0001213900-16-018368.txt : 20161114 0001213900-16-018368.hdr.sgml : 20161111 20161114121852 ACCESSION NUMBER: 0001213900-16-018368 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 65 CONFORMED PERIOD OF REPORT: 20160930 FILED AS OF DATE: 20161114 DATE AS OF CHANGE: 20161114 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: 161992682 BUSINESS ADDRESS: STREET 1: NO 19 BAOWANG ROAD STREET 2: BAODI ECONOMIC DEVELOPMENT ZONE CITY: TIANJIN, PRC STATE: F4 ZIP: 300180 BUSINESS PHONE: 862258896888 MAIL ADDRESS: STREET 1: NO 19 BAOWANG ROAD 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 f10q0916_jowayhealth.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One) 

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

 

For the quarterly period ended September 30, 2016

 

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

  86-22-22535999
(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 ☒   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 ☒   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.

 

Large accelerated filer     Accelerated filer  
       
Non-accelerated filer     Smaller reporting company  

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ☐   No ☒

 

The number of shares outstanding of the Issuer’s Common Stock as of November 13, 2016 was 20,054,000 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 30
   
Item 4. Controls and Procedures 30
   
PART II - OTHER INFORMATION 31
   
Item 1. Legal Proceedings 31
   
Item 1A. Risk Factors 31
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 31
   
Item 3. Defaults Upon Senior Securities 31
   
Item 4. Mine Safety Disclosures 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 condensed consolidated 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, 2016 (Unaudited) and December 31, 2015  4
   
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three and the Nine Months Ended September 30, 2016 and 2015 (Unaudited) 5
   
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2016 and 2015 (Unaudited) 6
   
Notes to Unaudited Condensed Consolidated Financial Statements  7-21

 

 1 

 

 

JOWAY HEALTH INDUSTRIES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   September 30,   December 31, 
   2016   2015 
   (Unaudited)   (Audited) 
ASSETS        
         
CURRENT ASSETS:        
Cash  $404,798   $369,249 
Accounts receivable   2,381    - 
Other receivables   94,840    100,298 
Inventories   682,585    830,623 
Advances to suppliers   106,288    90,542 
Prepaid taxes   20,269    64,789 
Prepaid expense   3,599    2,464 
Total current assets   1,314,760    1,457,965 
           
PROPERTY, PLANT AND EQUIPMENT, net   4,668,497    5,113,844 
           
OTHER ASSETS:          
Intangible assets, net   536,800    568,768 
Total other assets   536,800    568,768 
           
Total assets  $6,520,057   $7,140,577 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
CURRENT LIABILITIES:          
Accounts payable  $86,364   $126,866 
Advances from customers   194,072    34,059 
Other payables   64,813    54,884 
Due to related parties   128,470    130,933 
Total current liabilities   473,719    346,742 
           
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; 20,054,000  shares issued and outstanding at September 30, 2016 and December 31, 2015   20,054    20,054 
Additional paid-in-capital   7,361,665    7,361,665 
Statutory reserves   354,052    354,052 
Accumulated deficits   (2,364,260)   (1,790,669)
Accumulated other comprehensive income   674,827    848,733 
Total stockholders' equity   6,046,338    6,793,835 
Total liabilities and stockholders' equity  $6,520,057   $7,140,577 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 2 

 

 

JOWAY HEALTH INDUSTRIES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

 

   Three months ended
September 30,
   Nine months ended
September 30,
 
   2016   2015   2016   2015 
                 
REVENUES  $894,194   $858,128   $2,519,260   $2,410,328 
                     
COST OF REVENUES   375,874    290,731    959,700    816,202 
                     
GROSS PROFIT   518,320    567,397    1,559,560    1,594,126 
                     
Selling expenses   245,199    174,367    891,726    620,719 
General and administrative expenses   396,433    430,476    1,234,684    1,445,237 
OPERATING EXPENSES   641,632    604,843    2,126,410    2,065,956 
                     
LOSS FROM OPERATIONS   (123,312)   (37,446)   (566,850)   (471,830)
                     
Interest income   121    171    282    512 
Other income   180    2,039    1,551    25,762 
Other expenses   (497)   (49,482)   (7,649)   (52,867)
OTHER EXPENSE, NET   (196)   (47,272)   (5,816)   (26,593)
                     
LOSS BEFORE INCOME TAXES   (123,508)   (84,718)   (572,666)   (498,423)
                     
INCOME TAXES (BENEFITS)   (8)   (4,265)   925    13,218 
                     
NET LOSS   (123,500)   (80,453)   (573,591)   (511,641)
                     
OTHER COMPREHENSIVE LOSS:                    
Foreign currency translation adjustment   (25,644)   (309,078)   (173,906)   (228,781)
                     
COMPREHENSIVE LOSS  $(149,144)  $(389,531)  $(747,497)  $(740,422)
                     
NET LOSS PER COMMON SHARE, BASIC AND DILUTED  $(0.01)  $(0.00)  $(0.03)  $(0.03)
                     
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, BASIC AND DILUTED   20,054,000    20,054,000    20,054,000    20,054,000 

  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 3 

 

 

JOWAY HEALTH INDUSTRIES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   Nine months ended
September 30,
 
   2016   2015 
         
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss  $(573,591)  $(511,641)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities          
Depreciation   355,083    283,868 
Amortization   17,132    13,574 
Loss on sale of assets   5,243    - 
Changes in operating assets and liabilities:          
Accounts receivable, trade   (2,381)   26,192 
Other receivables   5,458    5,421 
Inventories   151,418    69,768 
Advances to suppliers   (15,746)   31,736 
Prepaid expense   (1,135)   (2,694)
Accounts payable   (40,502)   47,900 
Advances from customers   160,013    188,649 
Other payable   3,745    1,815 
Salary and welfare payable   6,184    3,087 
Taxes payable   44,520    19,416 
Net cash provided by operating activities   115,441    177,091 
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of property plant and equipment   (46,335)   (165,512)
Proceeds from sale of equipment   152    - 
Net cash used in investing activities   (46,183)   (165,512)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Due to (due from) related parties   (2,463)   89,956 
Net cash provided by (used in) financing activities   (2,463)   89,956 
           
EFFECT OF EXCHANGE RATE CHANGES ON CASH   (31,246)   54,335 
           
NET INCREASE IN CASH   35,549    155,870 
           
CASH, beginning of period   369,249    542,672 
           
CASH, end of period  $404,798   $698,542 
           
SUPPLEMENTAL DISCLOSURES:          
           
Income taxes paid  $2,848   $23,457 
Interest paid  $-   $- 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 4 

 

  

JOWAY HEALTH INDUSTRIES GROUP INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION

 

The unaudited condensed 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 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.

 

 5 

 

 

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.

 

The following table lists the Company and its subsidiaries:

 

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 20,054  

86.8% owned by Crystal Globe Limited

13.2%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 Healthcare Knit Goods and Daily Healthcare and Personal Care 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 Wellness House for family use and Activated Water Machine and construction of Tourmaline Wellness House
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

 

 6 

 

 

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 into 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 and 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, Jingshe Zhang and Baogang Song, the shareholders of Joway Shengshi (the “Grantees”), entered into a Call Option Agreement, dated July 20,2010 with Lionel Evan Liu (the “Grantor”), the sole shareholder of Crystal Globe Limited (the controlling shareholder of Dynamic Elite), a British Virgin Islands company (“CGL”) (the “Call Option Agreement”), pursuant to which the Grantees had the right to purchase up to 100% of the shares of CGL (the “Call Option”) at an exercise price of $2.00 per share (the “Exercise Price”) for a period of five years. The Call Option vested as to 34% of the shares of CGL on April 2, 2011 and as to 33% on each of April 2, 2012 and 2013(the respective “Call Option Effective Date”). On March 28, 2015, the Grantor and Grantees amended the Call Option Agreement, to (i) reduce the Exercise Price to $0.00 per share and (ii) extend the Grantees’ rights to exercise their call option within ten years from the respective Option Effective Date.

 

On November 13, 2016, Jinghe Zhang exercised his Call Option as to 99% of the shares of CGL and Baogang Song exercised his Call Option as to 1% of the shares of CGL. As a result of exercising his Call Option, Jinghe Zhang became the controlling shareholder of CGL and in turn, the controlling shareholder of the Company. Jinghe Zhang now controls 17,233,920 shares, or 85.9%, of the issued and outstanding shares of the Company’s common stock.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). Accordingly, they do not include all of the information and the footnotes required by generally accepted accounting principles for complete financial statements. The Company’s functional currency is the Chinese Renminbi (“RMB”); however, the accompanying unaudited condensed 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.

 

Operating results for the nine month period ended September 30, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2016. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s form 10-K for the fiscal year ended December 31, 2015 which was filed on March 30, 2016.

 

 7 

 

 

Use of Estimates

 

The preparation of the consolidated financial statements in conformity with US GAAP requires 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 and 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” (“ASC 810”), the Company is required to include in its consolidated financial statements the financial statements of its variable interest entities (“VIEs”). ASC 810 requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. VIEs are those entities in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the company is the primary beneficiary of the entity.

 

Based on the various Contractual Agreements, the Company is able to exercise control over the VIEs, and to obtain the full economic benefits. The terms of the exclusive option agreement are currently exercisable and legally enforceable under PRC laws and regulations. The minimum amount of consideration permitted by the applicable PRC law to exercise the option does not represent a financial barrier or disincentive for the Company to exercise its rights under the exclusive option agreement. A simple majority vote of the Company’s board of directors is required to pass a resolution to exercise its rights under the exclusive option agreement, for which consent of the shareholder of VIEs is not required. Therefore, this gives the Company the power to direct the activities that most significantly impact VIEs’ economic performance. The Company’s ability to exercise effective control, together with the consulting service agreements and the equity pledge agreements, give the Company the rights to receive substantially all of the economic benefits from VIEs in consideration for the services provided by its wholly owned subsidiaries in China. Accordingly, as the primary beneficiary of VIEs and in accordance with U.S. GAAP, Joway Shengshi, Joway Technology, Joway Decoration, and Shengtang Trading, as VIEs of Junhe Consulting, has been consolidated in the Company’s financial statements. Sales from Joway Shengshi, Joway Technology, Joway Decoration, and Shengtang Trading are included in the Company’s total sales, their incomes or losses from operations are consolidated with the Company’s, and the Company’s net income or loss includes net income or loss from Joway Shengshi, Joway Technology, Joway Decoration, and Shengtang Trading.

 

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 United States dollars 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, 
   2016   2015   2015 
Period ended RMB: USD Exchange rate   6.66938    6.3538    6.4927 
Average RMB: USD Exchange rate   6.57924    6.1606    6.2401 

 

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.

 

 8 

 

 

Foreign currency translation adjustments have been reported as comprehensive loss in the consolidated financial statements and totaled $25,644 and $309,078 for the three months ended September 30, 2016 and 2015, respectively, and $173,906 and $228,781 for the nine months ended September 30, 2016 and 2015, respectively.

 

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, and 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. 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 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

 

  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

 

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.

 

 9 

 

 

Accounts Receivable

 

Accounts receivable are presented net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses. On a periodic basis, the Company 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 allowances. Accounts are written off after exhaustive efforts at collection. As of September 30, 2016 and December 31, 2015, based on a review of its outstanding balances, the Company allowance for doubtful accounts had a zero balance, respectively.

 

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 are 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 a valuation allowance is required. As of September 30, 2016 and December 31, 2015, the Company recorded $124,207 and $127,587 for inventory valuation allowance, respectively.

 

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 $106,288 and $90,542 as of September 30, 2016 and December 31, 2015, 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.

 

 10 

 

 

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. 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, 2016 and 2015.

 

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 shipments 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 a franchisee customer 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 $41,060 and $17,704 for the three months ended September 30, 2016 and 2015, respectively, and $125,915 and $63,611 for the nine months ended September 30, 2016 and 2015, 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”, 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.

 

 11 

 

 

Basic and Diluted Earnings per Share

 

The Company reports earnings per share in accordance with FASB ASC 260 “Earnings per share”. The Company’s basic earnings per share are computed using the weighted average number of shares outstanding for the periods presented. Diluted earnings per share are computed based on the assumption that any dilutive options or warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, the Company’s outstanding stock warrants are assumed to be exercised, and funds thus obtained were assumed to be used to purchase common stock at the average market price during the period. There were no dilutive instruments outstanding during the nine months periods ended September 30, 2016 and 2015.

 

Segment Information

 

The Company follows FASB ASC 280-Segment Reporting, which requires that companies disclose segment data based on how management makes decision about allocating resources to segments and evaluating their performance.

 

For the nine months ended September 30, 2016 and the year ended December 31, 2015, management has determined that the Company is operating in three reportable business segments, (1) Healthcare Knit Goods 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.

 

Recently Issued Accounting Pronouncements

 

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The standard requires several targeted changes including that equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) be measured at fair value with changes in fair value recognized in net income. The new guidance also changes certain disclosure requirements and other aspects of current US GAAP. Amendments are to be applied as a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. This standard is effective for fiscal years starting after December 15, 2017, including interim periods within those fiscal years. The standard does not permit early adoption with the exception of certain targeted provisions. The Company is currently assessing the impact and timing of adopting this guidance on its consolidated financial statements.

