0001213900-18-015591.txt : 20181114 0001213900-18-015591.hdr.sgml : 20181114 20181114061104 ACCESSION NUMBER: 0001213900-18-015591 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 66 CONFORMED PERIOD OF REPORT: 20180930 FILED AS OF DATE: 20181114 DATE AS OF CHANGE: 20181114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Joway Health Industries Group Inc CENTRAL INDEX KEY: 0001263364 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] 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: 181180190 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 f10q0918_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, 2018

 

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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company
  Emerging growth company

  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

  

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

 

The number of shares outstanding of the Issuer’s Common Stock as of November 14, 2018 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 21
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk 31
   
Item 4. Controls and Procedures 31
   
PART II - OTHER INFORMATION 33
   
Item 1. Legal Proceedings 33
   
Item 1A. Risk Factors 33
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 33
   
Item 3. Defaults Upon Senior Securities 33
   
Item 4. Mine Safety Disclosures 33
   
Item 5. Other Information 33
   
Item 6. Exhibits 33
   
SIGNATURES 34

 

i

 

 

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, 2018 (Unaudited) and December 31, 2017  2
   
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three and the Nine Months Ended September 30, 2018 and 2017 (Unaudited) 3
   
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017 (Unaudited)  4
   
Notes to Unaudited Condensed Consolidated Financial Statements  5-20

 

1

 

 

JOWAY HEALTH INDUSTRIES GROUP INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   September 30,   December 31, 
   2018   2017 
   (Unaudited)   (Audited) 
ASSETS        
         
CURRENT ASSETS:          
Cash  $115,639   $518,535 
Accounts receivable   1,316    2,777 
Other receivables   37,876    66,003 
Inventories   549,245    618,247 
Advances to suppliers   33,895    95,521 
Prepaid taxes   64,554    75,557 
Prepaid expense   1,748    2,364 
Total current assets   804,273    1,379,004 
           
PROPERTY, PLANT AND EQUIPMENT, net   3,862,130    4,398,832 
           
OTHER ASSETS:          
Intangible assets, net   479,167    521,294 
Total other assets   479,167    521,294 
           
Total assets  $5,145,570   $6,299,130 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
CURRENT LIABILITIES:          
Accounts payable  $45,447   $29,419 
Advances from customers   31,271    38,034 
Other payables   57,761    66,716 
Due to related parties   348,453    129,038 
Total current liabilities   482,932    263,207 
           
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, 2018 and December 31, 2017   20,054    20,054 
Additional paid-in-capital   7,361,665    7,361,665 
Statutory reserves   354,052    354,052 
Accumulated deficits   (3,616,313)   (2,503,952)
Accumulated other comprehensive income   543,180    804,104 
Total stockholders’ equity   4,662,638    6,035,923 
Total liabilities and stockholders’ equity  $5,145,570   $6,299,130 

  

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,
 
   2018   2017   2018   2017 
                 
REVENUES  $390,465   $734,938   $1,477,385   $2,608,746 
                     
COST OF REVENUES   163,193    312,613    650,547    918,760 
                     
GROSS PROFIT   227,272    422,325    826,838    1,689,986 
                     
    Selling expenses   167,921    235,005    663,437    733,799 
    General and administrative expenses   370,827    447,777    1,258,832    1,333,063 
OPERATING EXPENSES   538,748    682,782    1,922,269    2,066,862 
                     
LOSS FROM OPERATIONS   (311,476)   (260,457)   (1,095,431)   (376,876)
                     
    Interest income   76    147    282    566 
    Other income   

1,090

    9,880    3,422    15,091 
    Other expenses   -    (42,240)   (20,634)   (110,841)
OTHER INCOME (EXPENSE), NET   1,166    (32,213)   (16,930)   (95,184)
                     
LOSS BEFORE INCOME TAXES   (310,310)   (292,670)   (1,112,361)   (472,060)
                     
INCOME BENEFITS   -    -    -    (32)
                     
NET LOSS   (310,310)   (292,670)   (1,112,361)   (472,028)
                     
OTHER COMPREHENSIVE INCOME (LOSS):                    
     Foreign currency translation adjustment   (188,893)   113,690    (260,924)   270,407 
                     
COMPREHENSIVE LOSS  $(499,203)  $(178,980)  $(1,373,285)  $(201,621)
                     
NET LOSS PER COMMON SHARE, BASIC AND DILUTED  $(0.02)  $(0.01)  $(0.06)  $(0.02)
                     
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,
 
   2018   2017 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(1,112,361)  $(472,028)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities          
Depreciation   321,283    326,896 
Amortization   15,666    16,561 
Allowance for doubtful accounts   1,316    - 
Loss on sale of assets   6,175    110,841 
Changes in operating assets and liabilities:          
Accounts receivable, trade   145    (2,716)
Other receivables   28,127    5,528 
Inventories   72,433    19,384 
Advances to suppliers   61,626    1,346 
Prepaid expense   616    (1,025)
Accounts payable   16,028    (14,935)
Advances from customers   (6,763)   99,399 
Other payable   194    (5,896)
Salary and welfare payable   (9,149)   5,069 
Taxes payable   11,003    773 
Net cash provided by (used in) operating activities   (593,661)   89,197 
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of property plant and equipment   (7,303)   (355,765)
Proceeds from sale of equipment   344    74,538 
Net cash used in investing activities   (6,959)   (281,227)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds (repayment) of due to related parties   219,415    (2,707)
Net cash provided by (used in) financing activities   219,415    (2,707)
           
EFFECT OF EXCHANGE RATE CHANGES ON CASH   (21,691)   59,562 
           
NET DECREASE IN CASH   (402,896)   (135,175)
           
CASH, beginning of period   518,535    919,390 
           
CASH, end of period  $115,639   $784,215 
           
SUPPLEMENTAL DISCLOSURES:          
           
Income taxes paid  $-   $- 
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

 

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.

