JRSS 10-Q
JRSIS HEALTH CARE Corp (JRSS)
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 incorporation or organization) | (I.R.S. Employer Identification No.) | |
| ||
| (Address of Principal Executive Offices) (Zip Code) | ||
| (Registrant’s telephone number, including area code) | ||
| Not Applicable | ||
| (Former name, former address and former fiscal year, if changed since last report) | ||
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 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 fi les).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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
As of December 20, 2024, the registrant had
TABLE OF CONTENTS
| Page | ||
| PART I | FINANCIAL INFORMATION | 1 |
| Item 1 | Financial Statements | 1 |
| Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 33 |
| Item 3 | Quantitative and Qualitative Disclosures About Market Risk | 40 |
| Item 4 | Controls and Procedures | 41 |
| PART II | OTHER INFORMATION | 42 |
| Item 1 | Legal Proceedings | 42 |
| Item 1A | Risk Factors | 42 |
| Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 42 |
| Item 3 | Defaults Upon Senior Securities | 42 |
| Item 4 | Mine Safety Disclosures | 42 |
| Item 5 | Other Information. | 42 |
| Item 6 | Exhibits. | 42 |
| Signatures | 43 |
i
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Accounts receivable, net - related parties | ||||||||
| Advances to suppliers | ||||||||
| Amount due from related parties | ||||||||
| Inventories | ||||||||
| Prepayments and other receivables | ||||||||
| Total Current Assets | ||||||||
| NON-CURRENT ASSETS | ||||||||
| Equipment and vehicles, net | ||||||||
| Intangible assets, net | ||||||||
| Right of use assets | ||||||||
| Total Non-Current Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Short-term loans | $ | $ | ||||||
| Long-term loans due within one year | ||||||||
| Accounts payable, trade | ||||||||
| Accounts payable, trade-related parties | ||||||||
| Advances from customers | ||||||||
| Amount due to related parties | ||||||||
| Taxes payable | ||||||||
| Other payables and accrued liabilities | ||||||||
| Operating lease liabilities, current | ||||||||
| Total Current Liabilities | ||||||||
| Long-term loans - noncurrent portion | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| EQUITY | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total JRSIS HEALTH CARE CORPORATION’s equity | ( | ) | ( | ) | ||||
| NONCONTROLLING INTERESTS | ( | ) | ( | ) | ||||
| TOTAL EQUITY | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited consolidated financial statements
1
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| REVENUE | $ | $ | $ | $ | ||||||||||||
| COST OF REVENUE | ||||||||||||||||
| GROSS PROFIT | ||||||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Research and development | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| INCOME (LOSS) FROM OPERATIONS | ( | ) | ( | ) | ||||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Interest income | - | |||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ( | ) | ||||||||||||||
| Total other expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| INCOME (LOSS) BEFORE INCOME TAXES | ( | ) | ( | ) | ( | ) | ||||||||||
| INCOME TAXES EXPENSES (BENEFIT) | ( | ) | ||||||||||||||
| NET INCOME (LOSS) | ( | ) | ( | ) | ( | ) | ||||||||||
| Less: net income (loss) attributable to noncontrolling interest | ( | ) | ( | ) | ( | ) | ||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO JRSIS HEALTH CARE CORPORATION | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| COMPREHENSIVE INCOME (LOSS) | ||||||||||||||||
| NET INCOME (LOSS) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||||||||
| TOTAL COMPREHENSIVE INCOME (LOSS) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Less: comprehensive income (loss) attributable to noncontrolling interest | ( | ) | ( | ) | ( | ) | ||||||||||
| COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO JRSIS HEALTH CARE CORPORATION | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
| EARNINGS (LOSS) PER SHARE | ||||||||||||||||
| Income (loss) per share - basic and diluted | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
The accompanying notes are an integral part of the unaudited consolidated financial statements
2
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
| Accumulated | ||||||||||||||||||||||||||||
| Common Stock | Additional | other | ||||||||||||||||||||||||||
| Number of | Paid-in | Accumulated | comprehensive | Noncontrolling | ||||||||||||||||||||||||
| Shares | Par Value | capital | Deficit | income | interest | Total | ||||||||||||||||||||||
| BALANCE, January 1, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Issuance of common shares to acquired accounting acquiree | ( | ) | ||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Foreign currency translation adjustments | - | |||||||||||||||||||||||||||
| BALANCE, December 31, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Issuance of common shares | ||||||||||||||||||||||||||||
| Capital increasing from VIE’s legal owners | - | |||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Foreign currency translation adjustments | - | ( | ) | |||||||||||||||||||||||||
| BALANCE, September 30, 2024 (Unaudited) | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||
The accompanying notes are an integral part of the unaudited consolidated financial statements
3
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Right-of-use assets amortization | ||||||||
| Lease liabilities interest expense | ||||||||
| Inventories impairment (return) | ( | ) | ( | ) | ||||
| Loss from disposal of equipment | ||||||||
| Deferred income tax | ||||||||
| Change in operating assets and liabilities | ||||||||
| Accounts receivable | ||||||||
| Accounts receivable - related parties | ( | ) | ||||||
| Advances to suppliers | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Prepayments and other receivables | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accounts payable - related parties | ( | ) | ||||||
| Advances from customers | ( | ) | ( | ) | ||||
| Taxes payable | ( | ) | ||||||
| Lease liabilities | ( | ) | ( | ) | ||||
| Other payables and accrued liabilities | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| Purchase of intangible assets | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Cash from issuance of common shares | ||||||||
| Proceeds from loans | ||||||||
| Repayment of short-term loans | ( | ) | ( | ) | ||||
| Contribution from VIE’s legal owners | ||||||||
| Amount financed from (to) related parties | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| EFFECT OF EXCHANGE RATE ON CASH | ( | ) | ( | ) | ||||
| DECREASE IN CASH | ( | ) | ( | ) | ||||
| CASH, beginning of period | ||||||||
| CASH, end of period | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Cash paid for income tax | $ | $ | ||||||
| Cash paid for interest expense, net of capitalized interest | $ | $ | ||||||
| NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES | ||||||||
| Right-of-use assets decreased in amendment current operating lease liabilities | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited consolidated financial statements
4
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| 1. | ORGANIZATION AND BUSINESS BACKGROUND |
JRSIS Health Care Corporation (the “Company”
or “JRSIS”) was incorporated on November 20, 2013 under the laws of the State of Florida. In December 2013 JRSIS acquired
Until March 31, 2022, Runteng owned
On April 12, 2022, Runteng organized and owned
On November 30, 2023, the Company through Laidian,
a wholly-owned subsidiary of JRSIS, completed an acquisition transaction by entering into and executing four agreements with Yongzhou
Jumi Intelligent Technology Co., Ltd. (“Yongzhou JIT”) and Guangzhou Jumi Intelligent Equipment Co., Ltd. (“Guangzhou
JIE”) (the “Management Agreements”). After the execution of these Management Agreements, the Company obtained
Each of the Management Agreements is summarized as below:
Exclusive Business Cooperation Agreement.
Under the Exclusive Business Consulting Agreement
between Laidian and Yongzhou JIT, Laidian has the exclusive right to provide Yongzhou JIT marketing, management, consulting and other
services related to its business operations. To fulfill its obligations, Laidian will provide to Yongzhou JIT the management and marketing
services of Zhuowei Zhong, who is the Chairman of Laidian. In compensation for the services provided by Laidian, Yongzhou JIT will pay
Laidian a quarterly fee equal to
Equity Interest Pledge Agreement.
Guangzhou JIE, which owns all the registered
equity in Yongzhou JIT, has entered into an Equity Interest Pledge Agreement with Laidian. Pursuant to this agreement, Guangzhou JIE
pledged
5
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Exclusive Option Agreement.
Under the Exclusive Option Agreement among Laidian, Yongzhou JIT and Guangzhou JIE, Guangzhou JIE irrevocably granted Laidian or its designated person(s) an exclusive option to purchase, when and to the extent permitted under PRC law, all or part of its equity interest in Yongzhou JIT. The purchase price for the equity interest in Yongzhou JIT shall be determined through consultation according to the appraisal value approved by the relevant authorities and shall be the minimum amount permissible under PRC law. The Exclusive Option Agreement will be valid until all of the equity interest in Yongzhou JIT has been transferred to Laidian. The Exclusive Option Agreement provides, among other things, without Laidian’s prior written consent:
| ● | Guangzhou JIE may not transfer, encumber, grant a security interest in, or otherwise dispose of any equity interest in Yongzhou JIT, except as provided in the Exclusive Option Agreement; |
| ● | Yongzhou JIT may not (i) sell, transfer, grant security interest in or otherwise dispose of any assets, business, revenue or interest, (ii) enter into any material contract except for those incurred in the ordinary course of business, or (iii) incur any liabilities (except for those incurred in the ordinary course of business) or extend loans or credit facilities to any third party; |
| ● | Yongzhou JIT may not declare or pay any dividends and its shareholder must remit in full to Laidian any funds received from Yongzhou JIT except those funds payable to the holder of the |
| ● | Yongzhou JIT may not merge with or acquire any third parties, or make investment in any third parties. |
Power of Attorney.
Under the Power of Attorney, Guangzhou JIE grants to Laidian the authority to exercise all the powers given to Guangzhou JIE as a shareholder of Yongzhou JIT.
Yongzhou JIT was organized in 2018 in Yongzhou City in the Hunan Province of the PRC and is legally a wholly owned subsidiary of Guangzhou JIE. Yongzhou JIT is engaged in the business of developing medical and smart technology and producing equipment based on its technology. Yongzhou JIT is best known for developing the first smart medicine vending machine.