 

In February 2016, the FASB issued a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet. Most prominent among the amendments is the recognition of assets and liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. Under the new standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We anticipate this standard will have a material impact on our consolidated balance sheets, and we are currently evaluating its impact.

 

In March 2016, the Financial Accounting Standards Board (“FASB”) issued a new standard that changes the accounting for certain aspects of share-based payments to employees. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. In addition, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows. The standard also allows us to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on our cash flows statement, and provides an accounting policy election to account for forfeitures as they occur. The Company is currently assessing the impact and timing of adopting this guidance on its consolidated financial statements.

 

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In April 2016, the FASB issued ASU 2016- 10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”. The amendments add further guidance on identifying performance obligations and also to improve the operability and understandability of the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. Public entities should apply the amendments for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein. Early application for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

 

In May 2016, the FASB issued ASU 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting”, The amendments rescinds SEC paragraphs pursuant to two SEC Staff Announcements at the March 3, 2016 Emerging Issues Task Force (EITF) meeting. Specifically, registrants should not rely on the following SEC Staff Observer comments upon adoption of Topic 606: 1) Revenue and Expense Recognition for Freight Services in Process, which is codified in paragraph 605-20-S99-2; 2) Accounting for Shipping and Handling Fees and Costs, which is codified in paragraph 605-45-S99-1; 3) Accounting for Consideration Given by a Vendor to a Customer (including Reseller of the Vendor's Products), which is codified in paragraph 605-50-S99-1; 4) Accounting for Gas-Balancing Arrangements (i.e., use of the "entitlements method"), which is codified in paragraph 932-10-S99-5, which is effective upon adoption of ASU 2014-09. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

 

In May 2016, the FASB issued ASU 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients". The amendments, among other things: (1) clarify the objective of the collectability criterion for applying paragraph 606-10-25-7; (2) permit an entity to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price; (3) specify that the measurement date for noncash consideration is contract inception; (4) provide a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations; (5) clarify that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application, and (6) clarify that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. The effective date of these amendments is at the same date that Topic 606 is effective. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

 

In June 2016, the FASB issued a new standard to replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade and other receivables, loans, and other financial instruments, we will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. The new standard will be effective for us beginning July 1, 2020, with early adoption permitted beginning July 1, 2019. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. We are currently evaluating the impact of this standard on our consolidated financial statements.

 

 13 

 

 

NOTE 3 – ACCOUNTS RECEIVABLE

 

Accounts receivable consisted of the following:

 

   September 30,   December 31, 
   2016   2015 
Accounts receivable  $2,381   $     - 
Less: allowance for bad debt   -    - 
   $2,381   $- 

 

As of the periods presented, the Company has no allowance for bad debts, because the management, based on their analysis, considers all the accounts receivable to be collectible.

 

NOTE 4 – INVENTORIES

 

Inventories consisted of the following:

 

   September 30,   December 31, 
   2016   2015 
Raw materials  $388,649   $209,120 
Finished goods   379,934    709,841 
Low value consumables   38,209    39,249 
Total   806,792    958,210 
Less: impairment loss   (124,207)   (127,587)
Inventory, net  $682,585   $830,623 

 

Low value consumables represent low priced and easily worn articles and are amortized on equal-split amortization method. Pursuant to this method, half value of the low value consumable should be amortized once used and the remaining half value should be amortized when disposed of.

 

As of September 30, 2016 and December 31, 2015, the Company recognized $124,207 and $127,587, respectively, as a reserve for impairment loss from inventory.

 

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NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment consisted of the following:

 

   September 30,   December 31, 
   2015   2015 
Building  $5,951,711   $6,097,106 
Operating Equipment   357,955    367,696 
Office furniture and equipment   341,891    339,666 
Vehicles   1,103,381    1,133,406 
Total   7,754,938    7,937,874 
Less: accumulated depreciation   (3,086,441)   (2,824,030)
Property, plant and equipment, net  $4,668,497   $5,113,844 

 

Depreciation expense for the three months ended September 30, 2016 and 2015 amounted to $128,343 and $6,293, respectively, and for the nine months ended September 30, 2016 and 2015 amounted to $355,083 and $283,868, respectively.

 

NOTE 6 – INTANGIBLE ASSETS

 

Intangible assets consisted of the following:

 

   September 30,   December 31, 
   2016   2015 
Land use rights  $618,957   $635,800 
Other intangible assets   79,193    81,348 
Total   698,150    717,148 
Less: accumulated amortization   (161,350)   (148,380)
Intangible assets, net  $536,800   $568,768 

 

Amortization expense of intangible assets for the nine months ended September 30, 2016 and 2015 amounted to $17,132 and $13,574, respectively.

 

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

 

Estimated amortization expense for the year ending December 31,  Amount 
2016  $16,244 
2017  $16,244 
2018  $16,244 
2019  $16,244 
2020  $16,244 
Thereafter  $487,548 

 

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NOTE 7 – RELATED PARTY TRANSACTIONS

 

Payables due to related parties consist of the following:

 

   September 30,   December 31, 
   2016   2015 
Shenyang Joway Industrial Development Co., Ltd.  $2,184   $2,244 
Jinghe Zhang   126,286    128,689 
Total  $128,470   $130,933 

 

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 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 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, 2010, Shenyang Joway advanced an aggregate of $791,701 to Joway Shengshi and Joway Technology of which $789,408 has been repaid. For the nine months ended September 30, 2016 and 2015, the Company repaid $60 and $3,780 of these advances, respectively. As of September 30, 2016, the total unpaid principal balance due Shenyang Joway for advances was $2,184.

 

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, the Company’s 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 March 31, 2016, Joway Shengshi received cash advances in the aggregate principal amount of $4,736,754 from Jinghe Zhang of which $4,610,468 has been repaid. The Company repaid $2,403 of advances to Jinghe Zhang for the nine months ended September 30, 2016 and received $93,736 of advance from Jinghe Zhang for the nine months ended September 30, 2015. As of September 30, 2016, the total unpaid principal balance due Jinghe Zhang for advances was $126,286.

 

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

 

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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 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,
 
   2016   2015 
Tax computed at China statutory rates   25%   25%
Effect of losses   (25%)   (25%)
Effective rate   0%   0%

 

NOTE 9 – STATUTORY RESERVES

 

Pursuant to the laws and regulations of the PRC, annual income of the Company’s subsidiaries is required to be partly allocated to the statutory reserves funds after the payment of the PRC income taxes. The allocation to the statutory reserves funds should be at least 10% of income after tax until the reserves reaches 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, 2016, the Company had allocated $354,052 to statutory reserves.

 

NOTE 10 – SEGMENTS

 

In 2016 and 2015, the Company operated in three reportable business segments: (1) Healthcare Knit Goods 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 follows:

 

For the three months ended September 30, 2016

 

   Sales   COGS   Gross profit   Income (Loss) from operations   Depreciation and amortization   Assets 
Healthcare Knit Goods Series  $149,220   $37,915   $111,305   $16,293   $22,358   $176,775 
Daily Healthcare and Personal Care Series   242,402    117,278    125,124    (57,775)   36,319    202,485 
Wellness House and Activated Water Machine Series   502,572    220,681    281,891    (81,830)   75,300    361,356 
Segment Totals  $894,194   $375,874   $518,320    (123,312)  $133,977    740,616 
Other Expense, net                  (196)          
Income Benefits                  (8)          
Unallocated Assets                            5,779,441 
Net Loss                 $(123,500)          
Total Assets                           $6,520,057 

 

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For the three months ended September 30, 2015

 

   Sales   COGS   Gross profit   Income (Loss) from operations   Depreciation and amortization   Assets 
Healthcare Knit Goods Series  $235,663   $55,714   $179,949   $21,645   $1,681   $230,120 
Daily Healthcare and Personal Care Series   230,785    73,031    157,754    (17,054)   1,646    189,146 
Wellness House and Activated Water Machine Series   391,680    161,986    229,694    (42,037)   2,793    349,851 
Segment Totals  $858,128   $290,731   $567,397    (37,446)  $6,122    769,117 
Other Expense, net                  (47,272)          
Income Benefits                  (4,265)          
Unallocated Assets                            6,777,662 
Net Loss                 $(80,453)          
Total Assets                           $7,546,779 

 

For the nine months ended September 30, 2016

 

   Sales   COGS   Gross profit   Loss from operations   Depreciation and amortization   Assets 
Healthcare Knit Goods Series  $593,718   $175,603   $418,115   $(83,021)  $87,720   $176,775 
Daily Healthcare and Personal Care Series   554,188    229,879    324,309    (143,461)   81,880    202,485 
Wellness House and Activated Water Machine Series   1,371,354    554,218    817,136    (340,368)   202,615    361,356 
Segment Totals  $2,519,260   $959,700   $1,559,560    (566,850)  $372,215    740,616 
Other Expense, net                  (5,816)          
Income Tax                  925           
Unallocated Assets                            5,779,441 
Net Loss                 $(573,591)          
Total Assets                           $6,520,057 

 

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For the nine months ended September 30, 2015

 

   Sales   COGS   Gross profit   Loss from operations   Depreciation and amortization   Assets 
Healthcare Knit Goods Series  $754,594   $187,142   $567,452   $(79,330)  $93,119   $230,120 
Daily Healthcare and Personal Care Series   504,016    166,134    337,882    (94,125)   62,197    189,146 
Wellness House and Activated Water Machine Series   1,151,718    462,926    688,792    (298,375)   142,126    349,851 
Segment Totals  $2,410,328   $816,202   $1,594,126    (471,830)  $297,442    769,117 
Other Expense, net                  (26,593)          
Income Tax                  13,218           
Unallocated Assets                            6,777,662 
Net Loss                 $(511,641)          
Total Assets                           $7,546,779 

  

NOTE 11 - FRANCHISE REVENUES

 

The Company enters into franchising agreements to develop retail outlets for the Company's products. The 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 competitor’s 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 act to manage the franchisees’ levels of product. Franchisees hold periodic conferences, assisted by the Company’s marketing department, to promote product awareness and the introduction of 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,
 
   2016   2015   2016   2015 
                 
Sales to franchise customers  $570,189   $621,030   $1,664,536   $1,767,370 
Sales to non-franchise customers   324,005    237,098    854,724    642,958 
                     
Total sales  $894,194   $858,128   $2,519,260   $2,410,328 

 

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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 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 March 30, 2016.

 

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 100 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.

 

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.

 

We are a holding company with no material operations of our own. 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 manufacture 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 manufacture 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.

 

As a holding company, our ability to pay dividends and other cash distributions to our shareholders depends in part upon dividends and other distributions paid to us by our PRC subsidiaries. The amount of dividends paid by our PRC subsidiaries to us primarily depends on the service fees paid to our PRC subsidiaries from Joway Shengshi and its subsidiaries, and, to a lesser degree, our PRC subsidiaries’ retained earnings. Conducting our operations through contractual arrangements with Joway Shengshi and its subsidiaries has a risk that we may lose the power to direct the activities that most significantly affect the economic performance of Joway Shengshi and its subsidiaries, which may result in our being unable to consolidate their financial results with our results and may impair our access to their cash flow from operations and thereby reduce our liquidity.

 

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Description of Selected Income Statement Items

 

Revenues. We generate revenue from sales of our Healthcare Knit goods 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.

 

Other (expense) income. Our other (expense) income consists primarily of interest income, investment income and bank service fee.

 

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.

 

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,
 
   2016   2015   2016   2015 
REVENUES  $894,194   $858,128   $2,519,260   $2,410,328 
COST OF REVENUES   375,874    290,731    959,700    816,202 
GROSS PROFIT   518,320    567,397    1,559,560    1,594,126 
OPERATING EXPENSES   641,632    604,843    2,126,410    2,065,956 
LOSS FROM OPERATIONS   (123,312)   (37,446)   (566,850)   (471,830)
OTHER (EXPENSE) INCOME, NET   (196)   (47,272)   (5,816)   (26,593)
LOSS BEFORE INCOME TAXES   (123,508)   (84,718)   (572,666)   (498,423)
INCOME TAXES (BENEFITS)   (8)   (4,265)   925    13,218 
NET LOSS  $(123,500)  $(80,453)  $(573,591)  $(511,641)

 

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Business Segments

 

In 2016 and 2015, we operated in three reportable business segments: (1) Healthcare Knit Goods, (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, 2016

 

   Healthcare Knitgoods Series   % of Total   Daily Healthcare and Personal Care Series   % of Total   Wellness House and Activated Water Machine Series   % of Total   Total 
REVENUES  $149,220    16.7%  $242,402    27.1%  $502,572    56.2%  $894,194 
COST OF REVENUES   37,915    10.1%   117,278    31.2%   220,681    58.7%   375,874 
GROSS PROFIT   111,305    21.5%   125,124    24.1%   281,891    54.4%   518,320 
GROSS MARGIN   74.6%        51.6%        56.1%        58.0%
OPERATING EXPENSES   95,012    14.8%   182,899    28.5%   363,721    56.7%   641,632 
INCOME (LOSS) FROM OPERATIONS  $16,293    -13.2%  $(57,775)   46.9%  $(81,830)   66.4%  $(123,312)

 

For the three months ended September 30, 2015

 