 

6

 

  

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, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2018. 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, 2017 which was filed on April 2, 2018.

 

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,
 
   2018   2017   2017 
Period ended RMB: USD Exchange rate   6.86654    6.8063    6.50739 
Average RMB: USD Exchange rate   6.51368    6.6545    6.75783 

 

8

 

 

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 income (loss) in the consolidated financial statements and totaled $(188,893) and $113,690 for the three months ended September 30, 2018 and 2017, respectively, and $(260,924) and $270,407 for the nine months ended September 30, 2018 and 2017, 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.

 

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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, 2018 and December 31, 2017, the Company allowance $1,316 and $0 for doubtful accounts, 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, 2018 and December 31, 2017, the Company recorded $62,153 and $65,584 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 $33,895 and $95,521 as of September 30, 2018 and December 31, 2017, 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, 2018 and 2017.

 

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 $25,410 and $42,283 for the three months ended September 30, 2018 and 2017, respectively, and $93,698 and $110,116 for the nine months ended September 30, 2018 and 2017, 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 month periods ended September 30, 2018 and 2017.

 

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, 2018 and the year ended December 31, 2017, 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 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

        

In June 2018, the FASB issued ASU 2018-07, “Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” which simplifies the accounting for share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments to nonemployees with the requirements for share-based payments granted to employees. ASU 2018-07 becomes effective for the Company on January 1, 2019. Early adoption is permitted. The adoption of this accounting pronouncement is not expected to have an impact on the Company’s consolidated financial statements. 

 

12

 

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have 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. The Company does not expect the impact on its consolidated financial statements to be material.

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

 

13

 

 

NOTE 3 – ACCOUNTS RECEIVABLE

 

Accounts receivable consisted of the following:

 

   September 30,   December 31, 
   2018   2017 
Accounts receivable  $2,632   $2,777 
Less: allowance for bad debt   (1,316)   - 
   $1,316   $2,777 

 

As of the periods presented, the Company allowance $1,316 and $0 for doubtful accounts, respectively.

 

NOTE 4 – INVENTORIES

 

Inventories consisted of the following:

 

   September 30,   December 31, 
   2018   2017 
Raw materials  $149,093   $219,357 
Finished goods   425,193    425,314 
Low value consumables   37,112    39,160 
Total   611,398    683,831 
Less: impairment loss   (62,153)   (65,584)
Inventory, net  $549,245   $618,247 

 

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, 2018 and December 31, 2017, the Company recognized $62,153 and $65,584, 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, 
   2018   2017 
Building  $5,798,654   $6,118,687 
Operating Equipment   337,152    372,368 
Office furniture and equipment   343,432    360,601 
Vehicles   1,021,911    1,116,010 
Total   7,501,149    7,967,666 
Less: accumulated depreciation   (3,639,019)   (3,568,834)
Property, plant and equipment, net  $3,862,130   $4,398,832 

 

Depreciation expense for the three months ended September 30, 2018 and 2017 amounted to $109,826 and $115,282, respectively, and for the nine months ended September 30, 2018 and 2017 amounted to $321,283 and $326,896, respectively.

 

NOTE 6 – INTANGIBLE ASSETS

 

Intangible assets consisted of the following:

 

   September 30,   December 31, 
   2018   2017 
Land use rights  $601,185   $634,365 
Other intangible assets   76,919    81,164 
Total   678,104    715,529 
Less: accumulated amortization   (198,937)   (194,235)
Intangible assets, net  $479,167   $521,294 

 

Amortization expense of intangible assets for the three months ended September 30, 2018 and 2017 was $4,911 and $5,631, respectively, and for the nine months ended September 30, 2018 and 2017 amounted to $15,666 and $16,561, respectively.

 

15

 

 

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

 

Estimated amortization expense for
the year ending December 31,

   Amount 
2018  $22,240 
2019  $22,240 
2020  $22,240 
2021  $22,240 
2022  $22,240 
Thereafter  $410,094 

 

NOTE 7 – RELATED PARTY TRANSACTIONS

 

Payables due to related parties consist of the following:

 

   September 30,   December 31, 
   2018   2017 
Shenyang Joway Industrial Development Co., Ltd.  $2,121   $2,239 
Jinghe Zhang   346,332    126,799 
Total  $348,453   $129,038 

 

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 $789,512 has been repaid. For the nine months ended September 30, 2018 and 2017, the Company both repaid $0 of these advances. But the exchange rate fluctuation affected $118 of decrease in the balance of these advances for the nine months ended September 30, 2018. As of September 30, 2018, the total unpaid principal balance due Shenyang Joway for advances was $2,121.

 

Shenyang Joway ceased operations at the end of 2009.

 

16

 

 

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 $4,390,422 has been repaid. For the nine months ended September 30, 2018 and 2017, the Company received $219,533 and repaid $2,707 of these advances, respectively. As of September 30, 2018, the total unpaid principal balance due Jinghe Zhang for advances was $346,332.

 

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

 

NOTE 8 – INCOME TAXES

 

The Company operations in the People’s Republic of China are subject to the Income Tax Law of the People’s Republic of China. Pursuant to the PRC Income Tax Laws, the Company is subject to the Enterprise Income Tax (“EIT”) which is generally a statutory rate of 25% beginning January 2008, on income as reported in its statutory financial statements after appropriate tax adjustments.