In consideration of the agreements by the owners
of Yongzhou JIT other than the holder of the
For financial reporting purposes, the execution of the Management Agreements represents a “Reverse Acquisition” rather than a business combination and Yongzhou JIT is deemed to be the accounting acquirer in the transaction. The execution of the Management Agreements is being accounted for as a reverse acquisition and recapitalization. Yongzhou JIT is the acquirer for financial reporting purposes and JRSIS is the acquired company. Consequently, the assets and liabilities and the operations that will be reflected in the historical financial statements for periods prior to the execution of the Management Agreements will be those of Yongzhou JIT and will be recorded at the carrying amount basis of Yongzhou JIT, and the consolidated financial statements after execution of the Management Agreements will include the assets and liabilities of the Company and Yongzhou JIT, and the historical operations of Yongzhou JIT and operations of the Combined Company from the date of execution of the Management Agreements. No gain and loss recognized as a reverse acquisition and recapitalization.
6
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| Name | Place of incorporation and kind of legal entity | Principal activities and place of operation | Effective interest held | |||||
| JRSIS Health Care Corporation. (“JRSIS”) | ||||||||
| JRSIS Health Care Limited. (“JRSIS-BVI”) | ||||||||
| Runteng Medical Group Company Limited. (“Runteng” or “RT”) | ||||||||
| Laidian Technology (Zhongshan) Co., Ltd. (“Laidian”) | ||||||||
| Yongzhou Jumi Intelligent Technology Co., Ltd. (“Yongzhou JIT” or “YZ JIT”) | ||||||||
| 2. | GOING CONCERN UNCERTAINTIES |
The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
As reflected in the accompanying unaudited consolidated
financial statements, for the nine months ended September 30, 2024 and 2023 the Company incurred a significant net loss of $
The continuation of the Company as a going concern through the next twelve months is dependent upon (1) the continued financial support from its external financing, including bank loans and issuance of its shares to potential shareholders, and (2) further implement management’s business plan to extend its operations and generate sufficient revenue and cash flows to meet its obligations. Management believes that it can obtain additional bank loans and the issuance of common shares of the Company is available if the Company decides to do so and believes that the Company’s operation can generate enough revenue and cash to meet its obligation in the normal course of business in future because the Company’s operations are on the upward trend. While the Company believes in its ability to raise additional funds and in the viability of its strategy to increase sales volume and cash flows, there can be neither any assurances to that effect, nor any assurance that the Company will be successful in securing sufficient funds to sustain the operations.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties. The Company is working to devote more efforts to improve its operation and generate more profits and cash flow. Management believes that the actions presently being taken to obtain additional funding and implement its strategic plan provide the opportunity for the Company to continue as a going concern.
7
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
| ● | Basis of Presentation and Consolidation |
These accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). These unaudited consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
The unaudited interim consolidated financial information as of September 30, 2024 and for the three and nine months ended September 30, 2024 and 2023 have been prepared, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures, which are normally included in annual consolidated financial statements prepared in accordance with US GAAP, have been omitted pursuant to those rules and regulations. The unaudited interim consolidated financial information should be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company’s Form 10-K for the fiscal year ended December 31, 2023 previously filed with the SEC on May 26, 2024.
In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statements of the Company’s unaudited consolidated financial position as of September 30, 2024 and its unaudited consolidated results of operations for the three and nine months ended September 30, 2024 and 2023, and its unaudited consolidated cash flows for the nine months ended September 30, 2024 and 2023, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the fiscal year or any future periods.
| ● | Reclassification |
Certain prior period balances were reclassified to conform to the current period presentation, mainly with consideration of reflecting the acquisition transaction by entering into and executing four Management Agreements with Yongzhou JIT and Guangzhou JIE. None of these reclassifications had an impact on reported financial position or cash flows for any of the periods presented.
| ● | Use of Estimates |
The preparation of the unaudited consolidated financial statements in conformity with US GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the unaudited consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods.
The Company bases its estimates and judgments on historical experience and on various other assumptions and information that are believed to be reasonable under the circumstances. Estimates and assumptions of future events and their effects cannot be perceived with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.
Significant estimates and assumptions made by management include, among others, useful lives and impairment of long-lived assets, collectability of accounts receivable, discount rate of leases and its impairment assessment, allowance for inventory, revenue recognition, product warranty liabilities, deferred tax and uncertain tax positions. While the Company believes that the estimates and assumptions used in the preparation of the consolidated financial statements are appropriate, actual results could differ from those estimates.
| ● | Fair Value Measurement |
The Company follows the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements” (“ASC 820”), to address fair value measurement with respect to financial assets and liabilities. ASC 820 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 it considers assumptions that market participants would use when pricing the asset or liability.
8
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
ASC 820 also 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. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs are:
| Level 1: | Observable inputs that reflect unadjusted quoted prices for identical instruments traded in active markets; |
| Level 2: | Include other observable inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, other observable inputs other than quoted price and market corroborated inputs; and |
| Level 3: | Unobservable inputs that are supported by little or no market activity. |
ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.
The Company’s financial instruments include cash, accounts receivable, advance to suppliers, prepaid expenses and other current assets, bank loans, accounts payable, amount due from/to related parties, and accrued expenses and other current liabilities. The carrying values of these financial instruments approximate their fair values due to their short-term maturities. The carrying amount of the long-term borrowing approximates its fair values since it bears an interest rate which approximates market interest rate.
| ● | Foreign Currencies Translation |
The reporting currency of the Company is the United States Dollar (“US$”). The Company’s subsidiaries in the PRC maintain their books and records in their local currency, the Renminbi Yuan (“RMB”), which is the functional currency as being the primary currency of the economic environment in which these entities operate.
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statement of operations.
In general, for consolidation and reporting purposes, assets and liabilities of its subsidiaries whose functional currency is not the US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date, equity accounts are translated at its historical rates; revenue and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.
9
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| September 30, 2024 | September 30, 2023 | |||||||
| Period-end RMB:US$1 exchange rate | ||||||||
| For the nine months ended RMB:US$1 average exchange rate | ||||||||
| December 31, 2023 | ||||
| Period-end RMB:US$1 exchange rate | ||||
| For the year ended RMB:US$1 average exchange rate | ||||
| ● | Related Parties |
The Company adopted ASC 850, Related Party Disclosures,
for the identification of related parties and disclosure of related party transactions. Related parties include: (a) Affiliates of the
entity, who directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with an
entity; (b) Entities for which investments in their equity securities would be required to be accounted for by the equity method by the
investing entity; (c) Trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the
trusteeship of management; (d) Principal owners, who record or known beneficial owners of more than
| ● | Segment Reporting |
ASC Topic 280, “Segment Reporting”
establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization
structure as well as information about geographical areas, business segments and major customers in financial statements. The Company’s
chief operating decision maker has been identified as the CEO who reviews consolidated results of the Company when making decisions about
allocating resources and assessing performance. The Company is domiciled in the United States while its main business operation is within
the PRC and it earns a majority of its revenue from external customers attributed from the PRC. As a whole and hence, the Company has
only
| ● | Cash |
Cash consists of cash on hand and deposits in financial institutions which is readily available in checking and saving accounts. The Company maintains cash with various financial institutions in the PRC and are uninsured. The Company has not experienced any losses in bank account and believes it is not exposed to any risk on its cash held in bank accounts.
| ● | Accounts Receivable |
Accounts receivable arise from revenue from contracts with customers and are reported at their original amount less an allowance for expected credit losses. Accounts receivable are initially recorded at the invoiced amount, and are payable at various times based on contractual payment terms, generally 30 to 90 days from delivery. Credit is granted based on management’s evaluation of a customer’s financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. At the end of each period, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for any estimated credit losses resulting from the inability of its customers to make required payments. Account balances are charged off against the allowance for credit losses after all means of collection have been exhausted and the potential for recovery is considered remote.
10
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| ● | Advances To Suppliers |
Advances to suppliers consist of prepayments
to our vendors, such as outsources services and marketing promotion parties. We typically receive products from vendors within three
to nine months after making prepayments. We continuously monitor delivery from, and payments to, our vendors while maintaining a provision
for estimated credit losses based upon historical experience and any specific supplier issues, such as discontinuing of inventory supply,
that have been identified. If we have difficulty receiving products from a vendor, we take the following steps: cease purchasing products
from such vendor, ask for return of our prepayment promptly, and if necessary, take legal action. If all of these steps are unsuccessful,
management then determines whether the prepayments should be reserved or written off. As of September 30, 2024 and December 31, 2023,
the balance of allowance for doubtful accounts was $
| ● | Inventories |
Inventories consist of raw material and parts, work-in-progressing, and finished goods of the Company’s product, such as medicine or goods vending machine, health micro-consulting room. Inventories are stated at the lower of cost and net realizable value. Cost is determined using weighted average method. Net realizable value equal to the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company carries out physical inventory counts from time to time and at least once within a fiscal year. The Company reviews historical sales activity quarterly to determine excessive, slow-moving items, and items that damage, physical deterioration, obsolescence to determine if evidence exists that the net realizable value of inventory is lower than its cost, if any, the difference shall be recognized as a loss in earnings in the period in which it occurs.
| ● | Equipment and Vehicles |
Equipment and vehicles are stated at cost less
accumulated depreciation and impairment, if any.
| Items | Expected useful lives | Residual value | ||||
| Production line and equipment | | % | ||||
| Office equipment | % | |||||
| Vehicle | % | |||||
Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.
| ● | Intangible Assets |
Intangible assets consist primarily of patents,
including utility model patents, software copyright and utility software purchased from outside parties. Intangible assets are stated
at cost less accumulated amortization and impairment, if any.
| Expected useful lives | ||
| Utility model | ||
| Copyright | ||
| Utility software |
11
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| ● | Impairment of Long-lived Assets |
In accordance with the provisions of ASC Topic 360, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as property, plant and equipment held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.
| ● | Leases |
The Company stated lease transactions in accordance with the FASB ASC Topic 842 Leases.
Identify a lease
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange of a consideration. To assess whether a contract is or contains a lease, the Company assesses whether the contract involves the use of an identified asset, whether it has the right to obtain substantially all the economic benefits from the use of the asset and whether it has the right to control the use of the asset.
