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0001193125-11-308868.txt : 20111114 0001193125-11-308868.hdr.sgml : 20111111 20111114071905 ACCESSION NUMBER: 0001193125-11-308868 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20110930 FILED AS OF DATE: 20111114 DATE AS OF CHANGE: 20111114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Joway Health Industries Group Inc CENTRAL INDEX KEY: 0001263364 STANDARD INDUSTRIAL CLASSIFICATION: [9995] IRS NUMBER: 980221494 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-108715 FILM NUMBER: 111197688 BUSINESS ADDRESS: STREET 1: NO 2 BAOWANG DR STREET 2: BAODI ECONOMIC DEVELOPMENT ZONE CITY: TIANJIN, PRC STATE: F4 ZIP: 300180 BUSINESS PHONE: 862258896888 MAIL ADDRESS: STREET 1: NO 2 BAOWANG DR STREET 2: BAODI ECONOMIC DEVELOPMENT ZONE CITY: TIANJIN, PRC STATE: F4 ZIP: 300180 FORMER COMPANY: FORMER CONFORMED NAME: G2 VENTURES INC DATE OF NAME CHANGE: 20030911 10-Q 1 d226912d10q.htm FORM 10-Q Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from to

Commission File No. 333-108715

Joway Health Industries Group Inc.

(Exact Name of Registrant as Specified in Its Charter)


Nevada		98-0221494
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

No. 2, Baowang Road, Baodi Economic Development Zone, Tianjin, PRC 301800		86-22-22533666
(Address of Principal Executive Offices)		(Issuer’s Telephone Number)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 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 x

The number of shares outstanding of the Issuer’s Common Stock as of November 14, 2011 was 20,018,000 shares.

TABLE OF CONTENTS



PART I - FINANCIAL INFORMATION			1

Item 1. Financial Statements			1

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			20

Item 3. Quantitative and Qualitative Disclosures About Market Risk			31

Item 4. Controls and Procedures			31

PART II - OTHER INFORMATION			32

Item 1. Legal Proceedings			32

Item 1A. Risk Factors			32

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			32

Item 3. Defaults Upon Senior Securities			32

Item 4. Removed and Reserved			32

Item 5. Other Information			32

Item 6. Exhibits			32

SIGNATURES			33

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

In the opinion of management, the accompanying unaudited financial statements included in this Form 10-Q reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


	Page

Condensed Consolidated Balance Sheets as of September 30, 2011 (Unaudited) and December 31, 2010 (Audited)		2

Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 2011 and 2010 (Unaudited)		3

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010 (Unaudited)		4

Notes to Condensed Consolidated Financial Statements		5-19

JOWAY HEALTH INDUSTRIES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	September 30,		December 31,
	2011		2010
	(Unaudited)		(Audited)
ASSETS

CURRENT ASSETS:
Cash	$	4,069,349	$	5,281,420
Accounts receivable, net		33,920		9,638
Other receivables		32,893		81,162
Inventories		1,289,989		711,704
Advances to suppliers		384,955		143,609
Prepaid tax		67,340		—
Prepaid expense		7,699		33,884

Total current assets		5,886,145		6,261,417

PROPERTY, PLANT AND EQUIPMENT, net		6,356,170		5,519,711

OTHER ASSETS:
Intangible assets, net		622,987		615,607
Long-term prepaid expenses		205,205		207,621

Total other assets		828,192		823,228


Total assets	$	13,070,507	$	12,604,356


LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	241,837	$	305,416
Advances from customers		—		1,422
Taxes payable		—		519,726
Salary payable		54,392		—
Other payables		11,887		50,810
Due to related parties		579,994		852,134

Total current liabilities		888,110		1,729,508

COMMITMENTS

STOCKHOLDERS’ EQUITY:
Preferred stock - par value $0.001; 1,000,000 shares authorized; no shares issued and outstanding
Common stock - par value $0.001; 200,000,000 shares authorized; 20,018,000 and 20,000,000 shares issued and outstanding as of September 30, 2011 and December 31, 2010		20,018		20,000
Additional paid-in-capital		7,343,161		7,316,179
Statutory reserves		336,604		336,604
Retained earnings		3,677,986		2,772,488
Accumulated other comprehensive income		804,628		429,577

Total stockholders’ equity		12,182,397		10,874,848

Total liabilities and stockholders’ equity	$	13,070,507	$	12,604,356

The accompanying notes are an integral part of these financial statements

JOWAY HEALTH INDUSTRIES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME


	Three months ended September 30,						Nine months ended September 30,
	2011			2010			2011			2010
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
REVENUES	$	908,973		$	1,761,455		$	3,605,549		$	4,085,296

COST OF REVENUES		227,052			463,276			781,201			1,102,764


GROSS PROFIT		681,921			1,298,179			2,824,348			2,982,532

Selling expenses		141,193			140,546			427,507			376,216
General and administrative expenses		492,195			432,397			1,592,243			958,222

OPERATING EXPENSES		633,388			572,943			2,019,750			1,334,438


INCOME FROM OPERATIONS		48,533			725,236			804,598			1,648,094


Interest income		1,281			1,120			4,456			2,295
Other income		15,181			52,332			391,556			53,707
Other expenses		(11,804	)		(47,246	)		(13,070	)		(73,636	)

OTHER (EXPENSE) INCOME, NET		4,658			6,206			382,942			(17,634	)


INCOME BEFORE INCOME TAXES		53,191			731,442			1,187,540			1,630,460

INCOME TAXES		(21,266	)		143,791			282,042			355,024


NET INCOME		74,457			587,651			905,498			1,275,436

OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustments		113,315			147,632			375,051			183,340


COMPREHENSIVE INCOME	$	187,772		$	735,283		$	1,280,549		$	1,458,776


NET INCOME PER COMMON SHARE, BASIC AND DILUTED	$	0.00		$	0.03		$	0.05		$	0.07


WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, BASIC AND DILUTED		20,018,000			18,515,426			20,018,000			18,515,426

The accompanying notes are an integral part of these financial statements

JOWAY HEALTH INDUSTRIES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine months ended September 30,
	2011			2010
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	905,498		$	1,275,436
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		333,375			241,676
Amortization		14,233			10,746
Stock-based compensation		27,000			—
Changes in operating assets and liabilities:
Accounts receivable, trade		(24,282	)		(46,473	)
Other receivables		48,269			44,773
Inventories		(578,285	)		(493,907	)
Advances to suppliers		(241,346	)		(274,959	)
Prepaid Expense		26,185			—
Accounts payable		(63,579	)		(47,831	)
Advances from customers		(1,422	)		(475,187	)
Other payable		(12,905	)		12,559
Salary and welfare payable		15,925			34,313
Tax payable		(574,617	)		315,305
Accrued expenses		—			58,770

Net cash provided by (used in) operating activities		(125,951	)		655,221


CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property plant and equipment		(1,167,418	)		(244,497	)
Investment in trust		—			1,462,587
Purchase of intangible assets		—			(41,400	)

Net cash provided by (used in) investing activities		(1,167,418	)		1,176,690


CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contribution		—			10,000
Due to related parties		(272,140	)		(548,780	)

Net cash used in financing activities		(272,140	)		(538,780	)


EFFECT OF EXCHANGE RATE CHANGES ON CASH		353,438			183,340


NET INCREASE (DECREASE) IN CASH		(1,212,071	)		1,476,471

CASH, beginning of period		5,281,420			935,719


CASH, end of period	$	4,069,349		$	2,412,190


SUPPLEMENTAL DISCLOSURES:

Income taxes paid	$	530,377		$	240,639
Interest paid	$	—		$	—

The accompanying notes are an integral part of these financial statements

JOWAY HEALTH INDUSTRIES GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION

The consolidated financial statements include the financial statements of Joway Health Industries Group Inc. (referred to herein as “Joway Health”), its subsidiaries, and variable interest entities (“VIEs”) where Joway Health is deemed the primary beneficiary. Joway Health, its subsidiaries and VIEs are collectively referred to herein as the “Company,” “we” and “us”.

Joway Health (formerly G2 Ventures, Inc.) was originally incorporated under the laws of the State of Texas on March 21, 2003. On September 21, 2010, Joway Health entered into a Share Exchange Agreement (the “Share Exchange”) with the sole stockholder of Dynamic Elite International Limited. As a result of the Share Exchange, Dynamic Elite became a wholly-owned subsidiary of Joway Health and the stockholders of Dynamic Elite acquired approximately 76.08% of the issued and outstanding stock of Joway Health. The share exchange transaction resulted in the shareholders of Dynamic Elite acquiring a majority voting interest in Joway Health. Generally accepted accounting principles in the United States of America require that the company whose shareholders retain the majority interest in the combined business be treated as the acquirer for accounting purposes. The reverse acquisition process utilizes the capital structure of Joway Health and the assets and liabilities of Dynamic Elite recorded at historical cost. On December 22, 2010, Joway Health changed its jurisdiction of incorporation from the State of Texas to the State of Nevada.

Dynamic Elite International Limited (referred to herein as “Dynamic Elite”) was incorporated under the laws of the British Virgin Islands on June 2, 2010 as a limited liability company (a BVI company). Dynamic Elite engages in manufacturing and distributing tourmaline products in China. Its wholly owned subsidiary, Tianjin Junhe Management Consulting Co., Ltd. was incorporated on September 15, 2010 in Tianjin, People’s Republic of China (“PRC”). Other than the equity interest in Junhe Consulting, Dynamic Elite does not own any assets or conduct any operations.

Tianjin Junhe Management Consulting Co., Ltd. (referred to herein as “Junhe Consulting”) conducts its business through Tianjin Joway Shengshi Group Co., Ltd. that is consolidated as a variable interest entity.

Tianjin Joway Shengshi Group Co., Ltd. (referred to herein as “Joway Shengshi”) was incorporated in PRC on May 17, 2007. Joway Shengshi is currently owned 99% by Jinghe Zhang, the Company’s current CEO and President and 1% by Song Baogang. Joway Shengshi engages in manufacturing and distributing tourmaline products in China. Shenyang Joway Electronic Technology Co., Ltd., Tianjin Joway Decoration Engineering Co., Ltd. and Tianjin Oriental Shengtang Trading Import & Export Trading Co., Ltd are subsidiaries of Joway Shengshi.

Shenyang Joway Electronic Technology Co., Ltd. (referred to herein as “Joway Technology”) was originally named Liaoning Joway Technology Engineering Co., Ltd. which was incorporated on March 28, 2007 in PRC. The name was changed on June 22, 2011. It engages in the distribution of Tourmaline Activated Water Machines and the construction of Tourmaline Wellness Houses. Prior to July 25, 2010, Joway Shengshi owned 90.91% of Joway Technology. Joway Shengshi entered into a share acquisition agreement with Jingyun Chen, another stockholder of Joway Technology on July 25, 2010 to acquire the remaining 9.09% of the share of Joway Technology. As a result of the share acquisition, Joway Technology became a wholly-owned subsidiary of Joway Shengshi.

Tianjin Joway Decoration Engineering Co., Ltd. (referred to herein as “Joway Decoration”) was incorporated on April 22, 2009 in PRC. It engages in the distribution of Tourmaline Activated Water Machines, Tourmaline Wellness House for family use and Tourmaline Wellness House materials. Prior to July 9, 2010, Joway Shengshi owned 90% of Joway Decoration. Joway Shengshi entered into a share acquisition agreement with Jingyun Chen, another stockholder of Joway Decoration on July 9, 2010 to acquire the remaining 10% of the shares of Joway Decoration. As a result of the share acquisition, Joway Decoration became a wholly-owned subsidiary of Joway Shengshi. Jingyun Chen is currently the General Manager of Joway Decoration.

Tianjin Oriental Shengtang Import & Export Trading Co., Ltd (referred to herein as “Shengtang Trading”) was incorporated on September 18, 2009 in the PRC. It engages in purchasing raw materials which it sells to other companies of the group. Prior to July 28, 2010, Joway Shengshi owned 95% of Shengtang Trading. Joway Shengshi entered into a share acquisition agreement with Wang Aiying, another stockholder of Shengtang Trading on July 28, 2010 to acquire the remaining 5% of the shares of Shengtang Trading. As a result of the share acquisition, Shengtang Trading became a wholly-owned subsidiary of Joway Shengshi.


Name	Domicile and Date of Incorporation	Paid in Capital		Percentage of Effective Ownership	Principal Activities
Joway Health Industries Group Inc.	March 21, 2003, Nevada	USD	20,018	86.96% owned by Crystal Globe Limited 13.04% owned by other institutional and individual investors	Investment Holding
Dynamic Elite International Limited	June 2, 2010, British Virgin Islands	USD	10,000	100% owned by Joway Health Industries Group Inc.	Investment Holding
Tianjin Junhe Management Consulting Co., Ltd.	September 15, 2010, PRC	USD	20,000	100% owned by Dynamic Elite International Limited	Advisory
Tianjin Joway Shengshi Group Co., Ltd.	May 17, 2007, PRC	USD	7,216,140.72	99% owned by Jinghe Zhang, and 1% owned by Baogang Song	Production and distribution of tourmaline products
Shenyang Joway Electronic Technology Co., Ltd.	March 28, 2007, PRC	USD	142,072.97	100% owned by Tianjin Joway Shengshi Group Co., Ltd	Distribution of Tourmaline Activated Water Machine and construction of Tourmaline Wellness House
Tianjin Joway Decoration Engineering Co., Ltd.	April 22, 2009, PRC	USD	292,367.74	100% owned by Tianjin Joway Shengshi Group Co., Ltd	Distribution of Tourmaline Activated Water Machine, Tourmaline Wellness House for family use and Tourmaline Wellness House materials
Tianjin Oriental Shengtang Import & Export Trading Co., Ltd.	September 18, 2009, PRC	USD	292,463.75	100% owned by Tianjin Joway Shengshi Group Co., Ltd	Distribution of tourmaline products

On September 16, 2010, prior to the share exchange, Junhe Consulting entered into a series of contractual agreements (the “Contractual Agreements”) with Joway Shengshi and Joway Shengshi’s owners. The following is a brief description of the Contractual Agreements entered between Junhe Consulting and Joway Shengshi or Joway Shengshi’s owners:

1. Consulting Services Agreement. Pursuant to the consulting services agreement between Junhe Consulting and Joway Shengshi, Junhe Consulting has the right to advise, consult, manage, and operate Joway Shengshi, and collect and own all of the net profits of the Operating Entities.