 

The 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,
 
   2018   2017 
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, 2018, the Company had allocated $354,052 to statutory reserves.

 

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NOTE 10 – SEGMENTS

 

In 2018 and 2017, 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, 2018

 

   Sales   COGS   Gross profit   Loss from operations   Depreciation and amortization   Assets 
Healthcare Knit Goods Series  $56,159   $15,306   $40,853   $(36,571)  $16,502   $131,356 
Daily Healthcare and Personal Care Series   130,115    53,697    76,418    (101,319)   38,234    253,988 
Wellness House and Activated Water Machine Series   204,191    94,190    110,001    (173,586)   60,001    158,548 
Segment Totals  $390,465   $163,193   $227,272    (311,476)  $114,737    543,892 
Other Income, net                  1,166           
Income Tax                 -           
Unallocated Assets                            4,601,678 
Net Loss                 $(310,310)          
Total Assets                           $5,145,570 

  

For the three months ended September 30, 2017

 

   Sales   COGS   Gross profit   Loss from operations   Depreciation and amortization   Assets 
Healthcare Knit Goods Series  $162,297   $55,115   $107,182   $(44,882)  $26,705   $165,363 
Daily Healthcare and Personal Care Series   225,437    82,004    143,433    (62,034)   37,095    216,318 
Wellness House and Activated Water Machine Series   347,204    175,494    171,710    (153,541)   57,131    260,605 
Segment Totals  $734,938   $312,613   $422,325    (260,457)  $120,931    642,286 
Other Expense, net                  (32,213)          
Income Taxes                  -           
Unallocated Assets                            5,938,286 
Net Loss                 $(292,670)          
Total Assets                           $6,580,572 

 

 

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For the nine months ended September 30, 2018

 

   Sales   COGS   Gross profit   Loss from operations   Depreciation and amortization   Assets 
Healthcare Knit Goods Series  $210,259   $70,480   $139,779   $(133,796)  $47,954   $131,356 
Daily Healthcare and Personal Care Series   428,935    186,541    242,394    (315,706)   97,828    253,988 
Wellness House and Activated Water Machine Series   838,191    393,526    444,665    (645,929)   191,167    158,548 
Segment Totals  $1,477,385   $650,547   $826,838    (1,095,431)  $336,949    543,892 
Other Expenses, net                  (16,930)          
Income Tax                  -           
Unallocated Assets                            4,601,678 
Net Loss                 $(1,112,361)          
Total Assets                           $5,145,570 

 

For the nine months ended September 30, 2017

 

   Sales   COGS   Gross profit   Loss from operations   Depreciation and amortization   Assets 
Healthcare Knit Goods Series  $600,136   $156,481   $443,655   $(31,817)  $79,012   $165,363 
Daily Healthcare and Personal Care Series   726,099    206,892    519,207    (56,071)   95,595    216,318 
Wellness House and Activated Water Machine Series   1,282,511    555,387    727,124    (288,988)   168,850    260,605 
Segment Totals  $2,608,746   $918,760   $1,689,986    (376,876)  $343,457    642,286 
Other Expense, net                  (95,184)          
Income Benefits                  (32)          
Unallocated Assets                            5,938,286 
Net Loss                 $(472,028)          
Total Assets                           $6,580,572 

 

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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,
 
   2018   2017   2018   2017 
                 
Sales to franchise customers  $292,306   $585,722   $1,038,238   $1,901,033 
Sales to non-franchise customers   98,159    149,216    439,147    707,713 
                     
Total sales  $390,465   $734,938   $1,477,385   $2,608,746 

 

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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 April 2, 2018.

 

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.

 

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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.

 

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. Our other expense 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,
 
   2018   2017   2018   2017 
REVENUES  $390,465   $734,938   $1,477,385   $2,608,746 
COST OF REVENUES   163,193    312,613    650,547    918,760 
GROSS PROFIT   227,272    422,325    826,838    1,689,986 
OPERATING EXPENSES   538,748    682,782    1,922,269    2,066,862 
LOSS FROM OPERATIONS   (311,476)   (260,457)   (1,095,431)   (376,876)

OTHER INCOME (EXPENSE), NET

   1,166    (32,213)   (16,930)   (95,184)
LOSS BEFORE INCOME TAXES   (310,310)   (292,670)   (1,112,361)   (472,060)
INCOME TAXES (BENEFITS)   -    -    -    (32)
NET LOSS  $(310,310)  $(292,670)  $(1,112,361)  $(472,028)

 

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Business Segments

 

In 2018 and 2017, 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, 2018

 

   Healthcare Knit Goods Series   % of Total   Daily Healthcare and Personal Care Series   % of Total   Wellness House and Activated Water Machine Series   % of Total   Total 
REVENUES  $56,159    14.4%  $130,115    33.3%  $204,191    52.3%  $390,465 
COST OF REVENUES   15,306    9.4%   53,697    32.9%   94,190    57.7%   163,193 
GROSS PROFIT   40,853    18.0%   76,418    33.6%   110,001    48.4%   227,272 
GROSS MARGIN   72.7%        58.7%        53.9%        58.2%
OPERATING EXPENSES   77,424    14.4%   177,737    33.0%   283,587    52.6%   538,748 
LOSS FROM OPERATIONS  $(36,571)   11.7%  $(101,319)   32.5%  $(173,586)   55.7%  $(311,476)

 

For the three months ended September 30, 2017

 

