH CARE Corp (JRSS)
About this 10-Q
JRSIS HEALTH CARE Corp filed this 10-Q on November 15, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).
Headline figures
Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $13.57K
- Net loss
- $119.13K
- compared with a net loss of $132.46K a year earlier
- Diluted EPS
- -$0.02
- compared with -$0.02 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
or
For the transition period from _______ to _______
Commission
File Number:
(Exact name of Registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification Number) |
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Exchange Act) 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.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
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 Exchange Act). Yes ☐ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As
of the date of filing this report, there were outstanding
NOTE REGARDING REVERSE STOCK SPLIT
On June 29, 2023, JRSIS Health Care Corporation implemented a one-for-ten reverse split of its common stock. To facilitate comparative analysis, all statements in this Report regarding numbers of shares of common stock and all references to prices of a share of common stock, if referencing events or circumstances occurring prior to June 29, 2023, have been modified to reflect the effect of the reverse stock split on a pro forma basis.
TABLE OF CONTENTS
| Page | ||
| PART I – FINANCIAL INFORMATION | 1 | |
| Item 1 | Consolidated Financial Statements | 1 |
| Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 2 |
| Item 3 | Quantitative and Qualitative Disclosures About Market Risk | 8 |
| Item 4 | Controls and Procedures | 8 |
| PART II – OTHER INFORMATION | 9 | |
| Item 1 | Legal Proceedings | 9 |
| Item 1A | Risk Factors | 9 |
| Item 2 | Unregistered Sale of Equity Securities and Use of Proceeds | 9 |
| Item 3 | Defaults Upon Senior Securities | 9 |
| Item 4 | Mine Safety Disclosures | 9 |
| Item 5 | Other Information | 9 |
| Item 6 | Exhibits | 10 |
| Signatures | 11 | |
i
PART I – FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
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 nine months ended September 30, 2023 are not necessarily indicative of the results that can be expected for the year ended December 31, 2023. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
1
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
JRSIS HEALTH CARE CORPORATION
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN USD, EXCEPT SHARES)
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Other receivables | ||||||||
| Amount due from related parties | ||||||||
| Deferred expenses | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and shareholders’ equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Amount due to related parties | ||||||||
| Payroll payable | ||||||||
| Lease liabilities - current | ||||||||
| Total current liabilities | ||||||||
| Lease liabilities - non-current | ||||||||
| Total liabilities | $ | $ | ||||||
| Shareholders’ equity | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total shareholders’ equity of the Company | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
| * |
See notes to consolidated financial statements
F-2
JRSIS HEALTH CARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(AMOUNTS IN USD, EXCEPT SHARES) (UNAUDITED)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue: | ||||||||||||||||
| Consultation | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Operating costs and expenses: | ||||||||||||||||
| Salaries and benefits | ||||||||||||||||
| Stock-based compensation | ||||||||||||||||
| Office supplies | ||||||||||||||||
| Right-of-use assets amortization | ||||||||||||||||
| Lease liabilities interest expense | ||||||||||||||||
| Professional fee | ||||||||||||||||
| Change in fair value of warrant liability | ( | ) | ||||||||||||||
| Depreciation | ||||||||||||||||
| Total operating costs and expenses | ||||||||||||||||
| Loss from operations before other income and income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||||||
| Loss from operations before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax | ||||||||||||||||
| Loss from continued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss from discontinued operations | - | ( | ) | |||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Comprehensive income: | ||||||||||||||||
| Foreign currency translation adjustment from continued operations | ||||||||||||||||
| Foreign currency translation adjustment from discontinued operations | - | |||||||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss from continuing operations per share of common stock | ||||||||||||||||
| Basic earnings per share* | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted earnings per share* | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss from discontinuing operations per share of common stock | ||||||||||||||||
| Basic earnings per share* | $ | $ | $ | $ | ( | ) | ||||||||||
| Diluted earnings per share* | $ | $ | $ | $ | ( | ) | ||||||||||
| Net loss per share of common stock | ||||||||||||||||
| Basic earnings per share* | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted earnings per share* | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of shares outstanding (Basic)* | ||||||||||||||||
| Weighted average number of shares outstanding (Diluted)* | ||||||||||||||||
| * |
See notes to consolidated financial statements
F-3
JRSIS HEALTH CARE CORPORATION
CONSOLIDATED STATEMENT OF SHARESHOLDERS’ EQUITY
(AMOUNTS IN USD, EXCEPT SHARES)
| Common stock | Accumulated | Accumulated other comprehensive | Additional paid-in | Non- controlling | Total shareholders’ | |||||||||||||||||||||||
| Number* | Amount | deficits | income | capital | Interest | equity | ||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||||||
| Balance at March 31, 2022 (Unaudited) | ( | ) | ||||||||||||||||||||||||||
| Discontinued Operations adjustment | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Loss from discontinuing operations | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Net income | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Shares issued for officer compensation | ||||||||||||||||||||||||||||
