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, established
JRSIS Health Care Corporation , a Florida corporation ("JRSS" or the "Company").
On February 25, 2013 , the officer of Jiarun established JRSIS Health Care
Limited ("JHCL"), as a wholly owned subsidiary of the Company, and on September
17, 2012 , the officer of Jiarun established Runteng Medical Group Co., Ltd
("Runteng"), as a wholly owned subsidiary of JHCL. Until April 28, 2022 Runteng,
a Hong Kong registered Investment Company, held 70% equity interest in Jiarun.
On December 20, 2013 , the Company acquired 100% of the issued and outstanding
capital stock of JHCL, for 12,000,000 shares of its common stock. JHCL, through
its wholly owned subsidiary, Runteng Medical Group Co., Ltd , holds majority
ownership in Jiarun, a company duly incorporated, organized and validly existing
under the laws of China . As the parent company, JRSS relies on Jiarun to conduct
100% of its businesses and operations.
On March 17, 2022 , the Company entered into an agreement on the establishment of
Laidian Technology (Zhongshan) Co., Ltd. ("Laidian") with Zhong Zhuowei . The
agreement contains a covenant by Zhong Zhuowei to fund the operations of Laidian
which is 100% owned by Runteng, in consideration of Mr. Zhong's financial
commitment and commitment to provide management services, the Company agreed to
issue 39,130,000 shares of its common stock to Zhong Zhuowei upon the initiation
of operations of Laidian.
On
OnApril 28, 2022 , JRSS completed the spin-off of its subsidiary Jiarun, as JRSS's subsidiary Runteng transferred its 70% equity interest in Jiarun toZhang Junsheng (the "Spin-Off"). In exchange for the 70% equity interest in Jiarun,Zhang Junsheng transferred to Runteng 5,392,000 shares of JRSS' common stock.
On
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 endedSeptember 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 Nine Months Ended
The following table shows key components of the results of operations for the
three and nine months ended
Three Months Ended
September 30, Change
2022 2021 Amount %
Net sales - - - -
Operating costs and expenses:
Salaries and benefits 4,861 - 4,861 n/a
Stock-based compensation 81,821 - 81,821 n/a
Office supplies 4,927 992 3,935 397 %
Rentals and leases 4,323 - 4,323 n/a
Professional fee 34,362 11,556 22,806 197 %
Change in fair value of warrant
liability - (5,077 ) 5,077 (100 )%
Depreciation 2,166 - 2,166 n/a
Total operating costs and expenses 132,460 7,471 124,989 1673 %
Loss from operations before other income
and income taxes (132,460 ) (7,471 ) (124,989 ) 1673 %
Other income - - - -
Loss from operations before income taxes (132,460 ) (7,471 ) (124,989 ) 1673 % Income taxes
- - - -
Net loss from continued operations (132,460 ) (7,471 ) (124,989 ) 1673 %
Net income from discontinued operations - 548,966 (548,966 ) (100 )%
Net income (loss) $ (132,460 ) $ 541,495 $ (673,955 ) (124 )%
Comprehensive income (Loss):
Foreign currency translation adjustment
from continued operations 3,741 7,257 (3,516 ) (48 )%
Foreign currency translation adjustment
from discontinued operations - 98 (98 ) (100 )%
Comprehensive income (loss) $ (128,719 ) $ 548,850 $ (677,569 ) (123 )%
Nine Months Ended
September 30, Change
2022 2021 $ %
Net sales - - - -
Operating costs and expenses:
Salaries and benefits 9,282 - 9,282 n/a
Stock-based compensation 163,643 -
163,643 n/a
Office supplies 34,195 6,184 28,011 453 %
Rentals and leases 10,435 - 10,435 n/a
Professional fee 60,850 31,701 29,149 92 %
Change in fair value of warranty
liability (7 ) 1,636 (1,643 ) (100 )%
Depreciation 3,671 - 3,671 n/a
Total operating costs and expenses 282,069 39,521 242,548 614 %
Loss from operations before other income
and income taxes (282,069 ) (39,521 ) (242,548 ) 614 %
Other income - - - -
Loss from operations before income taxes (282,069 ) (39,521 ) (242,548 ) 614 %
Income tax - - - -
Net loss from continued operations (282,069 ) (39,521 ) (242,548 ) 614 %
Net income (loss) from discontinued
operations (33,393,670 ) 2,100,025 (35,493,695 ) (1690 )%
Net income (loss) $ (33,675,739 ) $ 2,060,504 $ (35,736,243 ) (1734 )%
Comprehensive income (loss):
Foreign currency translation adjustment
from continued operations 21,298 52,129 (30,831 ) (59 )%
Foreign currency translation adjustment
from discontinued operations 301,922 353,332 (51,410 ) (15 )%
Comprehensive income (loss) $ (33,352,519 ) $ 2,465,965 $ (35,818,484 ) (1453 )%
4
Operating Costs and Expenses
The Company's continued operations for the nine months endedSeptember 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$282,069 for the nine months endedSeptember 30, 2022 , 58% 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, remaining$981,858 was the expense of the Company for the coming next 3 years since April of 2022. For the nine months endedSeptember 30, 2022 the Company record$163,643 stock-based compensation expenses.
