JRSIS HEALTH CARE CORPORATION Cautionary Statement Regarding Forward Looking Statements
The discussion contained in this Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E ofthe United States Securities Exchange Act of 1934, as amended. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases like "anticipate," "estimate," "plans," "projects," "continuing," "ongoing," "target," "expects," "management believes," "we believe," "we intend," "we may," "we will," "we should," "we seek," "we plan," the negative of those terms, and similar words or phrases. We base these forward-looking statements on our expectations, assumptions, estimates and projections about our business and the industry in which we operate as of the date of this Form 10-Q. These forward-looking statements are subject to a number of risks and uncertainties that cannot be predicted, quantified or controlled and that could cause actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. The "Risk Factors" section in our Annual Report on Form 10-K describes factors, among others, that could contribute to or cause these differences. Actual results may vary materially from those anticipated, estimated, projected or expected should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect. Because the factors discussed in the Risk Factors section of our Form 10-K could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement made by us or on our behalf, you should not place undue reliance on any such forward-looking statement. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. Except as required by law, we undertake no obligation to publicly revise our forward-looking statements to reflect events or circumstances that arise after the date of this Form 10-Q. The following discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, which have been prepared in accordance with accounting principles generally accepted inthe United States . The preparation of such financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate these estimates, including those related to useful lives of real estate assets, bad debts, impairment, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. There can be no assurance that actual results will not differ from those estimates. The analysis set forth below is provided pursuant to applicableSEC regulations and is not intended to serve as a basis for projections of future events. Overview
Harbin Jiarun Hospital Company Limited ("Jiarun") was established inHarbin in the Province ofHeilongjiang ofthe People's Republic of China ("PRC") by the ownerJunsheng Zhang onFebruary 17, 2006 .
Harbin Jiarun Hospital Co., Ltd Nanjing Road Branch ("
Harbin Jiarun Hospital Co., Ltd Harbin New District Branch ("3rd
2
On November 20, 2013 , Junsheng Zhang , the senior officer of Jiarun Hospital ,
established JRSIS Health Care Corporation , a Florida corporation ("JHCC" or the
"Company"). On February 25, 2013 , the officer of Jiarun Hospital established
JRSIS Health Care Limited ("JHCL"), a wholly owned subsidiary of the Company,
and on September 17, 2012 , the officer of Jiarun Hospital established Runteng
Medical Group Co., Ltd ("Runteng"), a wholly owned subsidiary of JHCL. Until
April 28, 2022 Runteng, a Hong Kong registered Investment Company, held a 70%
ownership interest in Harbin Jiarun Hospital Company Ltd , a Heilongjiang
registered company.
On December 20, 2013 , the Company acquired 100% of the issued and outstanding
capital stock of JRSIS Health Care Limited , a privately held Limited Liability
Company registered in the British Virgin Islands , for 12,000,000 shares of our
common stock. JHCL, through its wholly owned subsidiary, Runteng Medical Group
Co., Ltd , holds majority ownership in Jiarun, a company duly incorporated,
organized and validly existing under the laws of China . As the parent company,
JHCC rely on Jiarun to conduct 100% of our businesses and operations.
On March 17, 2022 , the company entered into an Agreement on the Establishment of
Laidian Technology (Zhongshan) Co., Ltd. ("Laidian") with Zhong Zhuowei . The
agreement contains a covenant by Zhong Zhuowei to fund the operations of Laidian
which is 100% owned by Runteng Medical, in consideration of Mr. Zhong's
financial commitment and commitment to provide management services, the company
agreed to issue 39,130,000 shares of its common stock to Zhong Zhuowei upon the
initiation of operations of Laidian.
On April 12, 2022 , Runteng has setup and owned 100% of the equity in Laidian
Technology (Zhongshan) Co., Ltd ("Laidian"), a wholly-owned subsidiary to engage
in the business of providing charging services to electric vehicles incorporated
in Zhongshan City of Guangdong, China .
On April 28, 2022 JRSIS Health Care Corporation ("JRSIS") completed the spin-off
of its subsidiary Harbin Jiarun Hospital Co., Ltd. ("Jiarun") as JRSIS's
subsidiary Runteng Medical Group Co., Ltd. ("Runteng Medical") transferred its
70% equity interest in Jiarun to Zhang Junsheng (the "Spin-Off"). In exchange
for the 70% interest in Jiarun, Zhang Junsheng transferred to Runteng Medical
5,392,000 shares of JRSIS common stock.
On May 5, 2022 , the company issued 39,130,000 shares of its common stock to
Zhong Zhuowei . Under "Agreement on the establishment of Laidian technology
(Zhongshan) Co., Ltd." to serve as a management and setup the Laidian. As Mr.