   Healthcare Knitgoods Series   % of Total   Daily Healthcare and Personal Care Series   % of Total   Wellness House and Activated Water Machine Series   % of Total   Total 
REVENUES  $235,663    27.5%  $230,785    26.9%  $391,680    45.6%  $858,128 
COST OF REVENUES   55,714    19.2%   73,031    25.1%   161,986    55.7%   290,731 
GROSS PROFIT   179,949    31.7%   157,754    27.8%   229,694    40.5%   567,397 
GROSS MARGIN   76.4%        68.4%        58.6%        66.1%
OPERATING EXPENSES   158,304    26.2%   174,808    28.9%   271,731    44.9%   604,843 
INCOME (LOSS) FROM OPERATIONS  $21,645    -57.8%  $(17,054)   45.5%  $(42,037)   112.3%  $(37,446)

 

For the nine months ended September 30, 2016

 

   Healthcare Knitgoods Series   % of Total   Daily Healthcare and Personal Care Series   % of Total   Wellness House and Activated Water Machine Series   % of Total   Total 
REVENUES  $593,718    23.6%  $554,188    22.0%  $1,371,354    54.4%  $2,519,260 
COST OF REVENUES   175,603    18.3%   229,879    24.0%   554,218    57.7%   959,700 
GROSS PROFIT   418,115    26.8%   324,309    20.8%   817,136    52.4%   1,559,560 
GROSS MARGIN   70.4%        58.5%        59.6%        61.9%
OPERATING EXPENSES   501,136    23.6%   467,770    22.0%   1,157,504    54.4%   2,126,410 
LOSS FROM OPERATIONS  $(83,021)   14.6%  $(143,461)   25.3%  $(340,368)   60.0%  $(566,850)

 

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For the nine months ended September 30, 2015

 

   Healthcare Knitgoods Series   % of Total   Daily Healthcare and Personal Care Series   % of Total   Wellness House and Activated Water Machine Series   % of Total   Total 
REVENUES  $754,594    31.3%  $504,016    20.9%  $1,151,718    47.8%  $2,410,328 
COST OF REVENUES   187,142    22.9%   166,134    20.4%   462,926    56.7%   816,202 
GROSS PROFIT   567,452    35.6%   337,882    21.2%   688,792    43.2%   1,594,126 
GROSS MARGIN   75.2%        67.0%        59.8%        66.1%
OPERATING EXPENSES   646,782    31.3%   432,007    20.9%   987,167    47.8%   2,065,956 
LOSS FROM OPERATIONS  $(79,330)   16.8%  $(94,125)   19.9%  $(298,375)   63.2%  $(471,830)

 

For The Three Months Ended September 30, 2016 Compared to September 30, 2015

 

Revenue. For the three months ended September 30, 2016, revenue was $894,194 compared to $858,128 for the three months ended September 30, 2015, an increase of $36,066 or 4.2%. This increase was mainly due to the increase in revenue from wellness house.

 

Revenue from healthcare knit goods segment decreased by $86,443 or 36.7% to $149,220 for the three months ended September 30, 2016 from $235,663 for the three months ended September 30, 2015. This decrease was mainly due to the decrease in sales of our mattress products. During the third quarter of 2015, we promoted our mattress products by offering more discounts to our franchisees and brought out bigger sales.

 

Revenue from daily healthcare and personal care products increased by $11,617 or 5% to $242,402 for the three months ended September 30, 2016 from $230,785 for the three months ended September 30, 2015. This was primarily due to the increase in sales of Body Composition Analyzer, which is a new product launched in August 2016.

 

Revenue from wellness houses and activated water machines increased by $110,892 or 28.3% to $502,572 for the three months ended September 30, 2016 from $391,680 for the three months ended September 30, 2015. This increase was mainly due to a steadily increase in the wellness house usages. Since the second quarter of 2014, we strengthened our promotion on wellness houses, which attracted more and more customers for wellness houses.

 

Cost of Goods Sold. For the three months ended September 30, 2016, cost of goods sold was $375,874 compared to $290,731 for the three months ended September 30, 2015, an increase of $85,143 or 29.3%. This increase was mainly due to the increase in the cost of wellness house and activated water machine segment and daily healthcare and personal care segment.

 

Cost of goods sold for healthcare knit goods segment decreased to $37,915 for the three months ended September 30, 2016 from $55,714 for the three months ended September 30, 2015, a decrease of $17,799 or 31.9%. This decrease was due to the decrease in sales.

 

Cost of goods sold for the daily healthcare and personal care segment increased to $117,278 for the three months ended September 30, 2016 from $73,031 for the three months ended September 30, 2015, an increase of $44,247 or 60.6%. This increase was due to the increase in sales.

 

Cost of goods sold for our wellness house and activated water machine segment increased to $220,681 for the three months ended September 30, 2016 from $161,986 for the three months ended September 30, 2015, an increase of $58,695 or 36.2%. This increase was mainly due to the increase in the cost of the construction of our wellness house as a result of the increase in sales.

 

Gross profit. Our gross profit decreased by $49,077 or 8.6% to $518,320 for the three months ended September 30, 2016, compared to $567,397 for the three months ended September 30, 2015. This decrease was mainly due to the decrease in gross profit of healthcare knit goods segment and daily healthcare and personal care segment. Our gross margin decreased from 66.1% for the three months ended September 30, 2015 to 58% for the three months ended September 30, 2016. This decrease was mainly due to the decreased gross margin in daily healthcare and personal care segment.

 

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Gross profit for the healthcare knit goods segment decreased by $68,644 or 38.1% to $111,305 for the three months ended September 30, 2016 compared to $179,949 for the three months ended September 30, 2015. This decrease was mainly due to decrease in gross profit from our mattress products, as a result of decrease in sales. The gross margins of healthcare knit goods segment decreased slightly from 76.4% for the three months ended September 30, 2015 to 74.6% for the three months ended September 30, 2016.

 

Gross profit of daily healthcare and personal care segment decreased by $32,630 or 20.7% to $125,124 for the three months ended September 30, 2016, compared to $157,754 for the three months ended September 30, 2015. This decrease was mainly due to the decreased profit of tourmaline shawls. The gross margin of daily healthcare and personal care segment decreased from 68.4% for the three months ended September 30, 2015 to 51.6% for the three months ended September 30, 2016, which were influenced greatly by price reduction after more discounts to our franchisees.

 

Gross profit of the wellness house and activated water machine segments increased by $52,197 or 22.7% to $281,891 for the three months ended September 30, 2016, compared to $229,694 for the three months ended September 30, 2015. This increase was mainly due to the increase in gross profit from construction of wellness houses. The gross margin of our wellness house and activated water machine segments decreased from 58.6% for the three months ended September 30, 2015 to 56.1% for the three months ended September 30, 2016. This decrease was mainly due to that we offered more discounts to our franchisees for foot sauna bucket and tourmaline activated water machines.

 

Operating expenses. Our total operating expenses consist of sales and marketing expenses and general and administrative expenses. Our total operating expenses increased by $36,789 or 6.1%, from $604,843 for the three months ended September 30, 2015 to $641,632 for the three months ended September 30, 2016. This increase was mainly due to the increase of travel expenses and transportation expenses. Operating expenses for healthcare knit goods segment decreased by $63,292 or 40% to $95,012 for the three months ended September 30, 2016 from $158,304 for the three months ended September 30, 2015. Operating expenses for daily healthcare and personal care segment increased by $8,091 or 4.6% to $182,899 for the three months ended September 30, 2016 from $174,808 for the three months ended September 30, 2015. Operating expenses for our wellness house and activated water machine segment increased by $91,990 or 33.9% to $363,721 for the three months ended September 30, 2016 from $271,731 for the three months ended September 30, 2015.

 

Loss from operations. As a result of the foregoing, our loss from operations was $123,312 for the three months ended September 30, 2016, compared to $37,446 for the three months ended September 30, 2015, an increase of $85,866. The increased loss was mainly due to the increase in both product cost and operating expenses.

 

Income taxes. Our income tax expenses were negative $8 for the three months ended September 30, 2016, compared to negative $4,265 for the three months ended. The negative income tax for the third quarter of 2016 and 2015 were due to the change of currency translation rate.

 

Net loss. For the three months ended September 30, 2016, our net loss was $123,500 compared to $80,453 for the three months ended September 30, 2015, which was mainly due to increase in both product cost and operating expenses.

 

For the Nine Months Ended September 30, 2016 Compared to September 30, 2015

 

Revenue. For the nine months ended September 30, 2016, revenue was $2,519,260 compared to $2,410,328 for the nine months ended September 30, 2015, an increase of $108,932 or 4.5%. This increase was mainly due to the increase in revenue from wellness house and activated water machine segment.

 

Revenue from healthcare knit goods segment decreased by $160,876, or 21.3% to $593,718 for the nine months ended September 30, 2016 from $754,594 for the nine months ended September 30, 2015. This decrease was mainly due to the decrease in sales of our mattress products.

 

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Revenue from daily healthcare and personal care products increased by $50,172 or 10% to $554,188 for the nine months ended September 30, 2016 from $504,016 for the nine months ended September 30, 2015. This was primarily due to the increase in sales of Tourmaline knee Protector and Body Composition Analyzer.

 

Revenue from wellness houses and activated water machines increased by $219,636 or 19.1% to $1,371,354 for the nine months ended September 30, 2016 from $1,151,718 for the nine months ended September 30, 2015. This increase was mainly due to the increase in construction of wellness houses.

 

Cost of Goods Sold. For the nine months ended September 30, 2016, cost of goods sold was $959,700 compared to $816,202 for the nine months ended September 30, 2015, an increase of $143,498, or 17.6%. This increase was mainly due to the increase in the cost of wellness house and activated water machine segment and daily healthcare and personal care segment.

 

Cost of goods sold for healthcare knit goods segment decreased to $175,603 for the nine months ended September 30, 2016 from $187,142 for the nine months ended September 30, 2015, a decrease of $11,539 or 6.2%. This decrease was mainly due to the decrease in the cost of our mattress products, as a result of decrease in sales.

 

Cost of goods sold for the daily healthcare and personal care segment increased to $229,879 for the nine months ended September 30, 2016 from $166,134 for the nine months ended September 30, 2015, an increase of $63,745 or 38.4%. This increase was mainly due to the increase in sales.

 

Cost of goods sold for our wellness house and activated water machine segment increased to $554,218 for the nine months ended September 30, 2016 from $462,926 for the nine months ended September 30, 2015, an increase of $91,292 or 19.7%. This increase was mainly due to the increase in the cost of the construction of our wellness houses.

 

Gross profit. Our gross profit decreased by $34,566 or 2.2% to $1,559,560 for the nine months ended September 30, 2016, compared to $1,594,126 for the nine months ended September 30, 2015. This decrease was due to RMB’s depreciation against USD. Excluding the effect of exchange rate fluctuation, our gross profit increased by RMB 439,947 for the nine months ended September 30, 2016, compared with the same period of 2015. Our gross margin decreased from 66.1% for the nine months ended September 30, 2015 to 61.9% for the nine months ended September 30, 2016. This decrease was mainly due to healthcare knit goods segment and daily healthcare and personal care segment.

 

Gross profit for the healthcare knit goods segment decreased by $149,337 or 26.3% to $418,115 for the nine months ended September 30, 2016 compared to $567,452 for the nine months ended September 30, 2015. This decrease was mainly due to the decrease in gross profit for our mattress products. The gross margins of healthcare knit goods segment decreased from 75.2% for the nine months ended September 30, 2015 to 70.4% for the nine months ended September 30, 2016. The reduced output of our healthcare knit goods caused higher cost rate and lower gross profit margin.

 

Gross profit of daily healthcare and personal care segment decreased by $13,573 or 4% to $324,309 for the nine months ended September 30, 2016, compared to $337,882 for the nine months ended September 30, 2015. This decrease was primarily due to RMB’s depreciation against USD. In fact our gross profit of daily healthcare and personal care segment increased by RMB 52,151 for the nine months ended September 30, 2016, compared with the same period of 2015, excluding the effect of exchange rate fluctuation. Our gross margin of daily healthcare and personal care segment decreased from 67% for the nine months ended September 30, 2015 to 58.5% for the nine months ended September 30, 2016. This decrease was mainly due to more discounts offered to our franchisees.

 

Gross profit of the wellness house and activated water machine segments increased by $128,344 or 18.6% to $817,136 for the nine months ended September 30, 2016, compared to $688,792 for the nine months ended September 30, 2015. This increase was mainly due to the increase in gross profit from wellness houses. The gross margin of our wellness house and activated water machine segments decreased slightly from 59.8% for the nine months ended September 30, 2015 to 59.6% for the nine months ended September 30, 2016.

 

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Operating expenses. Our total operating expenses consist of sales and marketing expenses and general and administrative expenses. Our total operating expenses increased by $60,454 or 2.9%, from $2,065,956 for the nine months ended September 30, 2015 to $2,126,410 for the nine months ended September 30, 2016. This increase was mainly due to the increase of conference expenses. Operating expenses for healthcare knit goods segment decreased by $145,646 or 22.5% to $501,136 for the nine months ended September 30, 2016 from $646,782 for the nine months ended September 30, 2015. Operating expenses for daily healthcare and personal care segment increased by $35,763 or 8.3% to $467,770 for the nine months ended September 30, 2016 from $432,007 for the nine months ended September 30, 2015. Operating expenses for our wellness house and activated water machine segment increased by $170,337 or 17.3% to $1,157,504 for the nine months ended September 30, 2016 from $987,167 for the nine months ended September 30, 2015.