   Healthcare Knit Goods Series   % of Total   Daily Healthcare and Personal Care Series   % of Total   Wellness House and Activated Water Machine Series   % of Total   Total 
REVENUES  $162,297    22.1%  $225,437    30.7%  $347,204    47.2%  $734,938 
COST OF REVENUES   55,115    17.6%   82,004    26.2%   175,494    56.1%   312,613 
GROSS PROFIT   107,182    25.4%   143,433    34.0%   171,710    40.7%   422,325 
GROSS MARGIN   66.0%        63.6%        49.5%        57.5%
OPERATING EXPENSES   152,064    22.3%   205,467    30.1%   325,251    47.6%   682,782 
LOSS FROM OPERATIONS  $(44,882)   17.2%  $(62,034)   23.8%  $(153,541)   59.0%  $(260,457)

 

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For the nine months ended September 30, 2018

 

   Healthcare Knit Goods Series   % of Total   Daily Healthcare and Personal Care Series   % of Total   Wellness House and Activated Water Machine Series   % of Total   Total 
REVENUES  $210,259    14.2%  $428,935    29.0%  $838,191    56.7%  $1,477,385 
COST OF REVENUES   70,480    10.8%   186,541    28.7%   393,526    60.5%   650,547 
GROSS PROFIT   139,779    16.9%   242,394    29.3%   444,665    53.8%   826,838 
GROSS MARGIN   66.5%        56.5%        53.1%        56.0%
OPERATING EXPENSES   273,575    14.2%   558,100    29.0%   1,090,594    56.7%   1,922,269 
LOSS FROM OPERATIONS  $(133,796)   12.2%  $(315,706)   28.8%  $(645,929)   59.0%  $(1,095,431)

 

For the nine months ended September 30, 2017

 

   Healthcare Knit Goods Series   % of Total   Daily Healthcare and Personal Care Series   % of Total   Wellness House and Activated Water Machine Series   % of Total   Total 
REVENUES  $600,136    23.0%  $726,099    27.8%  $1,282,511    49.2%  $2,608,746 
COST OF REVENUES   156,481    17.0%   206,892    22.5%   555,387    60.4%   918,760 
GROSS PROFIT   443,655    26.3%   519,207    30.7%   727,124    43.0%   1,689,986 
GROSS MARGIN   73.9%        71.5%        56.7%        64.8%
OPERATING EXPENSES   475,472    23.0%   575,278    27.8%   1,016,112    49.2%   2,066,862 
LOSS FROM OPERATIONS  $(31,817)   8.4%  $(56,071)   14.9%  $(288,988)   76.7%  $(376,876)

 

For The Three Months Ended September 30, 2018 Compared to September 30, 2017

 

Revenue. For the three months ended September 30, 2018, revenue was $390,465 compared to $734,938 for the three months ended September 30, 2017, a decrease of $344,473 or 46.9%. In early 2018, most of our sales staff resigned after we implemented austerity plans on marketing. Meanwhile we regulated our marketing policy to our franchisees. The above two mentioned made a temporary adverse effect on our revenue. We anticipated our revenue will improve at the end of 2018, after the reconstruction period.

 

Revenue from healthcare knit goods segment decreased by $106,138 or 65.4% to $56,159 for the three months ended September 30, 2018 from $162,297 for the three months ended September 30, 2017. This decrease was mainly due to the decrease in sales of our mattress products. Our mattress products are our best-selling products and were most affected by market fluctuations.

 

Revenue from daily healthcare and personal care products decreased by $95,322 or 42.3% to $130,115 for the three months ended September 30, 2018 from $225,437 for the three months ended September 30, 2017. This was primarily due to the decrease in sales of our Tourmaline shawls.

 

Revenue from wellness houses and activated water machines decreased by $143,013 or 41.2% to $204,191 for the three months ended September 30, 2018 from $347,204 for the three months ended September 30, 2017. This decrease was mainly due to the decrease in the construction of our wellness house.

 

Cost of Goods Sold. For the three months ended September 30, 2018, cost of goods sold was $163,193 compared to $312,613 for the three months ended September 30, 2017, a decrease of $149,420 or 47.8%. This decrease was mainly due to the decrease in the cost of wellness house and activated water machine segment.

 

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Cost of goods sold for healthcare knit goods segment decreased to $15,306 for the three months ended September 30, 2018 from $55,115 for the three months ended September 30, 2017, a decrease of $39,809 or 72.2%. This decrease was due to the decrease in sales.

 

Cost of goods sold for the daily healthcare and personal care segment decreased to $53,697 for the three months ended September 30, 2018 from $82,004 for the three months ended September 30, 2017, a decrease of $28,307 or 34.5%. This decrease was due to the decrease in sales.

 

Cost of goods sold for our wellness house and activated water machine segment decreased to $94,190 for the three months ended September 30, 2018 from $175,494 for the three months ended September 30, 2017, a decrease of $81,304 or 46.3%. This decrease was mainly due to the decrease in the cost of the construction of our wellness house as a result of the decrease in sales.

 

Gross profit. Our gross profit decreased by $195,053 or 46.2% to $227,272 for the three months ended September 30, 2018, compared to $422,325 for the three months ended September 30, 2017. This decrease was mainly due to the decrease in sales. Our gross margin slightly increased from 57.5% for the three months ended September 30, 2017 to 58.2% for the three months ended September 30, 2018.

 

Gross profit for the healthcare knit goods segment decreased by $66,329 or 61.9% to $40,853 for the three months ended September 30, 2018 compared to $107,182 for the three months ended September 30, 2017. This decrease was mainly due to the decreased gross profit of our mattress products. The gross margins of healthcare knit goods segment increased from 66% for the three months ended September 30, 2017 to 72.7% for the three months ended September 30, 2018. It was mainly due to the increase in proportion of our higher gross margin products.