Lease classification
Lease classification for leases under which the Company is a lessor is evaluated at lease commencement and leases not classified as sales-type leases or direct financing leases are classified as operating leases. Leases qualify as sales-type leases if the contract includes either transfer of ownership clauses, certain purchase options, a lease term representing a major part of the economic life of the asset, or the present value of the lease payments and residual guarantees provided by the lessee exceeds substantially all of the fair value of the asset. Additionally, leasing an asset so specialized that it is not deemed to have any value to the Company at the end of the lease term may also result in classification as a sales-type lease. Leases qualify as direct financing leases when the present value of the lease payments and residual value guarantees provided by the lessee and unrelated third parties exceeds substantially all of the fair value of the asset and collection of the payments is probable. There are not leases under which the Company is a lessor during the periods of the accompanying financial statements.
Lease classification for leases under which the Company is a lessee is evaluated at lease commencement as finance or operating leases. Leases qualify as finance leases if the lease transfers ownership of the asset at the end of the lease term, the lease grants an option to purchase the asset that the Company is reasonably certain to exercise, the lease term is for a major part of the remaining economic life of the asset, or the present value of the lease payments exceeds substantially all of the fair value of the asset. Leases that do not qualify as finance leases are deemed to be operating leases.
In accordance with the FASB ASC Topic 842, the Company recognizes a right-of-use asset and a lease liability at the commencement date of the lease and recognizes in profit or loss the lease cost or expense during the lease term. As an accounting policy, the Company elects not to recognize a right-of-use asset and a lease liability to a short-term lease which with a term of 12 months or less, instead it recognizes the lease payments in profit or loss on a straight-line basis over the lease term. Variable lease payments are recorded in earnings in the period in which the obligation for those payments is incurred. The Company generally uses an incremental borrowing rate as discount rate to measure its lease liabilities, as the rate implicit in the lease is typically not readily determinable. Certain lease agreements include renewal options that are under the Company’s control. The Company includes optional renewal periods in the lease term only when it is reasonably certain that the Company will exercise its option.
Right-of-use assets
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and less any lease incentive received.
12
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Lease liabilities
Lease liability is initially measured at the present value of the outstanding lease payments at the commencement date, discounted using the Company’s incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed lease payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee and any exercise price under a purchase option that the Company is reasonably certain to exercise. Lease liability is measured at amortized cost using the effective interest rate method. It is re-measured when there is a change in future lease payments, if there is a change in the estimate of the amount expected to be payable under a residual value guarantee, or if there is any change in the Company assessment of option purchases, contract extensions or termination options.
| ● | Revenue Recognition |
The Company adopted ASC Topic 606, Revenue from Contract with Customers (“ASC 606”) for all periods presented. Under ASC 606, revenue is recognized when control of the promised goods and services is transferred to the Company’s customers and the performance obligation was satisfied, in an amount that reflects the consideration that the Company expects to be entitled to in exchange for those goods and services transferred. The Company determines revenue recognition through the following steps:
| ● | Identify the contract with a customer; | |
| ● | Identify the performance obligations in the contract; | |
| ● | Determine the transaction price; | |
| ● | Allocate the transaction price to the performance obligations in the contract; and | |
| ● | Recognize revenue when (or as) the entity satisfies a performance obligation. |
The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation is recognized as revenue when that performance obligation is satisfied by the control of the promised goods and services is transferred to the customers, which at a point in time or over time as appropriate.
The Company’s revenue consists primarily of sales of machines plus design and development of software systems for customers based on the Company’s intelligent and communication technology, system installation and maintenances services.
The Company determined for each performance obligation identified at contract inception whether it satisfies the performance obligation over time or satisfies the performance obligation at a point in time. If an entity does not satisfy a performance obligation over time, the performance obligation is satisfied at a point in time.
The Company recognizes revenue from sales of machines at the point in time when the Company has transferred physical possession of the goods to the customer and the customer has accepted the goods, therefore, indicating as control of the goods has been transferred to the customer.
The Company determined each performance obligation identified from a contract with a customer for design and development of software systems and contracts for system installment and maintenance at the inception of each contract whether it satisfied over time or at point in time. During the three and nine months ended September 30, 2024 and 2023, all the performance obligation identified from the contracts were satisfied at point in time and its related revenue were recognized at point in time.
13
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| ● | Contract Balances |
When a contract with customers has been performed, the Company presents the contract in the consolidated balance sheet as a contract asset or a contract liability, depending on the relationship between the Company’s performance and the customer’s payment.
Contract assets or accounts receivable
A contract asset is the Company’s right to consideration in exchange for goods or services that the Company has transferred to a customer. A receivable is recorded when the Company has an unconditional right to consideration. A right to consideration is unconditional if only the passage of time is required before payment of that consideration is due. The Company does not have material contract assets.
Contract liabilities
The contract liability represents the billings or cash received for goods or services in advance of revenue recognition which is recognized as revenue when all of the Company’s revenue recognition criteria are met. The Company presents contract liabilities in its financial statements as advances from customers.
| ● | Cost of Revenue |
Cost of revenue consists primarily of material costs, direct labor, depreciation, and manufacturing overhead, which are directly attributable to the manufacture of products and other costs directly related to rendering of services or projects performance.
| ● | Advertising Expenses |
The Company expenses advertising costs as incurred
and includes it in selling expenses. The Company reported $
| ● | Research and Development Expenses |
Research and development expenses consist primarily
of salary and welfare for research and development department personnel and materials used for research. The Company reported $
| ● | Comprehensive Income |
ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statement of stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
| ● | Income Taxes |
Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
14
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
For the three and nine months ended September 30, 2024 and 2023, the Company did not have any interest and penalties associated with tax positions. As of September 30, 2024 and December 31, 2023, the Company did not have any significant unrecognized uncertain tax positions.
The Company conducts majority of its businesses in the PRC and is subject to tax in this jurisdiction. As a result of its business activities, the Company files tax returns that are subject to examination by a foreign tax authority.
| ● | Value Added Tax |
Sales revenue represents the invoiced value of
goods, net of Value-Added Tax (“VAT”). All of the Company’s goods or services are sold in the PRC and are subject to
a VAT on the gross sales price. The VAT rates range from
| ● | Income (Loss) Per Share |
The Company calculates income (loss) per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income (loss) per share is computed by dividing the net income (loss) attributable to the holders of common shares by the weighted-average number of common shares outstanding during the period. Diluted income (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.
| ● | Recent Accounting Pronouncements |
In November 2023, the Financial Accounting Standards Board (“FASB”) issued a new standard to improve reportable segment disclosures. The guidance expands the disclosures required for reportable segments in our annual and interim consolidated financial statements, primarily through enhanced disclosures about significant segment expenses. The standard will be effective for us beginning with our annual reporting for fiscal year 2025 and interim periods thereafter, with early adoption permitted. We are currently evaluating the impact of this standard on our segment disclosures.
In December 2023, the FASB issued a new standard to improve income tax disclosures. The guidance requires disclosure of disaggregated income taxes paid, prescribes standardized categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. The standard will be effective for us beginning with our annual reporting for fiscal year 2026, with early adoption permitted. We are currently evaluating the impact of this standard on our income tax disclosures.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated balance sheets, consolidated statements of income and consolidated statements of cashflows.
15
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| 4. | VARIABLE INTEREST ENTITY AND OTHER CONSOLIDATION MATTERS |
On November 30, 2023, the Company and Yongzhou JIT closed a reverse acquisition as Laidian, an indirectly wholly-owned subsidiary of JRSIS, entered into four agreements with Yongzhou JIT and Guangzhou JIE (the “Management Agreements”). The key terms of these Management Agreements are summarized in Note 1 - Organization and Business Background of previous notes to these financial statements.
In accordance with FASB ASC 810, Variable Interest Entity (“VIE”) is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. Laidian is deemed to have a controlling financial interest and be the primary beneficiary of Yongzhou JIT under the term of Management Agreements, because it has both of the following characteristics:
| 1. | power to direct activities of Yongzhou JIT that most significantly impact its economic performance, and |
| 2. | obligation to absorb losses of the entity that could potentially be significant to Yongzhou JIT or right to receive benefits from the entity that could potentially be significant to Yongzhou JIT. |
In addition, as all of these Management Agreements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC, they would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could further limit the Company’s ability to enforce these Management Agreements. Furthermore, these contracts may not be enforceable in China if PRC government authorities or courts take a view that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event the Company is unable to enforce these Management Agreements, it may not be able to exert effective control over Yongzhou JIT and its ability to conduct its business may be materially and adversely affected.
All of the Company’s main current operations are conducted through Yongzhou JIT. Current regulations in China permit Yongzhou JIT to pay dividends to the Company only out of its accumulated distributable profits, if any, determined in accordance with their articles of association and PRC accounting standards and regulations. The ability of Yongzhou JIT to make dividends and other payments to the Company may be restricted by factors including changes in applicable foreign exchange and other laws and regulations.
In the opinion of management, (i) the corporate structure of the Company is in compliance with existing PRC laws and regulations; (ii) the Management Agreements are valid and binding, and do not result in any violation of PRC laws or regulations currently in effect; and (iii) the business operations of Laidian and the VIE are in compliance with existing PRC laws and regulations in all material respects.
However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to the foregoing opinion of its management. If the current corporate structure of the Company or the Management Agreements is found to be in violation of any existing or future PRC laws and regulations, the Company may be required to restructure its corporate structure and operations in the PRC to comply with changing and new PRC laws and regulations. In the opinion of management, the likelihood of loss in respect of the Company’s current corporate structure or the Management Agreements is remote based on current facts and circumstances.