| Shares issued for private placement | ||||||||||||||||||||||||||||
| Shares repurchase and cancelled | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||||||
| Balance at June 30, 2022 (Unaudited) | ( | ) | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | - | - | - | ( | ) | |||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | |||||||||||||||||||||||
| Balance at September 30, 2022 (Unaudited) | $ | $ | ( | ) | $ | $ | $ | - | $ | |||||||||||||||||||
| Common stock | Accumulated | Accumulated other comprehensive | Additional paid-in | Non- controlling | Total shareholders’ | |||||||||||||||||||||||
| Number* | Amount | deficits | income | capital | Interest | equity | ||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at March 31, 2023 (Unaudited) | ( | ) | ||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||||||
| Balance at June 30, 2023 (Unaudited) | ( | ) | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | - | - | - | ( | ) | |||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | |||||||||||||||||||||||
| Balance at September 30, 2023 (Unaudited) | $ | $ | ( | ) | $ | $ | $ | - | $ | |||||||||||||||||||
| * |
See notes to consolidated financial statements
F-4
JRSIS HEALTH CARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN USD, EXCEPT SHARES)
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Add: Net loss from discontinued operations | ( | ) | ||||||
| Net loss from continued operations | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation | ||||||||
| Right-of-use assets amortization | ||||||||
| Lease liabilities interest expense | ||||||||
| Change in fair value of warranty liability | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Other receivables | ( | ) | ||||||
| Amount due from related parties | ||||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Amount due to related parties | ||||||||
| Payroll payable | ( | ) | ||||||
| Deposits received | ||||||||
| Net cash used in operating activities from continued operations | ( | ) | ( | ) | ||||
| Net cash provided by operating activities from discontinued operations | ||||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash Flows From Investing Activities | ||||||||
| Purchases of property and equipment | ( | ) | ||||||
| Net cash used in investing activities from continued operations | ( | ) | ||||||
| Net cash used in investing activities from discontinued operations | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash Flows From Financing Activities | ||||||||
| Shareholder contribution to a subsidiary | ||||||||
| Proceeds from issuance of common stock in private placement | ||||||||
| Extinguishment of warranty liability | ||||||||
| Net cash provided by financing activities from continued operations | ||||||||
| Net cash used in financing activities from discontinued operations | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ||||||
| Effect of exchange rate fluctuation on cash and cash equivalents | ( | ) | ( | ) | ||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, ending of period | $ | $ | ||||||
| Analysis of cash and cash equivalents | ||||||||
| Included in cash and cash equivalents per consolidated balance sheets | $ | $ | ||||||
| Included in cash and cash equivalents of discontinued operations | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Continuing operations: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| Discontinued operations: | ||||||||
| Cash paid for income taxes | $ | $ | ( | ) | ||||
| Cash paid for interest | $ | $ | ( | ) | ||||
| Supplemental disclosure of non-cash activities | ||||||||
| Shares issued for officer compensation | $ | ( | ) | $ | ( | ) | ||
| Shares repurchase | ( | ) | ||||||
See notes to consolidated financial statements
F-5
JRSIS HEALTH CARE CORPORATION
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
On
April 12, 2022, Runteng organized and acquired
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
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 has been reclassified and reflected in JRSIS’s consolidated financial statements as a discontinued operation for comparative purposes.
Reverse Stock Split
On
May 1, 2023, the Company’s Board of Directors and the holder of a majority of the voting power in the Company approved a 1-for-10
reverse stock split of the Company’s common stock (the “Reverse Stock Split”) which was implemented on June 29, 2023.
After the Reverse Stock Split, each ten (10) shares of the Corporation’s common stock issued and outstanding shall automatically
be combined into one (
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 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.
F-6
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.
| Nine Months Ended September 30, | ||||||||||
| 2023 | 2022 | |||||||||
| (USD to RMB/ USD to HKD) | (USD to RMB/ USD to HKD) | |||||||||
| Assets and liabilities | ||||||||||
| Revenue and expenses | ||||||||||
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. As of September 30, 2023 and as of December 31,
2022, no customer accounted for more than
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.
F-7
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.
| Transportation instrument | ||
| Office equipment |
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).
F-8
JRSIS HEALTH CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN USD)
NOTE 2. SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and cash equivalents, other receivables, deferred expenses, accounts payable, amount due to related parties, other payable and payroll payable 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 lease liabilities also approximates carrying value as they bear interest at current market rates.
J. Segment and geographic information
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, and is identified on the basis of the internal financial reports that are provided to and regularly reviewed by the Group’s chief operating decision maker in order to allocate resources and assess performance of the segment.