 

Gross profit of daily healthcare and personal care segment decreased by $67,015 or 46.7% to $76,418 for the three months ended September 30, 2018, compared to $143,433 for the three months ended September 30, 2017. This decrease was mainly due to the decreased profit of tourmaline shawls. The gross margin of daily healthcare and personal care segment decreased from 63.6% for the three months ended September 30, 2017 to 58.7% for the three months ended September 30, 2018. It was mainly due to the more discounts on Xin-Nao-Ling Fish Oil Soft Gel to our franchisees in 2018.

 

Gross profit of the wellness house and activated water machine segments decreased by $61,709 or 35.9% to $110,001 for the three months ended September 30, 2018, compared to $171,710 for the three months ended September 30, 2017. This decrease was mainly due to the decrease in gross profit from construction of wellness houses. The gross margin of our wellness house and activated water machine segments increased from 49.5% for the three months ended September 30, 2017 to 53.9% for the three months ended September 30, 2018. This increase was mainly influenced by the increased gross margin of our wellness houses construction.

 

Operating expenses. Our total operating expenses consist of sales and marketing expenses and general and administrative expenses. Our total operating expenses decreased by $144,034 or 21.2%, from $682,782 for the three months ended September 30, 2017 to $538,748 for the three months ended September 30, 2018. This decrease was mainly due to the decrease of salary and conference expenses. Operating expenses for healthcare knit goods segment decreased by $74,640 or 49.1% to $77,424 for the three months ended September 30, 2018 from $152,064 for the three months ended September 30, 2017. Operating expenses for daily healthcare and personal care segment decreased by $27,730 or 13.5% to $177,737 for the three months ended September 30, 2018 from $205,467 for the three months ended September 30, 2017. Operating expenses for our wellness house and activated water machine segment decreased by $41,664 or 12.8% to $283,587 for the three months ended September 30, 2018 from $325,251 for the three months ended September 30, 2017.

 

Loss from operations. As a result of the foregoing, our loss from operations was $311,476 for the three months ended September 30, 2018, compared to $260,457 for the three months ended September 30, 2017, an increase of $51,019. The increased loss was mainly due to the decrease in sales as discussed above.

 

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Income taxes. Our income tax expenses did not incur for the three months ended September 30, 2018 and 2017.

 

Net loss. For the three months ended September 30, 2018, our net loss was $310,310 compared to $292,670 for the three months ended September 30, 2017, which was mainly due to decrease in sales.

 

For the Nine Months Ended September 30, 2018 Compared to September 30, 2017

 

Revenue. For the nine months ended September 30, 2018, revenue was $1,477,385 compared to $2,608,746 for the nine months ended September 30, 2017, a decrease of $1,131,361 or 43.4%. This decrease was mainly due to our more regulated marketing policy in 2018.

 

Revenue from healthcare knit goods segment decreased by $389,877, or 65% to $210,259 for the nine months ended September 30, 2018 from $600,136 for the nine months ended September 30, 2017. This decrease was mainly due to the decrease in sales of our mattress products. Our mattress products are our best-selling products and were most affected by market fluctuations.

 

Revenue from daily healthcare and personal care products decreased by $297,164 or 40.9% to $428,935 for the nine months ended September 30, 2018 from $726,099 for the nine months ended September 30, 2017. This decrease was primarily due to the decrease in sales of our tourmaline breast petals, the new product we launched in 2017.

 

Revenue from wellness houses and activated water machines decreased by $444,320 or 34.6% to $838,191 for the nine months ended September 30, 2018 from $1,282,511 for the nine months ended September 30, 2017. This decrease was mainly due to the decrease in construction of wellness houses.

 

Cost of Goods Sold. For the nine months ended September 30, 2018, cost of goods sold was $650,547 compared to $918,760 for the nine months ended September 30, 2017, a decrease of $268,213, or 29.2%. This decrease was mainly due to the decrease in the cost of wellness house and activated water machine segment and healthcare knit goods segment.

 

Cost of goods sold for healthcare knit goods segment decreased to $70,480 for the nine months ended September 30, 2018 from $156,481 for the nine months ended September 30, 2017, a decrease of $86,001 or 55%. 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 decreased to $186,541 for the nine months ended September 30, 2018 from $206,892 for the nine months ended September 30, 2017, a decrease of $20,351 or 9.8%. This decrease was mainly due to the decrease in the cost of our tourmaline breast petals, as a result of decrease in sales.

 

Cost of goods sold for our wellness house and activated water machine segment decreased to $393,526 for the nine months ended September 30, 2018 from $555,387 for the nine months ended September 30, 2017, a decrease of $161,861 or 29.1%. This decrease was mainly due to the decrease in the cost of our wellness house, as a result of the decrease in sales.

 

Gross profit. Our gross profit decreased by $863,148 or 51.1% to $826,838 for the nine months ended September 30, 2018, compared to $1,689,986 for the nine months ended September 30, 2017. This decrease was due to the decrease in sales. Our gross margin decreased from 64.8% for the nine months ended September 30, 2017 to 56% for the nine months ended September 30, 2018. This decrease was mainly due to the decrease in gross margin in our daily healthcare and personal care segment and healthcare knit goods segment.

 

Gross profit for the healthcare knit goods segment decreased by $303,876 or 68.5% to $139,779 for the nine months ended September 30, 2018 compared to $443,655 for the nine months ended September 30, 2017. 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 73.9% for the nine months ended September 30, 2017 to 66.5% for the nine months ended September 30, 2018. It was mainly due to that we gave more discounts to our franchisees in 2018.