Zhong had previously acquired 8,000,000 shares in private transactions, he owned
47,130,000 shares (80.7%) of the Company's common stock as on May 5, 2022 .
On
Critical Accounting Policies and Management Estimates
In preparing our financial statements we are required to formulate accounting policies regarding valuation of our assets and liabilities and to develop estimates of those values. In our preparation of the financial statements for the periods endedJune 30, 2022 , there were no estimates made which were (a) subject to a high degree of uncertainty and (b) material to our results. 3
Results of Operations for Three and Six Months EndedJune 30, 2022 and 2021
The following table shows key components of the results of operations for three
and six months ended
Three Months Ended
June 30, Change
2022 2021 $ %
Net Sales - - - -
Operating costs and expenses:
Salaries and benefits 4,421 - 4,421 n/a
Stock-based compensation 81,822 -
81,822 n/a
Office supplies 25,430 4,096 21,334 521 %
Rentals and leases 6,112 - 6,112 n/a
Professional fee 8,000 11,237 (3,237 ) (29 )%
Warrant expense - (13,818 ) 13,818 (100 )%
Depreciation 1,505 - 1,505 n/aTotal operating costs and expenses 127,290 1,515 125,775 3071 % Loss from operations before other income and income taxes (127,290 ) (1,515 ) (125,775 ) 3071 % Other income - - - - Income(loss) from operations before income taxes (127,290 ) (1,515 ) (125,775 ) 3071 % Income tax - - - - Income(loss) from continued operations (127,290 ) (1,515 ) (125,775 ) 3071 % Net Income(loss) from discontinued operations (36,054,805 ) 1,024,602 (37,079,407 ) (3121 )% Net income (loss)$ (36,182,095 ) $ 1,023,087 $ (37,205,182 ) (3637 )% Comprehensive income: Foreign currency translation adjustment from continued operations 6,356 2,688 3,668 136 % Foreign currency translation adjustment from discontinued operations 104,913 469,167 (364,254 ) (78 )% Comprehensive income (loss)$ (36,070,826 ) $ 1,494,942
$ (37,565,768 ) (2513 )% Six Months Ended June 30, Change 2022 2021 $ % Net Sales - - - - Operating costs and expenses: Salaries and benefits 4,421 - 4,421 n/a Stock-based compensation 81,822 -
81,822 n/a
Office supplies 39,756 5,192 34,564 666 %
Rentals and leases 6,112 - 6,112 n/a
Professional fee 16,000 20,145 (4,145 ) (21 )%
Warrant expense (7 ) 6,713 (6,720 ) (100 )%
Depreciation 1,505 - 1,505 n/aTotal operating costs and expenses 149,609 32,050 117,559 367 % Loss from operations before other income and income taxes (149,609 ) (32,050 ) (117,559 ) 367 % Other income - - - - Income(loss) from operations before income taxes (149,609 ) (32,050 ) (117,559 ) 367 % Income tax - - - - Loss from continued operations (149,609 ) (32,050 ) (117,559 ) 367 % Net income(loss) from discontinued operations (33,393,670 ) 1,551,059 (34,944,729 ) (2253 )% Net income (loss)$ (33,543,279 ) $ 1,519,009 $ (35,062,288 ) (2308 )% Comprehensive income: Foreign currency translation adjustment from continued operations 17,557 44,872 (27,315 ) (61 )% Foreign currency translation adjustment from discontinued operations 301,922 353,234 (51,312 ) (15 )% Comprehensive income (loss)$ (33,223,800 ) $ 1,917,115 $ (35,140,915 ) (1833 )% 4 Operating Costs and Expenses The Company's continued operations during the six months endedJune 30, 2022 consisted of organizing its subsidiary Laidian and collecting the equipment, facilities and personnel that will be needed for Laidian's operations. Total operating costs and expenses were$149,609 for the six months endedJune 30, 2022 , 55% of which was attributable to the Company's grant of 39,130,000 shares of its common stock as officer compensation toZhong Zhuowei upon the initiation of operations of Laidian. These shares had a negotiated value of$1,056,510 , of which$74,652 was obligation for Laidian's paid in capital, remains$981,858 was the expense of the company for the coming next 3 years since April of 2022. During the six months endedJune 30, 2022 the company record$81,822 compensation expenses.