In accordance with ASC (“Accounting Standard Codification”) 280, Segment Reporting, operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. The Group uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Group’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Group’s reportable segments. The Group’s CODM has been identified as the chief executive officer (the “CEO”), who reviews consolidated results when making decisions about allocating resources and assessing performance of the Group.
The
Group has determined that there is only
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. Shares 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
F-9
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
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.
F-10
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
After the Spin-Off, JRSIS did not beneficially own any equity interest in Jiarun and will no longer consolidate Jiarun’s financial results with financial results of JRSS. Commencing on the second quarter of fiscal year 2022, Jiarun’s historical financial results for periods prior to April 1, 2022 was 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.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net Sales | ||||||||||||||||
| Operating costs and expenses | ||||||||||||||||
| Earnings from operations before other income and income taxes | ||||||||||||||||
| Other income(loss) | ( | ) | ||||||||||||||
| Loss from operations before income taxes | ( | ) | ||||||||||||||
| Income tax | ||||||||||||||||
| Net loss from discontinued operations | ( | ) | ||||||||||||||
F-11
JRSIS HEALTH CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN USD)
NOTE 4. PROPERTY AND EQUIPMENT, NET
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| Transportation equipment | $ | $ | ||||||
| Office equipment and others | ||||||||
| Total property and equipment at cost | ||||||||
| Accumulated depreciation | ( |
) | ( |
) | ||||
| Total property and equipment, net | $ | $ | ||||||
The
Company recorded depreciation expense of $
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 $
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 $
| September 30, 2023 | ||||
| (Unaudited) | ||||
| Assets | ||||
| Right-of-use assets | $ | |||
| Total | $ | |||
| Liabilities | ||||
| Lease liabilities- Current | ||||
| Lease liabilities- Non-current | ||||
| Total | $ | |||
| Year ending September 30, | Amount | |||
| 2024 | ||||
| Total | $ | |||
The
company has recorded operating lease expense of $
F-12
JRSIS HEALTH CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN USD)
NOTE 6. REVENUE
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Consultation | $ | $ | ||||||
| Total Revenue | $ | $ | ||||||
The Company’s revenue for the nine months ended September 30, 2023 derived from its provision to a customer of consulting services as well as plans and designs for charging piles for Shanghai Jieshi.
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
| Amounts | ||||
| Loss before income tax | $ | ( | ) | |
| Tax rate at | ( | ) | ||
| Allowance on tax losses | ||||
| 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
F-13
JRSIS HEALTH CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN USD)
NOTE 7. INCOME TAX EXPENSE (Continued)
| Amounts | ||||
| Loss before income tax | $ | |||
| Tax rate at |
||||
| 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
| Amounts | ||||
| Loss before income tax | $ | ( | ) | |
| Tax rate at | ( | ) | ||
| Allowance on tax losses | ||||
| Income tax expense | $ | |||
NOTE 8. RELATED PARTY TRANSACTIONS
The following is the list of the related parties with which the Company had transactions:
Amount due (to)/ from related parties
| Name of related parties | September 30, 2023 | December 31, 2022 | ||||||
| (Unaudited) | ||||||||
| Zhuowei Zhong | $ | ( | ) | $ | ||||
Amounts due to Zhuowei Zhong as at September 30, 2023, the Chairman of the Company, represented the amounts paid by Mr. Zhong for the daily operation of the company, and the amounts due from Zhuowei Zhong as at December 31, 2022 represented excess reimbursement from the company.
F-14
JRSIS HEALTH CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN USD)
NOTE 8. RELATED PARTY TRANSACTIONS (Continued)
Related parties’ transactions
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Stock-based compensation paid to: | ||||||||
| Zhong Zhuowei (#1) | $ | $ | ||||||
(#1)
On
same day, the Company issued
NOTE 9. BASIC AND DILUTED EARNINGS PER SHARE
Basic
earnings per share is computed using the weighted average number of common stock outstanding during the period. Diluted earnings per
share is computed using the weighted average number of common stock and, if dilutive, potential common stock outstanding during the period.
Potential common stock comprises shares issuable upon the exercise of share-based awards, using the treasury stock method.
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Numerator: | ||||||||
| Net loss available to common stockholders | $ | ( | ) | $ | ( | ) | ||
| Net loss from continued operations | ( | ) | ( | ) | ||||
| Net loss from discontinued operations | ( | ) | ||||||
| Denominator: | ||||||||
| Basic weighted average number of shares outstanding* | ||||||||
| Diluted weighted average number of shares outstanding* | ||||||||
| Net income (loss) per share: | ||||||||
| Net income (loss) per share of common stock | ||||||||
| Basic earnings per share* | $ | ( | ) | $ | ( | ) | ||
| Diluted earnings per share* | $ | ( | ) | $ | ( | ) | ||
| Net loss from continuing operations per share of common stock | ||||||||
| Basic earnings per share* | $ | ( | ) | $ | ( | ) | ||
| Diluted earnings per share* | $ | ( | ) | $ | ( | ) | ||
| Net income from discontinuing operations per share of common stock | ||||||||
| Basic earnings per share* | $ | $ | ( | ) | ||||
| Diluted earnings per share* | $ | $ | ( | ) | ||||
| * |
The dilutive earnings per share will not be computed if the effect would be anti-dilutive.