 

Loss from operations. As a result of the foregoing, our loss from operations was $566,850 for the nine months ended September 30, 2016, compared to $471,830 for the nine months ended September 30, 2015, an increase of $95,020. This was mainly due to the increase in operating expenses.

 

Income taxes. Our income tax expenses were $925 for the nine months ended September 30, 2016, compared to $13,218 for the nine months ended September 30, 2015. This decrease was due to the decreased income of Joway Decoration.

 

Net loss. Our net loss was $573,591 for the nine months ended September 30, 2016, compared to $511,641 for the nine months ended September 30, 2015. This increase was mainly due to the increase in loss from operation.

 

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,
 
   2016   2015   2016   2015 
                 
Sales to franchise customers  $570,189   $621,030   $1,664,536   $1,767,370 
Sales to non-franchise customers   324,005    237,098    854,724    642,958 
                     
Total sales  $894,194   $858,128   $2,519,260   $2,410,328 

 

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Liquidity and Capital Resources

 

Our cash at December 31, 2015 was $369,249 and increased to $404,798 at September 30, 2016, an increase of $35,549. This increase was mainly provided by our operating activities. On September 30, 2016, we had net working capital of $841,041, a decrease of $270,182 from $1,111,223 on December 31, 2015.

 

Our cash flow information summary is as follows:

 

   For the nine months ended
September 30,
 
   2016   2015 
Net cash provided by (used in):           
Operating activities  $115,441   $177,091 
Investing activities  $(46,183)  $(165,512)
Financing activities  $(2,463)  $89,956 

 

Net Cash Provided by Operating Activities

 

Net cash provided by operating activities was $115,441 for the nine months ended September 30, 2016, compared to $177,091 for the nine months ended September 30, 2015. This decrease was primarily due to increased loss of $61,950.

 

For the nine months ended September 30, 2016, cash was mainly used to cover the loss of $573,591, which was primarily offset by an add-back of $355,083 of depreciation for non-cash expense, the increase in advances from customer of $160,013 and the decrease in inventory purchase of $151,418.

 

For the nine months ended September 30, 2015, cash was mainly used to cover the loss of $511,641, which was primarily offset by an add-back of $283,868 of depreciation for non-cash expense, the increase in advances from customer of $188,649, the decrease in inventory purchase of $69,768 and the increase in accounts payable of $47,900.

 

Net Cash Used in Investing Activities

 

Net cash used in investing activities was $46,183 for the nine months ended September 30, 2016, compared to $165,512 for the nine months ended September 30, 2015.

 

For the nine months ended September 30, 2016, we expended $46,335 on purchase of office equipment. For the nine months ended September 30, 2015, we expended $165,512 on purchase of vehicles and office equipment.

 

Net Cash Provided by (Used in) Financing Activities

 

Net cash used in financing activities was $2,463 for the nine months ended September 30, 2016, compared to $89,956 provided by financing activities for the nine months ended September 30, 2015.

 

On May 7, 2007, our operating 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, our 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. Pursuant to these agreements, Shenyang Joway advanced an aggregate of $791,701 to Joway Shengshi and Joway Technology through December 31, 2010. We repaid $60 and $3,780 of these advances for the nine months ended September 30, 2016 and 2015, respectively. As of September 30, 2016, the total unpaid principal balance due Shenyang Joway for advances was $2,184. Shenyang Joway ceased operations at the end of 2009, although it still exists as a legal entity.

 

On May 10, 2007, our operating subsidiaries, Joway Shengshi entered into a cash advance agreement with Jinghe Zhang, our President, Chief Executive Officer and director. Pursuant to the agreements, Jinghe Zhang agreed to advance operating capital to Joway Shengshi. These advances are interest free, unsecured and are repayable upon demand. During the period beginning May 17, 2007 (inception of Joway Shengshi) through March 31, 2016, Joway Shengshi received cash advances in the aggregate principal amount of $4,736,754 from Jinghe Zhang. We repaid $2,403 of advances for the nine months ended September 30, 2016 and received $93,736 of advances for the nine months ended September 30, 2015. As of September 30, 2016, the total unpaid principal balance due Jinghe Zhang for advances made to Joway Shengshi was $126,286.

 

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The Company has sufficient liquidity from internal and external sources to meet the Company’s operating cash needs over the next 12 months even if Mr. Zhang and Shenyang Joway were to demand immediate repayment of the remaining balance under these loans and no longer wish to provide future loans to any of our 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, 2016, the Company had allocated $354,052 to statutory reserves.

 

Off Balance Sheet Items

 

Under SEC regulations, we are required to disclose off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, such as changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. An off-balance sheet arrangement means a transaction, agreement or contractual arrangement to which any entity that is not consolidated with us is a party, under which we have:

 

  any obligation under certain guarantee contracts,

 

  any retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets,

 

  any obligation under a contract that would be accounted for as a derivative instrument, except that it is both indexed to our stock and classified in shareholder equity in our statement of financial position, and

 

  any obligation arising out of a material variable interest held by us in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or engages in leasing, hedging or research and development services with us.

 

We do not have any off-balance sheet arrangements that we are required to disclose pursuant to these regulations. In the ordinary course of business, we enter into operating lease commitments, purchase commitments and other contractual obligations. These transactions are recognized in our financial statements in accordance with generally accepted accounting principles in the United States.

 

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 and its wholly owned subsidiaries and controlled VIEs. All significant inter-company accounts and transactions have been eliminated in the consolidation.

 

 28 

 

 

Pursuant to Accounting Standards Codification Topic 810 “Consolidation” (“ASC 810”), the Company is required to include in its consolidated financial statements the financial statements of its variable interest entities (“VIEs”). ASC 810 requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. VIEs are those entities in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the company is the primary beneficiary of the entity.

 

Based on the various Contractual Agreements, we believe we are able to exercise control over the VIEs, and to obtain the full economic benefits. We believe that the terms of the exclusive option agreement are currently exercisable and legally enforceable under PRC laws and regulations. We also believe that the minimum amount of consideration permitted by the applicable PRC law to exercise the option does not represent a financial barrier or disincentive for us to exercise our rights under the exclusive option agreement. A simple majority vote of our board of directors is required to pass a resolution to exercise our rights under the exclusive option agreement, for which consent of the shareholder of VIEs is not required. Therefore, we believe this gives us the power to direct the activities that most significantly impact VIEs’ economic performance. T We believe that our ability to exercise effective control, together with the consulting service agreements and the equity pledge agreements, give us the rights to receive substantially all of the economic benefits from VIEs in consideration for the services provided by its wholly owned subsidiaries in China. Accordingly, as the primary beneficiary of VIEs and in accordance with U.S. GAAP, Joway Shengshi, Joway Technology, Joway Decoration, and Shengtang Trading, as VIEs of Junhe Consulting, has been consolidated in the Company’s financial statements. Sales from Joway Shengshi, Joway Technology, Joway Decoration, and Shengtang Trading are included in our total sales, their incomes or losses from operations are consolidated with ours, and our net income or loss includes net income or loss from Joway Shengshi, Joway Technology, Joway Decoration, and Shengtang Trading.

 

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.

 

 29 

 

 

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

 

We do not anticipate that the adoption of recently issued accounting pronouncements to have a material effect on our condensed 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 their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2016, our disclosure controls and procedures were not effective, based on the material weakness described below:

 

We did not have sufficient skilled accounting personnel that are either qualified as Certified Public Accountants in the U.S. or that have received education from U.S. institutions or other educational programs that would provide enough relevant education relating to U.S. GAAP. The Company’s CFO and Financial Manager have worked for U.S. listed companies but have limited experience with U.S. GAAP and are not U.S. Certified Public Accountants. Further, our operating subsidiaries are based in China, and in accordance with PRC laws and regulations, are required to comply with PRC GAAP, rather than U.S. GAAP. Thus, the accounting skills and understanding necessary to fulfill the requirements of U.S. GAAP-based reporting, including the preparation of financial statements and consolidation, are inadequate, and determined to be a material weakness.

 

 30 

 

 

Remediation Initiative

 

  We have started a training program in the principles and rules of U.S. GAAP, SEC reporting requirements and the application thereof. The program is provided by an independent training institution, for our finance and accounting personnel, including our Chief Financial Officer, Financial Manager and others.

 

  We are in the process of designing a program to provide ongoing company-wide training regarding the Company’s internal controls, with particular emphasis on our finance and accounting staff.

 

  In 2011 we established the position of internal audit manager. From September 2011 to July 2012, we hired an internal audit manager who implemented an internal review process over financial reporting to review all recent accounting pronouncements and to verify that the accounting treatments identified in such report have been fully implemented and confirmed by our internal control department. Currently, we are still in the process of seeking for a proper candidate to perform as our internal audit manager.

 

We believe that the foregoing steps will remediate the significant deficiencies identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting for the nine months ended September 30, 2016 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.

 

As of the date of this filing, there have been no material changes from the risk factors disclosed in Part I, Item 1A (Risk Factors) contained in our Annual Report on Form 10-K for the year ended December 31, 2015. We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially affect our operations. The risks, uncertainties and other factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2015 may cause our actual results, performances and achievements to be materially different from those expressed or implied by our forward-looking statements. If any of these risks or events occurs, our business, financial condition or results of operations may be adversely affected.

 

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

 

None.

 

Item 3. Defaults upon Senior Securities.

 

None.

 

 31 

 

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

Item 5.01 Changes in Control of Registrant.

 

On July 20, 2010, in connection with the Share Exchange and as consideration for entering into the VIE Agreements, Lionel Evan Liu (the “Grantor”), the sole shareholder of Crystal Globe Limited, a British Virgin Islands company (“CGL”), entered into a Call Option Agreement (the “Call Option Agreement”) with Jinghe Zhang and Baogang Song, the shareholders of Joway Shengshi (the “Grantees”) and Lionel Evan Liu (the “Grantor”, pursuant to which the Grantees had the right to purchase up to 100% of the shares of CGL (the “Call Option”) at an exercise price of $2.00 per share (the “Exercise Price”) for a period of five years. The Call Option vested as to 34% of the shares of CGL on April 2, 2011 and as to 33% on each of April 2, 2012 and 2013(the respective “Call Option Effective Date”). On March 28, 2015, the Grantor and Grantees amended the Call Option Agreement, to (i) reduce the Exercise Price to $0.00 per share and (ii) extend the Grantees’ rights to exercise their call option within ten years from the above respective Option Effective Date. As of September 30, 2016, CGL held 17,408,000 shares of the common stock of the Company, representing 86.81% of the issued and outstanding shares of the Company.

 

On November 13, 2016, Jinghe Zhang exercised his Call Option as to 99% of the shares of CGL and Baogang Song exercised his Call Option as to 1% of the shares of CGL. As a result of exercising his Call Option, Jinghe Zhang became the controlling shareholder of CGL and in turn, the controlling shareholder of the Company. Jinghe Zhang now controls 17,233,920 shares, or 85.9%, of the issued and outstanding shares of the Company’s common stock.

 

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.LAB  XBRL Label Linkbase Document*
    
101.PRE  XBRL Presentation Linkbase Document*
    
101.DEF  XBRL Definition Linkbase Document*

 

 

 

* Filed herewith

 

 32 

 

 

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, 2016

 

  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

  

 

 

33

 

 

EX-31.1 2 f10q0916ex31i_jowayhealth.htm CERTIFICATION

EXHIBIT 31.1

 

CERTIFICATION

 

I, Jinghe Zhang, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q for the nine months ended September 30, 2016 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, 2016

 

  /s/ Jinghe Zhang
  Jinghe Zhang
  Chief Executive Officer
  (Principal Executive Officer)

 

EX-31.2 3 f10q0916ex31ii_jowayhealth.htm CERTIFICATION

EXHIBIT 31.2

 

CERTIFICATION

 

I, Yuan Huang, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q for the nine months ended September 30, 2016 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, 2016

 

  /s/ Yuan Huang
  Yuan Huang
 

Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32.1 4 f10q0916ex32i_jowayhealth.htm CERTIFICATION

EXHIBIT 32.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Jinghe Zhang, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Joway Health Industries Group Inc. for the nine months ended September 30, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Joway Health Industries Group Inc.

 

Date: November 14, 2016

 

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

 

EX-32.2 5 f10q0916ex32ii_jowayhealth.htm CERTIFICATION

EXHIBIT 32.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Yuan Huang, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Joway Health Industries Group Inc. for the nine months ended September 30, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Joway Health Industries Group Inc.