 

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Gross profit of daily healthcare and personal care segment decreased by $276,813 or 53.3% to $242,394 for the nine months ended September 30, 2018, compared to $519,207 for the nine months ended September 30, 2017. This decrease was primarily due to the decrease in sales. Our gross margin of daily healthcare and personal care segment decreased from 71.5% for the nine months ended September 30, 2017 to 56.5% for the nine months ended September 30, 2018. This was mainly due to the decrease in sales of tourmaline breast petals, which has a higher gross profit rate.

 

Gross profit of the wellness house and activated water machine segments decreased by $282,459 or 38.8% to $444,665 for the nine months ended September 30, 2018, compared to $727,124 for the nine months ended September 30, 2017. This decrease was mainly due to the decrease in sales. The gross margin of our wellness house and activated water machine segments decreased slightly from 56.7% for the nine months ended September 30, 2017 to 53.1% for the nine months ended September 30, 2018.

 

Operating expenses. Our total operating expenses consist of sales and marketing expenses and general and administrative expenses. Our total operating expenses decreased by $144,593 or 7%, from $2,066,862 for the nine months ended September 30, 2017 to $1,922,269 for the nine months ended September 30, 2018. This decrease was mainly due to the decrease of salary and conference expenses. Operating expenses for healthcare knit goods segment decreased by $201,897 or 42.5% to $273,575 for the nine months ended September 30, 2018 from $475,472 for the nine months ended September 30, 2017. Operating expenses for daily healthcare and personal care segment decreased by $17,178 or 3% to $558,100 for the nine months ended September 30, 2018 from $575,278 for the nine months ended September 30, 2017. Operating expenses for our wellness house and activated water machine segment increased by $74,482 or 7.3% to $1,090,594 for the nine months ended September 30, 2018 from $1,016,112 for the nine months ended September 30, 2017.

 

Loss from operations. As a result of the foregoing, our loss from operations was $1,095,431 for the nine months ended September 30, 2018, compared to $376,876 for the nine months ended September 30, 2017, an increase of $718,555. The increased loss from operations was mainly due to the decrease in sales.

 

Income taxes (income tax benefits). Our income tax expenses were $0 for the nine months ended September 30, 2018, compared to $(32) of income tax benefits for the nine months ended September 30, 2017. The income tax benefits in 2017 was due to the refund of our income tax for 2016.

 

Net loss. Our net loss was $1,112,361 for the nine months ended September 30, 2018, compared to $472,028 for the nine months ended September 30, 2017. The increased loss was mainly due to the decrease in sales.

 

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,
 
   2018   2017   2018   2017 
                 
Sales to franchise customers  $292,306   $585,722   $1,038,238   $1,901,033 
Sales to non-franchise customers   98,159    149,216    439,147    707,713 
                     
Total sales  $390,465   $734,938   $1,477,385   $2,608,746 

 

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Liquidity and Capital Resources

 

Our cash at December 31, 2017 was $518,535 and decreased to $115,639 at September 30, 2018, a decrease of $402,896. This decrease was mainly due to our deteriorated operating results. On September 30, 2018, we had net working capital of $321,341, a decrease of $794,456 from $1,115,797 on December 31, 2017.

 

Our cash flow information summary is as follows:

 

   For the nine months ended
September 30,
 
   2018   2017 
Net cash provided by (used in):           
Operating activities  $(593,661)  $89,197 
Investing activities  $(6,959)  $(281,227)
Financing activities  $219,415   $(2,707)

 

Net Cash Provided By (Used In) Operating Activities

 

Net cash used in operating activities was $593,661 for the nine months ended September 30, 2018, compared to $89,197 of net cash provided by operating activities for the nine months ended September 30, 2017. This was primarily due to an increase of $640,333 in net loss from our deteriorated operating results.

 

For the nine months ended September 30, 2018, cash was mainly used to cover the loss of $1,112,361, which was primarily offset by an add-back of depreciation of $321,283, a decrease in inventories of $72,433 and a decrease in advances to suppliers of $61,626.

 

For the nine months ended September 30, 2017, cash was mainly provided by $326,896 of add-back of depreciation and $110,841 of loss on sale of assets for non-cash expense, the increase in advances from customer of $99,399, which were primarily offset by cash used to cover the loss of $472,028.

 

Net Cash Used in Investing Activities

 

Net cash used in investing activities was $6,959 for the nine months ended September 30, 2018, compared to $281,227 for the nine months ended September 30, 2017.

 

For the nine months ended September 30, 2018, we expended $7,303 on purchase of office equipment. For the nine months ended September 30, 2017, we expended $355,765 on purchase of vehicles and office equipment.

 

Net Cash Provided By (Used In) Financing Activities

 

For the nine months ended September 30, 2018, $219,415 of cash was provided by financing activities, compared to $2,707 of cash used in financing activities for the nine months ended September 30, 2017. The cash was provided by and used to repay advances from Jinghe Zhang and Shenyang Joway.

 

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 $0 of these advances for the nine months ended September 30, 2018 and 2017, respectively. As of September 30, 2018, the total unpaid principal balance due Shenyang Joway for advances was $2,121. Shenyang Joway ceased operations at the end of 2009, although it still exists as a legal entity.

 

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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 received $219,533 and repaid $2,707 of advances for the nine months ended September 30, 2018 and 2017, respectively. As of September 30, 2018, the total unpaid principal balance due Jinghe Zhang for advances made to Joway Shengshi was $346,332.

 

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, 2018, 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.