F-15
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 September 30, 2023 and December 31, 2022.
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 September 30, 2023 and December 31, 2022.
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 with Zhong Zhuowei. The agreement contained a covenant
by Zhong Zhuowei to fund the operations of Laidian, which is
On
May 17, 2022, the Company issued a total of
On
April 28, 2022,
On
May 1, 2023, the Company’s Board of Directors and the holder of a majority of the voting power in the Company approved a 1-for-10
reverse stock split of the Company’s common stock (the “Reverse Stock Split”) which was implemented on June 29, 2023.
After the Reverse Stock Split, each ten (
There
were
F-16
JRSIS HEALTH CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN USD)
NOTE 12. GOING CONCERN
As
reflected in the accompanying consolidated financial statements, the Company had a recurring loss of $
To continue as a going concern, the Company is actively pursuing additional funding and strategic partners to enable it to implement its business plan. In addition, the Company is also working to devote more efforts to improve its operation and generate more profits. Besides, the major shareholder will continuously provide financial support to the Company. Management believes that these actions will allow the Company to continue its operations through the next fiscal year.
NOTE 13. SUBSEQUENT EVENTS
On
October 18, 2023 JRSIS entered into an Agreement to Contract (the “Agreement”) with Laidian, Zhuowei Zhong, Yongzhou Jumi
Intelligent Technology Co., Ltd. (“Yongzhou JIT”), Guangzhou Jumi Intelligent Equipment Co., Ltd. (“Guangzhou JIE”),
Linhai Zhu, Yulin Investment (Guangzhou) Partnership L.P. (“Yulin IGP”), Jumi Intelligent Information Technology (Guangzhou)
Partnership L.P. (“Jumi IIP”) and Jumi Group Company, Ltd. (“Jumi GCL”). The Agreement contemplates that Laidian
will enter into a set of agreements with Yongzhou JIT and Guangzhou JIE (the “Management Agreements”) pursuant to which Laidian
will provide to Yongzhou JIT the management services of Laidian’s President, Zhuowei Zhong. In exchange for those services, Yongzhou
JIT will pay to Laidian
The Management Agreements will be executed and JRSIS will issue the common shares to Jumi GCL at a closing after three conditions to closing have been satisfied:
| ● | Yongzhou JIT shall have delivered to JRSIS US-GAAP audited financial statements of Yongzhou JIT for the past two fiscal years and such unaudited interim financial statements as will be required by the Rules of the SEC. | |
| ● | Zhifei Huang and Zhuowen Chen shall have resigned from the JRSIS Board of Directors and Linhai Zhu shall have been appointed to serve on the Board. | |
| ● | The parties shall have agreed that the Management Agreements, when signed, will comply with applicable laws of the Peoplee SEC.the SEC.osing have been satisYongzhou JIT a variable interest entity with respect to Laidian under US-GAAP. |
If the closing does not occur on or before December 31, 2023, the Agreement will terminate.
Other than the above, the Management of the Company has determined that there were no other material subsequent events required to be disclosed or because of which adjustments are needed.
F-17
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement Regarding Forward Looking Statements
The discussion contained in this Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases like “anticipate,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “target,” “expects,” “management believes,” “we believe,” “we intend,” “we may,” “we will,” “we should,” “we seek,” “we plan,” the negative of those terms, and similar words or phrases. We base these forward-looking statements on our expectations, assumptions, estimates and projections about our business and the industry in which we operate as of the date of this Form 10-Q. These forward-looking statements are subject to a number of risks and uncertainties that cannot be predicted, quantified or controlled and that could cause actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. The “Risk Factors” section in our Annual Report on Form 10-K describes factors, among others, that could contribute to or cause these differences. Actual results may vary materially from those anticipated, estimated, projected or expected should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect. Because the factors discussed in the Risk Factors section of our Form 10-K could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement made by us or on our behalf, you should not place undue reliance on any such forward-looking statement. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. Except as required by law, we undertake no obligation to publicly revise our forward-looking statements to reflect events or circumstances that arise after the date of this Form 10-Q.