2. Operating Agreement. Under the operating agreement between Junhe Consulting and Joway Shengshi, Junhe Consulting has the right to recommend director candidates, appoint the senior executives of Joway Shengshi, approve any transactions that may materially affect the assets, liabilities, rights or operations of Joway Shengshi, and guarantee the contractual performance by Joway Shengshi of any agreements with third parties, in exchange for a pledge by Joway Shengshi of its accounts receivable and assets.

3. Voting Rights Proxy Agreement. Under the voting rights proxy agreement between Joway Shengshi’s owners and Junhe Consulting, the owners of Joway Shengshi have vested their collective voting control over Joway Shengshi to Junhe Consulting and will only transfer their respective equity interests in Joway Shengshi to Junhe Consulting or its designee.

4. Option Agreement. Under the option agreement between Joway Shengshi’s owners and Junhe Consulting, the owners of Joway Shengshi have granted Junhe Consulting the irrevocable right and option to acquire all of their equity interests in Joway Shengshi.

5. Equity Pledge Agreement. Under the equity pledge agreement between Joway Shengshi’s owners and Junhe Consulting, the owners of Joway Shengshi have pledged all of their rights, titles and interests in Joway Shengshi to Junhe Consulting to guarantee Joway Shengshi’s performance of its obligations under the Consulting Services Agreement.

As a result of the Contractual Agreements, Joway Shengshi is effectively a variable interest entity of Junhe Consulting. Accordingly, the Company through its wholly-owned subsidiary Junhe Consulting, consolidates Joway Shengshi’s results of operation, assets and liabilities in its financial statements.

In connection with the Share Exchange and as consideration for entering into the VIE Agreements, the shareholders of Joway Shengshi entered into a Call Option Agreement with the sole shareholder of Crystal Globe (the controlling shareholder of Dynamic Elite), pursuant to which the shareholders of Joway Shengshi have the right to purchase up to 100% of the shares of Crystal Globe at an aggregate price equal to $20,000 over the next three years. The Call Option vests as to 34% of the shares of Crystal Globe on April 2, 2011 and as to 33% on April 2 of 2012 and 2013 respectively. As a result, the shareholders of Joway Shengshi will become the indirect beneficial owners of the shares of the Company held by Crystal Globe.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). The Company’s functional currency is the Chinese Renminbi (“RMB”); however, the accompanying consolidated financial statements have been translated and presented in United States Dollars (“USD”). All significant inter-company transactions and balances have been eliminated. The consolidated financial statements include all adjustments that, in the opinion of management, are necessary to make the financial statements not misleading.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and the footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the nine-month period ended September 30, 2011 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2011. The accompanying consolidated financial statements should be read in conjunction with the Company’s form 10-K for the fiscal year ended December 31, 2010 filed on April 14, 2011.

Use of Estimates

The preparation of the consolidated financial statements is in conformity with generally accepted accounting principles in the United States of America, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. Actual results could differ from those estimates.

Basis of Consolidation

The accompanying consolidated financial statements include the Company, its wholly owned subsidiaries, and controlled VIEs. All significant inter-company accounts and transactions have been eliminated in the consolidation.

Pursuant to Accounting Standards Codification Topic 810 “Consolidation”, Joway Shengshi, as a VIE of Junhe Consulting, has been consolidated in the Company’s financial statements. Joway Shengshi’s sales are included in the Company’s total sales, its income from operations is consolidated with the Company’s, and the Company’s net income includes all of Joway Shengshi’s net income.

Based on the various Contractual Agreements, the Company is able to exercise control over the VIEs, and to obtain the full economic benefits. Accordingly, the non–controlling interests have no economic interest in the VIEs.

Foreign Currency Translation

The accompanying consolidated financial statements are presented in USD. The functional currency of the Company is RMB. The consolidated financial statements are translated into USD from RMB at period-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Equity accounts are translated at their historical exchange rates when the equity transactions occurred. The resulting transaction adjustments are recorded as a component of stockholders’ equity. Gains and losses from foreign currency transactions are included in net income.


	For the nine months ended September 30,				For the year ended December 31,
	2011		2010		2010
Period ended RMB: USD Exchange rate		6.4018		6.6981		6.6118
Average RMB: USD Exchange rate		6.50601		6.8164		6.77875

The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into USD at the rates used in translation.

For the nine months ended September 30, 2011 and 2010, foreign currency translation adjustments of $375,051 and $ 183,340, respectively, have been reported as other comprehensive income in the consolidated financial statements.

Other Comprehensive Income

Other comprehensive income is defined as the change in equity during the period from transactions and other events, excluding the changes resulting from investments by owners and distributions to owners. Other comprehensive income is not included in the computation of income tax expense or benefit. Accumulated other comprehensive income represents the accumulated balance of foreign currency translation adjustments.

Concentrations of Credit Risk

The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environment in the PRC, and by the general state of the PRC’s economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. Substantially all of the Company’s cash is maintained with state-owned banks within the PRC, and no deposits are covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts.

Fair Value of Financial Instruments

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820 (formerly Statement of Financial Accounting Standard (“SFAS”) No. 157 Fair Value Measurements) establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as the following:

•

Level 1—defined as observable inputs such as quoted prices in active markets for identical assets or liabilities;

•

Level 2—defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

•

Level 3—defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The carrying amounts reported in the balance sheets for cash, accounts receivable, other receivable, accounts payable, other payable, and amounts due from related parties generally approximate their fair market values based on the short-term maturity of these instruments. ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.

Cash and Cash Equivalents

For financial reporting purposes, the Company considers all highly liquid financial instruments with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents at any point during the period of the financial statements presented. Balances at financial institutions or state-owned banks within the PRC are not covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts.

Accounts Receivable

Accounts receivable are carried at net realizable value. The Company, when necessary, maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of the accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends, and changes in customer payment patterns to evaluate the adequacy of these reserves. As of September 30, 2011 and December 31, 2010, respectively, the Company had no allowance for doubtful accounts.

Inventories

Inventories are stated at the lower of cost, as determined by the specific identification method on contract level (for each individual contract, inventories cost flow is determined by weighted-average method), or the net realizable value, which is determined on selling prices less any further costs expected to be incurred for completion and disposal. The Company regularly evaluates the composition of its inventories to identify slow-moving and obsolete inventories to determine whether valuation allowance is required. As of September 30, 2011 and December 31, 2010, respectively, the Company had no reserves for inventories.

Advances to suppliers

Advances to suppliers represent the cash paid in advance for inventory items or construction in progress. The advance payments are meant to ensure preferential pricing and delivery. The amounts advanced under such arrangements totaled $384,955 and $143,609 as of September 30, 2011 and December 31, 2010, respectively.

Property, Plant, and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation, and include expenditures that substantially increase the useful lives of existing assets.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives are as follows:


Building		20 years
Operating Equipment		10 years
Office furniture and equipment		3 or 5 years
Vehicles		10 years

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts, and any gain or loss is included in the consolidated statements of operations. Maintenance, repairs, and minor renewals are charged directly to expenses as incurred. Significant renewals and betterment to buildings and equipment are capitalized. Leasehold improvements are depreciated over the lesser of the useful life or the life of the lease.

Intangible assets

Intangible assets mainly consist of land use rights. All land located in the PRC is owned by the government and cannot be sold to any individual or company. The land use rights granted to the Company are being amortized using the straight-line method over the lease term of 50 years. Other intangible assets are software programs that are amortized over their estimated useful life of 10 years.

Impairment of Long-Lived Assets

Long-lived assets of the Company are reviewed annually as to whether their carrying value has become impaired, pursuant to the guidelines established in FASB ASC 360 (formerly SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets). The Company considers assets to be impaired if the carrying value exceeds the future projected cash flows from the related operations. The Company also re-evaluates the periods of depreciation and amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives. The Company did not record any impairment loss for the nine months ended September 30, 2011 and 2010.

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the purchase price is fixed or determinable and collectability is reasonably assured.

With respect to sales of product to both franchisee and non-franchisee customers, the Company prepares product shipment upon the receipt of a customer’s purchase order. Sales prices are based on fixed price lists that are different depending on whether the price list is for franchisee customers or for non-franchisee customers. The Company recognizes revenue when the product is shipped. The Company does not sell product to any customers with a right of return as defined in ASC 605-15-25-4. Sales are presented net of value added tax (VAT).

For Tourmaline Wellness House sales, the Company recognizes revenue under the completed contract method. Customers contact the Company with requests to construct a Wellness House. The Company and the customer enter into a contract, at which time the customer pays a deposit of at least one-half of the sales price. A contract is considered completed when all significant costs have been incurred and the project has been accepted by the customer. The contracts have a place for the customer to sign indicating their acceptance of the completed Wellness House. At this time the customer will also pay any remaining balance on the contract. The Company recognizes the full contract revenue at this point. Contract costs consist primarily of materials and labor costs. The construction period of a Wellness House generally does not exceed five days.

Shipping costs

Shipping costs are included in selling expenses and totaled $29,973 and $40,558 for the nine months ended September 30, 2011 and 2010, respectively, and $8,435 and $23,285 for the three months ended September 30, 2011 and 2010, respectively.

Income Taxes

The Company is governed by the Income Tax Law and associated legislations of the PRC. The Company accounts for income taxes in accordance with FASB ASC 740 “Income Taxes” (formerly SFAS No. 109 Accounting for Income Taxes), which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. ASC 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Realization of deferred tax assets is dependent upon future earnings, if any, of which the timing and amount are uncertain.

According to ASC 740, the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50% likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition.

Subsequent Events

The Company evaluates subsequent events for purposes of recognition or disclosure through the date that the financial statements are issued.

Recently Issued Accounting Pronouncements

In December 2010, the FASB issued ASU 2010-28, Intangibles-Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (a consensus of the FASB Emerging Issues Task Force). ASU 2010-28 provides amendments to Topic 350 that modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. As a result, goodwill impairments may be reported sooner than under the current practice. ASU 2010-28 is effective for fiscal years and interim periods within those years, beginning after December 15, 2010, with early adoption not permitted. The provisions of ASU 2010-28 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2010 and should be applied prospectively. The adoption of this standard did not have a material effect on the Company’s consolidated financial statements.

In December 2010, FASB issued ASU 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations (a consensus of the FASB Emerging Issues Task Force). ASU 2010-29 provides amendments to subtopic 805-10 of the FASB ASC that require a public entity to disclose pro forma information for business combinations that occurred in the current reporting period. ASU 2010-29 is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period, beginning on or after December 15, 2010, with early adoption permitted. The adoption of this standard did not have a material effect on the Company’s consolidated financial statements.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. ASU 2011-04 changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements to ensure consistency between U.S. GAAP and International Financial Reporting Standards (“IFRS”). ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is to be applied prospectively. ASU 2011-04 will be effective for interim and annual periods beginning after Dec. 15, 2011, with early adoption permitted. The Company believes that the adoption of this standard will not materially expand its consolidated financial statement footnote disclosures.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which amends the current comprehensive income guidance. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity. Instead, we must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. ASU 2011-05 will be effective for interim and annual periods beginning after Dec. 15, 2011, with early adoption permitted. The adoption of ASU 2011-05 will not have a material impact on the Company’s consolidated financial statements.

In September 2011, the FASB issued ASU 2011-08, Testing Goodwill for Impairment, which amends the guidance in ASC 350-20, “Intangibles – Goodwill and Other – Goodwill”. Under ASU 2011-08, entities have the option of performing a qualitative assessment before calculating the fair value of the reporting unit when testing goodwill for impairment. If the fair value of the reporting unit is determined, based on qualitative factors, to be more likely than not less than the carrying amount of the reporting unit, then entities are required to perform the two-step goodwill impairment test. ASU 2011-08 is effective for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company does not anticipate that the adoption of this standard will have a material effect on the Company’s consolidated financial statements.

NOTE 3 – ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:


	September 30,		December 31,
	2011		2010
Accounts receivable	$	33,920	$	9,638
Less: Allowance for bad debt		—		—

Accounts receivable	$	33,920	$	9,638

NOTE 4 – INVENTORIES

Inventories consist of the following:


	September 30,		December 31,
	2011		2010
Raw materials	$	325,025	$	100,706
Packages		6,932		11,406
Finished goods		933,288		557,251
Goods shipped in transit		—		21,891
Low value consumables		24,744		20,450

Total	$	1,289,989	$	711,704

Goods shipped in transit represent goods on the way from the suppliers to the Company. Low value consumables represent low value and easily worn out items and are amortized on an equal-split amortization method. Pursuant to this method, half the value of the low value consumable is be amortized once used and the remaining half value is be amortized when disposed of.

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:


	September 30,			December 31,
	2011			2010
Building	$	5,417,856		$	5,245,777
Operating Equipment		328,632			313,118
Office furniture and equipment		356,168			206,821
Vehicles		1,083,782			250,888

Total		7,186,438			6,016,604
Less: accumulated depreciation		(830,268	)		(496,893	)

Property, plant and equipment, net	$	6,356,170		$	5,519,711

Depreciation expense for the nine months ended September 30, 2011 and 2010 amounted to $333,375 and $241,676, respectively, and for the three months ended September 30, 2011 and 2010 amounted to $116,110 and $96,027, respectively.