Income from operations and net income
Loss from continued operations was$149,609 for the six months endedJune 30, 2022 , again attributable to the$81,822 compensation expense incurred by issuing 39,130,000 shares of common stock to the Company's new Chairman. OnApril 28, 2022 , the Company completed the spin-off of its subsidiaryHarbin Jiarun Hospital Co., Ltd. as JRSIS's subsidiaryRunteng Medical Group Co., Ltd. transferred its 70% equity interest in Jiarun toZhang Junsheng (the "Spin-Off"). According to spin-off agreement, the effective date of spin-off wasApril 1, 2022 , the Company record$36,054,805 loss from discontinuing operations in other income as spin-off Jiarun. After deducting other income and expenses as well as the provision for income tax, the Company's net loss for the six months endedJune 30, 2022 was$33,543,279 , representing an increase of$35,062,288 or 2308%, from net income of$1,519,009 recorded for the six months endedJune 30, 2021 . The increase of loss from operations and net loss for the six months endedJune 30, 2022 were primarily due to aforementioned upward changes in operating revenue and expenses.
Foreign Currency Translation Adjustment.
Our reporting currency is theU.S. dollar. Our local currency, Renminbi (RMB), is our functional currency. Results of operations and cash flows are translated at average exchange rates during the period, and assets and liabilities are translated at the unified exchange rate as quoted by thePeople's Bank of China at the end of the period. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of stockholders' equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. For the six months endedJune 30, 2022 and 2021, foreign currency translation adjustments of$17,557 and$44,872 , respectively, have been reported as other comprehensive income in the consolidated statements of operations and comprehensive income. 5
Liquidity and Capital Resources
As ofJune 30, 2022 , the Company had$37,659 of cash and cash equivalents, a decrease of$818,312 from our cash balance (included discontinued operations) atDecember 31, 2021 . The decrease was primarily caused by our investing activities, which used in$2,527,559 of cash during the first half year of 2022. Our working capital atJune 30, 2022 was$928,190 , an increase of$4,661,761 from our$3,733,571 in working capital deficit atDecember 31, 2021 . The increase was primarily attributable to the company spin-off Jiarun hospital with decrease of$ 2,240,486 working capital deficit fromDecember 31, 2021 . The primary non-cash component of our working capital atJune 30, 2022 was Deferred expenses totaling$900,036 . This balance was the Company's grant of 39,130,000 shares of its common stock as officer compensation toZhong Zhuowei upon the initiation of operations of Laidian. These shares had a negotiated value of$1,056,510 , of which$74,652 was obligation for Laidian's paid in capital, remains$981,858 was the expense of the company for the coming next 3 years since April of 2022. During the six months endedJune 30, 2022 the company record$81,822 compensation expenses. Although our current resources and cash flows are adequate to pay our current ongoing obligations, we anticipate that our future liquidity requirements will arise from the need to fund our growth and future capital expenditures. The primary sources of funding for such growth requirements are expected to be additional funds raised from the sale of equity and/or debt financing. However, we can provide no assurances that we will be able to obtain additional financing on terms satisfactory to us.
Cash Flows and Capital Resources
Our cash flows for the six months ended ofJune 30, 2022 and 2021 are summarized below: Six Months Ended June 30, 2022 2021 Net cash provided by operating activities 2,132,017 3,619,288 Net cash provided by (used in) investing activities (2,827,559 ) (2,096,489 ) Net cash (used in) financing activities 161,795 (2,004,971 ) Effect of exchange rate fluctuation on cash and cash equivalents (284,565 ) (49,884 ) Net decrease in cash and cash equivalents (818,312 ) (525,056 ) Cash and cash equivalents, beginning of period 855,971 844,827 Cash and cash equivalents, ending of period$ 37,659 $ 312,771
Net Cash Provided by Operating Activities
For the six months ended
Net cash used in investing activities for the six months endedJune 30, 2022 was$2,827,559 , compared to net cash used in investing activities of$2,096,489 for the six months endedJune 30, 2021 . The cash used in investing activities for the six months endedJune 30, 2022 was mainly used for the purchase of equipment.
Net Cash Provided by Financing Activities
Net cash provided by financing activities for the six months endedJune 30, 2022 was$161,795 , as compared to net cash used in financing activities of$2,004,971 for the six months endedJune 30, 2021 . The cash provided by financing activities for the six months endedJune 30, 2022 was mainly the company issued 39,130,000 shares of its common stock as officer compensation toZhong Zhuowei upon the initiation of operations of Laidian with value of$1,056,510 . In addition, the Company issued 6,000,000 shares of its common stock to six shareholders for sales of$60,000 , and payment for lease obligation$867,508 in discontinued operations. 6 Although our current resources and cash flows are adequate to pay our current ongoing obligations, we anticipate that our future liquidity requirements will arise from the need to fund our growth and future capital expenditures. The primary sources of funding for such growth requirements are expected to be additional funds raised from the sale of equity and/or debt financing. However, we can provide no assurances that we will be able to obtain additional financing on terms satisfactory to us.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet items reasonably likely to have a material effect on our financial condition.
Recent Accounting Pronouncements
Recent accounting pronouncements issued by the FASB, the AICPA and the
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