The following discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of such financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate these estimates, including those related to useful lives of real estate assets, bad debts, impairment, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. There can be no assurance that actual results will not differ from those estimates. The analysis set forth below is provided pursuant to applicable SEC regulations and is not intended to serve as a basis for projections of future events.
Overview
On November 20, 2013, Junsheng Zhang, the senior officer of Jiarun, established JRSIS Health Care Corporation, a Florida corporation (“JRSS” or the “Company”). On February 25, 2013, the officer of Jiarun established JRSIS Health Care Limited (“JHCL”), as a wholly owned subsidiary of the Company, and on September 17, 2012, the officer of Jiarun established Runteng Medical Group Co., Ltd (“Runteng”), as a wholly owned subsidiary of JHCL. Until April 28, 2022 Runteng, a Hong Kong registered Investment Company, held 70% equity interest in Jiarun.
2
On December 20, 2013, the Company acquired 100% of the issued and outstanding capital stock of JHCL, for 12,000,000 shares of its common stock. JHCL, through its wholly owned subsidiary, Runteng Medical Group Co., Ltd, holds majority ownership in Jiarun, a company duly incorporated, organized and validly existing under the laws of China. Until 2022, JRSS relied on Jiarun to conduct 100% of its businesses and operations.
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, in consideration of Mr. Zhong’s financial commitment and commitment to provide management services, the Company agreed to issue 3,913,000 shares of its common stock to Zhong Zhuowei upon the initiation of operations of Laidian.
On April 12, 2022, Runteng has setup and owned 100% of the equity in Laidian to engage in the business of providing charging services to electric vehicles incorporated in Zhongshan City of Guangdong, China.
On April 28, 2022, JRSS completed the spin-off of its subsidiary Jiarun, as JRSS’s subsidiary Runteng transferred its 70% equity interest in Jiarun to Zhang Junsheng (the “Spin-Off”). In exchange for the 70% equity interest in Jiarun, Zhang Junsheng transferred to Runteng 539,200 shares of JRSS’ common stock.
On May 5, 2022, JRSS issued 3,913,000 shares of its common stock to Zhong Zhuowei. Under “agreement on the establishment of Laidian” to serve as a management and set up the Laidian. As Mr. Zhong had previously acquired 800,000 shares in private transactions, he owned 4,713,000 shares (80.7%) of JRSS’s common stock as on May 5, 2022.
On May 17, 2022, the Company issued a total of 600,000 share of common stock for US$60,000 at US$0.01 per share to six non-US shareholders.
On May 1, 2023, the Company’s Board of Directors and the holder of a majority of its voting power approved a 1-for-10 reverse stock split of the Company’s common stock (the “Reverse Stock Split”) which was implemented on June 29, 2023. After the Reverse Stock Split, each ten (10) shares of the Corporation’s common stock issued and outstanding shall automatically be combined into one (1) share of the Corporation’s common stock, par value $0.001 per share, without any further action by the Corporation or the holder thereof (the “Reverse Stock Split”). No fractional shares of common stock shall be issued in connection with the Reverse Stock Split. Rather, fractional shares created as a result of the Reverse Stock Split shall be rounded up to the next largest whole number of shares. For further information regarding this Reverse Stock Split, see “NOTE 11. COMMON STOCK”.
Critical Accounting Policies and Management Estimates
In preparing our financial statements, we are required to formulate accounting policies regarding valuation of our assets and liabilities and to develop estimates of those values. In our preparation of the financial statements for the periods ended September 30, 2023, there were no estimates made which were (a) subject to a high degree of uncertainty and (b) material to our results.