NOTE 6 – INTANGIBLE ASSETS

Intangible assets consist of the following:


	September 30,			December 31,
	2011			2010
Land use rights	$	644,828		$	624,347
Other intangible assets		35,641			34,509

Total		680,469			658,856
Less: accumulated amortization		(57,482	)		(43,249	)

Intangible assets, net	$	622,987		$	615,607

Amortization expense of intangible assets for the nine months ended September 30, 2011 and 2010 was $14,233 and $10,746, respectively, and for the three months ended September 30, 2011 and 2010 was $4,783 and $4,491, respectively.

The estimated amortization expense for the next five years is as the following:


Estimated amortization expense for the year ending December 31,	Amount
2011	$	16,039
2012	$	16,039
2013	$	16,039
2014	$	16,039
2015	$	16,039
Thereafter	$	535,412

NOTE 7 – RELATED PARTY TRANSACTIONS

Payables due to related parties consists of the following:


	September 30,		December 31,
	2011		2010
Shenyang Joway Industrial Development Co., Ltd.	$	535,563	$	613,721
Jinghe Zhang		44,431		235,336
Jingyun Chen		—		3,077

Total	$	579,994	$	852,134

Transactions with Shenyang Joway

Shenyang Joway Industrial Development Co., Ltd. (“Shenyang Joway”) was formed in 2005 in Shenyang, China by Mr. Jinghe Zhang and three other individuals. Mr. Zhang holds more than 50% of the equity in Shenyang Joway. Shenyang Joway was in the business of marketing and distributing clothing and related products to other companies. In 2009 Mr. Zhang decided to shut down the operations of Shenyang Joway in order to focus his attention on the Joway Shengshi’s business. Shenyang Joway has ceased operations, although it still exists as a legal entity, and Joway Shengshi was able to find new suppliers with no material adverse impact to the Company.

•

On January 15, 2009, Joway Shengshi entered into a sales contract with Shenyang Joway, pursuant to which Joway Shengshi agreed to purchase inventory of $27,560 from Shenyang Joway.

•

On February 15, 2009, Joway Shengshi entered into an Equipment Sales Contract with Shenyang Joway. Pursuant to the agreement, Joway Shengshi agreed to purchase certain operating and office equipment in the amount of $158,832 from Shenyang Joway.

•

On December 1, 2009, we, through our subsidiary Joway Shengshi, entered into a royalty-free license agreement with Shenyang Joway. Pursuant to the license agreement, we are authorized to use the trademark “Xi” for a term of nine years.

•

On December 20, 2009, Joway Shengshi entered into a sales contract with Shenyang Joway. Pursuant to the sales contract, Joway Shengshi agreed to purchase inventory of $137,395 from Shenyang Joway.

•

On May 7, 2007, the Company’s subsidiary Joway Shengshi entered into an agreement with Shenyang Joway pursuant to which Joway Shengshi and Shenyang Joway agreed to provide each other with interest-free, unsecured advances for working capital. On May 10, 2007, the Company’s subsidiary Joway Technology and Shenyang Joway entered into an agreement pursuant to which Joway Technology and Shenyang Joway agreed to provide each other with interest-free, unsecured advances for working capital. Through December 31, 2008, Joway Technology advanced $58,568 to Shenyang Joway, which was paid off by Shenyang Joway to Joway Technology in 2009. Through December 31, 2010, Shenyang Joway advanced an aggregate of $791,701 to Joway Shengshi and Joway Technology. During the nine months ended September 30, 2011, the Company repaid $78,158 of these advances. As of September 30, 2011, the total unpaid principal balance due Shenyang Joway for advances was $535,563. Shenyang Joway ceased operations at the end of 2009.

Transactions with Jinghe Zhang

•

On December 1, 2009, the Company, through its subsidiary Joway Shengshi, entered into a royalty-free license agreement with Jinghe Zhang, our President, Chief Executive Officer and director. Pursuant to the license agreement, we are authorized to use the trademark “Joway” for a term of nine years and five patents from December 1, 2009 till the expiration dates of the patents.

•

On May 10, 2007, Joway Shengshi entered into a cash advance agreement with Jinghe Zhang, our President, Chief Executive Officer and director. Pursuant to the agreement, Jinghe Zhang agreed to advance operating capital to Joway Shengshi. The advances are interest free, unsecured, and have no specified repayment terms. The agreement is valid throughout Joway Shengshi’s term of operation. During the period beginning May 17, 2007 (inception of Joway Shengshi) through September 30, 2011, Joway Shengshi received cash advances in the aggregate principal amount of $4,637,397 from Jinghe Zhang of which $4,592,966 has been repaid. In 2010 and 2011, Joway Shengshi was advanced $0 by Jinghe Zhang. As of September 30, 2011, the total unpaid principal balance due Jinghe Zhang for advances was $44,431.

•

On May 10, 2007, Joway Technology entered into a cash advance agreement with Jinghe Zhang, our President, Chief Executive Officer and director. Pursuant to the agreement, Jinghe Zhang agreed to advance operating capital to Joway Technology. The advances are interest free, unsecured, and have no specified repayment terms. The agreement is valid throughout Joway Technology’s term of operation. During the period beginning March 28, 2007 (inception of Joway Technology) through December 31, 2010, Joway Technology received cash advances in the aggregate principal amount of $22,031 from Jinghe Zhang all of which has been repaid. As of September 30, 2011, the total unpaid principal balance due Jinghe Zhang for advances was $0.

Other Related Party Transactions

Jingyun Chen is the General Manager of Joway Technology and Joway Decoration. In November, 2010, the Company received $3,077 of insurance refund on behalf of Jingyun Chen. On May 4, 2011, the Company paid the proceeds of the insurance refund of $3,077 to Jingyun Chen.

The amounts owed to related parties are non-interest bearing and have no specified repayment terms.

NOTE 8 – INCOME TAXES

The Company operations in the People’s Republic of China are subject to the Income Tax Law of the People’s Republic of China. Pursuant to the PRC Income Tax Laws, the Company is subject to the Enterprise Income Tax (“EIT”) which is generally a statutory rate of 25% beginning January 2008, on income as reported in its statutory financial statements after appropriate tax adjustments. The Company’s subsidiary, Joway Decoration, as a wholesale and retail enterprise, is taxed at the income tax rate of 5% of revenue in 2011 (4% in 2010) pursuant to “Measures for Verification Collection of Enterprise Income Tax” issued by the PRC State Administration of Taxation.

The table below summarizes the differences between the PRC statutory federal rate and the Company’s effective tax rate:


	For the nine months ended September 30,
	2011			2010
Tax computed at China statutory rates		25	%		25	%
Effect of reduced rate on Joway Decoration (1)		(9	%)		(3	%)
Tax adjustment from China tax authority for 2010 income tax (2)		6	%		0
Effective rate		22	%		22	%

(1)	Pursuant to Measures for Verification Collection of Enterprise Income Tax issued by the PRC State Administration of Taxation, Joway Decoration, as a wholesale and retail enterprise, is subject to taxable income at a verified rate of 5% of revenue (4% for 2010).

(2)	The Company’s 2010 Corporate Income Tax Filing in China was reviewed by the PRC tax authority. As a result, the Company’s income was reduced for the 2010 taxable year and the Company paid additional income tax of $61,653.

As of September 30, 2011 and 2010, the Company had no deferred tax assets or liabilities.

NOTE 9 – STATUTORY RESERVES

Pursuant to the laws and regulations of the PRC, the Company’s PRC subsidiaries are required to allocate a portion of their after-tax income to the statutory reserves funds. The minimum statutory reserves allocation is 10% of after tax income until the reserves reach 50% of the entities’ registered capital or members’ equity. The reserve funds are not transferable to the Company in the form of cash dividends, loans or advances. Thus, the reserve funds are not available for distribution except in liquidation. As of September 30, 2011, the Company’s subsidiaries had allocated $336,604 to statutory reserves.

NOTE 10 – OTHER INCOME

Other income primarily consists of subsidies from the Tianjin Baodi District Management Committee and short-term investment income.

Joway Shengshi and Joway Decoration are located in Tianjin Baodi District. Pursuant to a series of investment encouragement policies issued by the Tianjin Baodi government in January 2011, Joway Shengshi and Joway Decoration were awarded a total of RMB 2,307,012 (~ US $354,597) by the Tianjin Baodi District Management Committee for the contribution on tax revenue for the year of 2009 and 2010 in Tianjin Baodi District.

NOTE 11 – SEGMENTS

In 2011 and 2010, the Company operated in three reportable business segments - (1) Healthcare Knitgoods Series, (2) Daily Healthcare and Personal Care Series, and (3) Wellness House and Activated Water Machine Series. The Company’s reportable segments are strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations. Information with respect to these reportable business segments is as the following:

For the three months ended September 30, 2011


	Sales		COGS		Gross profit		Income (loss) from operations			Depreciation and amortization		Assets

Healthcare Knitgoods Series	$	416,895	$	64,393	$	352,502	$	20,125		$	61,563	$	277,290
Daily Healthcare and Personal Care Series		124,910		43,700		81,210		(15,218	)		17,551		227,929
Wellness House and Activated Water Machine Series		367,168		118,959		248,209		43,626			41,779		794,513

Segment Totals	$	908,973	$	227,052	$	681,921		48,533		$	120,893		1,299,732

Other Income (Expense), net								4,658
Income Tax								(21,266	)

Unallocated Assets													11,770,775

Net Income							$	74,457

Total Assets												$	13,070,507

For the three months ended September 30, 2010


	Sales		COGS		Gross profit		Income from operations		Depreciation and amortization		Assets

Healthcare Knitgoods Series	$	989,350	$	209,846	$	779,504	$	383,094	$	55,979	$	416,350
Daily Healthcare and Personal Care Series		317,904		83,460		234,444		106,673		17,940		213,666
Wellness House and Activated Water Machine Series		454,201		169,970		284,231		235,469		26,599		505,790

Segment Totals	$	1,761,455	$	463,276	$	1,298,179		725,236	$	100,518		1,135,806

Other Income (Expense), net								6,206
Income Tax								143,791

Unallocated Assets												9,603,318

Net Income							$	587,651

Total Assets											$	10,739,124

For the nine months ended September 30, 2011


	Sales		COGS		Gross profit		Income from operations		Depreciation and amortization		Assets

Healthcare Knitgoods Series	$	2,149,554	$	358,455	$	1,791,099	$	466,226	$	207,237	$	277,290
Daily Healthcare and Personal Care Series		571,503		154,581		416,922		64,682		55,098		227,929
Wellness House and Activated Water Machine Series		884,492		268,165		616,327		273,690		85,273		794,513

Segment Totals	$	3,605,549	$	781,201	$	2,824,348		804,598	$	347,608		1,299,732

Other Income (Expense), net								382,942
Income Tax								282,042

Unallocated Assets												11,770,775

Net Income							$	905,498

Total Assets											$	13,070,507

For the nine months ended September 30, 2010


	Sales		COGS		Gross profit		Income from operations			Depreciation and amortization		Assets

Healthcare Knitgoods Series	$	2,429,967	$	515,229	$	1,914,738	$	1,031,589		$	150,143	$	416,350
Daily Healthcare and Personal Care Series		796,224		223,830		572,394		283,014			49,197		213,666
Wellness House and Activated Water Machine Series		859,105		363,705		495,400		333,491			53,082		505,790

Segment Totals	$	4,085,296	$	1,102,764	$	2,982,532		1,648,094		$	252,422		1,135,806

Other Income (Expense), net								(17,634	)
Income Tax								355,024

Unallocated Assets													9,603,318

Net Income							$	1,275,436

Total Assets												$	10,739,124

NOTE 12 – FRANCHISE REVENUES

The Company enters into franchise agreements to develop retail outlets for the Company’s products. These agreements provide that franchisees will sell Company products exclusively at a predetermined retail price. In exchange, the Company provides them with geographic exclusivity, discounted products, training, and support. The agreements also require franchisees to adhere to certain standards of product merchandising, promotion, and presentment. The agreements also prohibit franchisees from selling competitors’ products. The agreements do not require any initial franchise fees from the franchisees, nor do they require the franchisees to pay continuing royalties. The agreements do not require the franchisees to purchase any minimum levels of product, but do require that they make at least one purchase during each year. The Company does not manage the franchisees’ levels of product. Franchisees hold periodic conferences, assisted by the Company’s marketing department, to promote product awareness and introduce new products. The franchising agreements are generally for terms of three years and are renewable at the mutual agreement of both parties. The franchising agreements are cancelable at the Company’s discretion if franchisees violate the terms of the agreements.

The following is a breakdown of revenue between franchise and non-franchise customers:


	For the three months ended September 30,				For the nine months ended September 30,
	2011		2010		2011		2010

Sales to franchise customers	$	838,309	$	1,578,801	$	3,358,318	$	3,595,532
Sales to non-franchise customers		70,664		182,654		247,231		489,764


Total sales	$	908,973	$	1,761,455	$	3,605,549	$	4,085,296

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes thereto included in Item 1 of this Quarterly Report on Form 10-Q and with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 14, 2011.

FORWARD-LOOKING STATEMENTS:

Certain statements made in this report may constitute “forward-looking statements on our current expectations and projections about future events.” These forward-looking statements involve known or unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases you can identify forward-looking statements by some words such as “may,” “should,” “potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. These statements are based on our current beliefs, expectations, and assumptions, and are subject to a number of risks and uncertainties. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. These forward-looking statements are made as of the date of this report, and we assume no obligation to update these forward-looking statements whether as a result of new information, future events, or otherwise, other than as required by law. In light of these assumptions, risks, and uncertainties, the forward-looking events discussed in this report might not occur and actual results and events may vary significantly from those discussed in the forward-looking statements.