16
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| September 30, 2024 | December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Accounts receivable, net - related parties | ||||||||
| Advances to suppliers | ||||||||
| Amount due from related parties | ||||||||
| Inventories | ||||||||
| Prepayments and other receivables | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Equipment and vehicle, net | ||||||||
| Intangible assets, net | ||||||||
| Right of use assets | ||||||||
| Total assets from VIE | ||||||||
| Current liabilities: | ||||||||
| Short-term loans | ||||||||
| Long-term loans due within one year | ||||||||
| Accounts payable, trade | ||||||||
| Accounts payable, trade - related parties | ||||||||
| Advances from customers | ||||||||
| Amount due to related parties | ||||||||
| Taxes payable | ||||||||
| Other payables and accrued liabilities | ||||||||
| Operating lease liabilities, current | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Long-term loans - noncurrent portion | ||||||||
| Operating lease liabilities, non-current | ||||||||
| Total liabilities | ||||||||
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Other income (expenses) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Income taxes (benefit) | ( | ) | ||||||||||||||
| Net income (loss) from VIE operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Less: net income (loss) attributable to noncontrolling interest | ( | ) | ( | ) | ( | ) | ||||||||||
| Net income (loss) attributable to parent company | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
17
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2024, the VIE had amounts
due to non-VIE subsidiaries within the Company of approximately $
For the nine months ended September 30, 2024,
JRSIS issued
Under the Management Agreements, the Company has the power to direct activities of the VIE and can have assets transferred out of the VIE under its control. Therefore, the Company considers that there is no asset in the VIE that can be used only to settle obligations of the VIE, except for registered capital and PRC statutory reserves. As the VIE is incorporated as a limited liability company under the Company Law of the PRC, creditors of the VIE do not have recourse to the general credit of the Company for any of the liabilities of the VIE.
The Company and its directly and indirectly wholly owned subsidiaries, JRSIS-BVI, Runteng and Laidian, do not have any substantial assets or liabilities or results of operations. They were incorporated for the purpose of providing a corporation structure for Yongzhou JIT to be listed in the market and to raise additional capital for its development.
| 5. | ACCOUNTS RECEIVABLE |
| September 30, 2024 | December 31, 2023 | |||||||
| Accounts receivable, cost | $ | $ | ||||||
| Less: allowance for credit loss | ||||||||
| Accounts receivable, net | $ | $ | ||||||
The Company did not record any allowance for credit loss of accounts receivable for the three and nine months ended September 30, 2024 and 2023.
| 6. | INVENTORIES |
| September 30, 2024 | December 31, 2023 | |||||||
| Raw materials and parts | $ | $ | ||||||
| Work-in-progress | ||||||||
| Finished goods | ||||||||
| Subtotal | ||||||||
| Less: impairment allowance | ( | ) | ( | ) | ||||
| Inventories, net of allowance for impairment | $ | $ | ||||||
18
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The Company did not record any allowance for
impairment of inventories for the three and nine months ended September 30, 2024 and 2023, respectively. There were $
| 7. | PREPAYMENTS AND OTHER RECEIVABLES |
Prepayments and other receivables present the
amount the Company prepaid as deposits on leases and utilities, security deposits of certain contracts, advances to employees for ordinary
business purpose for the company which might reimburse or return from the employee, VAT deductible and advances for employee’s social
security payments such as and so on.
| September 30, 2024 | December 31, 2023 | |||||||
| Deposits | $ | $ | ||||||
| Advances to personnel | ||||||||
| VAT deductible | ||||||||
| Other receivables | ||||||||
| Subtotal | ||||||||
| Less: allowance for doubtful accounts | ||||||||
| Prepayments and other receivables, net | $ | $ | ||||||
Management evaluated the recoverable value of these balances periodically according to the Company’s credit policy and allowance for credit loss, if any. For the three and nine months ended September 30, 2024 and 2023, the Company did not report any allowance for credit loss of prepayment and other receivables.
| 8. | EQUIPMENT AND VEHICLES |
| September 30, 2024 | December 31, 2023 | |||||||
| Production line and equipment | $ | $ | ||||||
| Office equipment and furniture | ||||||||
| Transportation instrument | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Equipment and vehicles, net | $ | $ | ||||||
The Company reported depreciation expense on
its equipment and vehicles in the amount of $
No impairment loss was recognized during the three and nine months ended September 30, 2024 and 2023.
19
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| 9. | INTANGIBLE ASSETS |
| September 30, 2024 | December 31, 2023 | |||||||
| Utility model | $ | $ | ||||||
| Copyright | ||||||||
| Financial application software | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
The Company recorded amortization expense on
these intangible assets for the three months ended September 30, 2024 and 2023 totaling $
| Year ending September 30: | ||||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total: | $ | |||
| 10. | LEASES |
The following consisted of leases under which the Company is a lessee.
Operating Lease
In October 2022, the Company entered in a lease
contract to lease five dormitory rooms for use as dormitory of staffs (“2022 Dormitory Lease”). According to the lease contract,
the lease term is about 24 months duration from October 2022 to September 2024; the lease payments are $
Short-term Lease
Generally, the Company enters into lease contracts to rent a plant area for use of its product manufacturing, laboratory for research and development and production office (“Plant Leases”) in May each year. Plant leases were renewed every year upon re-negotiation of the lease term with the lessor. Each Plant Lease has a lease term of 12 months but with varying plant sizes and unit rental fees, determined in the circumstances. The Company can determine whether it will continue to lease the plant from the lessor and the lease terms if it continue the lease at the commencement date of each Plant lease. Each Plant Lease is treated as a separate lease agreement. The Company elected not to recognize a right-of-use asset and lease liability requirement to these Plants Leases, because it has a lease term of 12 months or less. The Company recognized the lease payments in profit or loss on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.
20
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| September 30, 2024 | December 31, 2023 | |||||||
| Assets | ||||||||
| Right-of-use assets | $ | $ | ||||||
| Total | $ | $ | ||||||
| Liabilities | ||||||||
| Finance lease liabilities-current | $ | $ | ||||||
| Operating lease liabilities-current | ||||||||
| Finance lease liabilities-non-current | ||||||||
| Operating lease liabilities-non-current | ||||||||
| Total of leases liabilities | $ | $ | ||||||
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Lease Cost: | ||||||||||||||||
| Finance lease cost | ||||||||||||||||
| Amortization of right-of-use assets | $ | $ | $ | $ | ||||||||||||
| Interest on lease liabilities | ||||||||||||||||
| Operating lease cost | ||||||||||||||||
| Short-term lease cost | ||||||||||||||||
| Variable lease cost | ||||||||||||||||
| Sublease income | ||||||||||||||||
| Total lease cost | $ | $ | $ | $ | ||||||||||||
| Other information | ||||||||||||||||
| (Gain) and losses on sale and lease back transactions, net | $ | $ | $ | $ | ||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||||||||||||||
| Operating cash flows from finance leases | $ | $ | $ | $ | ||||||||||||
| Operating cash flows from operating leases | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Financing cash flow from finance leases | $ | $ | $ | $ | ||||||||||||
| Right-of-use assets obtained in exchange for new finance lease liabilities | $ | $ | $ | $ | ||||||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | $ | $ | $ | ||||||||||||
| Weighted-average remaining lease term – finance leases | ||||||||||||||||
| Weighted-average remaining lease term – operating leases | ||||||||||||||||
| Weighted-average discount rate – finance leases | ||||||||||||||||
| Weighted-average discount rate – operating leases | % | % | % | % | ||||||||||||
21
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total of undiscounted cash flows | ||||
| Less interest accrued | ||||
| Operating lease liabilities | $ |
| 11. | REVENUE |
The Company’s revenue derived from two sources: 1) sales of smart terminal products, such as unmanned medicine vending machine, that the Company self-manufactured and assembled in its plant, and 2) services rendered, such as installation and debugging of new equipment, maintenance of terminal systems of smart equipment, designing and development of application systems customized to its customers. Goods and services that the Company transferred deriving its revenue are all based on the Company’s technology and manufacturing capacity.
The Company derived its revenue from both third-party customers and related party customers. During the periods presented in the financial statements, the Company derived its revenue from its related parties mainly with Guangzhou JIE, Guangzhou JIT, Youzhou Jingmi Health Technology Co., Ltd. and Yaolian (Guangzhou) Wulinwang Co., Ltd. (see Note 12 for relationship of these related parties). Generally related parties purchase machines from Yongzhou JIT and resell them to their customers. They also have Yongzhou JIT provide instalment and maintenance service for their customers from time to time and pay case by case under a negotiated range of rates charged to Yongzhou JIT. End users of the Company’s goods and services mainly include medicine service organization, business entities and local government.
During the three and nine months ended September 30, 2024 and 2023, all customers of the Company were within the PRC and all revenue derived within the PRC.