3
Results of Operations for Three and Nine Months Ended September 30, 2023 and 2022
The following table shows key components of the results of operations for the three and nine months ended September 30, 2023 and 2022:
| Three Months Ended September 30, | Change | |||||||||||||||
| 2023 | 2022 | Amount | % | |||||||||||||
| Revenue: | ||||||||||||||||
| Consultation | 13,567 | - | 13,567 | n/a | ||||||||||||
| Total revenue | 13,567 | - | 13,567 | n/a | ||||||||||||
| Operating costs and expenses: | ||||||||||||||||
| Salaries and benefits | 3,411 | 4,861 | (1,450 | ) | (30 | )% | ||||||||||
| Stock-based compensation | 81,822 | 81,821 | 1 | 0 | % | |||||||||||
| Office supplies | 7,621 | 4,927 | 2,694 | 55 | % | |||||||||||
| Right-of-use assets amortization | 3,985 | 4,004 | (19 | ) | 0 | % | ||||||||||
| Lease liabilities interest expense | 109 | 319 | (210 | ) | (66 | )% | ||||||||||
| Professional fee | 33,736 | 34,362 | (626 | ) | (2 | )% | ||||||||||
| Change in fair value of warrant liability | - | - | - | n/a | ||||||||||||
| Depreciation | 2,016 | 2,166 | (150 | ) | (7 | )% | ||||||||||
| Total operating costs and expenses | 132,700 | 132,460 | 240 | 0 | % | |||||||||||
| Loss from operations before other income and income taxes | (119,133 | ) | (132,460 | ) | 13,327 | (10 | )% | |||||||||
| Other income | - | - | - | n/a | ||||||||||||
| Loss from operations before income taxes | (119,133 | ) | (132,460 | ) | 13,327 | (10 | )% | |||||||||
| Income taxes | - | - | - | - | ||||||||||||
| Net loss from continued operations | (119,133 | ) | (132,460 | ) | 13,327 | (10 | )% | |||||||||
| Net loss from discontinued operations | - | - | - | n/a | ||||||||||||
| Net loss | $ | (119,133 | ) | $ | (132,460 | ) | $ | 13,327 | (10 | )% | ||||||
| Comprehensive income (Loss): | ||||||||||||||||
| Foreign currency translation adjustment from continued operations | 874 | 3,741 | (2,867 | ) | (77 | )% | ||||||||||
| Foreign currency translation adjustment from discontinued operations | - | - | - | n/a | ||||||||||||
| Comprehensive loss | $ | (118,259 | ) | $ | (128,719 | ) | $ | 10,460 | (8 | )% | ||||||
4
| Nine Months Ended September 30, | Change | |||||||||||||||
| 2023 | 2022 | $ | % | |||||||||||||
| Revenue: | ||||||||||||||||
| Consultation | 56,884 | - | 56,884 | n/a | ||||||||||||
| Total revenue | 56,884 | - | 56,884 | n/a | ||||||||||||
| Operating costs and expenses: | ||||||||||||||||
| Salaries and benefits | 11,389 | 9,282 | 2,107 | 23 | % | |||||||||||
| Stock-based compensation | 245,465 | 163,643 | 81,822 | 50 | % | |||||||||||
| Office supplies | 18,398 | 34,195 | (15,797 | ) | (46 | )% | ||||||||||
| Right-of-use assets amortization | 12,181 | 9,619 | 2,562 | 27 | % | |||||||||||
| Lease liabilities interest expense | 490 | 816 | (326 | ) | (40 | )% | ||||||||||
| Professional fee | 106,023 | 60,850 | 45,173 | 74 | % | |||||||||||
| Change in fair value of warrant liability | - | (7 | ) | 7 | (100 | )% | ||||||||||
| Depreciation | 6,240 | 3,671 | 2,569 | 70 | % | |||||||||||
| Total operating costs and expenses | 400,186 | 282,069 | 118,117 | 42 | % | |||||||||||
| Loss from operations before other income and income taxes | (343,302 | ) | (282,069 | ) | (61,233 | ) | 22 | % | ||||||||
| Other income | - | - | - | n/a | ||||||||||||
| Loss from operations before income taxes | (343,302 | ) | (282,069 | ) | (61,233 | ) | 22 | % | ||||||||
| Income tax | - | - | - | - | ||||||||||||
| Loss from continued operations | (343,302 | ) | (282,069 | ) | (61,233 | ) | 22 | % | ||||||||
| Net loss from discontinued operations | - | (33,393,670 | ) | 33,393,670 | (100 | )% | ||||||||||
| Net loss | $ | (343,302 | ) | $ | (33,675,739 | ) | $ | 33,332,437 | (99 | )% | ||||||
| Comprehensive income (loss): | ||||||||||||||||
| Foreign currency translation adjustment from continued operations | 5,717 | 21,298 | (15,581 | ) | (73 | )% | ||||||||||
| Foreign currency translation adjustment from discontinued operations | - | 301,922 | (301,922 | ) | (100 | )% | ||||||||||
| Comprehensive loss | $ | (337,585 | ) | $ | (33,352,519 | ) | $ | 33,014,934 | (99 | )% | ||||||
Revenue
In the third quarter of 2023, the Company, through its newly-organized subsidiary, Laidian, continued its business of providing consulting services to enterprises seeking to develop and commercialize EV charging stations in Dongguan City. Operating revenue for the nine months ended September 30, 2023 was the fees for consulting services as well as planning and design of charging stations for Laidian’s customer.
Operating Costs and Expenses
The Company’s continued operations for the nine months ended September 30, 2023 consisted of organizing its subsidiary Laidian and collecting the equipment, facilities and personnel that will be needed for Laidian’s operations. Total operating costs and expenses were $400,186 for the nine months ended September 30, 2023.