Overview

General

We develop, manufacture, market, distribute, and sell products, including knit goods, daily healthcare and personal care products, and wellness house and activated water machine products, that are coated, embedded or filled with tourmaline. Most of our products, such as clothing, bedding, and mattresses are purchased as finished products which we then coat and/or infuse with liquid or granular tourmaline using one or more of our manufacturing techniques. We conduct all of our operations in Tianjin City, China and distribute most of our products to more than 200 franchisees in China. Our franchisees, in turn, sell the products to their customers. All of our revenues to date have been generated by sales to customers located in the PRC.

All of our operations are conducted through Joway Shengshi and its three subsidiaries, Joway Technology, Joway Decoration, and Shengtang Trading. Joway Shengshi engages in the manufacturing and distribution of tourmaline health-related products such as knit goods, and daily healthcare and personal care products. Joway Technology and Joway Decoration engage in the manufacturing and distribution of activated water machines and wellness houses. We utilize our Shengtang Trading subsidiary to purchase raw materials, which are then sold to Joway Shengshi and Joway Decoration.

Beginning in 2009, we began to develop a franchise network to distribute our healthcare knit goods, daily healthcare products and personal care products. Through these franchisees, we were able to significantly increase sales of our healthcare knit goods segment and daily healthcare and personal care segment. In 2010, we began distributing our wellness house and activated water machine products through our franchise network.

Description of Selected Income Statement Items

Revenues. We generate revenue from sales of our Healthcare Knitgoods Series, Daily Healthcare and Personal Care Series and Wellness House and Activated Water Machine Series.

Cost of goods sold. Cost of goods sold consists of costs directly attributable to production, including the cost of raw materials, salaries for staff engaged in production activity, electricity, depreciation, packing materials, and related expenses.

Operating expenses. Our total operating expenses consist of sales and marketing expenses and general and administrative expenses. Sales and marketing expenses consist primarily of salaries and traveling expenses of our marketing department employees, transportation expenses, and advertising expenses. General and administrative expenses consist primarily of salaries of our administrative department employees, payroll taxes and benefits, general office expenses and depreciation. We expect administrative expenses to continue to increase as we incur expenses related to costs of compliance with U.S. securities laws and regulations, and our reporting obligations thereunder, including increased audit and legal fees and investor relations expenses.

Other (expense) income. Our other (expense) income consists primarily of interest income, subsidy income, and other revenue from sales of obsolete equipment.

Income taxes. According to the revised Enterprise Income Tax Law effective as of January 1, 2008, the income tax rate of our PRC subsidiaries is generally 25%. Joway Health Industries Group Inc. was established under the laws of the State of Nevada and is subject to U.S. federal income tax and Nevada annual reporting requirements. No provision for income taxes in the United States has been made as the Company has no income taxable in the United States. The Company’s PRC subsidiaries expect to use their retained earnings to support their PRC operations, and do not expect to declare any dividends within the foreseeable future.

Results of Operations

The following table sets forth certain information regarding our results of operations.


	For the three months ended September 30,					For the nine months ended September 30,
	2011			2010		2011		2010
REVENUES	$	908,973		$	1,761,455	$	3,605,549	$	4,085,296
COST OF REVENUES		227,052			463,276		781,201		1,102,764

GROSS PROFIT		681,921			1,298,179		2,824,348		2,982,532
OPERATING EXPENSES		633,388			572,943		2,019,750		1,334,438

INCOME FROM OPERATIONS		48,533			725,236		804,598		1,648,094
OTHER (EXPENSE) INCOME, NET		4,658			6,206		382,942		(17,634	)

INCOME BEFORE INCOME TAXES		53,191			731,442		1,187,540		1,630,460
INCOME TAXES		(21,266	)		143,791		282,042		355,024

NET INCOME	$	74,457		$	587,651	$	905,498	$	1,275,436

Business Segments

In 2011 and 2010, we operated in three reportable business segments – (1) Healthcare Knitgoods, (2) Daily Healthcare and Personal Care Products and (3) Wellness House and Activated Water Machine Products. The following table sets forth the contributions of each reportable business segment in dollars and as a percent of revenue:

For the three months ended September 30, 2011


	Healthcare Knitgoods Series			% of Total			Daily Healthcare and Personal Care Series			% of Total			Wellness House and Activated Water Machine Series			% of Total			Total
REVENUES	$	416,895			45.9	%	$	124,910			13.7	%	$	367,168			40.4	%	$	908,973
COST OF REVENUES		64,393			28.4	%		43,700			19.2	%		118,959			52.4	%		227,052

GROSS PROFIT		352,502			51.7	%		81,210			11.9	%		248,209			36.4	%		681,921
GROSS MARGIN		84.6	%					65.0	%					67.6	%					75.0	%
OPERATING EXPENSES		332,377			52.5	%		96,428			15.2	%		204,583			32.3	%		633,388

INCOME FROM OPERATIONS	$	20,125			41.5	%	$	(15,218	)		-31.4	%	$	43,626			89.9	%	$	48,533

For the three months ended September 30, 2010


	Healthcare Knitgoods Series			% of Total			Daily Healthcare and Personal Care Series			% of Total			Wellness House and Activated Water Machine Series			% of Total			Total
REVENUES	$	989,350			56.2	%	$	317,904			18.0	%	$	454,201			25.8	%	$	1,761,455
COST OF REVENUES		209,846			45.3	%		83,460			18.0	%		169,970			36.7	%		463,276

GROSS PROFIT		779,504			60.0	%		234,444			18.1	%		284,231			21.9	%		1,298,179
GROSS MARGIN		78.8	%					73.7	%					62.6	%					73.7	%
OPERATING EXPENSES		396,410			69.2	%		127,771			22.3	%		48,762			8.5	%		572,943

INCOME FROM OPERATIONS	$	383,094			52.8	%	$	106,673			14.7	%	$	235,469			32.5	%	$	725,236

For the nine months ended September 30, 2011


	Healthcare Knitgoods Series			% of Total			Daily Healthcare and Personal Care Series			% of Total			Wellness House and Activated Water Machine Series			% of Total			Total
REVENUES	$	2,149,554			59.6	%	$	571,503			15.9	%	$	884,492			24.5	%	$	3,605,549
COST OF REVENUES		358,455			45.9	%		154,581			19.8	%		268,165			34.3	%		781,201

GROSS PROFIT		1,791,099			63.4	%		416,922			14.8	%		616,327			21.8	%		2,824,348
GROSS MARGIN		83.3	%					73.0	%					69.7	%					78.3	%
OPERATING EXPENSES		1,324,873			65.6	%		352,240			17.4	%		342,637			17.0	%		2,019,750

INCOME FROM OPERATIONS	$	466,226			57.9	%	$	64,682			8.0	%	$	273,690			34.0	%	$	804,598

For the nine months ended September 30, 2010


	Healthcare Knitgoods Series			% of Total			Daily Healthcare and Personal Care Series			% of Total			Wellness House and Activated Water Machine Series			% of Total			Total
REVENUES	$	2,429,967			59.5	%	$	796,224			19.5	%	$	859,105			21.0	%	$	4,085,296
COST OF REVENUES		515,229			46.7	%		223,830			20.3	%		363,705			33.0	%		1,102,764

GROSS PROFIT		1,914,738			64.2	%		572,394			19.2	%		495,400			16.6	%		2,982,532
GROSS MARGIN		78.8	%					71.9	%					57.7	%					73.0	%
OPERATING EXPENSES		883,149			66.2	%		289,380			21.7	%		161,909			12.1	%		1,334,438

INCOME FROM OPERATIONS	$	1,031,589			62.6	%	$	283,014			17.2	%	$	333,491			20.2	%	$	1,648,094

For The Three Months Ended September 30, 2011 Compared to September 30, 2010

Revenue. For the three months ended September 30, 2011, revenue was $908,973 compared to $1,761,455 for the three months ended September 30, 2010, a decrease of $852,482 or 48.4%. This decrease was mainly attributable to the decrease in revenue from healthcare knit goods segment. In this segment, our main products are mostly durable consumables such as our mattress products and our wellness houses for family use. In the third quarter of 2010 most of our franchisees were new customers and had high initial demand for our main products. Our franchisees’ demand for our products may have been affected because of the large amount of our main products they purchased in 2010. Aimed at this situation, we plan to develop more fast consumables in the future. For instance, we plan to introduce a line of cosmetics and edible health products later this year. In addition, we strengthened the enforcement of the terms of our franchise agreements and policies in 2011 after focusing mostly on increasing franchise stores in 2010. As a result, the number of our franchisees increased more slowly in 2011.

Revenue from the healthcare knit goods segment decreased by $572,455, or 57.9% to $416,895 for the three months ended September 30, 2011 from $989,350 for the three months ended September 30, 2010. This was primarily due to $0.5 million decrease from $0.8 million to $0.3 million in sales of our mattress products. Our mattress products are durable consumables, and our revenues may have been impacted by the large orders of this product by our franchisees in 2010.

Revenue from daily healthcare and personal care products decreased by $192,994 or 60.7% to $124,910 for the three months ended September 30, 2011 from $317,904 for the three months ended September 30, 2010. This was primarily due to a decrease in sales of our Tourmaline Knee Protector, Tourmaline Waist Protector, and Tourmaline Scarf. With the purchase demand of our franchisees shrinking this year, the sales of the three best selling products in 2010 suffered greatly.

Revenue from wellness houses and activated water machines decreased by $87,033 or 19.2% to $367,168 for the three months ended September 30, 2011 from $454,201 for the three months ended September 30, 2010. This was primarily due to a decrease in sales of wellness houses for family use. In August 2010, we launched our new wellness houses for family use. As a result, our franchisees purchased a large number of our wellness houses in August and September, 2010. Since our wellness houses are durable consumables, the large number of purchases by our franchisees in 2010 may have had an adverse affect on our sales in 2011. In addition, in September 2011 we began to promote a new wellness house for family use with more functionality which we introduced in October 2011. As a result, some franchisees cancelled their purchase orders for older models. Since the new wellness house model only holds two persons and its price is higher than our older models with the same capacity, we anticipate that sales of our existing wellness house models will not suffer a significant adverse affect in the future.

Cost of Goods Sold. For the three months ended September 30, 2011, cost of goods sold was $227,052 compared to $463,276 for the three months ended September 30, 2010, a decrease of $236,224, or 51%. This decrease was mainly due to the decrease in sales.

Cost of goods sold for the healthcare knit goods segment decreased to $64,393 for the three months ended September 30, 2011 from $209,846 for the three months ended September 30, 2010, a decrease of $145,453 or 69.3%. This decrease was mainly due to the decrease in sales as well as a decrease in the cost of our mattress products as a result of the decrease in sales.

Cost of goods sold for the daily healthcare and personal care segment decreased to $43,700 for the three months ended September 30, 2011 from $83,460 for the three months ended September, 2010, a decrease of $39,760 or 47.6%. This decrease was mainly due to the decrease in the cost of Xin-Nao-Ling Fish Oil Soft Gel and Zhi-Li-Bao Fish Oil Soft Gel. The decrease in cost is partly due to the slight decrease in sales of these two products for the third quarter of 2011 compared to the same period of 2010, and mainly due to the significant decrease in their materials cost which has a high cost rate.

Cost of goods sold for our wellness house and activated water machine segment decreased to $118,959 for the three months ended September 30, 2011 from $169,970 for the three months ended September 30, 2010, a decrease of $51,011 or 30%. This decrease was mainly due to the decrease in cost of wellness houses for family use as a result of the decrease in sales.

Gross profit. Our gross profit decreased by $616,258 or 47.5% to $681,921 for the three months ended September 30, 2011, compared to $1,298,179 for the three months ended September 30, 2010. This decrease was mainly due to the decrease in gross profit for healthcare knit goods segment and daily healthcare and personal care segment. Our gross margin was 75% for the three months ended September 30, 2011, compared to 73.7% for the three months ended September 30, 2010. This increase was mainly due to the increase of gross margin in the healthcare knit goods segment and the wellness house and activated water machine segments.

Gross profit of the healthcare knit goods segment decreased by $427,002 or 54.8% to $352,502 for the three months ended September 30, 2011 compared to $779,504 for the three months ended September 30, 2010. This decrease was mainly due to decreased sales of our mattress products. The gross margin of our healthcare knit goods segment increased from 78.8% for the three months ended September 30, 2010 to 84.6% for the three months ended September 30, 2011. This was mainly due to the introduction of new healthcare knit goods products with higher gross margins, such as our Tourmaline Wool quilt and Tourmaline Skinny Pant products.

Gross profit of the daily healthcare and personal care segment decreased by $153,234 or 65.4% to $81,210 for the three months ended September 30, 2011, compared to $234,444 for the three months ended September 30, 2010. This decrease was primarily due to the decreased sales of our Tourmaline Knee Protector, Tourmaline Waist Protector, and Tourmaline Scarf products. The gross margin of our daily healthcare and personal care segment declined from 73.7% for the three months ended September 30, 2010 to 65% for the three months ended September 30, 2011. This decrease was mainly due to the decrease in sales of our Tourmaline Knee Protector, Tourmaline Waist Protector, and Tourmaline Scarf products which have higher gross margins.

Gross profit of the wellness house and activated water machine segment decreased by $36,022 or 12.7% to $248,209 for the three months ended September 30, 2011, compared to $284,231 for the three months ended September 30, 2010. This decrease was mainly due to a decrease in sales of wellness houses for family use. The gross margin of our wellness house and activated water machine segment increased from 62.6% for the three months ended September 30, 2010 to 67.6% for the three months ended September 30, 2011. This increase was mainly due to the fact that our Tourmaline Water Machines have a lower cost of goods.