 

Date: November 14, 2016

 

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

 

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Document and Entity Information - shares
9 Months Ended
Sep. 30, 2016
Nov. 13, 2016
Document and Entity Information [Abstract]    
Entity Registrant Name Joway Health Industries Group Inc  
Entity Central Index Key 0001263364  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Type 10-Q  
Document Period End Date Sep. 30, 2016  
Document Fiscal Year Focus 2016  
Document Fiscal Period Focus Q3  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock Shares Outstanding   20,054,000
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Condensed Consolidated Balance Sheets - USD ($)
Sep. 30, 2016
Dec. 31, 2015
CURRENT ASSETS:    
Cash $ 404,798 $ 369,249
Accounts receivable 2,381
Other receivables 94,840 100,298
Inventories 682,585 830,623
Advances to suppliers 106,288 90,542
Prepaid taxes 20,269 64,789
Prepaid expense 3,599 2,464
Total current assets 1,314,760 1,457,965
PROPERTY, PLANT AND EQUIPMENT, net 4,668,497 5,113,844
OTHER ASSETS:    
Intangible assets, net 536,800 568,768
Total other assets 536,800 568,768
Total assets 6,520,057 7,140,577
CURRENT LIABILITIES:    
Accounts payable 86,364 126,866
Advances from customers 194,072 34,059
Other payables 64,813 54,884
Due to related parties 128,470 130,933
Total current liabilities 473,719 346,742
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; 20,054,000 shares issued and outstanding at September 30, 2016 and December 31, 2015 20,054 20,054
Additional paid-in-capital 7,361,665 7,361,665
Statutory reserves 354,052 354,052
Accumulated deficits (2,364,260) (1,790,669)
Accumulated other comprehensive income 674,827 848,733
Total stockholders' equity 6,046,338 6,793,835
Total liabilities and stockholders' equity $ 6,520,057 $ 7,140,577
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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Sep. 30, 2016
Dec. 31, 2015
Statement of Financial Position [Abstract]    
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 1,000,000 1,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 200,000,000 200,000,000
Common stock, shares issued 20,054,000 20,054,000
Common stock, shares outstanding 20,054,000 20,054,000
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Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Income Statement [Abstract]        
REVENUES $ 894,194 $ 858,128 $ 2,519,260 $ 2,410,328
COST OF REVENUES 375,874 290,731 959,700 816,202
GROSS PROFIT 518,320 567,397 1,559,560 1,594,126
Selling expenses 245,199 174,367 891,726 620,719
General and administrative expenses 396,433 430,476 1,234,684 1,445,237
OPERATING EXPENSES 641,632 604,843 2,126,410 2,065,956
LOSS FROM OPERATIONS (123,312) (37,446) (566,850) (471,830)
Interest income 121 171 282 512
Other income 180 2,039 1,551 25,762
Other expenses (497) (49,482) (7,649) (52,867)
OTHER EXPENSE, NET (196) (47,272) (5,816) (26,593)
LOSS BEFORE INCOME TAXES (123,508) (84,718) (572,666) (498,423)
INCOME TAXES (BENEFITS) (8) (4,265) 925 13,218
NET LOSS (123,500) (80,453) (573,591) (511,641)
OTHER COMPREHENSIVE LOSS:        
Foreign currency translation adjustment (25,644) (309,078) (173,906) (228,781)
COMPREHENSIVE LOSS $ (149,144) $ (389,531) $ (747,497) $ (740,422)
NET LOSS PER COMMON SHARE, BASIC AND DILUTED $ (0.01) $ 0.00 $ (0.03) $ (0.03)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, BASIC AND DILUTED 20,054,000 20,054,000 20,054,000 20,054,000
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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (573,591) $ (511,641)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities    
Depreciation 355,083 283,868
Amortization 17,132 13,574
Loss on sale of assets 5,243
Changes in operating assets and liabilities:    
Accounts receivable, trade (2,381) 26,192
Other receivables 5,458 5,421
Inventories 151,418 69,768
Advances to suppliers (15,746) 31,736
Prepaid expense (1,135) (2,694)
Accounts payable (40,502) 47,900
Advances from customers 160,013 188,649
Other payable 3,745 1,815
Salary and welfare payable 6,184 3,087
Taxes payable 44,520 19,416
Net cash provided by operating activities 115,441 177,091
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchase of property plant and equipment (46,335) (165,512)
Proceeds from sale of equipment 152
Net cash used in investing activities (46,183) (165,512)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Due to (due from) related parties (2,463) 89,956
Net cash provided by (used in) financing activities (2,463) 89,956
EFFECT OF EXCHANGE RATE CHANGES ON CASH (31,246) 54,335
NET INCREASE IN CASH 35,549 155,870
CASH, beginning of period 369,249 542,672
CASH, end of period 404,798 698,542
SUPPLEMENTAL DISCLOSURES:    
Income taxes paid 2,848 23,457
Interest paid
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Organization
9 Months Ended
Sep. 30, 2016
Organization [Abstract]  
ORGANIZATION

NOTE 1 – ORGANIZATION

 

The unaudited condensed 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 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.

 

The following table lists the Company and its subsidiaries:

 

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 20,054  

86.8% owned by Crystal Globe Limited

13.2%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 Healthcare Knit Goods and Daily Healthcare and Personal Care 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 Wellness House for family use and Activated Water Machine and construction of Tourmaline Wellness House
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 into 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 and 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, Jingshe Zhang and Baogang Song, the shareholders of Joway Shengshi (the “Grantees”), entered into a Call Option Agreement, dated July 20,2010 with Lionel Evan Liu (the “Grantor”), the sole shareholder of Crystal Globe Limited (the controlling shareholder of Dynamic Elite), a British Virgin Islands company (“CGL”) (the “Call Option Agreement”), pursuant to which the Grantees had the right to purchase up to 100% of the shares of CGL (the “Call Option”) at an exercise price of $2.00 per share (the “Exercise Price”) for a period of five years. The Call Option vested as to 34% of the shares of CGL on April 2, 2011 and as to 33% on each of April 2, 2012 and 2013(the respective “Call Option Effective Date”). On March 28, 2015, the Grantor and Grantees amended the Call Option Agreement, to (i) reduce the Exercise Price to $0.00 per share and (ii) extend the Grantees’ rights to exercise their call option within ten years from the respective Option Effective Date.

 

On November 13, 2016, Jinghe Zhang exercised his Call Option as to 99% of the shares of CGL and Baogang Song exercised his Call Option as to 1% of the shares of CGL. As a result of exercising his Call Option, Jinghe Zhang became the controlling shareholder of CGL and in turn, the controlling shareholder of the Company. Jinghe Zhang now controls 17,233,920 shares, or 85.9%, of the issued and outstanding shares of the Company’s common stock.

XML 18 R7.htm IDEA: XBRL DOCUMENT v3.5.0.2
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2016
Summary of Significant Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). Accordingly, they do not include all of the information and the footnotes required by generally accepted accounting principles for complete financial statements. The Company’s functional currency is the Chinese Renminbi (“RMB”); however, the accompanying unaudited condensed 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.

 

Operating results for the nine month period ended September 30, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2016. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s form 10-K for the fiscal year ended December 31, 2015 which was filed on March 30, 2016.

 

Use of Estimates

 

The preparation of the consolidated financial statements in conformity with US GAAP requires 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 and 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” (“ASC 810”), the Company is required to include in its consolidated financial statements the financial statements of its variable interest entities (“VIEs”). ASC 810 requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. VIEs are those entities in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the company is the primary beneficiary of the entity.

 

Based on the various Contractual Agreements, the Company is able to exercise control over the VIEs, and to obtain the full economic benefits. The terms of the exclusive option agreement are currently exercisable and legally enforceable under PRC laws and regulations. The minimum amount of consideration permitted by the applicable PRC law to exercise the option does not represent a financial barrier or disincentive for the Company to exercise its rights under the exclusive option agreement. A simple majority vote of the Company’s board of directors is required to pass a resolution to exercise its rights under the exclusive option agreement, for which consent of the shareholder of VIEs is not required. Therefore, this gives the Company the power to direct the activities that most significantly impact VIEs’ economic performance. The Company’s ability to exercise effective control, together with the consulting service agreements and the equity pledge agreements, give the Company the rights to receive substantially all of the economic benefits from VIEs in consideration for the services provided by its wholly owned subsidiaries in China. Accordingly, as the primary beneficiary of VIEs and in accordance with U.S. GAAP, Joway Shengshi, Joway Technology, Joway Decoration, and Shengtang Trading, as VIEs of Junhe Consulting, has been consolidated in the Company’s financial statements. Sales from Joway Shengshi, Joway Technology, Joway Decoration, and Shengtang Trading are included in the Company’s total sales, their incomes or losses from operations are consolidated with the Company’s, and the Company’s net income or loss includes net income or loss from Joway Shengshi, Joway Technology, Joway Decoration, and Shengtang Trading.

 

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 United States dollars 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, 
  2016  2015  2015 
Period ended RMB: USD Exchange rate  6.66938   6.3538   6.4927 
Average RMB: USD Exchange rate  6.57924   6.1606   6.2401 

 

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.

 

Foreign currency translation adjustments have been reported as comprehensive loss in the consolidated financial statements and totaled $25,644 and $309,078 for the three months ended September 30, 2016 and 2015, respectively, and $173,906 and $228,781 for the nine months ended September 30, 2016 and 2015, respectively.

 

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, and 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. 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 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

 

 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

 

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 presented net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses. On a periodic basis, the Company 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 allowances. Accounts are written off after exhaustive efforts at collection. As of September 30, 2016 and December 31, 2015, based on a review of its outstanding balances, the Company allowance for doubtful accounts had a zero balance, respectively.

 

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 are 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 a valuation allowance is required. As of September 30, 2016 and December 31, 2015, the Company recorded $124,207 and $127,587 for inventory valuation allowance, respectively.

 

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 $106,288 and $90,542 as of September 30, 2016 and December 31, 2015, 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. 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, 2016 and 2015.

 

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 shipments 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 a franchisee customer 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 $41,060 and $17,704 for the three months ended September 30, 2016 and 2015, respectively, and $125,915 and $63,611 for the nine months ended September 30, 2016 and 2015, 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”, 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.

 

Basic and Diluted Earnings per Share

 

The Company reports earnings per share in accordance with FASB ASC 260 “Earnings per share”. The Company’s basic earnings per share are computed using the weighted average number of shares outstanding for the periods presented. Diluted earnings per share are computed based on the assumption that any dilutive options or warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, the Company’s outstanding stock warrants are assumed to be exercised, and funds thus obtained were assumed to be used to purchase common stock at the average market price during the period. There were no dilutive instruments outstanding during the nine months periods ended September 30, 2016 and 2015.

 

Segment Information

 

The Company follows FASB ASC 280-Segment Reporting, which requires that companies disclose segment data based on how management makes decision about allocating resources to segments and evaluating their performance.

 

For the nine months ended September 30, 2016 and the year ended December 31, 2015, management has determined that the Company is operating in three reportable business segments, (1) Healthcare Knit Goods 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.

 

Recently Issued Accounting Pronouncements

 

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The standard requires several targeted changes including that equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) be measured at fair value with changes in fair value recognized in net income. The new guidance also changes certain disclosure requirements and other aspects of current US GAAP. Amendments are to be applied as a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. This standard is effective for fiscal years starting after December 15, 2017, including interim periods within those fiscal years. The standard does not permit early adoption with the exception of certain targeted provisions. The Company is currently assessing the impact and timing of adopting this guidance on its consolidated financial statements.

 

In February 2016, the FASB issued a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet. Most prominent among the amendments is the recognition of assets and liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. Under the new standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We anticipate this standard will have a material impact on our consolidated balance sheets, and we are currently evaluating its impact.

 

In March 2016, the Financial Accounting Standards Board (“FASB”) issued a new standard that changes the accounting for certain aspects of share-based payments to employees. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. In addition, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows. The standard also allows us to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on our cash flows statement, and provides an accounting policy election to account for forfeitures as they occur. The Company is currently assessing the impact and timing of adopting this guidance on its consolidated financial statements.

 

In April 2016, the FASB issued ASU 2016- 10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”. The amendments add further guidance on identifying performance obligations and also to improve the operability and understandability of the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. Public entities should apply the amendments for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein. Early application for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

 

In May 2016, the FASB issued ASU 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting”, The amendments rescinds SEC paragraphs pursuant to two SEC Staff Announcements at the March 3, 2016 Emerging Issues Task Force (EITF) meeting. Specifically, registrants should not rely on the following SEC Staff Observer comments upon adoption of Topic 606: 1) Revenue and Expense Recognition for Freight Services in Process, which is codified in paragraph 605-20-S99-2; 2) Accounting for Shipping and Handling Fees and Costs, which is codified in paragraph 605-45-S99-1; 3) Accounting for Consideration Given by a Vendor to a Customer (including Reseller of the Vendor's Products), which is codified in paragraph 605-50-S99-1; 4) Accounting for Gas-Balancing Arrangements (i.e., use of the "entitlements method"), which is codified in paragraph 932-10-S99-5, which is effective upon adoption of ASU 2014-09. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

 

In May 2016, the FASB issued ASU 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients". The amendments, among other things: (1) clarify the objective of the collectability criterion for applying paragraph 606-10-25-7; (2) permit an entity to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price; (3) specify that the measurement date for noncash consideration is contract inception; (4) provide a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations; (5) clarify that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application, and (6) clarify that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. The effective date of these amendments is at the same date that Topic 606 is effective. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

 

In June 2016, the FASB issued a new standard to replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade and other receivables, loans, and other financial instruments, we will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. The new standard will be effective for us beginning July 1, 2020, with early adoption permitted beginning July 1, 2019. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. We are currently evaluating the impact of this standard on our consolidated financial statements.