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue: | ||||||||||||||||
| Goods sold directly to third parties | $ | $ | $ | $ | ||||||||||||
| Goods sold to related parties | ||||||||||||||||
| Total revenue from goods sold | ||||||||||||||||
| Service rendered directly to third parties | ||||||||||||||||
| Service rendered to related parties | ||||||||||||||||
| Total revenue from service rendered | ||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenue: | ||||||||||||||||
| Goods sold directly to third parties | $ | $ | $ | $ | ||||||||||||
| Goods sold to related parties | ||||||||||||||||
| Total cost of revenue from goods sold | ||||||||||||||||
| Service rendered directly to third parties | ||||||||||||||||
| Service rendered to related parties | ||||||||||||||||
| Total cost of revenue from service rendered | ||||||||||||||||
| Total cost of revenue | $ | $ | $ | $ | ||||||||||||
| Gross profit | $ | $ | $ | $ | ||||||||||||
22
JRSIS HEALTH CARE CORPORATION AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| 12. | RELATED PARTIES AND RELATED PARTIES TRANSACTIONS |
Related parties and its relationship:
| Name of related parties | Relationship | |
| Guangzhou Jumi Intelligent Equipment Co., Ltd. (“Guangzhou JIE” or “GZ JIE”) | ||
| Guangzhou Jumi Intelligent Technology Co., Ltd. (“Guangzhou JIT” or “GZ JIT) | ||
| Kangmi Yaolian (Guangzhou) Wulinwang Co., Ltd. | ||
| Shanghai Jiuchenbengou Information and Technology Co., Ltd. | ||
| Yongzhou Jingmi Health Technology Co., Ltd. | ||
| Linhai Zhu, his spouse Mei Liu | ||
| Zhuowei Zhong | ||
| Lugeng Zhou |
Accounts receivable, net – related parties
| Name of related parties: | September 30, 2024 | December 31, 2023 | ||||||
| Guangzhou Jumi Intelligent Equipment Co., Ltd. (1) | $ | $ | ||||||
| Guangzhou Jumi Intelligent Technology Co., Ltd. | ||||||||
| Kangmi Yaolian (Guangzhou) Wulinwang Co., Ltd. (2) | ||||||||
| Shanghai Jiuchenbengou Information and Technology Co., Ltd. (2) | ||||||||
| Yongzhou Jingmi Health Technology Co., Ltd. (2) | ||||||||
| $ | $ | |||||||
| (1) |
| (2) |
23
JRSIS HEALTH CARE CORPORATION
AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| Name of related parties: | September 30, 2024 | December 31, 2023 | ||||||
| Lugeng Zhou (1) | $ | $ | ||||||
| Yongzhou Jingmi Health Technology Co., Ltd. (2) | ||||||||
| $ | $ | |||||||
| (1) |
| (2) |
| Name of related parties: | September 30, 2024 | December 31, 2023 | ||||||
| Guangzhou Jumi Intelligent Equipment Co., Ltd. (1) | $ | $ | ||||||
| $ | $ | |||||||
| (1) |
| Name of related parties: | September 30, 2024 | December 31, 2023 | ||||||
| Linhai Zhu | $ | $ | ||||||
| Zhuowei Zhong | ||||||||
| $ | $ | |||||||
Related parties’ transactions
Revenue recognized from goods and services transferred
to related parties amounts to $
Purchase of raw materials and software to be used
in assembling machines from related parties amounted to $
On June 29, 2024, Guangzhou JIE made a capital
contribution of $
Guarantee provided by related parties consisted of the following:
On May 20, 2022, Linhai Zhu, his spouse Mei Liu
and Guangzhou Jumi Intelligent Equipment Co., Ltd. provided a guarantee for the short-term loan of $
On July 20, 2022, Linhai Zhu, his spouse Mei Liu
and Guangzhou Jumi Intelligent Equipment Co., Ltd. provided a guarantee for the short-term loan of $
24
JRSIS HEALTH CARE CORPORATION
AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
On August 16, 2022, Linhai Zhu and his spouse
Mei Liu provided a guarantee for the short-term loan of $
On June 29, 2023, Linhai Zhu, his spouse Mei Liu
and Guangzhou Jumi Intelligent Equipment Co., Ltd. provided a guarantee for the short-term loan of $
On July 2, 2024, Linhai Zhu, his spouse Mei Liu
and Guangzhou Jumi Intelligent Equipment Co., Ltd. provided a guarantee for the short-term loan from Bank of China which has ending balance
as of September 30, 2024 of $
On August 12, 2024, Linhai Zhu, his spouse Mei
Liu and Guangzhou Jumi Intelligent Equipment Co., Ltd. provided a guarantee for the short-term loan from China Construction Bank which
has ending balance as of September 30, 2024 of $
| 13. | BANK LOANS |
Short-term Loans
| September 30, 2024 | December 31, 2023 | |||||||
| In June 2023, YZ JIT borrowed from Bank of China US$ | $ | $ | ||||||
| In August 2022, YZ JIT borrowed from China Construction Bank US$ | ||||||||
| On March 5, 2024, YZ JIT borrowed from Industrial and Commercial Bank of China (ICBC) $ | ||||||||
| In July 2024, YZ JIT borrowed from Bank of China amount to US$ | ||||||||
| In August 2024, YZ JIT borrowed from China Construction Bank amount to US$ | ||||||||
| Total short-term loans | $ | $ | ||||||
25
JRSIS HEALTH CARE CORPORATION
AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Long-term loans
| September 30, 2024 | December 31, 2023 | |||||||
| In December 2023, YZ JIT and Shenzhen Qianhai Webank entered into a loan agreement to borrow RMB | $ | $ | ||||||
| Subtotal of long-term loans | ||||||||
| Less: long-term loans - current portion | ( | ) | ( | ) | ||||
| Long-term loans – noncurrent portion | $ | $ | ||||||
All bank loans the Company borrowed were for use
as working capital in the ordinary course of business. For the three months ended September 30, 2024 and 2023, the Company recorded interest
expense on bank loans of $
| 14. | OTHER PAYABLES AND ACCRUED LIABILITIES |
| September 30, 2024 | December 31, 2023 | |||||||
| Salary payable | $ | $ | ||||||
| Short-term lease payable (1) | ||||||||
| Accrued operating expenses (2) | ||||||||
| Other payables | ||||||||
| $ | $ | |||||||
| (1) |
| (2) |
| 15. | NON-CONTROLLING INTERESTS |
The Company has a controlling financial interest
in YZ JIT, a majority VIE of the Company, which is consolidated in the Company’s financial statements with a non-controlling interest
(“NCI”) recognized. The Company held an
As of September 30, 2024 and December 31, 2023,
NCI in the consolidated balance sheet was ($
26
JRSIS HEALTH CARE CORPORATION
AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| 16. | TAXATION |
Income Taxes
United States of America
JRSIS is registered in the State of Florida and is subject to the tax laws of United States of America.
The Company has no tax position at September 30, 2024 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The Company did not recognize interest accrued related to unrecognized tax benefits or penalties during the periods presented. The Company had no accruals for interest and penalties at September 30, 2024. The Company’s utilization of any net operating loss carry forward may be unlikely as a result of its intended activities.
As of September 30, 2024, the operations in the
United States of America had incurred $
British Virgin Islands (“BVI”)
The Company subsidiary, JRSIS Health Care Limited, is incorporated in BVI and is not subject to tax on income or capital gain. In addition, payments of dividends by the Company to its shareholders are not subject to withholding tax in the BVI.
Hong Kong
The Company’s subsidiary, Runteng Medical
Group Company Limited, is incorporated in Hong Kong and has no operating profit or tax liabilities during the periods presented. Runteng
is subject to tax at
The PRC
The Company’s subsidiaries operating in
the PRC are subject to the Corporate Income Tax Law of the People’s Republic of China at a unified income tax rate of
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Loss before income taxes from PRC operation | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Statutory income tax rate | % | % | % | % | ||||||||||||
| Income tax expense (benefit) at statutory rate | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Tax effect of non-deductible items | ||||||||||||||||
| Tax effect of non-taxable items | ||||||||||||||||
| Valuation allowance of deferred tax assets | ||||||||||||||||
| Income tax expense (benefit) | $ | $ | ( | ) | $ | $ | ||||||||||
27
JRSIS HEALTH CARE CORPORATION
AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Value-Added Tax and Other Withholding and Other Levies
The Company’s goods and services are sold
in the PRC and are subject to Value-added tax (“VAT”) on the gross sales price. The VAT rates range from
The Company is also subject to other levies such as stamp tax, unban construction tax, and additional education tax which are charged by local governments. The rate of such levies is small and varies among the different jurisdictions in which the Company does business. The Company also acts as the personal income tax withholding agent for the salaries paid its employees.
| September 30, 2024 | December 31, 2023 | |||||||
| VAT payable | $ | $ | ||||||
| Corporation income tax | ||||||||
| Withholding personal tax | ||||||||
| Other levies | ||||||||
| Total taxed payables | $ | $ | ||||||
| 17. | EARNINGS PER SHARE |
Basic earnings per share is computed using the
weighted average number of common shares outstanding during the year. The dilutive effect of potential common shares outstanding is included
in diluted earnings per share.
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Numerator: | ||||||||||||||||
| Income (loss) attributable to common shareholders | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Denominator: | ||||||||||||||||
| Weighted average common shares outstanding – Basic and diluted | ||||||||||||||||
| Income (loss) per share – basic and diluted | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| 18. | STOCKHOLDERS’ EQUITY |
The Company is authorized issue
The Company is authorized to issue
28
JRSIS HEALTH CARE CORPORATION
AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| 19. | CHINA CONTRIBUTION PLAN |
Under the PRC Law, full-time employees of the
subsidiaries of the Company in the PRC are entitled to staff welfare benefits including medical care, welfare subsidies, unemployment
insurance and pension benefits through a China government-mandated multi-employer defined contribution plan. These benefits are required
to accrue for, based on certain percentages of the employees’ salaries. The total contributions made for such employee benefits
were approximately $
| 20. | STATUTORY RESERVES |
Under the PRC Law the Company’s subsidiaries
and VIE are required to make appropriations to their statutory reserve based on after-tax net earnings which are determined in accordance
with generally accepted accounting principles of the People’s Republic of China (the “PRC GAAP”). Appropriation to the
statutory reserve should be at least
| 21. | CONCENTRATIONS OF RISK |
The Company is exposed to the following concentrations of risks:
| (a) | Major customers |
| For the Three Months Ended September 30, 2024 | September 30, 2024 | |||||||||||
| Customers | Revenue | Percentage of revenue | Accounts receivable | |||||||||
| Customer A | $ | % | $ | |||||||||
| $ | % | $ | ||||||||||
| For the Nine Months Ended September 30, 2024 | September 30, 2024 | |||||||||||
| Customers | Revenue | Percentage of revenue | Accounts receivable | |||||||||
| Customer A | $ | % | $ | |||||||||
| Customer B | % | |||||||||||
| Customer C | % | |||||||||||
| $ | % | $ | ||||||||||
29
JRSIS HEALTH CARE CORPORATION
AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| For the Three Months Ended September 30, 2023 | September 30, 2023 | |||||||||||
| Customers | Revenue | Percentage of revenue | Accounts receivable | |||||||||
| Customer A | $ | % | $ | |||||||||
| $ | % | $ | - | |||||||||
| For the Nine Months Ended September 30, 2023 | September 30, 2023 | |||||||||||
| Customers | Revenue | Percentage of revenue | Accounts receivable | |||||||||
| Customer A | $ | % | $ | |||||||||
| Customer D | % | |||||||||||
| $ | % | $ | ||||||||||
| (b) | Major vendors |
| For the Three Months Ended September 30, 2024 | September 30, 2024 | |||||||||||
| Vendor | Purchases | Percentage of purchases | Accounts payable | |||||||||
| Vendor A | $ | % | $ | |||||||||
| Vendor B | % | |||||||||||
| Vendor C | % | |||||||||||
| $ | % | $ | ||||||||||
| For the Nine Months Ended September 30, 2024 | September 30, 2024 | |||||||||||
| Vendor | Purchases | Percentage of purchases | Accounts payable | |||||||||
| Vendor A | $ | % | $ | |||||||||
| $ | % | $ | ||||||||||
30
JRSIS HEALTH CARE CORPORATION
AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| For the Three Months Ended September 30, 2023 | September 30, 2023 | |||||||||||
| Vendor | Purchases | Percentage of purchases | Accounts payable | |||||||||
| Vendor A | $ | % | $ | |||||||||
| Vendor E | % | |||||||||||
| $ | % | $ | ||||||||||
| For the Nine Months Ended September 30, 2023 | September 30, 2023 | |||||||||||
| Vendor | Purchases | Percentage of purchases | Accounts payable | |||||||||
| Vendor A | $ | % | $ | |||||||||
| Vendor D | % | |||||||||||
| $ | % | $ | ||||||||||
| (c) | Credit risk |
Financial instruments that are potentially subject to credit risk consist principally of trade receivables. The Company believes the concentration of credit risk in its trade receivables is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.