Operating expenses. Our total operating expenses consist of sales and marketing expenses and general and administrative expenses. Our total operating expenses increased by $60,445, or 10.5%, from $572,943 for the three months ended September 30, 2010 to $633,388 for the three months ended September 30, 2011. This increase was mainly due to the increase in audit and attorney fees after becoming a listed company and employee salaries. Operating expenses for healthcare knit goods segment decreased by $64,033 or 16.2% to $332,377 for the three months ended September 30, 2011 from $396,410 for the three months ended September 30, 2010. Operating expenses for daily healthcare and personal care segment decreased by $31,343 or 24.5% to $96,428 for the three months ended September 30, 2011 from $127,771 for the three months ended September 30, 2010. The decrease in operating expenses for the healthcare knit goods segment and the daily healthcare and personal care segment was attributable to the reduced marketing expense and shipping expense with the decrease in sales. Operating expenses for our wellness house and activated water machine segment increased by $155,821 or 319.6% to $204,583 for the three months ended September 30, 2011 from $48,762 for the three months ended September 30, 2010. With more and more emphasis on the wellness house and activated water machine segment by us in 2011, the marketing expenses and management expenses for this segment increased as a result.

Income from operations. As a result of the foregoing, our income from operations was $48,533 for the three months ended September 30, 2011, compared to $725,236 for the three months ended September 30, 2010, a decrease of $676,703. This decrease was mainly due to both the decrease in sales and the increase in operating expenses.

Income taxes. Our income tax expenses were negative $21,266 for the three months ended September 30, 2011, compared to $143,791 for the three months ended September 30, 2010. This was mainly due to the facts that Joway Shengshi incurred loss for the three months ended September 30, 2011 and the fact that the taxable income amount of Joway Decoration and other subsidiaries could not cover Joway Shengshi’s loss for the same period. As a result, our accumulated income tax was reduced in the third quarter of 2011.

Net income. For the three months ended September 30, 2011, our net income was $74,457 compared to $587,651 for the three months ended September 30, 2010. This decrease was mainly due to the decrease in net Joway Shengshi’s net income.

For The Nine Months Ended September 30, 2011 Compared to September 30, 2010

Revenue. For the nine months ended September 30, 2011, revenue was $3,605,549 compared to $4,085,296 for the nine months ended September 30, 2010, a decrease of $479,747 or 11.7%. This decrease was primarily due to the decrease in sales of our healthcare knit goods segment and daily healthcare and personal care segment which was caused by reduced sales of our main products which are durable consumables and the slower growth of our franchisee base in 2011 as discussed above.

Revenue from the healthcare knit goods segment decreased by $280,413, or 11.5% to $2,149,554 for the nine months ended September 30, 2011 from $2,429,967 for the nine months ended September 30, 2010. This decrease was mainly due to $0.3 million decrease in sales of our mattress products.

Revenue from the daily healthcare and personal care segment decreased by $224,721 or 28.2% to $571,503 for the nine months ended September 30, 2011 from $796,224 for the nine months ended September 30, 2010. This decrease was primarily due to decrease in sales of Tourmaline Waist Protector and Tourmaline Soap.

Revenue from the wellness houses and activated water machines segment increased by $25,387 or 3% to $884,492 for the nine months ended September 30, 2011 from $859,105 for the nine months ended September 30, 2010. This increase was mainly due to an increase in sales of our Tourmaline Water Machine product.

Cost of Goods Sold. For the nine months ended September 30, 2011, cost of goods sold was $781,201 compared to $1,102,764 for the nine months ended September 30, 2010, a decrease of $321,563, or 29.2%. This decrease was mainly due to the decreased sales in healthcare knit goods segment.

Cost of goods sold for the healthcare knit goods segment decreased to $358,455 for the nine months ended September 30, 2011 from $515,229 for the nine months ended September 30, 2010, a decrease of $156,774 or 30.4%. This decrease was mainly due to the decrease in cost of our mattress products with the decrease in sales.

Cost of goods sold for the daily healthcare and personal care segment decreased to $154,581 for the nine months ended September 30, 2011 from $223,830 for the nine months ended September 30, 2010, a decrease of $69,249 or 30.9%. This decrease was mainly due to the decrease in cost of Xin-Nao-Ling Fish Oil Soft Gel and Zhi-Li-Bao Fish Oil Soft Gel with the decrease in sales.

Cost of goods sold for our wellness house and activated water machine segment decreased to $268,165 for the nine months ended September 30, 2011 from $363,705 for the nine months ended September 30, 2010, a decrease of $95,540 or 26.3%. This decrease was mainly due to the decrease in cost of Wellness House as a result of a decrease in sales.

Gross profit. Our gross profit decreased by $158,184 or 5.3% to $2,824,348 for the nine months ended September 30, 2011, compared to $2,982,532 for the nine months ended September 30, 2010. This decrease was primarily attributable to the decrease in gross profit for healthcare knit goods segment and daily healthcare and personal care segment. Our gross margin increased from 73% for the nine months ended September 30, 2010 to 78.3% for the nine months ended September 30, 2011. This increase was mainly due to the increase in gross margin at our wellness house and activated water machine segment.

Gross profit for the healthcare knit goods segment decreased by $123,639 or 6.5% to $1,791,099 for the nine months ended September 30, 2011 compared to $1,914,738 for the nine months ended September 30, 2010. This decrease was mainly due to the decreased sales in our mattress products. The gross margins of healthcare knit goods segment increased from 78.8% for the nine months ended September 30, 2010 to 83.3% for the nine months ended September 30, 2011. This increase was mainly due to the fact that our newly introduced healthcare knit goods have higher gross margin, including our Tourmaline Wool Quilt product.

Gross profit of daily healthcare and personal care segment decreased by $155,472 or 27.2% to $416,922 for the nine months ended September 30, 2011, compared to $572,394 for the nine months ended September 30, 2010. This decrease was primarily due to the decrease in sales of our Tourmaline Soap product. The gross margin of the daily healthcare and personal care segment increased from 71.9% for the nine months ended September 30, 2010 to 73% for the nine months ended September 30, 2011. This increase was mainly due to the increase in sales of our Tourmaline Scarves which have higher gross margin.

Gross profit of the wellness house and activated water machine segment increased by $120,927 or 24.4% to $616,327 for the nine months ended September 30, 2011, compared to $495,400 for the nine months ended September 30, 2010. This increase was mainly attributed to an increase in sales of Tourmaline Water Machines. The gross margin of our wellness house and activated water machine segments increased from 57.7% for the nine months ended September 30, 2010 to 69.7% for the nine months ended September 30, 2011. This increase was mainly attributed to increased sales of our Tourmaline Water Machines product which has a lower cost of goods.

Operating expenses. Our total operating expenses consist of sales and marketing expenses and general and administrative expenses. Our total operating expenses increased by $685,312, or 51.4%, from $1,334,438 for the nine months ended September 30, 2010 to $2,019,750 for the nine months ended September 30, 2011. This increase was mainly due to the increase of audit and attorney fees and employee salaries. Operating expenses for healthcare knit goods segment increased by $441,724 or 50% to $1,324,873 for the nine months ended September 30, 2011 from $883,149 for the nine months ended September 30, 2010. Operating expenses for daily healthcare and personal care segment increased by $62,860 or 21.7% to $352,240 for the nine months ended September 30, 2011 from $289,380 for the nine months ended September 30, 2010. Operating expenses for our wellness house and activated water machine segment increased by $180,728 or 111.6% to $342,637 for the nine months ended September 30, 2011 from $161,909 for the nine months ended September 30, 2010. This increase was mainly due to the more market emphasis on the wellness house and activated water machine segment by us in 2011.

Income from operations. As a result of the foregoing, our income from operations was $804,598 for the nine months ended September 30, 2011, compared to $1,648,094 for the nine months ended September 30, 2010, a decrease of $843,496, or 51.18%. This decrease was mainly due to the decrease in gross profit and the increase in operating expenses.

Income taxes. Our income tax expenses decreased from $355,024 for the nine months ended September 30, 2010 to $282,042 for the nine months ended September 30, 2011. This decrease was primarily due to the loss of Joway Shengshi for the third quarter of 2011.

Net income. For the nine months ended September 30, 2011, our net income was $905,498 compared to $1,275,436 for the nine months ended September 30, 2010. This decrease was mainly due to Joway Shengshi’s loss for the third quarter of 2011. For the nine months ended September 30, 2011, Joway Shengshi’s net income was $562,388, a decrease of $479,634 from $1,042,022 for the nine months ended September 30, 2010.

Franchising

We enter into franchise agreements to develop retail outlets for our products. These agreements provide that franchisees will sell our products exclusively. In exchange, we provide them with geographic exclusivity, discounted products, training, and support. The agreements also require franchisees to adhere to certain standards of product merchandising, promotion, and presentment. The agreements do not require the franchisees to purchase any minimum levels of product, but do require that they make at least one purchase during each year. The agreements are generally for terms of three years and are renewable at the mutual agreement of both parties. The Agreements are cancelable at our discretion if franchisees violate the terms of the agreements.

The following is a breakdown of revenue between franchise and non-franchise customers:


	For the three months ended September 30,				For the nine months ended September 30,
	2011		2010		2011		2010

Sales to franchise customers	$	838,309	$	1,578,801	$	3,358,318	$	3,595,532
Sales to non-franchise customers		70,664		182,654		247,231		489,764


Total sales	$	908,973	$	1,761,455	$	3,605,549	$	4,085,296

Liquidity and Capital Resources

Our cash at the beginning of the nine months ended September 30, 2011 was $5,281,420 and decreased to $4,069,349 by the end of the nine months, a decrease of $1,212,071. We had net working capital of $4,998,035 at September 30, 2011, an increase of $466,126 from $4,531,909 at December 31, 2010.

Our cash flow information summary is as follows:


	For the nine months ended September 30,
	2011			2010
Net cash provided by (used in):
Operating activities	$	(125,951	)	$	655,221
Investing activities		(1,167,418	)		1,176,690
Financing activities	$	(272,140	)	$	(538,780	)

Net Cash Provided By (Used In) Operating Activities

Net cash used in operating activities was $125,951 for the nine months ended September 30, 2011 compared to net cash provided by operating activities of $655,221 for the nine months ended September 30, 2010. This change was primarily due to the decreases in tax payable of $889,922 and net income of $369,938, which were offset by a decrease in advances by customers of $473,765.

For the nine months ended September 30, 2011, cash was mainly used to purchase inventory of $578,285, pay VAT of $307,245 and income tax of $233,072, and make advances to suppliers of $241,346, primarily offset by cash provided from net income of $905,498 and an add-back of $333,375 of depreciation for non-cash expense.

For the nine months ended September 30, 2010, cash was mainly used to purchase inventory of $493,907. Advances from customers decreased by $475,187 for the nine months ended September 30, 2010, which was primarily offset by cash provided from net income of $1,275,436 and increases in tax payable of $315,305.

Net Cash Provided By (Used In) Investing Activities

Net cash used in investing activities was $1,167,418 for the nine months ended September 30, 2011, compared to net cash provided by investing activities of $1,176,690 for the nine months ended September 30, 2010. In the nine months ended September 30, 2011, we spent $800,000 on purchasing four vehicles and $400,000 on buying operating and office equipment. For the nine months ended September 30, 2010, we spent $200,000 on the purchasing of new operating and office equipment and one vehicle. In addition, in 2010, the Company received $1.5 million from an investment in a CITIC trust fund invested in 2009.

Net Cash Used In Financing Activities

Net cash used in financing activities was $272,140 for the nine months ended September 30, 2011, compared to $538,780 for the nine months ended September 30, 2010. In the nine months ended September 30, 2011, we paid back $190,905 to Jinghe Zhang, compared to $461,454 paid back to Jinghe Zhang for the nine months ended September 30, 2010.

On May 10, 2007, our operating subsidiaries, Joway Shengshi and Joway Technology entered into cash advance agreements with Jinghe Zhang, our President, Chief Executive Officer and director. Pursuant to these agreements, Jinghe Zhang agreed to advance operating capital to Joway Shengshi and Joway Technology. These advances are interest free, unsecured, and are repayable upon demand. During the period beginning May 17, 2007 (inception of Joway Shengshi) through December 31, 2009 Joway Shengshi received cash advances in the aggregate principal amount of $4,637,397 from Jinghe Zhang of which $4,592,966 has been repaid. For the nine months ended September 30, 2011, Joway Shengshi was advanced $0 by Jinghe Zhang. As of September 30, 2011, the total unpaid principal balance due Jinghe Zhang for advances made to Joway Shengshi was $44,431. During the period beginning March 28, 2007 (inception of Joway Technology) through September 30, 2011, Joway Technology received cash advances in the aggregate principal amount of $22,031 from Jinghe Zhang all of which has been repaid. As of September 30, 2011, the total unpaid principal balance due Jinghe Zhang for advances was $0.

The Company has sufficient liquidity to meet the Company’s operating cash needs over the next 12 months if Mr. Zhang were to demand immediate repayment of the remaining balance under these loans and no longer wish to provide future loans to the Company or any of its operating units.

STATUTORY RESERVES

Pursuant to the laws and regulations of the PRC, the Company’s PRC subsidiaries are required to allocate a portion of their after-tax income to statutory reserves funds. The minimum statutory reserves allocation is 10% of after-tax income until the reserves reach 50% of the entities’ registered capital or members’ equity. The reserve funds are not transferable to the Company in the form of cash dividends, loans or advances. Thus, the reserve funds are not available for distribution except in liquidation. As of September 30, 2011, the Company had allocated $336,604 to statutory reserves.

Critical Accounting Policies

Management’s discussion and analysis of its financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Our financial statements reflect the selection and application of accounting policies which require management to make significant estimates and judgments. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe that the following reflect the more critical accounting policies that currently affect our financial condition and results of operations.

Basis of Consolidation

The accompanying consolidated financial statements include Joway Health, its wholly owned subsidiaries, and controlled VIEs. All significant inter-company accounts and transactions have been eliminated in the consolidation. Pursuant to Accounting Standards Codification Topic 810 “Consolidation,” Joway Shengshi, as a VIE of Junhe Consulting, have been consolidated in our financial statements. Joway Shengshi’s sales are included in our total sales, its income from operations is consolidated with ours, and our net income includes all of Joway Shengshi’s net income. Based on the various VIE Agreements, we are able to exercise control over the VIEs, and to obtain the full economic benefits. Accordingly, the non–controlling interests have no economic interest in the VIEs.