 

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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.

 

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.

 

30

 

 

Inventories

 

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

 

Property, Plant, and Equipment

 

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

 

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

 

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

 

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

 

Recent Accounting Pronouncements

 

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.

 

31

 

 

Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2018, 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.

 

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, 2018 that materially affected, or were reasonably likely to materially affect our internal control over financial reporting.

 

32

 

 

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, 2017. 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, 2017 may cause our actual results, performances and achievements to be materially different from those expressed or implied by our forward-looking statements. If any of these risks or events occurs, our business, financial condition or results of operations may be adversely affected.

  

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

 

None.

 

Item 3. Defaults upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

EXHIBIT INDEX

 

Exhibit No.

   

Description

31.1     Certification of Chief Executive Officer of Periodic Report pursuant to Rule 13a-14a and Rule 14d-14(a). *
       
31.2     Certification of Chief Financial Officer of Periodic Report pursuant to Rule 13a-14a and Rule 15d-14(a). *
       
32.1     Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350. *
       
32.2     Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350. *
       
101.INS     XBRL Instance Document*
       
101.SCH     XBRL Schema Document*
       
101.CAL     XBRL Calculation Linkbase Document*
       
101.LAB     XBRL Label Linkbase Document*
       
101.PRE     XBRL Presentation Linkbase Document*
       
101.DEF     XBRL Definition Linkbase Document*

 

*Filed herewith

 

33

 

 

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, 2018

 

  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

 

34

 

 

EX-31.1 2 f10q0918ex31-1_joway.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, 2018 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, 2018

 

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

 

EX-31.2 3 f10q0918ex31-2_joway.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, 2018 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, 2018

 

  /S/ Yuan Huang
  Yuan Huang
 

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

EX-32.1 4 f10q0918ex32-1_joway.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, 2018 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, 2018

 

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

 

EX-32.2 5 f10q0918ex32-2_joway.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, 2018 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, 2018

 

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

 