| (d) | Interest rate risk |
As the Company has no significant interest-bearing assets, the Company’s income and operating cash flows are substantially independent of changes in market interest rates.
The Company’s interest-rate risk arises from bank loans. The Company manages interest rate risk by varying the borrowing and maturity dates of variable rate debt, limiting the amount of variable rate debt, and continually monitoring the effects of market changes in interest rates. As of September 30, 2024 and December 31, 2023, all bank loans were at fixed rates.
31
JRSIS HEALTH CARE CORPORATION
AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| (e) | Exchange rate risk |
The reporting currency of the Company is US$. To date majority of the revenue and costs are denominated in RMB and a significant portion of the assets and liabilities are denominated in RMB. As a result, the Company is exposed to foreign exchange risk as its revenue and results of operations may be affected by fluctuations in the exchange rate between US$ and RMB. If RMB depreciates against US$, the value of RMB revenue and assets as expressed in US$ financial statements will decline. The Company does not hold any derivative or other financial instruments that expose the Company to substantial market risk.
| (f) | Economic and political risks |
The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operation may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy. A slowdown in the growth of the PRC’s economy might have an adverse effect on our current business and future developments, if we are not able to gain increasing demand for our smart machine from the development of the general economy.
The Company’s operations in the PRC are subject to special considerations. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation.
| 22. | SUBSEQUENT EVENTS |
The Company evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued. Subsequent to the date the financial statements were filed, there was no subsequent event that would require disclosure on or adjustment to the financial statements.
32
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with our unaudited consolidated financial statements and the notes thereto included elsewhere in this report.
In addition to historical information, the discussion in this section of this report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this section and those discussed in “Risk Factors” section of our annual report on Form 10-K, which filed on May 26, 2024.
We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
OVERVIEW
Company Structure
JRSIS Health Care Corporation (the “Company” or “JRSIS”) was incorporated on November 20, 2013 under the laws of the State of Florida. Through its 100% held subsidiary JRSIS Health Care Limited (“JRSIS-BVI”), a limited liability company registered in British Virgin Island (“BVI”), it holds 100% shares of Runteng Medical Group Co., Ltd (“Runteng”), a limited liability company registered in Hong Kong. On April 12, 2022, Runteng organized and owned 100% of the equity in Laidian Technology (Zhongshan) Co., Ltd (“Laidian”), a wholly foreign-owned enterprise (“WFOE”) subsidiary registered under the law of the People’s Republic of China (“the PRC”) in Zhongshan City, Guangdong Province.
Until March 31, 2022, Runteng also owned 70% of the equity in Harbin Jiarun Hospital Co., Ltd (“Jiarun”), a for-profit hospital incorporated in Harbin City of Heilongjiang province of the PRC and was fully disposed of on April 1, 2022.
On November 30, 2023, the Company, through its subsidiary Laidian, completed an acquisition transaction that resulted that the Company obtained 85.53% variable interest in Yongzhou Jumi Intelligent Technology Co., Ltd. (“Yongzhou JIT”). For a detail description of our corporate structure and contractual arrangements and its related risks, see “ITEM 1 Business” in PART I elsewhere in Form 10-K filed on May 26, 2024. The transaction represents a “Reverse Acquisition” rather than a normal business combination in that Yongzhou JIT is deemed to be the accounting acquirer in the transaction.
Management’s discussion and analysis in this section was based on the historic financial information of Yongzhou JIT as accounting acquirer. The financial statements represent the assets and liabilities and the operations that were reflected on the historical financial statements for periods prior to the Reverse Acquisition of Yongzhou JIT and will be recorded at the carrying amount basis of Yongzhou JIT. The consolidated financial statements after the Reverse Acquisition included the assets and liabilities of the Company and Yongzhou JIT, and the historical operations of Yongzhou JIT and operations of the Combined Company from the date of the Reverse Acquisition.
Technology and Innovation
We, through Yongzhou JIT, are committed to technological advancement and delivering cutting-edge smart machine and system solutions, especially for our One-stop smart medicine distribution program and our new retail smart terminal solution to meet the evolving needs of our customers. The technicians employed by Yongzhou JIT are committed to mastering intelligent algorithms and techniques, smart terminal technologies and moving communication-related technology as needed to elevate our products to a market lead.
33
As of the date of this report, Yongzhou JIT owns 2 patents for invention, 16 patents for utility models, 7 design patents and 21 software copyrights in the PRC. In addition, there are several invention patents in the process of undergoing substantive examination by government authorities. All the core patented technologies and models of patents and copyright have been applied in the Company’s products and services. The Company had established a research and development team composed of 8 experts, representing approximately 22% of the total employees of Yongzhou JIT. After years of efforts, the Company holds an outstanding position in the field of intelligent medicine products in the PRC. In addition, to promote research and innovation in smart medicine areas, the Company actively collaborates with several prominent research institutions and universities, such as Hunan Institute of Technology, to keep our smart techniques being updated and advanced.
Products and Services, Customers
Based on techniques we control and the plants and equipment we operate in China, we can provide our customers with customized goods and services, such as cloud-based smart hardware/equipment and the related application system/software, open platform of software as a service, cloud-based vending equipment, one-stop cloud-based medicine equipment (including automated drug sales, remote consultations, unmanned pharmacies) and a series of remote smart terminal products. We currently engage in the business of developing additional technology related to the medical industry and are producing and selling equipment based on our technology. We also provide services to design, develop, install, and maintain cloud-based systems for our customers.
Currently, all our operations are conducted in the PRC. Our customers include: a) governmental projects: such as local government’s healthcare project to up-grate its smart medical insurance, smart epidemic prevention measures, smart and system service on remote physical examination, health testing, remote consultation, prescription, payments and medicine delivery etc.; b) Hospital projects: such as a smart application system in a hospital for collecting drug information from each out-patient and directing the pharmacies in the hospital to prepare the dug for the out-patient and guide the put-patient to the right window to take his/her medicine; c) pharmacies outside the hospital and d) entities in health industry, such as the internet service platform; e) other entities providing smart health services based and depending on our technology. Our products and services can be applied in more and more areas along with the development of Smart City and Smart Life project all over the PRC and throughout the world.
Recent Development
With the popularity of China’s mobile payment, the update and development of cloud computing and the Internet of Things, coupled with the social demand for medical and pharmaceutical services facilitation, personalization, privacy protection, and various convenient services launched by the government and social forces in response to aging, vending and online services have a broad basis for development in most cities in China. Our smart products and services will be widely used in this environment, which is also one of the infrastructures for building a healthy China. However, this will require substantial investment from government and society. With the outbreak of the COVID-19 pandemic, especially since this year, the enthusiasm of the Chinese government and enterprises for such infrastructure investment has fluctuated with the changes in the macro economy, especially the expectations of China’s medium and long-term economic development. This kind of expected fluctuation has a great impact on the market for our smart products. We need to overcome the difficulties brought by this fluctuation and seek greater development while continuously improving the scientific and technological content of our products and services, which requires more effort and patience from us.
GOING CONCERN UNCERTAINTIES
The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
34
As reflected in the accompanying unaudited consolidated financial statements, for the nine months ended September 30, 2024 and 2023 the Company incurred significant net losses of $509,680 and $31,415. The recurring operating loss resulted in an accumulated deficit of $3,878,835 as of September 30, 2024. The Company generated cash outflow from its operations activities of $826,061 and cash inflow from operations of $420,966 for the nine months ended September 30, 2024 and 2023. The fluctuation of cash flows resulted in a working capital deficit of $512,474 as of September 30, 2024. Management believes these factors raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months.
The continuation of the Company as a going concern through the next twelve months is dependent upon (1) the continued financial support from its external financing, including bank loans and issuance of its shares to potential shareholders. Management believes that it can obtain additional bank loans and the issuance of common shares of the Company is available if the Company elects to do so, and (2) further implementation of management’s business plan to extend its operations and generate sufficient revenue and cash flows to meet its obligations. The Company’s operations are on an upward trend, and management believes that the Company’s operations can generate enough revenue and cash to meet its obligations in the normal course of business. While the Company believes in the viability of its strategy to increase sales volume and in its ability to raise additional funds, there can be neither any assurances to that effect, nor any assurance that the Company will be successful in securing sufficient funds to sustain the operations.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible future effect of the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties. The Company is working to improve its operations and generate more profits and cash flow.
Management believes that the actions presently being taken to obtain additional funding and implement its strategic plan provide the opportunity for the Company to continue as a going concern.