Revenue Recognition

We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the purchase price is fixed or determinable and collectability is reasonably assured.

With respect to sales of product to both franchisee and non-franchisee customers, we prepare product shipment upon the receipt of a customer’s purchase order. Sales prices are based on fixed price lists that are different depending on whether the price list is for franchisee customers or for non-franchisee customers. We recognize revenue when the product is shipped. We do not sell product to any customers with a right of return as defined in ASC 605-15-25-4. Sales are presented net of value added tax (VAT).

We recognize revenue on the sale of our wellness houses under the completed contract method. At the time when we enter into a contract with a customer to build a wellness house, the customer pays a deposit of at least one-half of the sales price. We consider the contract to be completed when all significant costs have been incurred and the customer accepts the project in writing by signing in the appropriate place on the contract. At this time the customer will also pay any remaining balance on the contract. We recognize the full contract revenue at this point. Contract costs consist primarily of materials and labor costs. The construction period of a wellness house generally does not exceed five days.

Accounts Receivable

Accounts receivable are carried at net realizable value. We provide reserves for potential credit losses on accounts receivable. Management reviews the composition of the accounts receivable and analyzes historical bad debts, customer concentrations, customers’ credit worthiness, current economic trends, and changes in customer’s payment patterns to evaluate the adequacy of these reserves.

Inventories

Inventories are stated at the lower of cost, as determined by the specific identification method on contract level (for each individual contract, inventories cost flow is determined by weighted-average method), or the net realizable value, which is determined on selling prices less any further costs expected to be incurred for completion and disposal. Management regularly evaluates the composition of its inventories to identify slow-moving and obsolete inventories to determine whether a valuation allowance is required.

Property, Plant, and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation, and include expenditures that substantially increase the useful lives of existing assets.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives are as follows:


Building		20 years
Operating Equipment		10 years
Office furniture and equipment		3 or 5 years
Vehicles		10 years

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts, and any gain or loss is included in the consolidated statements of income and other comprehensive income. Maintenance, repairs and minor renewals are charged directly to expenses as incurred. Significant renewals and betterment to buildings and equipment are capitalized. Leasehold improvements are depreciated over the lesser of the useful life or the life of the lease.

Recent Accounting Pronouncements

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. ASU 2011-04 changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements to ensure consistency between U.S. GAAP and International Financial Reporting Standards (“IFRS”). ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is to be applied prospectively. ASU 2011-04 will be effective for interim and annual periods beginning after Dec. 15, 2011, with early adoption permitted. We believe that the adoption of this standard will not materially expand our consolidated financial statement footnote disclosures.

In September 2011, the FASB issued ASU 2011-08, Testing Goodwill for Impairment, which amends the guidance in ASC 350-20, “Intangibles – Goodwill and Other – Goodwill”. Under ASU 2011-08, entities have the option of performing a qualitative assessment before calculating the fair value of the reporting unit when testing goodwill for impairment. If the fair value of the reporting unit is determined, based on qualitative factors, to be more likely than not less than the carrying amount of the reporting unit, then entities are required to perform the two-step goodwill impairment test. ASU 2011-08 is effective for fiscal years beginning after December 15, 2011, with early adoption permitted. We do not anticipate that the adoption of this standard will have a material effect on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not Applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures as defined in SEC Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this quarterly report. The purpose of this evaluation is to determine if, as of Evaluation Date, our disclosure controls and procedures were operating effectively such that the information, required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) was recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Based on evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2011, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting for the three months ended September 30,2011 that materially affected, or were reasonably likely to materially affect our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

This information has been omitted based on our status as a smaller reporting company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Reserved and Removed.

Item 5. Other Information.

None.

Item 6. Exhibits.

EXHIBIT INDEX


Exhibit No.		Description

31.1		Certification of Chief Executive Officer of Periodic Report pursuant to Rule 13a-14a and Rule 14d-14(a).*

31.2		Certification of Chief Financial Officer of Periodic Report pursuant to Rule 13a-14a and Rule 15d-14(a).*

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.*

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.*

101.INS		XBRL Instance Document*

101.SCH		XBRL Schema Document*

101.CAL		XBRL Calculation Linkbase Document*

101.DEF		XBRL Definition Linkbase Document*

101.LAB		XBRL Label Linkbase Document*

101.PRE		XBRL Presentation Linkbase Document*

*	Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DATE: November 14, 2011


Joway Health Industries Group Inc.

By:		/s/ Jinghe Zhang
		Jinghe Zhang
		President and Chief Executive Officer

By:		/s/ Yuan Huang
		Yuan Huang
		Chief Financial Officer

EX-31.1 2 d226912dex311.htm SECTION 302 CEO CERTIFICATION Section 302 CEO Certification

Exhibit 31.1

Certification of Principal Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

and Securities and Exchange Commission Release 34-46427

I, Jinghe Zhang, certify that:

1. I have reviewed this report on Form 10-Q for the quarter ended September 30, 2011 of Joway Health Industries Group Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2011

/s/ Jinghe Zhang

Jinghe Zhang, Principal Executive Officer

EX-31.2 3 d226912dex312.htm SECTION 302 CFO CERTIFICATION Section 302 CFO Certification

Exhibit 31.2

Certification of Principal Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

and Securities and Exchange Commission Release 34-46427

I, Yuan Huang, certify that:

1. I have reviewed this report on Form 10-Q for the quarter ended September 30, 2011 of Joway Health Industries Group Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2011

/s/ Yuan Huang

Yuan Huang, Principal Financial and Accounting Officer

EX-32.1 4 d226912dex321.htm SECTION 906 CEO CERTIFICATION Section 906 CEO Certification

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Joway Health Industries Group Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jinghe Zhang, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 14, 2011

/s/ Jinghe Zhang

Jinghe Zhang, Principal Executive Officer

EX-32.2 5 d226912dex322.htm SECTION 906 CFO CERTIFICATION Section 906 CFO Certification

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Joway Health Industries Group Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Yuan Huang, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 14, 2011

/s/ Yuan Huang

Yuan Huang, Principal Financial and Accounting Officer

EX-101.INS 6 cik0001263364-20110930.xml XBRL INSTANCE DOCUMENT 0001263364 2010-09-30 0001263364 2009-12-31 0001263364 2011-09-30 0001263364 2010-12-31 0001263364 2011-07-01 2011-09-30 0001263364 2010-07-01 2010-09-30 0001263364 2010-01-01 2010-09-30 0001263364 2011-11-14 0001263364 2011-01-01 2011-09-30 iso4217:USD xbrli:shares iso4217:USD xbrli:shares false --12-31 Q3 2011 2011-09-30 10-Q 0001263364 20018000 Smaller Reporting Company Joway Health Industries Group Inc -10000 548780 272140 <div> <div> NOTE 12 – FRANCHISE REVENUES The Company enters into franchise agreements to develop retail outlets for the Company's products. These agreements provide that franchisees will sell Company products exclusively at a predetermined retail price. In exchange, the Company provides them with geographic exclusivity, discounted products, training, and support. The agreements also require franchisees to adhere to certain standards of product merchandising, promotion, and presentment. The agreements also prohibit franchisees from selling competitors' products. The agreements do not require any initial franchise fees from the franchisees, nor do they require the franchisees to pay continuing royalties. The agreements do not require the franchisees to purchase any minimum levels of product, but do require that they make at least one purchase during each year. The Company does not manage the franchisees' levels of product. Franchisees hold periodic conferences, assisted by the Company's marketing department, to promote product awareness and introduce new products. The franchising agreements are generally for terms of three years and are renewable at the mutual agreement of both parties. The franchising agreements are cancelable at the Company's discretion if franchisees violate the terms of the agreements.   The following is a breakdown of revenue between franchise and non-franchise customers:   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="92%" align="center"> <tr><td width="58%"> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">For the three months ended September 30,</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">For the nine months ended September 30,</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">2011</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">2010</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">2011</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">2010</td> <td valign="bottom"> </td></tr> <tr><td height="8"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Sales to franchise customers</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">838,309</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,578,801</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,358,318</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,595,532</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Sales to non-franchise customers</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">70,664</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">182,654</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">247,231</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">489,764</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td height="8"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total sales</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">908,973</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,761,455</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,605,549</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,085,296</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table>  </div></div> 274959 241346 -1462587 <div> <div> NOTE 9 – STATUTORY RESERVES Pursuant to the laws and regulations of the PRC, the Company's PRC subsidiaries are required to allocate a portion of their after-tax income to the statutory reserves funds. The minimum statutory reserves allocation is 10% of after tax income until the reserves reach 50% of the entities' registered capital or members' equity. The reserve funds are not transferable to the Company in the form of cash dividends, loans or advances. Thus, the reserve funds are not available for distribution except in liquidation. As of September 30, 2011, the Company's subsidiaries had allocated $336,604 to statutory reserves. </div></div> 18515426 18515426 20018000 20018000

305416

241837

9638

33920

429577

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20018

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241676

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0.05

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183340

353438

54392

615607

622987

958222

432397

1592243

492195

2982532

1298179

2824348

681921

1630460

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240639

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-21266

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<div> <div> NOTE 6 – INTANGIBLE ASSETS Intangible assets consist of the following:   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"> <tr><td width="74%"> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">September 30,</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">December 31,</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Land use rights</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">644,828</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">624,347</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Other intangible assets</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">35,641</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">34,509</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">680,469</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">658,856</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Less: accumulated amortization</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(57,482</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(43,249</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Intangible assets, net</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">622,987</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">615,607</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table> Amortization expense of intangible assets for the nine months ended September 30, 2011 and 2010 was $14,233 and $10,746, respectively, and for the three months ended September 30, 2011 and 2010 was $4,783 and $4,491, respectively. The estimated amortization expense for the next five years is as the following:   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="68%" align="center"> <tr><td width="87%"> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td style="border-bottom: #000000 1px solid;" valign="bottom" nowrap="nowrap"> Estimated amortization expense for the year ending December 31,</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Amount</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> 2011</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">16,039</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> 2012</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">16,039</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> 2013</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">16,039</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> 2014</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">16,039</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> 2015</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">16,039</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Thereafter</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">535,412</td> <td valign="bottom" nowrap="nowrap">  </td></tr></table></div></div>

711704

1289989

2295

1120

4456

1281

12604356

13070507

1729508

888110

<div> <div> NOTE 3 – ACCOUNTS RECEIVABLE Accounts receivable consist of the following:   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"> <tr><td width="73%"> </td> <td valign="bottom" width="8%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="8%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">September 30,</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">December 31,</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">2011</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Accounts receivable</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">33,920</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">9,638</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Less: Allowance for bad debt</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Accounts receivable</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">33,920</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">9,638</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table>  </div></div>

-538780

-272140

1176690

-1167418

655221

-125951

1275436

587651

905498

74457

-17634

6206

382942

4658

1334438

572943

2019750

633388

1648094

725236

804598

48533

823228

828192

183340

147632

375051

113315

50810

11887

73636

47246

13070

11804

53707

52332

391556

15181

81162

32893

41400

244497

1167418

0.001

1000000

33884

7699

207621

205205

67340

5519711

6356170

2772488

3677986

4085296

1761455

3605549

908973

<div> <div> NOTE 11 – SEGMENTS In 2011 and 2010, the Company operated in three reportable business segments - (1) Healthcare Knitgoods Series, (2) Daily Healthcare and Personal Care Series, and (3) Wellness House and Activated Water Machine Series. The Company's reportable segments are strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations. Information with respect to these reportable business segments is as the following: For the three months ended September 30, 2011   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="51%"> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Sales</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">COGS</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Gross profit</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Income (loss) from operations</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Depreciation and amortization</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Assets</td> <td valign="bottom"> </td></tr> <tr><td height="8"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Healthcare Knitgoods Series</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">416,895</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">64,393</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">352,502</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">20,125</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">61,563</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">277,290</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Daily Healthcare and Personal Care Series</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">124,910</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">43,700</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">81,210</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(15,218</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">17,551</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">227,929</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Wellness House and Activated Water Machine Series</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">367,168</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">118,959</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">248,209</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">43,626</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">41,779</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">794,513</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Segment Totals</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">908,973</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">227,052</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">681,921</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">48,533</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">120,893</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,299,732</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Other Income (Expense), net</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4,658</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr><td valign="top"> Income Tax</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(21,266</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Unallocated Assets</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">11,770,775</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Net Income</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">74,457</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total Assets</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">13,070,507</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table> For the three months ended September 30, 2010   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="48%"> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Sales</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">COGS</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Gross profit</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Income from operations</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Depreciation and amortization</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Assets</td> <td valign="bottom"> </td></tr> <tr><td height="8"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Healthcare Knitgoods Series</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">989,350</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">209,846</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">779,504</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">383,094</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">55,979</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">416,350</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Daily Healthcare and Personal Care Series</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">317,904</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">83,460</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">234,444</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">106,673</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">17,940</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">213,666</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Wellness House and Activated Water Machine Series</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">454,201</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">169,970</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">284,231</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">235,469</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">26,599</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">505,790</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Segment Totals</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,761,455</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">463,276</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,298,179</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">725,236</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">100,518</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,135,806</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Other Income (Expense), net</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">6,206</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr><td valign="top"> Income Tax</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">143,791</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Unallocated Assets</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">9,603,318</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Net Income</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">587,651</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total Assets</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">10,739,124</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table>   For the nine months ended September 30, 2011   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="48%"> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Sales</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">COGS</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Gross profit</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Income from operations</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Depreciation and amortization</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Assets</td> <td valign="bottom"> </td></tr> <tr><td height="8"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Healthcare Knitgoods Series</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,149,554</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">358,455</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,791,099</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">466,226</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">207,237</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">277,290</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Daily Healthcare and Personal Care Series</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">571,503</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">154,581</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">416,922</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">64,682</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">55,098</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">227,929</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Wellness House and Activated Water Machine Series</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">884,492</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">268,165</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">616,327</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">273,690</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">85,273</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">794,513</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Segment Totals</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,605,549</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">781,201</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,824,348</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">804,598</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">347,608</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,299,732</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Other Income (Expense), net</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">382,942</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr><td valign="top"> Income Tax</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">282,042</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Unallocated Assets</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">11,770,775</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Net Income</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">905,498</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total Assets</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">13,070,507</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table> For the nine months ended September 30, 2010   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="46%"> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Sales</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">COGS</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Gross profit</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Income from operations</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Depreciation and amortization</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Assets</td> <td valign="bottom"> </td></tr> <tr><td height="8"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Healthcare Knitgoods Series</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,429,967</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">515,229</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,914,738</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,031,589</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">150,143</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">416,350</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Daily Healthcare and Personal Care Series</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">796,224</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">223,830</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">572,394</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">283,014</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">49,197</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">213,666</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Wellness House and Activated Water Machine Series</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">859,105</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">363,705</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">495,400</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">333,491</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">53,082</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">505,790</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Segment Totals</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,085,296</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,102,764</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,982,532</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,648,094</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">252,422</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,135,806</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Other Income (Expense), net</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(17,634</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr><td valign="top"> Income Tax</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">355,024</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Unallocated Assets</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">9,603,318</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Net Income</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,275,436</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total Assets</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">10,739,124</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table></div></div>