Loss from operations and net loss
Loss from continued operations before income taxes was$282,069 for the nine months endedSeptember 30, 2022 , attributable to the$163,643 stock-based compensation expenses incurred by issuing 39,130,000 shares of common stock to the Company's new Chairman,Zhong Zhuowei .
On
After deducting the provision for income tax, the Company's net loss for the nine months endedSeptember 30, 2022 was$33,675,739 , representing an increase of$35,736,243 or 1734%, from net income of$2,060,504 recorded for the nine months endedSeptember 30, 2021 . The increase of loss from operations to net loss for the nine months endedSeptember 30, 2022 were primarily due to Jiarun's less satisfactory operation results.
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 nine months endedSeptember 30, 2022 and 2021, foreign currency translation adjustments of$21,298 and$52,129 , respectively, have been reported as other comprehensive income in the consolidated statements of operations and comprehensive income (loss). 5
Liquidity and Capital Resources
As ofSeptember 30, 2022 , the Company had$11,084 of cash and cash equivalents, a decrease of$844,887 from our cash and cash equivalents balance (included discontinued operations) atDecember 31, 2021 . The decrease was primarily caused by our net cash used in investing activities, which was$2,829,408 for the nine months endedSeptember 30, 2022 .
Our working capital at
The primary non-cash component of our working capital atSeptember 30, 2022 was deferred expenses totaling$818,215 . 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, remaining$981,858 was the expense of the Company for the next 3 years since April of 2022. For the nine months endedSeptember 30, 2022 the Company record$163,643 stock-based compensation expenses. Although our current resources and cash flows are adequate to pay our current ongoing obligations, we anticipate that our future liquidity requirements will arise from the need to fund our growth and future capital expenditures. The primary sources of funding for such growth requirements are expected to be additional funds raised from the sale of equity and/or debt financing. However, we can provide no assurances that we will be able to obtain additional financing on terms satisfactory to us.
Cash Flows and Capital Resources
Our cash flows for the nine months ended ofSeptember 30, 2022 and 2021 are summarized below: Nine Months Ended September 30, 2022 2021 Net cash provided by operating activities$ 2,999,322 $ 7,378,481 Net cash used in investing activities (2,829,408 ) (6,444,421 ) Net cash used in financing activities (738,241 ) (1,260,015 ) Effect of exchange rate fluctuation on cash and cash equivalents (276,560 ) 8,770 Net decrease in cash and cash equivalents (844,887 ) (317,185 ) Cash and cash equivalents, beginning of period 855,971 844,827 Cash and cash equivalents, ending of period$ 11,084 $ 527,642
Net Cash Provided by Operating Activities
For the nine months endedSeptember 30, 2022 , we had cash flow from operating activities of$2,999,322 , a decrease of$4,379,159 from$7,378,481 of cash flow for the nine months endedSeptember 30, 2021 . Cash flow from operations decreased primarily because Jiarun hospital spun off from the Company resulting in$3,171,627 cash outflow from the Company atApril 1, 2022 in discontinued operations.
Net cash used in investing activities for the nine months endedSeptember 30, 2022 was$2,829,408 , compared to net cash used in investing activities of$6,444,421 for the nine months endedSeptember 30, 2021 . The cash used in investing activities for the nine months endedSeptember 30, 2022 was mainly used for the purchase of property and equipment.
Net cash used in financing activities for the nine months endedSeptember 30, 2022 was$738,241 , as compared to net cash used in financing activities of$1,260,015 for the nine months endedSeptember 30, 2021 . The cash provided by financing activities for the nine months endedSeptember 30, 2022 was mainly because the Company acquired Laidian inApril 2022 . 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 may be adequate to pay our current ongoing obligations, we anticipate that our future liquidity requirements will arise from the need to fund our growth and future capital expenditures. The primary sources of funding for such growth requirements are expected to be additional funds raised from the sale of equity and/or debt financing from all available sources. However, we can provide no assurances that we will be able to obtain additional financing on terms satisfactory to us.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet items reasonably likely to have a material effect on our financial condition.
Recent Accounting Pronouncements
Recent accounting pronouncements issued by the FASB, the AICPA and the
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