XML 19 R8.htm IDEA: XBRL DOCUMENT v3.5.0.2
Accounts Receivable
9 Months Ended
Sep. 30, 2016
Accounts Receivable [Abstract]  
ACCOUNTS RECEIVABLE

NOTE 3 – ACCOUNTS RECEIVABLE

 

Accounts receivable consisted of the following:

 

  September 30,  December 31, 
  2016  2015 
Accounts receivable $2,381  $     - 
Less: allowance for bad debt  -   - 
  $2,381  $- 

 

As of the periods presented, the Company has no allowance for bad debts, because the management, based on their analysis, considers all the accounts receivable to be collectible.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.5.0.2
Inventories
9 Months Ended
Sep. 30, 2016
Inventories [Abstract]  
INVENTORIES

NOTE 4 – INVENTORIES

 

Inventories consisted of the following:

 

  September 30,  December 31, 
  2016  2015 
Raw materials $388,649  $209,120 
Finished goods  379,934   709,841 
Low value consumables  38,209   39,249 
Total  806,792   958,210 
Less: impairment loss  (124,207)  (127,587)
Inventory, net $682,585  $830,623 

 

Low value consumables represent low priced and easily worn articles and are amortized on equal-split amortization method. Pursuant to this method, half value of the low value consumable should be amortized once used and the remaining half value should be amortized when disposed of.

 

As of September 30, 2016 and December 31, 2015, the Company recognized $124,207 and $127,587, respectively, as a reserve for impairment loss from inventory.

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.5.0.2
Property, Plant and Equipment
9 Months Ended
Sep. 30, 2016
Property, Plant and Equipment [Abstract]  
PROPERTY, PLANT AND EQUIPMENT

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment consisted of the following:

 

  September 30,  December 31, 
  2015  2015 
Building $5,951,711  $6,097,106 
Operating Equipment  357,955   367,696 
Office furniture and equipment  341,891   339,666 
Vehicles  1,103,381   1,133,406 
Total  7,754,938   7,937,874 
Less: accumulated depreciation  (3,086,441)  (2,824,030)
Property, plant and equipment, net $4,668,497  $5,113,844 

 

Depreciation expense for the three months ended September 30, 2016 and 2015 amounted to $128,343 and $6,293, respectively, and for the nine months ended September 30, 2016 and 2015 amounted to $355,083 and $283,868, respectively.

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.5.0.2
Intangible Assets
9 Months Ended
Sep. 30, 2016
Intangible Assets [Abstract]  
INTANGIBLE ASSETS

NOTE 6 – INTANGIBLE ASSETS

 

Intangible assets consisted of the following:

 

  September 30,  December 31, 
  2016  2015 
Land use rights $618,957  $635,800 
Other intangible assets  79,193   81,348 
Total  698,150   717,148 
Less: accumulated amortization  (161,350)  (148,380)
Intangible assets, net $536,800  $568,768 

 

Amortization expense of intangible assets for the nine months ended September 30, 2016 and 2015 amounted to $17,132 and $13,574, respectively.

 

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

 

Estimated amortization expense for the year ending December 31, Amount 
2016 $16,244 
2017 $16,244 
2018 $16,244 
2019 $16,244 
2020 $16,244 
Thereafter $487,548 
XML 23 R12.htm IDEA: XBRL DOCUMENT v3.5.0.2
Related Party Transactions
9 Months Ended
Sep. 30, 2016
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 7 – RELATED PARTY TRANSACTIONS

 

Payables due to related parties consist of the following:

 

  September 30,  December 31, 
  2016  2015 
Shenyang Joway Industrial Development Co., Ltd. $2,184  $2,244 
Jinghe Zhang  126,286   128,689 
Total $128,470  $130,933 

 

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 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 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, 2010, Shenyang Joway advanced an aggregate of $791,701 to Joway Shengshi and Joway Technology of which $789,408 has been repaid. For the nine months ended September 30, 2016 and 2015, the Company repaid $60 and $3,780 of these advances, respectively. As of September 30, 2016, the total unpaid principal balance due Shenyang Joway for advances was $2,184.

 

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, the Company’s 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 March 31, 2016, Joway Shengshi received cash advances in the aggregate principal amount of $4,736,754 from Jinghe Zhang of which $4,610,468 has been repaid. The Company repaid $2,403 of advances to Jinghe Zhang for the nine months ended September 30, 2016 and received $93,736 of advance from Jinghe Zhang for the nine months ended September 30, 2015. As of September 30, 2016, the total unpaid principal balance due Jinghe Zhang for advances was $126,286.

 

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

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Income Taxes
9 Months Ended
Sep. 30, 2016
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 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,
 
  2016  2015 
Tax computed at China statutory rates  25%  25%
Effect of losses  (25%)  (25%)
Effective rate  0%  0%
XML 25 R14.htm IDEA: XBRL DOCUMENT v3.5.0.2
Statutory Reserves
9 Months Ended
Sep. 30, 2016
Statutory Reserves [Abstract]  
STATUTORY RESERVES

NOTE 9 – STATUTORY RESERVES

 

Pursuant to the laws and regulations of the PRC, annual income of the Company’s subsidiaries is required to be partly allocated to the statutory reserves funds after the payment of the PRC income taxes. The allocation to the statutory reserves funds should be at least 10% of income after tax until the reserves reaches 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, 2016, the Company had allocated $354,052 to statutory reserves.

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.5.0.2
Segments
9 Months Ended
Sep. 30, 2016
Segments [Abstract]  
SEGMENTS

NOTE 10 – SEGMENTS

 

In 2016 and 2015, the Company operated in three reportable business segments: (1) Healthcare Knit Goods 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 follows:

 

For the three months ended September 30, 2016

 

  Sales  COGS  Gross profit  Income (Loss) from operations  Depreciation and amortization  Assets 
Healthcare Knit Goods Series $149,220  $37,915  $111,305  $16,293  $22,358  $176,775 
Daily Healthcare and Personal Care Series  242,402   117,278   125,124   (57,775)  36,319   202,485 
Wellness House and Activated Water Machine Series  502,572   220,681   281,891   (81,830)  75,300   361,356 
Segment Totals $894,194  $375,874  $518,320   (123,312) $133,977   740,616 
Other Expense, net              (196)        
Income Benefits              (8)        
Unallocated Assets                      5,779,441 
Net Loss             $(123,500)        
Total Assets                     $6,520,057 

  

For the three months ended September 30, 2015

 

  Sales  COGS  Gross profit  Income (Loss) from operations  Depreciation and amortization  Assets 
Healthcare Knit Goods Series $235,663  $55,714  $179,949  $21,645  $1,681  $230,120 
Daily Healthcare and Personal Care Series  230,785   73,031   157,754   (17,054)  1,646   189,146 
Wellness House and Activated Water Machine Series  391,680   161,986   229,694   (42,037)  2,793   349,851 
Segment Totals $858,128  $290,731  $567,397   (37,446) $6,122   769,117 
Other Expense, net              (47,272)        
Income Benefits              (4,265)        
Unallocated Assets                      6,777,662 
Net Loss             $(80,453)        
Total Assets                     $7,546,779 

 

For the nine months ended September 30, 2016

 

  Sales  COGS  Gross profit  Loss from operations  Depreciation and amortization  Assets 
Healthcare Knit Goods Series $593,718  $175,603  $418,115  $(83,021) $87,720  $176,775 
Daily Healthcare and Personal Care Series  554,188   229,879   324,309   (143,461)  81,880   202,485 
Wellness House and Activated Water Machine Series  1,371,354   554,218   817,136   (340,368)  202,615   361,356 
Segment Totals $2,519,260  $959,700  $1,559,560   (566,850) $372,215   740,616 
Other Expense, net              (5,816)        
Income Tax              925         
Unallocated Assets                      5,779,441 
Net Loss             $(573,591)        
Total Assets                     $6,520,057 

  

For the nine months ended September 30, 2015

 

  Sales  COGS  Gross profit  Loss from operations  Depreciation and amortization  Assets 
Healthcare Knit Goods Series $754,594  $187,142  $567,452  $(79,330) $93,119  $230,120 
Daily Healthcare and Personal Care Series  504,016   166,134   337,882   (94,125)  62,197   189,146 
Wellness House and Activated Water Machine Series  1,151,718   462,926   688,792   (298,375)  142,126   349,851 
Segment Totals $2,410,328  $816,202  $1,594,126   (471,830) $297,442   769,117 
Other Expense, net              (26,593)        
Income Tax              13,218         
Unallocated Assets                      6,777,662 
Net Loss             $(511,641)        
Total Assets                     $7,546,779 
XML 27 R16.htm IDEA: XBRL DOCUMENT v3.5.0.2
Franchise Revenues
9 Months Ended
Sep. 30, 2016
Franchise Revenues [Abstract]  
FRANCHISE REVENUES

NOTE 11 - FRANCHISE REVENUES

 

The Company enters into franchising agreements to develop retail outlets for the Company's products. The 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 competitor’s 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 act to manage the franchisees’ levels of product. Franchisees hold periodic conferences, assisted by the Company’s marketing department, to promote product awareness and the introduction of 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,
 
  2016  2015  2016  2015 
             
Sales to franchise customers $570,189  $621,030  $1,664,536  $1,767,370 
Sales to non-franchise customers  324,005   237,098   854,724   642,958 
                 
Total sales $894,194  $858,128  $2,519,260  $2,410,328 
XML 28 R17.htm IDEA: XBRL DOCUMENT v3.5.0.2
Summary of Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2016
Summary of Significant Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). Accordingly, they do not include all of the information and the footnotes required by generally accepted accounting principles for complete financial statements. The Company’s functional currency is the Chinese Renminbi (“RMB”); however, the accompanying unaudited condensed 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.

 

Operating results for the nine month period ended September 30, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2016. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s form 10-K for the fiscal year ended December 31, 2015 which was filed on March 30, 2016.

Use of Estimates

Use of Estimates

 

The preparation of the consolidated financial statements in conformity with US GAAP requires 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

Basis of Consolidation

 

The accompanying consolidated financial statements include the Company and 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” (“ASC 810”), the Company is required to include in its consolidated financial statements the financial statements of its variable interest entities (“VIEs”). ASC 810 requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. VIEs are those entities in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the company is the primary beneficiary of the entity.

 

Based on the various Contractual Agreements, the Company is able to exercise control over the VIEs, and to obtain the full economic benefits. The terms of the exclusive option agreement are currently exercisable and legally enforceable under PRC laws and regulations. The minimum amount of consideration permitted by the applicable PRC law to exercise the option does not represent a financial barrier or disincentive for the Company to exercise its rights under the exclusive option agreement. A simple majority vote of the Company’s board of directors is required to pass a resolution to exercise its rights under the exclusive option agreement, for which consent of the shareholder of VIEs is not required. Therefore, this gives the Company the power to direct the activities that most significantly impact VIEs’ economic performance. The Company’s ability to exercise effective control, together with the consulting service agreements and the equity pledge agreements, give the Company the rights to receive substantially all of the economic benefits from VIEs in consideration for the services provided by its wholly owned subsidiaries in China. Accordingly, as the primary beneficiary of VIEs and in accordance with U.S. GAAP, Joway Shengshi, Joway Technology, Joway Decoration, and Shengtang Trading, as VIEs of Junhe Consulting, has been consolidated in the Company’s financial statements. Sales from Joway Shengshi, Joway Technology, Joway Decoration, and Shengtang Trading are included in the Company’s total sales, their incomes or losses from operations are consolidated with the Company’s, and the Company’s net income or loss includes net income or loss from Joway Shengshi, Joway Technology, Joway Decoration, and Shengtang Trading.

Foreign Currency Translation

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 United States dollars 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, 
  2016  2015  2015 
Period ended RMB: USD Exchange rate  6.66938   6.3538   6.4927 
Average RMB: USD Exchange rate  6.57924   6.1606   6.2401 

 

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.

 

Foreign currency translation adjustments have been reported as comprehensive loss in the consolidated financial statements and totaled $25,644 and $309,078 for the three months ended September 30, 2016 and 2015, respectively, and $173,906 and $228,781 for the nine months ended September 30, 2016 and 2015, respectively.

Other Comprehensive Income

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, and 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

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. 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

Fair Value of Financial Instruments

 

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

 

 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

Cash

 

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

 

Accounts receivable are presented net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses. On a periodic basis, the Company 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 allowances. Accounts are written off after exhaustive efforts at collection. As of September 30, 2016 and December 31, 2015, based on a review of its outstanding balances, the Company allowance for doubtful accounts had a zero balance, respectively.

Inventories

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 are 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 a valuation allowance is required. As of September 30, 2016 and December 31, 2015, the Company recorded $124,207 and $127,587 for inventory valuation allowance, respectively.

Advances to Suppliers

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 $106,288 and $90,542 as of September 30, 2016 and December 31, 2015, respectively.

Property, Plant, and Equipment

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

 

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

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. 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, 2016 and 2015.

Revenue Recognition

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 shipments 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 a franchisee customer 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

 

Shipping costs are included in selling expenses and totaled $41,060 and $17,704 for the three months ended September 30, 2016 and 2015, respectively, and $125,915 and $63,611 for the nine months ended September 30, 2016 and 2015, respectively.

Income Taxes

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”, 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.

Basic and Diluted Earnings per Share

Basic and Diluted Earnings per Share

 

The Company reports earnings per share in accordance with FASB ASC 260 “Earnings per share”. The Company’s basic earnings per share are computed using the weighted average number of shares outstanding for the periods presented. Diluted earnings per share are computed based on the assumption that any dilutive options or warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, the Company’s outstanding stock warrants are assumed to be exercised, and funds thus obtained were assumed to be used to purchase common stock at the average market price during the period. There were no dilutive instruments outstanding during the nine months periods ended September 30, 2016 and 2015.