376216

140546

427507

141193

27000

<div> <div> NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("US GAAP"). The Company's functional currency is the Chinese Renminbi ("RMB"); however, the accompanying consolidated financial statements have been translated and presented in United States Dollars ("USD"). All significant inter-company transactions and balances have been eliminated. The consolidated financial statements include all adjustments that, in the opinion of management, are necessary to make the financial statements not misleading. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and the footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the nine-month period ended September 30, 2011 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2011. The accompanying consolidated financial statements should be read in conjunction with the Company's form 10-K for the fiscal year ended December 31, 2010 filed on April 14, 2011.   Use of Estimates The preparation of the consolidated financial statements is in conformity with generally accepted accounting principles in the United States of America, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. Actual results could differ from those estimates. Basis of Consolidation The accompanying consolidated financial statements include the Company, its wholly owned subsidiaries, and controlled VIEs. All significant inter-company accounts and transactions have been eliminated in the consolidation. Pursuant to Accounting Standards Codification Topic 810 "Consolidation", Joway Shengshi, as a VIE of Junhe Consulting, has been consolidated in the Company's financial statements. Joway Shengshi's sales are included in the Company's total sales, its income from operations is consolidated with the Company's, and the Company's net income includes all of Joway Shengshi's net income. Based on the various Contractual Agreements, the Company is able to exercise control over the VIEs, and to obtain the full economic benefits. Accordingly, the non–controlling interests have no economic interest in the VIEs. Foreign Currency Translation The accompanying consolidated financial statements are presented in USD. The functional currency of the Company is RMB. The consolidated financial statements are translated into USD from RMB at period-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Equity accounts are translated at their historical exchange rates when the equity transactions occurred. The resulting transaction adjustments are recorded as a component of stockholders' equity. Gains and losses from foreign currency transactions are included in net income.   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="84%" align="center"> <tr><td width="69%"> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">For the nine months  ended September 30,</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">For the year ended December 31,</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">2011</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">2010</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Period ended RMB: USD Exchange rate</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">6.4018</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">6.6981</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">6.6118</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Average RMB: USD Exchange rate</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">6.50601</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">6.8164</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">6.77875</td> <td valign="bottom" nowrap="nowrap">  </td></tr></table> The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into USD at the rates used in translation. For the nine months ended September 30, 2011 and 2010, foreign currency translation adjustments of $375,051 and $ 183,340, respectively, have been reported as other comprehensive income in the consolidated financial statements. Other Comprehensive Income Other comprehensive income is defined as the change in equity during the period from transactions and other events, excluding the changes resulting from investments by owners and distributions to owners. Other comprehensive income is not included in the computation of income tax expense or benefit. Accumulated other comprehensive income represents the accumulated balance of foreign currency translation adjustments.   Concentrations of Credit Risk The Company's operations are carried out in the PRC. Accordingly, the Company's business, financial condition, and results of operations may be influenced by the political, economic, and legal environment in the PRC, and by the general state of the PRC's economy. The Company's operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America. The Company's results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. Substantially all of the Company's cash is maintained with state-owned banks within the PRC, and no deposits are covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts. Fair Value of Financial Instruments Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 820 (formerly Statement of Financial Accounting Standard ("SFAS") No. 157 Fair Value Measurements) establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as the following:   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td width="5%"> </td> <td valign="top" width="2%" align="left"></td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> Level 1—defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; </td></tr></table>   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td width="5%"> </td> <td valign="top" width="2%" align="left"></td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> Level 2—defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and </td></tr></table>   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td width="5%"> </td> <td valign="top" width="2%" align="left"></td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> Level 3—defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. </td></tr></table> The carrying amounts reported in the balance sheets for cash, accounts receivable, other receivable, accounts payable, other payable, and amounts due from related parties generally approximate their fair market values based on the short-term maturity of these instruments. ASC 825-10 "Financial Instruments" allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments. Cash and Cash Equivalents For financial reporting purposes, the Company considers all highly liquid financial instruments with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents at any point during the period of the financial statements presented. Balances at financial institutions or state-owned banks within the PRC are not covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts. Accounts Receivable Accounts receivable are carried at net realizable value. The Company, when necessary, maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of the accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends, and changes in customer payment patterns to evaluate the adequacy of these reserves. As of September 30, 2011 and December 31, 2010, respectively, the Company had no allowance for doubtful accounts.   Inventories Inventories are stated at the lower of cost, as determined by the specific identification method on contract level (for each individual contract, inventories cost flow is determined by weighted-average method), or the net realizable value, which is determined on selling prices less any further costs expected to be incurred for completion and disposal. The Company regularly evaluates the composition of its inventories to identify slow-moving and obsolete inventories to determine whether valuation allowance is required. As of September 30, 2011 and December 31, 2010, respectively, the Company had no reserves for inventories. Advances to suppliers Advances to suppliers represent the cash paid in advance for inventory items or construction in progress. The advance payments are meant to ensure preferential pricing and delivery. The amounts advanced under such arrangements totaled $384,955 and $143,609 as of September 30, 2011 and December 31, 2010, respectively. Property, Plant, and Equipment Property, plant and equipment are stated at cost less accumulated depreciation, and include expenditures that substantially increase the useful lives of existing assets. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives are as follows:   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="68%" align="center"> <tr><td width="84%"> </td> <td valign="bottom" width="4%"> </td> <td> </td></tr> <tr><td valign="top"> Building</td> <td valign="bottom">  </td> <td valign="bottom">20 years</td></tr> <tr><td valign="top"> Operating Equipment</td> <td valign="bottom">  </td> <td valign="bottom">10 years</td></tr> <tr><td valign="top"> Office furniture and equipment</td> <td valign="bottom">  </td> <td valign="bottom">3 or 5 years</td></tr> <tr><td valign="top"> Vehicles</td> <td valign="bottom">  </td> <td valign="bottom">10 years</td></tr></table> The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts, and any gain or loss is included in the consolidated statements of operations. Maintenance, repairs, and minor renewals are charged directly to expenses as incurred. Significant renewals and betterment to buildings and equipment are capitalized. Leasehold improvements are depreciated over the lesser of the useful life or the life of the lease. Intangible assets Intangible assets mainly consist of land use rights. All land located in the PRC is owned by the government and cannot be sold to any individual or company. The land use rights granted to the Company are being amortized using the straight-line method over the lease term of 50 years. Other intangible assets are software programs that are amortized over their estimated useful life of 10 years. Impairment of Long-Lived Assets Long-lived assets of the Company are reviewed annually as to whether their carrying value has become impaired, pursuant to the guidelines established in FASB ASC 360 (formerly SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets). The Company considers assets to be impaired if the carrying value exceeds the future projected cash flows from the related operations. The Company also re-evaluates the periods of depreciation and amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives. The Company did not record any impairment loss for the nine months ended September 30, 2011 and 2010.   Revenue Recognition The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the purchase price is fixed or determinable and collectability is reasonably assured. With respect to sales of product to both franchisee and non-franchisee customers, the Company prepares product shipment upon the receipt of a customer's purchase order. Sales prices are based on fixed price lists that are different depending on whether the price list is for franchisee customers or for non-franchisee customers. The Company recognizes revenue when the product is shipped. The Company does not sell product to any customers with a right of return as defined in ASC 605-15-25-4. Sales are presented net of value added tax (VAT). For Tourmaline Wellness House sales, the Company recognizes revenue under the completed contract method. Customers contact the Company with requests to construct a Wellness House. The Company and the customer enter into a contract, at which time the customer pays a deposit of at least one-half of the sales price. A contract is considered completed when all significant costs have been incurred and the project has been accepted by the customer. The contracts have a place for the customer to sign indicating their acceptance of the completed Wellness House. At this time the customer will also pay any remaining balance on the contract. The Company recognizes the full contract revenue at this point. Contract costs consist primarily of materials and labor costs. The construction period of a Wellness House generally does not exceed five days. Shipping costs Shipping costs are included in selling expenses and totaled $29,973 and $40,558 for the nine months ended September 30, 2011 and 2010, respectively, and $8,435 and $23,285 for the three months ended September 30, 2011 and 2010, respectively. Income Taxes The Company is governed by the Income Tax Law and associated legislations of the PRC. The Company accounts for income taxes in accordance with FASB ASC 740 "Income Taxes" (formerly SFAS No. 109 Accounting for Income Taxes), which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. ASC 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Realization of deferred tax assets is dependent upon future earnings, if any, of which the timing and amount are uncertain. According to ASC 740, the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50% likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. Subsequent Events The Company evaluates subsequent events for purposes of recognition or disclosure through the date that the financial statements are issued. Recently Issued Accounting Pronouncements In December 2010, the FASB issued ASU 2010-28, Intangibles-Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (a consensus of the FASB Emerging Issues Task Force). ASU 2010-28 provides amendments to Topic 350 that modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. As a result, goodwill impairments may be reported sooner than under the current practice. ASU 2010-28 is effective for fiscal years and interim periods within those years, beginning after December 15, 2010, with early adoption not permitted. The provisions of ASU 2010-28 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2010 and should be applied prospectively. The adoption of this standard did not have a material effect on the Company's consolidated financial statements.   In December 2010, FASB issued ASU 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations (a consensus of the FASB Emerging Issues Task Force). ASU 2010-29 provides amendments to subtopic 805-10 of the FASB ASC that require a public entity to disclose pro forma information for business combinations that occurred in the current reporting period. ASU 2010-29 is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period, beginning on or after December 15, 2010, with early adoption permitted. The adoption of this standard did not have a material effect on the Company's consolidated financial statements. In May 2011, the FASB issued ASU 2011-04, Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. ASU 2011-04 changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements to ensure consistency between U.S. GAAP and International Financial Reporting Standards ("IFRS"). ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is to be applied prospectively. ASU 2011-04 will be effective for interim and annual periods beginning after Dec. 15, 2011, with early adoption permitted. The Company believes that the adoption of this standard will not materially expand its consolidated financial statement footnote disclosures. In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which amends the current comprehensive income guidance. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of shareholders' equity. Instead, we must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. ASU 2011-05 will be effective for interim and annual periods beginning after Dec. 15, 2011, with early adoption permitted. The adoption of ASU 2011-05 will not have a material impact on the Company's consolidated financial statements. In September 2011, the FASB issued ASU 2011-08, Testing Goodwill for Impairment, which amends the guidance in ASC 350-20, "Intangibles – Goodwill and Other – Goodwill". Under ASU 2011-08, entities have the option of performing a qualitative assessment before calculating the fair value of the reporting unit when testing goodwill for impairment. If the fair value of the reporting unit is determined, based on qualitative factors, to be more likely than not less than the carrying amount of the reporting unit, then entities are required to perform the two-step goodwill impairment test. ASU 2011-08 is effective for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company does not anticipate that the adoption of this standard will have a material effect on the Company's consolidated financial statements. </div></div>

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2011	Dec. 31, 2010
Condensed Consolidated Balance Sheets [Abstract]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
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Condensed Consolidated Statements Of Operations And Comprehensive Income (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Condensed Consolidated Statements Of Operations And Comprehensive Income [Abstract]
REVENUES	$ 908,973	$ 1,761,455	$ 3,605,549	$ 4,085,296
COST OF REVENUES	227,052	463,276	781,201	1,102,764
GROSS PROFIT	681,921	1,298,179	2,824,348	2,982,532
Selling expenses	141,193	140,546	427,507	376,216
General and administrative expenses	492,195	432,397	1,592,243	958,222
OPERATING EXPENSES	633,388	572,943	2,019,750	1,334,438
INCOME FROM OPERATIONS	48,533	725,236	804,598	1,648,094
Interest income	1,281	1,120	4,456	2,295
Other income	15,181	52,332	391,556	53,707
Other expenses	(11,804)	(47,246)	(13,070)	(73,636)
OTHER (EXPENSE) INCOME, NET	4,658	6,206	382,942	(17,634)
INCOME BEFORE INCOME TAXES	53,191	731,442	1,187,540	1,630,460
INCOME TAXES	(21,266)	143,791	282,042	355,024
NET INCOME	74,457	587,651	905,498	1,275,436
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustments	113,315	147,632	375,051	183,340
COMPREHENSIVE INCOME	$ 187,772	$ 735,283	$ 1,280,549	$ 1,458,776
NET INCOME PER COMMON SHARE, BASIC AND DILUTED	$ 0.00	$ 0.03	$ 0.05	$ 0.07
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, BASIC AND DILUTED	20,018,000	18,515,426	20,018,000	18,515,426

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Document And Entity Information	9 Months Ended
Document And Entity Information	Sep. 30, 2011	Nov. 14, 2011
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3
Entity Registrant Name	Joway Health Industries Group Inc
Entity Central Index Key	0001263364
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		20,018,000

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Related Party Transactions

9 Months Ended

Sep. 30, 2011

Related Party Transactions

NOTE 7 – RELATED PARTY TRANSACTIONS

Payables due to related parties consists of the following:


	September 30,		December 31,
	2011		2010
Shenyang Joway Industrial Development Co., Ltd.	$	535,563	$	613,721
Jinghe Zhang		44,431		235,336
Jingyun Chen		—		3,077

Total	$	579,994	$	852,134

Transactions with Shenyang Joway

Shenyang Joway Industrial Development Co., Ltd. ("Shenyang Joway") was formed in 2005 in Shenyang, China by Mr. Jinghe Zhang and three other individuals. Mr. Zhang holds more than 50% of the equity in Shenyang Joway. Shenyang Joway was in the business of marketing and distributing clothing and related products to other companies. In 2009 Mr. Zhang decided to shut down the operations of Shenyang Joway in order to focus his attention on the Joway Shengshi's business. Shenyang Joway has ceased operations, although it still exists as a legal entity, and Joway Shengshi was able to find new suppliers with no material adverse impact to the Company.