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the 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. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue recognition, receivable, inventory, leases, and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe 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. Actual results may differ from these estimates under different assumptions or conditions. Changes in estimates are recorded in the period in which they become known.
In connection with the preparation of our financial statements for the three and nine months ended September 30, 2024, there was no accounting estimate we made that was subject to a high degree of uncertainty and was critical to our results.
Please refer to our significant accounting policies in NOTE 3 to our unaudited consolidated financial statements included elsewhere in this report. We believe those accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
35
RESULTS OF OPERATIONS
Comparison of the three months ended September 30, 2024 and 2023
The following table sets forth the results of our operations for the three months ended September 30, 2024 and 2023, respectively, indicated as a percentage of total revenue.
| For the three months ended September 30, 2024 | For the three months ended September 30, 2023 | Amount | ||||||||||||||||||||||
| Amount | % of Revenue | Amount | % of Revenue | increase (decrease) | % Percentage | |||||||||||||||||||
| Revenue | $ | 222,922 | 100 | % | $ | 497,361 | 100 | % | $ | (274,439 | ) | (55 | )% | |||||||||||
| Cost of revenue | 196,037 | 88 | % | 377,252 | 76 | % | (181,215 | ) | (48 | )% | ||||||||||||||
| Gross profit | 26,885 | 12 | % | 120,109 | 24 | % | (93,224 | ) | (78 | )% | ||||||||||||||
| Operating expenses | 233,075 | 105 | % | 69,098 | 14 | % | 163,977 | 237 | % | |||||||||||||||
| Other income (loss), net | (13,780 | ) | (6 | )% | (11,727 | ) | (2 | )% | (2,053 | ) | 18 | % | ||||||||||||
| Income (loss ) before income tax | (219,970 | ) | (99 | )% | 39,284 | 8 | % | (259,254 | ) | (660 | )% | |||||||||||||
| Income tax expense (benefit) | 7 | 0 | % | (123 | ) | 0 | % | 130 | (106 | )% | ||||||||||||||
| Net Income (loss) from operations | (219,977 | ) | (99 | )% | 39,407 | 8 | % | (259,384 | ) | (658 | )% | |||||||||||||
| Less: non-controlling interest | (31,831 | ) | (14 | )% | 5,702 | 1 | % | (37,533 | ) | (658 | )% | |||||||||||||
| Net loss attributable to the Company | $ | (188,146 | ) | (84 | )% | $ | 33,705 | 7 | % | $ | (221,851 | ) | (658 | )% | ||||||||||
Comparison of the nine months ended September 30, 2024 and 2023
The following table sets forth the results of our operations for the nine months ended September 30, 2024 and 2023, respectively, indicated as a percentage of total revenue.
| For the nine months ended September 30, 2024 | For the nine months ended September 30, 2023 | Amount | ||||||||||||||||||||||
| Amount | % of Revenue | Amount | % of Revenue | increase (decrease) | % Percentage | |||||||||||||||||||
| Revenue | $ | 1,320,738 | 100 | % | $ | 1,311,750 | 100 | % | $ | 8,988 | 1 | % | ||||||||||||
| Cost of revenue | 1,050,519 | 80 | % | 1,000,638 | 76 | % | 49,881 | 5 | % | |||||||||||||||
| Gross profit | 270,219 | 20 | % | 311,112 | 24 | % | (40,893 | ) | (13 | )% | ||||||||||||||
| Operating expenses | 756,033 | 57 | % | 309,860 | 24 | % | 446,173 | 144 | % | |||||||||||||||
| Other loss, net | (20,951 | ) | (2 | )% | (24,610 | ) | (2 | )% | 3,659 | (15 | )% | |||||||||||||
| Loss before income tax | (506,765 | ) | (38 | )% | (23,358 | ) | (2 | )% | (483,407 | ) | 2070 | % | ||||||||||||
| Income tax expense | 2,915 | 0 | % | 8,057 | 1 | % | (5,142 | ) | (64 | )% | ||||||||||||||
| Net loss from operations | (509,680 | ) | (39 | )% | (31,415 | ) | (2 | )% | (478,265 | ) | 1522 | % | ||||||||||||
| Less: non-controlling interest | (73,743 | ) | (6 | )% | (4,546 | ) | (0 | )% | (69,197 | ) | 1522 | % | ||||||||||||
| Net loss attributable to the Company | $ | (435,937 | ) | (33 | )% | $ | (26,869 | ) | (2 | )% | $ | (409,068 | ) | 1522 | % | |||||||||
Revenue
Total revenue for the three months ended September 30, 2024 was $222,922, a decrease of $274,439, or approximately 55%, as compared to total revenue for the three months ended September 30, 2023 of $497,361. Total revenue for the nine months ended September 30, 2024 was $1,320,738, an increase of $8,988, or approximately 1%, as compared to total revenue for the nine months ended September 30, 2023 of $1,311,750. Currently, due to the bad economic environment, without the support of the government’s stimulus policies, Chinese society has grown increasingly cautious about investing in the medical and health industry, resulting in a significant decline in the demand for our products and services. During the third quarter of 2024, we did not acquire any new clients, resulting in our revenue being reduced by half compared to the same period in 2023. The revenue decline in the third quarter of 2024 erased much of the growth achieved in the first two quarters of the year compared to 2023.
36
We have taken more aggressive measures in our marketing and promotion efforts to improve our sales performance since the beginning of 2024. We initially expected that the demand for our products and services in the market could be expected to grow rapidly. However, the macroeconomic and social demand in the PRC is far less robust than it was expected in the wake of the COVID-19 pandemic, Especially, since the third quarter of this year, the overall economic vitality is relatively depressed, which has seriously affected the sales of the company’s products and services. We have committed to iterate and update continuously our products and services with our developing technology, and we expect that our revenue will continue to grow along with our marketing effort and the upgrading of our products in the foreseeable future. However, the growth of our revenue also depends on the microeconomic and social demand in the PRC.
Currently, the Company’s revenue derives from two sources: 1) sales of smart terminal products, such as unmanned medicine vending machines, that the Company self-manufactures and assembles in its plant, and 2) services rendered, such as installation and debugging of new equipment, maintenance of terminal systems of smart equipment, design and development of application systems customized for our customers. Goods and services from which the Company derived its revenue are all based on the Company’s technology and manufacturing capacity.
The Company derived its revenue from both third-party customers and related party customers. During the periods presented in these financial statements, the Company derived its revenue from its related parties mainly, with sales to Guangzhou JIE, Guangzhou JIT, Youzhou Jingmi Health Technology Co., Ltd. and Yaolian (Guangzhou) Wulinwang Co., Ltd. (see Note 12 for relationship of these related parties). In general, those related parties purchase a machine from Yongzhou JIT and resell it to their customers. In addition, Yongzhou JIT provided installation and maintenance services for its customers and was paid case by case under a range of negotiated rates. End users of the Company’s goods and services mainly include medical service organizations, business entities and local governments.
Cost of revenue
Cost of revenue for the three months ended September 30, 2024 was $196,037, a decrease of $181,215, or approximately 48%, as compared to cost of revenue recorded for the three months ended September 30, 2023 of $377,252. Cost of revenue for the nine months ended September 30, 2024 was $1,050,519, an increase of $49,881, or approximately 5%, as compared to cost of revenue for the nine months ended September 30, 2023 of $1,000,638.
During the three months ended September 30, 2024, we provided less personalized services and fewer products to our customers, mainly the related parties of YZ JIT, generating lower revenue., This is the main reason that lead to lower cost of revenues. The increase of the cost of revenue for the nine months ended September 30, 2024 resulted from an increase in the cost of labor, especially the cost of revenue from our technology service mainly consists of labor cost to fulfill our services obligations. Cost of revenue consists primarily of the cost of the machine sold and incremental cost to fulfil the contracts with customers.
Gross profit
Gross profit for the three months ended September 30, 2024 was $26,885, a decrease of $93,224, or approximately 78%, as compared to the three months ended September 30, 2023 of $120,109. The gross margin was 12% for the three months ended September 30, 2024, decreased from 24% for the three months ended September 30, 2023. Gross profit for the nine months ended September 30, 2024 was $270,219, a decrease of $40,893, or approximately 13%, as compared to the nine months ended September 30, 2023 of $311,112. The gross margin was 20% for the nine months ended September 30, 2024, decreased from 24% for the nine months ended September 30, 2023.
Generally, our services revenue contributes a higher margin than revenue from the sale of goods. In addition, our margins fluctuated based on customized contracts made with various factors, including customer background and special requirements of our products and services. Also, gross profit was affected by whether the customer is a third party or a related party. During the three months ended September 30, 2024, we encountered severe market challenges, and in order to increase our sales, we made a lot of price concessions, resulting in a halving of the gross margin in the third quarter of 2024 and the same period of 2023, Fortunately, some of our service revenues generated significant gross margins in the first half of 2024, which resulted in our gross margin for the nine months ended September 30, 2024 being essentially flat with the gross margin for the nine months ended September 30, 2023.
37
Operating expenses
Operating expenses consist mainly of research and development, employee salary, marketing and advertising, logistics, auditing and legal services, other professional service and listing support fees, depreciation and amortization, office rental fees and utilities that are underlying but not associated with production, and so are not recorded as cost of inventories.
Operating expenses for the three months ended September 30, 2024 were $233,075, an increase of $163,977, or approximately 237%, as compared to $69,098 for the three months ended September 30, 2023. During the three months ended September 30, 2024, our selling expenses increased $96,518, our general and administrative expenses increased $74,821 and our research and development expenses decreased $7,362, as compared to the same period of 2023.
Operating expenses for the nine months ended September 30, 2024 were $756,033, an increase of $446,173, or approximately 144%, as compared to $309,860 for the nine months ended September 30, 2023. During the nine months ended September 30, 2024, our selling expenses increased $289,925, our general and administrative expenses increased $212,396 and our research and development expenses decreased $56,148, as compared to the same period of 2023.