Segment Information

Segment Information

 

The Company follows FASB ASC 280-Segment Reporting, which requires that companies disclose segment data based on how management makes decision about allocating resources to segments and evaluating their performance.

 

For the nine months ended September 30, 2016 and the year ended December 31, 2015, management has determined that the Company is operating in three reportable business segments, (1) Healthcare Knit Goods 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.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

 

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The standard requires several targeted changes including that equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) be measured at fair value with changes in fair value recognized in net income. The new guidance also changes certain disclosure requirements and other aspects of current US GAAP. Amendments are to be applied as a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. This standard is effective for fiscal years starting after December 15, 2017, including interim periods within those fiscal years. The standard does not permit early adoption with the exception of certain targeted provisions. The Company is currently assessing the impact and timing of adopting this guidance on its consolidated financial statements.

 

In February 2016, the FASB issued a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet. Most prominent among the amendments is the recognition of assets and liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. Under the new standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We anticipate this standard will have a material impact on our consolidated balance sheets, and we are currently evaluating its impact.

 

In March 2016, the Financial Accounting Standards Board (“FASB”) issued a new standard that changes the accounting for certain aspects of share-based payments to employees. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. In addition, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows. The standard also allows us to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on our cash flows statement, and provides an accounting policy election to account for forfeitures as they occur. The Company is currently assessing the impact and timing of adopting this guidance on its consolidated financial statements.

 

In April 2016, the FASB issued ASU 2016- 10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”. The amendments add further guidance on identifying performance obligations and also to improve the operability and understandability of the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. Public entities should apply the amendments for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein. Early application for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

 

In May 2016, the FASB issued ASU 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting”, The amendments rescinds SEC paragraphs pursuant to two SEC Staff Announcements at the March 3, 2016 Emerging Issues Task Force (EITF) meeting. Specifically, registrants should not rely on the following SEC Staff Observer comments upon adoption of Topic 606: 1) Revenue and Expense Recognition for Freight Services in Process, which is codified in paragraph 605-20-S99-2; 2) Accounting for Shipping and Handling Fees and Costs, which is codified in paragraph 605-45-S99-1; 3) Accounting for Consideration Given by a Vendor to a Customer (including Reseller of the Vendor's Products), which is codified in paragraph 605-50-S99-1; 4) Accounting for Gas-Balancing Arrangements (i.e., use of the "entitlements method"), which is codified in paragraph 932-10-S99-5, which is effective upon adoption of ASU 2014-09. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

 

In May 2016, the FASB issued ASU 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients". The amendments, among other things: (1) clarify the objective of the collectability criterion for applying paragraph 606-10-25-7; (2) permit an entity to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price; (3) specify that the measurement date for noncash consideration is contract inception; (4) provide a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations; (5) clarify that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application, and (6) clarify that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. The effective date of these amendments is at the same date that Topic 606 is effective. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

 

In June 2016, the FASB issued a new standard to replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade and other receivables, loans, and other financial instruments, we will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. The new standard will be effective for us beginning July 1, 2020, with early adoption permitted beginning July 1, 2019. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. We are currently evaluating the impact of this standard on our consolidated financial statements.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.5.0.2
Organization (Tables)
9 Months Ended
Sep. 30, 2016
Organization [Abstract]  
Summary of list of company and its subsidiaries

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 20,054 86.8% owned by Crystal Globe Limited 
13.2%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 Healthcare Knit Goods and Daily Healthcare and Personal Care 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 Wellness House for family use and Activated Water Machine and construction of Tourmaline Wellness House
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
XML 30 R19.htm IDEA: XBRL DOCUMENT v3.5.0.2
Summary of Significant Accounting Policies (Tables)
9 Months Ended
Sep. 30, 2016
Summary of Significant Accounting Policies [Abstract]  
Summary of gains and losses from foreign currency transactions

  For the nine months ended 
September 30,
  For the year ended December 31, 
  2016  2015  2015 
Period ended RMB: USD Exchange rate  6.66938   6.3538   6.4927 
Average RMB: USD Exchange rate  6.57924   6.1606   6.2401
Summary of estimated useful lives of fixed assets

Building 20 years
Operating Equipment 10 years
Office furniture and equipment 3 or 5 years
Vehicles 10 years
XML 31 R20.htm IDEA: XBRL DOCUMENT v3.5.0.2
Accounts Receivable (Tables)
9 Months Ended
Sep. 30, 2016
Accounts Receivable [Abstract]  
Summary of accounts receivable

  September 30,  December 31, 
  2016  2015 
Accounts receivable $2,381  $     - 
Less: allowance for bad debt  -   - 
  $2,381  $- 
XML 32 R21.htm IDEA: XBRL DOCUMENT v3.5.0.2
Inventories (Tables)
9 Months Ended
Sep. 30, 2016
Inventories [Abstract]  
Summary of inventories

  September 30,  December 31, 
  2016  2015 
Raw materials $388,649  $209,120 
Finished goods  379,934   709,841 
Low value consumables  38,209   39,249 
Total  806,792   958,210 
Less: impairment loss  (124,207)  (127,587)
Inventory, net $682,585  $830,623 
XML 33 R22.htm IDEA: XBRL DOCUMENT v3.5.0.2
Property, Plant and Equipment (Tables)
9 Months Ended
Sep. 30, 2016
Property, Plant and Equipment [Abstract]  
Summary of property, plant and equipment

  September 30,  December 31, 
  2015  2015 
Building $5,951,711  $6,097,106 
Operating Equipment  357,955   367,696 
Office furniture and equipment  341,891   339,666 
Vehicles  1,103,381   1,133,406 
Total  7,754,938   7,937,874 
Less: accumulated depreciation  (3,086,441)  (2,824,030)
Property, plant and equipment, net $4,668,497  $5,113,844 
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.5.0.2
Intangible Assets (Tables)
9 Months Ended
Sep. 30, 2016
Intangible Assets [Abstract]  
Summary of intangible assets

  September 30,  December 31, 
  2016  2015 
Land use rights $618,957  $635,800 
Other intangible assets  79,193   81,348 
Total  698,150   717,148 
Less: accumulated amortization  (161,350)  (148,380)
Intangible assets, net $536,800  $568,768 
Summary of estimated amortization expense

Estimated amortization expense for the year ending December 31, Amount 
2016 $16,244 
2017 $16,244 
2018 $16,244 
2019 $16,244 
2020 $16,244 
Thereafter $487,548 
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.5.0.2
Related Party Transactions (Tables)
9 Months Ended
Sep. 30, 2016
Related Party Transactions [Abstract]  
Summary of payables due to related parties

  September 30,  December 31, 
  2016  2015 
Shenyang Joway Industrial Development Co., Ltd. $2,184  $2,244 
Jinghe Zhang  126,286   128,689 
Total $128,470  $130,933 
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.5.0.2
Income Taxes (Tables)
9 Months Ended
Sep. 30, 2016
Income Taxes [Abstract]  
Summary of differences between the PRC statutory federal rate and the Company's effective tax rate

  For the nine months ended 
September 30,
 
  2016  2015 
Tax computed at China statutory rates  25%  25%
Effect of losses  (25%)  (25%)
Effective rate  0%  0%
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.5.0.2
Segments (Tables)
9 Months Ended
Sep. 30, 2016
Segments [Abstract]  
Schedule of segment reporting

For the three months ended September 30, 2016

 

  Sales  COGS  Gross profit  Income (Loss) from operations  Depreciation and amortization  Assets 
Healthcare Knit Goods Series $149,220  $37,915  $111,305  $16,293  $22,358  $176,775 
Daily Healthcare and Personal Care Series  242,402   117,278   125,124   (57,775)  36,319   202,485 
Wellness House and Activated Water Machine Series  502,572   220,681   281,891   (81,830)  75,300   361,356 
Segment Totals $894,194  $375,874  $518,320   (123,312) $133,977   740,616 
Other Expense, net              (196)        
Income Benefits              (8)        
Unallocated Assets                      5,779,441 
Net Loss             $(123,500)        
Total Assets                     $6,520,057 

  

For the three months ended September 30, 2015

 

  Sales  COGS  Gross profit  Income (Loss) from operations  Depreciation and amortization  Assets 
Healthcare Knit Goods Series $235,663  $55,714  $179,949  $21,645  $1,681  $230,120 
Daily Healthcare and Personal Care Series  230,785   73,031   157,754   (17,054)  1,646   189,146 
Wellness House and Activated Water Machine Series  391,680   161,986   229,694   (42,037)  2,793   349,851 
Segment Totals $858,128  $290,731  $567,397   (37,446) $6,122   769,117 
Other Expense, net              (47,272)        
Income Benefits              (4,265)        
Unallocated Assets                      6,777,662 
Net Loss             $(80,453)        
Total Assets                     $7,546,779 

 

For the nine months ended September 30, 2016

 

  Sales  COGS  Gross profit  Loss from operations  Depreciation and amortization  Assets 
Healthcare Knit Goods Series $593,718  $175,603  $418,115  $(83,021) $87,720  $176,775 
Daily Healthcare and Personal Care Series  554,188   229,879   324,309   (143,461)  81,880   202,485 
Wellness House and Activated Water Machine Series  1,371,354   554,218   817,136   (340,368)  202,615   361,356 
Segment Totals $2,519,260  $959,700  $1,559,560   (566,850) $372,215   740,616 
Other Expense, net              (5,816)        
Income Tax              925         
Unallocated Assets                      5,779,441 
Net Loss             $(573,591)        
Total Assets                     $6,520,057 

  

For the nine months ended September 30, 2015

 

  Sales  COGS  Gross profit  Loss from operations  Depreciation and amortization  Assets 
Healthcare Knit Goods Series $754,594  $187,142  $567,452  $(79,330) $93,119  $230,120 
Daily Healthcare and Personal Care Series  504,016   166,134   337,882   (94,125)  62,197   189,146 
Wellness House and Activated Water Machine Series  1,151,718   462,926   688,792   (298,375)  142,126   349,851 
Segment Totals $2,410,328  $816,202  $1,594,126   (471,830) $297,442   769,117 
Other Expense, net              (26,593)        
Income Tax              13,218         
Unallocated Assets                      6,777,662 
Net Loss             $(511,641)        
Total Assets                     $7,546,779 
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.5.0.2
Franchise Revenues (Tables)
9 Months Ended
Sep. 30, 2016
Franchise Revenues [Abstract]  
Schedule of franchise and non-franchise customers

  For the three months ended
September 30,
  For the nine months ended
September 30,
 
  2016  2015  2016  2015 
             
Sales to franchise customers $570,189  $621,030  $1,664,536  $1,767,370 
Sales to non-franchise customers  324,005   237,098   854,724   642,958 
                 