•

On January 15, 2009, Joway Shengshi entered into a sales contract with Shenyang Joway, pursuant to which Joway Shengshi agreed to purchase inventory of $27,560 from Shenyang Joway.

•

On December 20, 2009, Joway Shengshi entered into a sales contract with Shenyang Joway. Pursuant to the sales contract, Joway Shengshi agreed to purchase inventory of $137,395 from Shenyang Joway.

•

On May 7, 2007, the Company's subsidiary Joway Shengshi entered into an agreement with Shenyang Joway pursuant to which Joway Shengshi and Shenyang Joway agreed to provide each other with interest-free, unsecured advances for working capital. On May 10, 2007, the Company's subsidiary Joway Technology and Shenyang Joway entered into an agreement pursuant to which Joway Technology and Shenyang Joway agreed to provide each other with interest-free, unsecured advances for working capital. Through December 31, 2008, Joway Technology advanced $58,568 to Shenyang Joway, which was paid off by Shenyang Joway to Joway Technology in 2009. Through December 31, 2010, Shenyang Joway advanced an aggregate of $791,701 to Joway Shengshi and Joway Technology. During the nine months ended September 30, 2011, the Company repaid $78,158 of these advances. As of September 30, 2011, the total unpaid principal balance due Shenyang Joway for advances was $535,563. Shenyang Joway ceased operations at the end of 2009.

Transactions with Jinghe Zhang

•

On December 1, 2009, the Company, through its subsidiary Joway Shengshi, entered into a royalty-free license agreement with Jinghe Zhang, our President, Chief Executive Officer and director. Pursuant to the license agreement, we are authorized to use the trademark "Joway" for a term of nine years and five patents from December 1, 2009 till the expiration dates of the patents.

•

On May 10, 2007, Joway Shengshi entered into a cash advance agreement with Jinghe Zhang, our President, Chief Executive Officer and director. Pursuant to the agreement, Jinghe Zhang agreed to advance operating capital to Joway Shengshi. The advances are interest free, unsecured, and have no specified repayment terms. The agreement is valid throughout Joway Shengshi's term of operation. During the period beginning May 17, 2007 (inception of Joway Shengshi) through September 30, 2011, Joway Shengshi received cash advances in the aggregate principal amount of $4,637,397 from Jinghe Zhang of which $4,592,966 has been repaid. In 2010 and 2011, Joway Shengshi was advanced $0 by Jinghe Zhang. As of September 30, 2011, the total unpaid principal balance due Jinghe Zhang for advances was $44,431.

•

On May 10, 2007, Joway Technology entered into a cash advance agreement with Jinghe Zhang, our President, Chief Executive Officer and director. Pursuant to the agreement, Jinghe Zhang agreed to advance operating capital to Joway Technology. The advances are interest free, unsecured, and have no specified repayment terms. The agreement is valid throughout Joway Technology's term of operation. During the period beginning March 28, 2007 (inception of Joway Technology) through December 31, 2010, Joway Technology received cash advances in the aggregate principal amount of $22,031 from Jinghe Zhang all of which has been repaid. As of September 30, 2011, the total unpaid principal balance due Jinghe Zhang for advances was $0.

Other Related Party Transactions

The amounts owed to related parties are non-interest bearing and have no specified repayment terms.

- Definition

The entire disclosure for related party transactions, including the nature of the relationship(s), a description of the transactions, the amount of the transactions, the effects of any change in the method of establishing the terms of the transaction from the previous period, stated interest rate, expiration date, terms and manner of settlement per the agreement with the related party, and amounts due to or from related parties. If the entity and one or more other entities are under common ownership or management control and this control affects the operating results or financial position, disclosure includes the nature of the control relationship even if there are no transactions between the entities. Disclosure may also include the aggregate amount of current and deferred tax expense for each statement of earnings presented where the entity is a member of a group that files a consolidated tax return, the amount of any tax related balances due to or from affiliates as of the date of each statement of financial position presented, the principal provisions of the method by which the consolidated amount of current and deferred tax expense is allocated to the members of the group and the nature and effect of any changes in that method. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

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Franchise Revenues

9 Months Ended

Sep. 30, 2011

Franchise Revenues [Abstract]

Franchise Revenues

NOTE 12 – FRANCHISE REVENUES

The Company enters into franchise agreements to develop retail outlets for the Company's products. These agreements provide that franchisees will sell Company products exclusively at a predetermined retail price. In exchange, the Company provides them with geographic exclusivity, discounted products, training, and support. The agreements also require franchisees to adhere to certain standards of product merchandising, promotion, and presentment. The agreements also prohibit franchisees from selling competitors' products. The agreements do not require any initial franchise fees from the franchisees, nor do they require the franchisees to pay continuing royalties. The agreements do not require the franchisees to purchase any minimum levels of product, but do require that they make at least one purchase during each year. The Company does not manage the franchisees' levels of product. Franchisees hold periodic conferences, assisted by the Company's marketing department, to promote product awareness and introduce new products. The franchising agreements are generally for terms of three years and are renewable at the mutual agreement of both parties. The franchising agreements are cancelable at the Company's discretion if franchisees violate the terms of the agreements.

The following is a breakdown of revenue between franchise and non-franchise customers:


	For the three months ended September 30,				For the nine months ended September 30,
	2011		2010		2011		2010

Sales to franchise customers	$	838,309	$	1,578,801	$	3,358,318	$	3,595,532
Sales to non-franchise customers		70,664		182,654		247,231		489,764


Total sales	$	908,973	$	1,761,455	$	3,605,549	$	4,085,296

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Accounts Receivable

9 Months Ended

Sep. 30, 2011

Accounts Receivable [Abstract]

Accounts Receivable

NOTE 3 – ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:


	September 30,		December 31,
	2011		2010
Accounts receivable	$	33,920	$	9,638
Less: Allowance for bad debt		—		—

Accounts receivable	$	33,920	$	9,638

- Definition

The entire disclosure for claims held for amounts due a company. Examples include trade accounts receivables, notes receivables, loans receivables.

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Statutory Reserves	9 Months Ended
Statutory Reserves	Sep. 30, 2011
Statutory Reserves [Abstract]
Statutory Reserves	NOTE 9 – STATUTORY RESERVES Pursuant to the laws and regulations of the PRC, the Company's PRC subsidiaries are required to allocate a portion of their after-tax income to the statutory reserves funds. The minimum statutory reserves allocation is 10% of after tax income until the reserves reach 50% of the entities' registered capital or members' equity. The reserve funds are not transferable to the Company in the form of cash dividends, loans or advances. Thus, the reserve funds are not available for distribution except in liquidation. As of September 30, 2011, the Company's subsidiaries had allocated $336,604 to statutory reserves.

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Other Income	9 Months Ended
Other Income	Sep. 30, 2011
Other Income [Abstract]
Other Income	NOTE 10 – OTHER INCOME Other income primarily consists of subsidies from the Tianjin Baodi District Management Committee and short-term investment income. Joway Shengshi and Joway Decoration are located in Tianjin Baodi District. Pursuant to a series of investment encouragement policies issued by the Tianjin Baodi government in January 2011, Joway Shengshi and Joway Decoration were awarded a total of RMB 2,307,012 (~ US $354,597) by the Tianjin Baodi District Management Committee for the contribution on tax revenue for the year of 2009 and 2010 in Tianjin Baodi District.

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Income Taxes
9 Months Ended
Sep. 30, 2011
Income Taxes [Abstract]
Income Taxes

NOTE 8 – INCOME TAXES

The Company operations in the People's Republic of China are subject to the Income Tax Law of the People's Republic of China. Pursuant to the PRC Income Tax Laws, the Company is subject to the Enterprise Income Tax ("EIT") which is generally a statutory rate of 25% beginning January 2008, on income as reported in its statutory financial statements after appropriate tax adjustments. The Company's subsidiary, Joway Decoration, as a wholesale and retail enterprise, is taxed at the income tax rate of 5% of revenue in 2011 (4% in 2010) pursuant to "Measures for Verification Collection of Enterprise Income Tax" issued by the PRC State Administration of Taxation.

The table below summarizes the differences between the PRC statutory federal rate and the Company's effective tax rate:

 For the nine months ended
September 30,

 2011 2010

Tax computed at China statutory rates
 25 % 25 %

Effect of reduced rate on Joway Decoration (1)
 (9 %) (3 %)

Tax adjustment from China tax authority for 2010 income tax (2)
 6 % 0

Effective rate
 22 % 22 %

(1) Pursuant to Measures for Verification Collection of Enterprise Income Tax issued by the PRC State Administration of Taxation, Joway Decoration, as a wholesale and retail enterprise, is subject to taxable income at a verified rate of 5% of revenue (4% for 2010).

(2) The Company's 2010 Corporate Income Tax Filing in China was reviewed by the PRC tax authority. As a result, the Company's income was reduced for the 2010 taxable year and the Company paid additional income tax of $61,653.

As of September 30, 2011 and 2010, the Company had no deferred tax assets or liabilities.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 109

-Paragraph 136, 172

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 109

-Paragraph 43, 44, 45, 46, 47, 48, 49

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Regulation S-X (SX)

-Number 210

-Section 08

-Paragraph h

-Article 4

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 3

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 9

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 15

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 235

-SubTopic 10

-Section S99

-Paragraph 1

-Subparagraph (SX 210.4-08.(h))

-URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690

+ Details

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Condensed Consolidated Statements Of Cash Flows (USD $)	9 Months Ended
Condensed Consolidated Statements Of Cash Flows (USD $)	Sep. 30, 2011	Sep. 30, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 905,498	$ 1,275,436
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation	333,375	241,676
Amortization	14,233	10,746
Stock-based compensation	27,000
Changes in operating assets and liabilities:
Accounts receivable, trade	(24,282)	(46,473)
Other receivables	48,269	44,773
Inventories	(578,285)	(493,907)
Advances to suppliers	(241,346)	(274,959)
Prepaid Expense	26,185
Accounts payable	(63,579)	(47,831)
Advances from customers	(1,422)	(475,187)
Other payable	(12,905)	12,559
Salary and welfare payable	15,925	34,313
Tax payable	(574,617)	315,305
Accrued expenses		58,770
Net cash provided by (used in) operating activities	(125,951)	655,221
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property plant and equipment	(1,167,418)	(244,497)
Investment in trust		1,462,587
Purchase of intangible assets		(41,400)
Net cash provided by (used in) investing activities	(1,167,418)	1,176,690
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contribution		10,000
Due to related parties	(272,140)	(548,780)
Net cash used in financing activities	(272,140)	(538,780)
EFFECT OF EXCHANGE RATE CHANGES ON CASH	353,438	183,340
NET INCREASE (DECREASE) IN CASH	(1,212,071)	1,476,471
CASH, beginning of period	5,281,420	935,719
CASH, end of period	4,069,349	2,412,190
SUPPLEMENTAL DISCLOSURES:
Income taxes paid	530,377	240,639
Interest paid

Condensed Consolidated Balance Sheets (USD $)	Sep. 30, 2011	Dec. 31, 2010
ASSETS
Cash	$ 4,069,349	$ 5,281,420
Accounts receivable, net	33,920	9,638
Other receivables	32,893	81,162
Inventories	1,289,989	711,704
Advances to suppliers	384,955	143,609
Prepaid tax	67,340
Prepaid expense	7,699	33,884
Total current assets	5,886,145	6,261,417
PROPERTY, PLANT AND EQUIPMENT, net	6,356,170	5,519,711
OTHER ASSETS:
Intangible assets, net	622,987	615,607
Long-term prepaid expenses	205,205	207,621
Total other assets	828,192	823,228
Total assets	13,070,507	12,604,356
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	241,837	305,416
Advances from customers		1,422
Taxes payable		519,726
Salary payable	54,392
Other payables	11,887	50,810
Due to related parties	579,994	852,134
Total current liabilities	888,110	1,729,508
COMMITMENTS
STOCKHOLDERS' EQUITY:
Preferred stock - par value $0.001; 1,000,000 shares authorized; no shares issued and outstanding
Common stock - par value $0.001; 200,000,000 shares authorized; 20,018,000 and 20,000,000 shares issued and outstanding as of September 30, 2011 and December 31, 2010	20,018	20,000
Additional paid-in-capital	7,343,161	7,316,179
Statutory reserves	336,604	336,604
Retained earnings	3,677,986	2,772,488
Accumulated other comprehensive income	804,628	429,577
Total stockholders' equity	12,182,397	10,874,848
Total liabilities and stockholders' equity	$ 13,070,507	$ 12,604,356