5
61% of the costs and expenses for the nine months ended September 30, 2023 were attributable to stock-based compensation. In April 2022, the Company issued 3,913,000 shares of its common stock to Zhong Zhuowei in consideration of his commitment to provide managerial services for the development of the Laidian’s charging station business and to provide such funds to Laidian as would be required to initiate its operations. These shares had a negotiated value of $1,056,510, of which $74,652 was reimbursement for Mr. Zhong’s payment of Laidian’s paid in capital. The remaining $981,858 was capitalized as deferred expenses and will be amortized as stock-based compensation over the three years commencing in April of 2022. For the nine months ended September 30, 2023, the Company record $245,465 stock-based compensation expense by virtue of this amortization.
The other significant operating expense was professional fees of $106,023 for nine months ended September 30, 2023. These fees were primarily accounting and legal fees related to the Company’s U.S. reporting obligations.
Loss from operations and net loss
Loss from continued operations before income taxes was $343,302 for the nine months ended September 30, 2023, attributable to the $245,465 stock-based compensation expenses incurred by issuing 3,913,000 shares of common stock to the Company’s new Chairman, Zhong Zhuowei. The balance of $97,837 were incurred for normal operation expenses.
On April 28, 2022, the Company completed the spin-off of its subsidiary Jiarun, and reclassified the results of Jiarun’s operations as discontinued operations. For the nine months ended September 30, 2022, the Company realized net loss from discontinued operations of $33,393,670, which represented the net loss of Jiarun during that period.
After deducting the provision for income tax, the Company’s net loss for the nine months ended September 30, 2023 and 2022 was $343,302 and $33,675,739 respectively.
Foreign Currency Translation Adjustment.
Our reporting currency is the U.S. dollar. Our local currency, Renminbi (RMB), is our functional currency. Results of operations and cash flows are translated at average exchange rates during the period, and assets and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China at the end of the period. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of stockholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. For the nine months ended September 30, 2023 and 2022, foreign currency translation adjustments of $5,717 and $21,298, respectively, have been reported as other comprehensive income in the consolidated statements of operations and comprehensive income (loss).
Liquidity and Capital Resources
As of September 30, 2023, the Company had $33,387 of cash and cash equivalents, a decrease of $25,229 from our cash and cash equivalents balance (included discontinued operations) at December 31, 2022. The decrease was primarily caused by our net cash used in operating activities, which was $20,180 for the nine months ended September 30, 2023.
Our working capital at September 30, 2023 was $436,182, a decrease of $319,437 from our $755,619 in working capital at December 31, 2022. The decrease was primarily attributable to the amortization of deferred expenses.
6
The primary non-cash component of our working capital at September 30, 2023 was deferred expenses totaling $490,928. This balance was the Company’s grant of 3,913,000 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, the remaining $981,858 was the expense of the Company for the 3 years after April of 2022. For the nine months ended September 30, 2023 the Company record $245,465 stock-based compensation expenses.
Although our current resources and cash flows are adequate to pay our current ongoing obligations, we anticipate that our future liquidity requirements will arise from the need to fund our growth and future capital expenditures. The primary sources of funding for such growth requirements are expected to be additional funds raised from the sale of equity and/or debt financing. However, we can provide no assurances that we will be able to obtain additional financing on terms satisfactory to us.
Cash Flows and Capital Resources
Our cash flows for the nine months ended September 30, 2023 and 2022 are summarized below:
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Net cash (used in) provided by operating activities | $ | (20,180 | ) | $ | 2,999,322 | |||
| Net cash used in investing activities | - | (2,829,408 | ) | |||||
| Net cash provided by financing activities | - | (738,241 | ) | |||||
| Effect of exchange rate fluctuation on cash and cash equivalents | (5,049 | ) | (276,560 | ) | ||||
| Net decrease in cash and cash equivalents | (25,229 | ) | (844,887 | ) | ||||
| Cash and cash equivalents, beginning of period | 58,616 | 855,971 | ||||||
| Cash and cash equivalents, ending of period | $ | 33,387 | $ | 11,084 | ||||
Net Cash (Used in) Provided by Operating Activities
Net cash used in operating activities for the nine months ended September 30, 2023 was $20,180, a decrease of $152,125 from the cash used by continuing operations for the nine months ended September 30, 2022. The Company also recorded $3,171,627 of cash provided by discontinued operations during the nine months ended September 30, 2022, which represented cash flow from the operations of Jiarun Hospital, which was spun off from the Company in April 2022.
Net Cash Used in Investing Activities
Net cash used in investing activities for the nine months ended September 30, 2023 and 2022 were $nil and $2,829,408, respectively. The cash used in investing activities for the nine months ended September 30, 2022 was mainly used for the purchase of property and equipment for discontinued operations.
Net Cash Used in Financing Activities
Net cash used in financing activities for the nine months ended September 30, 2023 and 2022 were $nil and $738,241, respectively. The cash used in financing activities for the nine months ended September 30, 2022 represented the settlement of lease obligations in relation to the spin-off of Jiarun Hospital.