The Company reduced its research and development expenditures for the three and nine months ended September 30, 2024 by reorganizing and streamlining its research team to save costs without compromising the efficiency of its activities. The Company is committed to an on-going reorganization to optimize its expenditures to respond to its deficiency of working capital and to make profits. The Company expects to invest more capital in its research and development activities as its financial condition gets better. The increase of selling expenses for the three and nine months ended September 30, 2024 as compared to the same period of prior year, mainly resulted from the increase of the marketing and advertising activities to promote sales in the current period. The increase of the general and administrative expenses for the three and nine months ended September 30, 2024 mainly resulted from the increasing of the professional services and related listing fees for public trading markets, and inventories counting loss during the nine months ended September 30, 2024.
Other income (expense), net
Other income mainly consists of: 1) non-capitalized interest expense accrued from bank loans used for working capital; 2) gain or loss on disposal of inventories, equipment and other assets; and 3) government subsidy on tax exemption. For the three months ended September 30, 2024 the Company reported other net loss of $13,780, an increase of $2,053, or approximately 18% of other net loss, as compared to other loss of $11,727 for the three months ended September 30, 2023. For the nine months ended September 30, 2024 the Company reported other net loss of $20,951, a decrease of other net loss of $3,659, or approximately 15%, as compared to other net loss of $24,610 for the nine months ended September 30, 2023.
The fluctuation in other expenses for the three and nine months ended September 30, 2024 as compared to the same period of 2023 mainly resulted in fluctuation of non-capitalized interest expense due to the reduction of bank loans. YZ JIT repaid more bank loan during the third of 2023 which result in the accrual of interest expense for the three months ended September 30, 2023 is less than that in the same period of 2024. However, before repaying bank loan in third quarter in 2023, total interest expense was accrued and recorded for the nine months ended September 30, 2023, which made other loss for the nine months ended September 30, 2023 greater than the same period of 2024.
Net income (loss)
We reported a net loss of $219,977 for the three months ended September 30, 2024, as compared to net income of $39,407 for the three months ended September 30, 2023, a decrease of $259,384 at our net income, or approximately 658%. We reported a net loss of $509,680 for the nine months ended September 30, 2024, as compared to net loss of $31,415 for the nine months ended September 30, 2023, an increase of $478,265 at our net loss or approximately 1522%.
38
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis. On September 30, 2024, we had cash of $1,372 and a working capital deficit of $512,474 as compared to cash of $741 and a working capital deficit of $404,105 on September 30, 2023.
To date, we have financed our operating and investing activities mainly through cash generated from our current operating activities, borrowings from financial institutions and contributions from our shareholders. We had plans to issue our common shares to finance more cash to supplement our working capital. We also planned to finance our business under our management measures and financing policy along with our current financing resources, such as accelerating the collection of receivables and slow down the payment of payable. We did not identify any material capital expenditures requirements at the date of this report, but we were not sure that our cash on hand will be sufficient to meet our current and anticipated needs for general corporate purposes for at least the next 12 months. As management measures and financing policies, we will continue to delay payment and accelerate collection in our operations, as well as optimize and reduce expenses to overcome cash deficits in our normal course of business in the foreseeable future. Even though we may, however, need additional cash resources in the future if we experience changes in business conditions or other developments. We may also need additional cash resources in the future if we find and wish to pursue opportunities for investment, acquisition, capital expenditure or similar actions. If we determine that our cash requirements exceed the amount of cash we have on hand, we may seek to issue equity or equity-linked securities or obtain debt financing including additional bank loans. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
The following is a summary of cash provided by or used in each of the indicated types of activities for the nine months ended September 30, 2024 and 2023, respectively.
| For the Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash provided by (used in) operating activities | $ | (826,061 | ) | $ | 420,966 | |||
| Net cash provided by (used in) investing activities | (9,182 | ) | (249 | ) | ||||
| Net cash provided by (used in) financing activities | 720,030 | (576,242 | ) | |||||
| Exchange rate effect on cash | (1,529 | ) | (2,547 | ) | ||||
| Net cash inflow (outflow) for the periods | $ | (116,742 | ) | $ | (158,072 | ) | ||
Operating Activities
Net cash used in our operating activities for the nine months ended September 30, 2024 was $826,061, as compared to net cash provided by operating activities of $420,966 for the nine months ended September 30, 2023. Net cash used in our operating activities for the nine months ended September 30, 2024 was attributable to a net loss of $509,680 for the period and was primarily increased by non-cash items such as a reversal of a $138,497 inventory impairment charge, and by a $578,004 increase in accounts receivable from related parties and amortization of $161,191 in advances from customers as income was recognized from completion of prepaid contracts. Net operating cash inflows for the nine months ended September 30, 2024 resulted primarily from the following factors: 1) accounts receivable decreased by $144,135 in cash collected from third parties; 2) advances to suppliers decreased by $294,389 due to receipt of inventories from venders; and 3) a decrease of inventories by $233,745 due to increase of goods sold and disposal of obsoleted inventories.
39
Net cash provided by our operating activities for the nine months ended September 30, 2023 was $420,966. This was attributable to net loss $31,415 for the nine months ended September 30, 2023 and was primarily adjusted by non-cash items such as (1) an aggregate total of $3,340 from right-of used assets amortization expenses and interest expenses accrual of lease liabilities of operating leases, (2) depreciation and amortization expenses of long-lived assets of $41,179, (3) an aggregate gain of $24,206 from disposal of impaired inventories, and (4) deferred income tax decrease of $4,487 for the nine months ended September 30, 2023. Net operating cash inflows for the nine months ended September 30, 2023 resulted primarily from the following factors: 1) accounts receivable from both third parties and related parties decreased aggregately by $312,421 due to more cash collected from customers; 2) accounts payable to related parties increased by $203,521 due to delay payment for the purchase from related parties; Cash inflows were offset by the following cash outflows factors: 1) an increase of advance to suppliers of $1,845 due to more inventories order from venders; 2) inventories increased by $18,258 due to the preparation for future goods sold; 3) prepaid expenses and other receivables increased by $1,938 and accounts payable to third parties decreased by $48,784 due to the Company make more payments at September 30, 2023; 4) advances from customers decreased by $3,803 due to revenue recognized from those advances; 4) Taxes payable decreased by $4,296 representing the payable of taxes both corporation income tax and VAT; 5) cash paid for operation lease liabilities of $4,455. 6) other payable and accrued liabilities decreased by $4,982 due to the Company made much more payment for its utility.
Investing Activities
There was $9,182 used in purchase of intangible assets for the nine months ended September 30, 2024.
There was $249 used in purchase of equipment for the nine months ended September 30 2023.
Financing Activities
Net Cash provided by our financing activities for the nine months ended September 30, 2024 was $720,030. For the nine months ended September 30, 2024, cash inflows provided by financial activities included: 1) received cash from issuance of common shares of $20,045; 2) proceeds from bank loans of $1,278,186, 3) capital contribution from our VIE’s legal owners of $419,578; Cash outflows in financial activities for the nine months ended September 30, 2024 included: 1) net cash used in financing purpose between the Company and its related parties amount of $15,823 and; 2) repayments of bank loans amount of $981,956.
Net cash used in our financing activities from the nine months ended September 30, 2023 was $576,242. For the nine months ended September 30, 2023, we received cash in our financial activities from proceeds of bank loan of amount $426,482 and net cash provided by financing purpose between the Company and its related parties amount $13,785; we repaid bank loan of $1,016,509.
Inflation
We believe that the relatively moderate rate of inflation over the past few years has not had a significant impact on our results of operations.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).
40
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’s management is responsible for establishing and maintaining adequate internal control over our financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of the Company’s financial reporting for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that in reasonable detail accurately and fairly reflect the Company’s transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of the Company’s financial statements and that receipts and expenditures of company assets are made in accordance with management authorization; and (iii) provide reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
The Company’s management is also required to assess and report on the effectiveness of the Company’s internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), under the supervision of and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation and the identification of a material weakness in internal control over financial reporting described below, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that as of the end of the period covered by this report the Company’s disclosure controls and procedures were not effective:
| ● | 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. JRSIS will set up an audit committee when more financial resources are available. |
Management’s Remediation plan
While management believes that the Company’s financial statements previously filed in the Company’s SEC reports have been properly recorded and disclosed in accordance with US GAAP, based on the material weakness in our internal control over financial reporting identified above, we have designed and plan to implement, or in some cases have already implemented, the specific remediation initiatives described below:
The Company is currently looking for an outside consultant with considerable public company reporting experience and breadth of knowledge of US GAAP to provide more training in connection with the preparation and review of its financial statements to the employees.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the fiscal quarter ended September 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
41
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 1A. RISK FACTORS
As of the date of this filing, there have been no material changes from the risk factors disclosed in Part I, Item 1A (Risk Factors) contained in our Annual Report on Form 10-K for the year ended December 31, 2023. We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially affect our operations. The risks, uncertainties and other factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2023 may cause our actual results, performances and achievements to be materially different from those expressed or implied by our forward-looking statements. If any of these risks or events occurs, our business, financial condition or results of operations may be adversely affected.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION.
During the quarter ended September 30, 2024,
ITEM 6. EXHIBITS.
The list of Exhibits required by Item 601 of Regulation S-K to be filed as a part of this Form 10-Q are set forth on the Exhibit Index immediately preceding such Exhibits and is incorporated herein by this reference.
| Exhibit Number |
Description | Incorporated by Reference to | ||
| 31.1 | Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Executive and Financial Officer | |||
| 32.1 | Section 1350 Certification of Principal Executive and Financial Officer | |||
| 101.INS | Inline XBRL Instance Document | |||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| JRSIS HEALTH CARE CORPORATION | ||
| (Registrant) | ||
| Date: December 20, 2024 | By: | /s/ Linhai Zhu |
| Linhai Zhu | ||
| Chairman of the board, | ||
| Chief Executive Officer, | ||
| Chief Financial and Accounting Officer | ||
43