Total sales $894,194  $858,128  $2,519,260  $2,410,328 
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.5.0.2
Organization (Details) - USD ($)
9 Months Ended
Sep. 30, 2016
Dec. 31, 2015
List of Company and its subsidiaries    
Paid in Capital $ 7,361,665 $ 7,361,665
Joway Health Industries Group Inc. [Member]    
List of Company and its subsidiaries    
Domicile and Date of Incorporation March 21, 2003, Nevada  
Paid in Capital $ 20,054  
Percentage of Effective Ownership 86.8% owned by Crystal Globe Limited 13.2%owned by other institutional and individual investors  
Principal Activities Investment Holding  
Dynamic Elite International Limited [Member]    
List of Company and its subsidiaries    
Domicile and Date of Incorporation June 2, 2010, British Virgin Islands  
Paid in Capital $ 10,000  
Percentage of Effective Ownership 100% owned by Joway Health Industries Group Inc.  
Principal Activities Investment Holding  
Tianjin Junhe Management Consulting Co., Ltd. [Member]    
List of Company and its subsidiaries    
Domicile and Date of Incorporation September 15, 2010, PRC  
Paid in Capital $ 20,000  
Percentage of Effective Ownership 100% owned by Dynamic Elite International Limited  
Principal Activities Advisory  
Tianjin Joway Shengshi Group Co., Ltd. [Member]    
List of Company and its subsidiaries    
Domicile and Date of Incorporation May 17, 2007, PRC  
Paid in Capital $ 7,216,140.72  
Percentage of Effective Ownership 99% owned by Jinghe Zhang, and 1% owned by Baogang Song  
Principal Activities Production and distribution of Healthcare Knit Goods and Daily Healthcare and Personal Care products  
Shenyang Joway Electronic Technology Co., Ltd. [Member]    
List of Company and its subsidiaries    
Domicile and Date of Incorporation March 28, 2007, PRC  
Paid in Capital $ 142,072.97  
Percentage of Effective Ownership 100% owned by Tianjin Joway Shengshi Group Co., Ltd  
Principal Activities Distribution of Tourmaline Activated Water Machine and construction of Tourmaline Wellness House  
Tianjin Joway Decoration Engineering Co., Ltd. [Member]    
List of Company and its subsidiaries    
Domicile and Date of Incorporation April 22, 2009, PRC  
Paid in Capital $ 292,367.74  
Percentage of Effective Ownership 100% owned by Tianjin Joway Shengshi Group Co., Ltd  
Principal Activities Distribution of Wellness House for family use and Activated Water Machine and construction of Tourmaline Wellness House  
Tianjin Oriental Shengtang Import & Export Trading Co., Ltd. [Member]    
List of Company and its subsidiaries    
Domicile and Date of Incorporation September 18, 2009, PRC  
Paid in Capital $ 292,463.75  
Percentage of Effective Ownership 100% owned by Tianjin Joway Shengshi Group Co., Ltd  
Principal Activities Distribution of tourmaline products  
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.5.0.2
Organization (Details Textual) - USD ($)
1 Months Ended 9 Months Ended
Mar. 28, 2015
Sep. 30, 2016
Nov. 13, 2016
Apr. 02, 2013
Apr. 02, 2012
Apr. 02, 2011
Sep. 21, 2010
Jul. 28, 2010
Jul. 25, 2010
Jul. 09, 2010
Organization (Textual)                    
Percentage of shares acquired by Dynamic Elite International Limited from Joway Health             76.08%      
Subsequent Event [Member] | Jingshe Zhang [Member]                    
Organization (Textual)                    
Ownership percentage     85.90%              
Percentage of right to purchase of shares     99.00%              
Subsequent Event [Member] | Baogang Song [Member]                    
Organization (Textual)                    
Percentage of right to purchase of shares     1.00%              
Tianjin Joway Shengshi Group Co., Ltd. [Member]                    
Organization (Textual)                    
Ownership percentage   99.00%                
Business acquisition percentage of remaining voting interests acquired   1.00%                
Joway Shengshi to Joway Technology [Member]                    
Organization (Textual)                    
Ownership percentage                 90.91%  
Business acquisition percentage of remaining voting interests acquired                 9.09%  
Joway Shengshi to Joway Decoration [Member]                    
Organization (Textual)                    
Ownership percentage                   90.00%
Business acquisition percentage of remaining voting interests acquired                   10.00%
Joway Shengshi to Shengtang Trading [Member]                    
Organization (Textual)                    
Ownership percentage               95.00%    
Business acquisition percentage of remaining voting interests acquired               5.00%    
Joway Shengshi to Crystal Globe [Member]                    
Organization (Textual)                    
Aggregate price to purchase of shares   $ 20,000                
Call Option expiration term under VIE Agreements   3 years                
Investment option description The Grantor and Grantees amended the Call Option Agreement, to (i) reduce the Exercise Price to $0.00 per share and (ii) extend the Grantees' rights to exercise their call option within ten years from the respective Option Effective Date.                  
Crystal Globe [Member]                    
Organization (Textual)                    
Percentage of Call Option vests       33.00% 33.00% 34.00%        
Crystal Globe [Member] | Jingshe Zhang [Member]                    
Organization (Textual)                    
Percentage of right to purchase of shares   100.00%                
Options exercise price per share   $ 2.00                
Crystal Globe [Member] | Baogang Song [Member]                    
Organization (Textual)                    
Percentage of right to purchase of shares   100.00%                
Options exercise price per share   $ 2.00                
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.5.0.2
Summary of Significant Accounting Policies (Details)
Sep. 30, 2016
Dec. 31, 2015
Sep. 30, 2015
Period ended RMB: USD Exchange rate [Member]      
Summary of gains and losses from foreign currency transactions      
Gains and losses from foreign currency transaction 6.66938 6.4927 6.3538
Average RMB: USD Exchange rate [Member]      
Summary of gains and losses from foreign currency transactions      
Gains and losses from foreign currency transaction 6.57924 6.2401 6.1606
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.5.0.2
Summary of Significant Accounting Policies (Details 1)
9 Months Ended
Sep. 30, 2016
Building [Member]  
Summary of estimated useful lives of fixed assets  
Estimated useful lives 20 years
Operating Equipment [Member]  
Summary of estimated useful lives of fixed assets  
Estimated useful lives 10 years
Office furniture and equipment [Member] | Minimum [Member]  
Summary of estimated useful lives of fixed assets  
Estimated useful lives 3 years
Office furniture and equipment [Member] | Maximum [Member]  
Summary of estimated useful lives of fixed assets  
Estimated useful lives 5 years
Vehicles [Member]  
Summary of estimated useful lives of fixed assets  
Estimated useful lives 10 years
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.5.0.2
Summary of Significant Accounting Policies (Details Textual) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Dec. 31, 2015
Summary of Significant Accounting Policies (Textual)          
Foreign currency translation adjustment $ (25,644) $ (309,078) $ (173,906) $ (228,781)  
Valuation allowance for inventory 124,207   124,207   $ 127,587
Allowance for doubtful accounts 0   0   0
Advances to suppliers 106,288   $ 106,288   $ 90,542
Land use rights granted to amortized using the straight-line method over     50 years    
Other intangible assets amortized over estimated useful life     10 years    
Construction period of a Wellness House     5 days    
Selling and Marketing Expense [Member]          
Summary of Significant Accounting Policies (Textual)          
Shipping costs included in selling expenses $ 41,060 $ 17,704 $ 125,915 $ 63,611  
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.5.0.2
Accounts Receivable (Details) - USD ($)
Sep. 30, 2016
Dec. 31, 2015
Summary of accounts receivable    
Accounts receivable $ 2,381
Less: allowance for bad debt
Accounts receivable, Total $ 2,381
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.5.0.2
Inventories (Details) - USD ($)
Sep. 30, 2016
Dec. 31, 2015
Summary of inventories    
Raw materials $ 388,649 $ 209,120
Finished goods 379,934 709,841
Low value consumables 38,209 39,249
Total 806,792 958,210
Less: impairment loss (124,207) (127,587)
Inventory, net $ 682,585 $ 830,623
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.5.0.2
Inventories (Details Textual) - USD ($)
9 Months Ended 12 Months Ended
Sep. 30, 2016
Dec. 31, 2015
Inventories (Textual)    
Impairment loss from inventory $ 124,207 $ 127,587
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.5.0.2
Property, Plant and Equipment (Details) - USD ($)
Sep. 30, 2016
Dec. 31, 2015
Summary of property, plant and equipment    
Total $ 7,754,938 $ 7,937,874
Less: accumulated depreciation (3,086,441) (2,824,030)
Property, plant and equipment, net 4,668,497 5,113,844
Building [Member]    
Summary of property, plant and equipment    
Total 5,951,711 6,097,106
Operating Equipment [Member]    
Summary of property, plant and equipment    
Total 357,955 367,696
Office furniture and equipment [Member]    
Summary of property, plant and equipment    
Total 341,891 339,666
Vehicles [Member]    
Summary of property, plant and equipment    
Total $ 1,103,381 $ 1,133,406
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.5.0.2
Property, Plant and Equipment (Details Textual) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Property Plant and Equipment (Textual)        
Depreciation expense $ 128,343 $ 6,293 $ 355,083 $ 283,868
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.5.0.2
Intangible Assets (Details) - USD ($)
Sep. 30, 2016
Dec. 31, 2015
Summary of intangible assets    
Land use rights $ 618,957 $ 635,800
Other intangible assets 79,193 81,348
Total 698,150 717,148
Less: accumulated amortization (161,350) (148,380)
Intangible assets, net $ 536,800 $ 568,768
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.5.0.2
Intangible Assets (Details 1)
Dec. 31, 2015
USD ($)
Summary of estimated amortization expense  
2016 $ 16,244
2017 16,244
2018 16,244
2019 16,244
2020 16,244
Thereafter $ 487,548
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.5.0.2
Intangible Assets (Details Textual) - USD ($)
9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Intangible Assets (Textual)    
Amortization expense of intangible assets $ 17,132 $ 13,574
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.5.0.2
Related Party Transactions (Details) - USD ($)
Sep. 30, 2016
Dec. 31, 2015
Summary of payables due to related parties    
Due to related parties $ 128,470 $ 130,933
Shenyang Joway Industrial Development Co., Ltd. [Member]    
Summary of payables due to related parties    
Due to related parties 2,184 2,244
Jinghe Zhang [Member]    
Summary of payables due to related parties    
Due to related parties $ 126,286 $ 128,689
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.5.0.2
Related Party Transactions (Details Textual) - USD ($)
1 Months Ended 9 Months Ended 106 Months Ended
Dec. 31, 2010
Sep. 30, 2016
Sep. 30, 2015
Mar. 31, 2016
Shenyang Joway, Joway Technology and Joway Shengshi Agreement [Member]        
Related Party Transactions (Textual)        
Repayments of related party advances   $ 60 $ 3,780  
Unpaid advances   2,184    
Jinghe Zhang and Joway Technology Agreement [Member]        
Related Party Transactions (Textual)        
Repayments of related party advances   2,403 $ 93,736  
Unpaid advances   $ 126,286    
Shenyang Joway Industrial Development Co., Ltd. [Member]        
Related Party Transactions (Textual)        
Ownership percentage   More than 50% of the equity.    
Shenyang Joway Industrial Development Co., Ltd. [Member] | Shenyang Joway, Joway Technology and Joway Shengshi Agreement [Member]        
Related Party Transactions (Textual)        
Interest-free, unsecured advances for working capital $ 791,701      
Repayments of related party advances $ 789,408      
Jinghe Zhang [Member] | Jinghe Zhang and Joway Technology Agreement [Member]        
Related Party Transactions (Textual)        
Repayments of related party advances       $ 4,610,468
Operating capital advances, aggregate principal amount       $ 4,736,754
XML 54 R43.htm IDEA: XBRL DOCUMENT v3.5.0.2
Income Taxes (Details)
9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Summary of differences between the PRC statutory federal rate and the Company's effective tax rate    
Tax computed at China statutory rates 25.00% 25.00%
Effect of losses (25.00%) (25.00%)
Effective rate 0.00% 0.00%
XML 55 R44.htm IDEA: XBRL DOCUMENT v3.5.0.2
Income Taxes (Details Textual)
9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Income Taxes (Textual)    
Statutory rate 25.00% 25.00%
Enterprise Income Tax [Member]    
Income Taxes (Textual)    
Statutory rate 25.00%  
XML 56 R45.htm IDEA: XBRL DOCUMENT v3.5.0.2
Statutory Reserves (Details) - USD ($)
Sep. 30, 2016
Dec. 31, 2015
Statutory Reserves (Textual)    
Statutory reserves allocation percentage 10.00%  
Income after tax until the reserves reaches percentage 50.00%  
Statutory reserves $ 354,052 $ 354,052
XML 57 R46.htm IDEA: XBRL DOCUMENT v3.5.0.2
Segments (Details) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Dec. 31, 2015
Reportable business segments          
Sales $ 894,194 $ 858,128 $ 2,519,260 $ 2,410,328  
COGS 375,874 290,731 959,700 816,202  
Gross profit 518,320 567,397 1,559,560 1,594,126  
Loss from operations (123,312) (37,446) (566,850) (471,830)  
Depreciation and amortization 740,616 6,122 372,215 291,320  
Assets 740,616 769,117 740,616 769,117  
Other Expense, net (196) (47,272) (5,816) (26,593)  
Income Benefits (8) (4,265) 925 13,218  
Unallocated Assets 5,779,441 6,777,662 5,779,441 6,777,662  
Net Loss (123,500) (80,453) (573,591) (511,641)  
Total Assets 6,520,057 7,546,779 6,520,057 7,546,779 $ 7,140,577
Healthcare Knit Goods Series [Member]          
Reportable business segments          
Sales 149,220 235,663 593,718 235,663  
COGS 242,402 55,714 175,603 55,714  
Gross profit 502,572 179,949 418,115 179,949  
Loss from operations 16,293 21,645 (83,021) 21,645  
Depreciation and amortization 22,358 1,681 87,720 1,681  
Assets 176,775 230,120 176,775 230,120  
Daily Healthcare and Personal Care Series [Member]          
Reportable business segments          
Sales 242,402 230,785 554,188 230,785  
COGS 117,278 73,031 229,879 73,031  
Gross profit 220,681 157,754 324,309 157,754  
Loss from operations (57,775) (17,054) (143,461) (17,054)  
Depreciation and amortization 36,319 1,646 81,880 1,646  
Assets 202,485 189,146 202,485 189,146  
Wellness House and Activated Water Machine Series [Member]          
Reportable business segments          
Sales 502,572 391,680 1,371,354 391,680  
COGS 125,124 161,986 554,218 161,986  
Gross profit 281,891 229,694 817,136 229,694  
Loss from operations (81,830) (42,037) (340,368) (42,037)  
Depreciation and amortization 75,300 2,793 202,615 2,793  
Assets $ 361,356 $ 349,851 $ 361,356 $ 349,851  
XML 58 R47.htm IDEA: XBRL DOCUMENT v3.5.0.2
Segments (Details Textual) - Segment
9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Segments (Textual)    
Number of reportable segments 3 3
XML 59 R48.htm IDEA: XBRL DOCUMENT v3.5.0.2
Franchise Revenues (Details) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Schedule of franchise and non-franchise customers        
Total sales $ 894,194 $ 858,128 $ 2,519,260 $ 2,410,328
Sales to franchise customers [Member]        
Schedule of franchise and non-franchise customers        
Total sales 570,189 621,030 1,664,536 1,767,370
Sales to non-franchise customers [Member]        
Schedule of franchise and non-franchise customers        
Total sales $ 324,005 $ 237,098 $ 854,724 $ 642,958
XML 60 R49.htm IDEA: XBRL DOCUMENT v3.5.0.2
Franchise Revenues (Details Textual)
9 Months Ended
Sep. 30, 2016
Franchise Revenues (Textual)  
Term of franchising renewable agreements 3 years
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