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Although our current resources and cash flows may be adequate to pay our current ongoing obligations, we anticipate that our future liquidity requirements will arise from the need to fund our growth and future capital expenditures. The primary sources of funding for such growth requirements are expected to be additional funds raised from the sale of equity and/or debt financing from all available sources. However, we can provide no assurances that we will be able to obtain additional financing on terms satisfactory to us.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet items reasonably likely to have a material effect on our financial condition.
Recent Accounting Pronouncements
Recent accounting pronouncements issued by the FASB, the AICPA and the SEC did not, or are not believed by management to, have a material effect on the Company’s present or future consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company”, we are not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluations of Disclosure Controls and Procedures
Under the supervision and with the participation of our management team, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of September 30, 2023. Based on this evaluation, Management determined that the following material weakness existed in our internal control over financial reporting
| ● | The relatively small number of employees who are responsible for accounting functions prevents us from segregating duties within our internal control system. The Company may engage more employees when more financial resources are available. | |
| ● | Our internal financial staff lack expertise in identifying and addressing complex accounting issued under U.S. Generally Accepted Accounting Principles. Currently, we are relying on external consultants to assist us complying with the US GAAP financial reporting process. | |
| ● | We are trying to improve our documentation system concerning our existing financial processes, risk assessment and internal controls so as to provide sufficient and adequate records for the preparation and disclosure of financial reporting process. Currently, we are relying on external consultants to assist us complying with the financial reporting process. | |
| ● | We do not presently have an audit committee. The Company will setup an audit committee when more financial resources are available. |
Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s system of disclosure controls and procedures was not effective as of September 30, 2023 for the purposes described in this paragraph.
Changes in Internal Control over Financial Reporting
During the period covered by this report, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
8
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company has no knowledge of existing or pending legal proceedings against the Company, nor is the Company involved as a plaintiff in any proceeding or pending litigation. There are no proceedings in which any of the Company’s directors, officers or any of their respective affiliates, or any beneficial stockholder, is an adverse party or has a material interest adverse to our interest.
ITEM 1A. RISK FACTORS
The Company is a smaller reporting company that is not required to provide this information.
ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) Unregistered sales of equity securities
The Company did not effect any sales of unregistered securities during the three months ended September 30, 2023.
(b) Purchases of equity securities
The Company did not repurchase any of its equity securities that were registered under Section 12 of the Securities Exchange Act during the three months ended September 30, 2023.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
ITEM 5. OTHER INFORMATION
None
9
ITEM 6. EXHIBITS
INDEX TO EXHIBITS
10
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
JRSIS HEALTH CARE CORPORATION. (Registrant)
| Signature | Title | Date | ||
| /s/ Zhifei Huang | Chief Executive Officer | November 15, 2023 | ||
| Zhifei Huang | (Principal Executive Officer) | |||
| /s/ Chen Zhuowen | Chief Financial Officer | November 15, 2023 | ||
| Chen Zhuowen | (Principal Financial and Accounting Officer) |
11
EXHIBIT 31.1
Certification of Principal Executive Officer
Section 302 Certification
| I, | Zhifei Huang, certify that: |
| 1. | I have reviewed this quarterly report on Form 10-Q for JRSIS HEALTH CARE CORPORATION. |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and the internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 15, 2023 | /s/ Zhifei Huang |
| Zhifei Huang, Chief Executive Officer | |
| (Principal Executive Officer) |
EXHIBIT 31.2
Certification of Principal Financial Officer
Section 302 Certification
| I, | Chen Zhuowen, certify that: |
| 1. | I have reviewed this quarterly report on Form 10-Q of JRSIS HEALTH CARE CORPORATION; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and the internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 15, 2023 | /s/ Chen Zhuowen |
| Chen Zhuowen, Chief Financial Officer | |
| (Principal Financial Officer) |
EXHIBIT 32.1
CERTIFICATIONS PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of JRSIS HEALTH CARE CORPORATION. (the “Company”) on Form 10-Q for the quarter ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Zhifei Huang, as Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| By: | /s/ Zhifei Huang | Dated: November 15, 2023 | |
| Zhifei Huang | |||
| Title: | Chief Executive Officer | ||
| (Principal Executive Officer) | |||
This certification is being furnished to the SEC as an exhibit to the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the of the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed copy of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided by the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATIONS PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of JRSIS HEALTH CARE CORPORATION. (the “Company”) on Form 10-Q for the quarter ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Chen Zhuowen, as Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| By: | /s/ Chen Zhuowen | Dated: November 15, 2023 | |
| Chen Zhuowen | |||
| Title: | Chief Financial Officer | ||
| (Principal Financial Officer) | |||
This certification is being furnished to the SEC as an exhibit to the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the of the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed copy of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided by the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.