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Summary of segment reporting Summary of revenue between franchise and non-franchise customers Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Table] Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] Joway Health Industries Group Inc. [Member] Tianjin Junhe Management Consulting Co., Ltd. [Member] Tianjin Joway Shengshi Group Co., Ltd. [Member] Shenyang Joway Electronic Technology Co., Ltd. [Member] Tianjin Joway Decoration Engineering Co., Ltd. [Member] Tianjin Oriental Shengtang Import & Export Trading Co., Ltd. [Member] List of Company and its subsidiaries Domicile and Date of Incorporation Paid in Capital Percentage of Effective Ownership Principal Activities Joway Shengshi To CGL [Member] CGL [Member] CGL [Member] Joway Shengshi To Joway Technology [Member] Joway Shengshi To Joway Decoration [Member] Subsequent Event Type [Axis] Organization (Textual) Percentage of shares acquired by Dynamic Elite International Limited from Joway Health Ownership percentage Business acquisition percentage of remaining voting interests acquired Percentage of right to purchase of shares Aggregate price to purchase of shares Percentage of call option vests Call Option expiration term under VIE Agreements Options exercise price per share Call option, description Common stock shares Percentage of call option exercised Percentage of shares transferred Foreign Currency Transaction Reporting Currency Exchange Rate [Table] Foreign Currency Transaction Reporting Currency Exchange Rate [Line Items] Period ended RMB: USD Exchange rate [Member] Average RMB: USD Exchange rate [Member] Summary of gains and losses from foreign currency transactions Gains and losses from foreign currency transactions Property, Plant and Equipment [Table] Property, Plant and Equipment [Line Items] Operating Equipment [Member] Office furniture and equipment [Member] Summary of estimated useful lives of fixed assets Estimated useful lives Summary Of Significant Accounting Policies [Table] Summary Of Significant Accounting Policies [Line Items] Shipping Costs [Member] Summary of Significant Accounting Policies (Textual) Foreign currency translation adjustments Valuation allowance for inventories Allowance for doubtful accounts Land use rights granted to amortized using the straight-line method over Other intangible assets are software programs that are amortized over estimated useful life Wellness House construction period Shipping costs included in selling expenses Measurement of tax position Income tax examination, likelihood upon ultimate settlement, description Number of reportable business segments Accounts receivable Less: allowance for bad debt Accounts receivable, total Accounts Receivable (Textual) Summary of inventories Raw materials Finished goods Low value consumables Total Less: impairment loss Inventory, net Inventories (Textual) Impairment loss from inventory Summary of property, plant and equipment Total Less: accumulated depreciation Property, plant and equipment, net Property, Plant and Equipment (Textual) Depreciation expense Summary of intangible assets Land use rights Other intangible assets Total Less: accumulated amortization Intangible assets, net Estimated amortization expense for the year ending December 31, 2018 2019 2020 2021 2022 Thereafter Intangible Assets (Textual) Amortization expense of intangible assets Schedule of Related Party Transactions, by Related Party [Table] Related Party Transaction [Line Items] Shenyang Joway Industrial Development Co., Ltd. [Member] Summary of payables due to related parties Total Related Party Transactions (Textual) Ownership percentage, description Advanced an aggregate amount Received amount of related parties Repayments of related party advances Exchange rate fluctuation Total unpaid principal balance Received cash advances in the aggregate principal amount Summary of differences between the PRC statutory federal rate and effective tax rate Tax computed at China statutory rates Effect of losses Effective rate Operating Loss Carryforwards [Table] Operating Loss Carryforwards [Line Items] Income Taxes (Textual) Statutory rate Statutory Reserves (Textual) Statutory reserves allocation, percentage Income after tax until the reserves reaches, percentage Schedule of Segment Reporting Information, by Segment [Table] Segment Reporting Information [Line Items] Segments [Axis] Reportable business segments Sales COGS Gross profit Loss from operations Depreciation and amortization Assets Other Income (Expense), net Income Tax (Benefits) Unallocated Assets Net Loss Total Assets Segments (Textual) Schedule of Revenue by Major Customers, by Reporting Segments [Table] Revenue, Major Customer [Line Items] Customer [Axis] Sales to franchise customers [Member] Sales to non-franchise customers [Member] Schedule of franchise and non-franchise customers Total sales Franchise Revenues (Textual) Franchising agreements, description Disclosure of accounting policy for advances to suppliers. Aggregate price to purchase of shares. Average renminbi united states dollar exchange rate. Breakdown of revenue between franchise and non franchise customers. Business acquisition percentage of remaining voting interests acquired. Description of call option. Call option expiration term under VIE agreements. Criteria percentage of registered capital. Crystal globe. Daily healthcare and personal care series. Document and entity information. Dynamic elite international limited. Enterprise income tax (EIT). Entity incorporation domicile and date of incorporation. Finite lived land use rights. Tabular disclosure for foreign currency. Foreign Currency Transaction Reporting Currency Exchange Rate [Line Items] Foreign currency transaction reporting currency exchange rate. Franchise customers. Franchise Revenues [Abstract] The entire disclosure for franchise revenues. Franchise Revenues (Textual) [Abstract] Healthcare knitgoods series. Amount of recover gain ( loss) for the period recorded in the aggreagte value of all inventory held by the reporting entity. Income taxes. Increase (decrease) in advances to suppliers. Intangible assets. Interest-free, unsecured working capital advances. Amount of inventory low value consumables net of reserves. Jinghe zhang. Jingshe Zhang. Joway shengshi to crystal globe. Joway shengshi to joway decoration. Joway shengshi to joway technology. Joway shengshi to shengtang trading. Useful life of land use rights. Lists of company and its subsidiaries. Tabular disclosure of lists of company and its subsidiaries. Maximum construction period of wellness house. Percentage of realized benefit upon ultimate settlement. Non franchise customers. Organization. Ownership percentage. The percentage of call option excercised. Percentage of call option vests. Percentage of effective ownership. Percentage of right to purchase of shares. Percentage of shares transferred. Property Plant And Equipment Estimated Useful Lives [Abstract] Tabular disclosure for property plant and equipment estimated useful lives. Property plant and equipment. Related party transactions. Definition :Year ended renminbi united states dollar exchange rate. Reportable Business Segments [Abstract] Tabular disclosure of franchise and non franchise customers. Amount of net assets (total assets less total liabilities) attributed to the reportable segment. Shenyang joway electronic technology co., ltd. Shenyang joway industrial development co., ltd. Statutory reserve fund allocation. Statutory reserves [Abstract] The entire disclosure for statutory reserves. Statutory reserves. Entire disclosure of summary of significant accounting policies. Entire disclosure of summary of significant accounting policies. Summary of significant accounting policies. Tianjin joway decoration engineering co., ltd. Tianjin joway shengshi group co., ltd. Tianjin junhe management consulting co., ltd. Tianjin oriental shengtang import and export trading co., ltd. Unallocated assets. Wellness house and activated water machine series. Description of franchising agreements. Amount of allowance for doubtful accounts. Assets, Current Other Assets, Noncurrent Liabilities, Current Stockholders' Equity Attributable to Parent Liabilities and Equity Operating Expenses Other Nonoperating Expense Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest Comprehensive Income (Loss), Net of Tax, Attributable to Parent Gain (Loss) on Disposition of Assets Increase (Decrease) in Accounts Receivable Increase (Decrease) in Other Receivables Increase (Decrease) in Inventories Increase Decrease in Advances to Suppliers Increase (Decrease) in Prepaid Expense Increase (Decrease) in Accounts Payable Increase (Decrease) in Customer Advances Net Cash Provided by (Used in) Operating Activities Payments to Acquire Property, Plant, and Equipment Net Cash Provided by (Used in) Investing Activities Net Cash Provided by (Used in) Financing Activities Cash and Cash Equivalents, Period Increase (Decrease) Cash and Cash Equivalents, Policy [Policy Text Block] Inventory, Policy [Policy Text Block] Allowance for Doubtful Accounts Receivable Accounts Receivable, Gross, Current Allowance for Doubtful Accounts Receivable, Current Inventory, Gross Inventory Adjustments Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment Finite-Lived Intangible Assets, Gross Finite-Lived Intangible Assets, Accumulated Amortization Effective Income Tax Rate Reconciliation, Percent EX-101.PRE 11 gtvi-20180930_pre.xml XBRL PRESENTATION FILE XML 12 R1.htm IDEA: XBRL DOCUMENT v3.10.0.1
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2018
Nov. 14, 2018
Document and Entity Information [Abstract]    
Entity Registrant Name Joway Health Industries Group Inc  
Entity Central Index Key 0001263364  
Trading Symbol GTVI  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Type 10-Q  
Document Period End Date Sep. 30, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q3  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Common Stock Shares Outstanding   20,054,000
XML 13 R2.htm IDEA: XBRL DOCUMENT v3.10.0.1
Condensed Consolidated Balance Sheets - USD ($)
Sep. 30, 2018
Dec. 31, 2017
CURRENT ASSETS:    
Cash $ 115,639 $ 518,535
Accounts receivable 1,316 2,777
Other receivables 37,876 66,003
Inventories 549,245 618,247
Advances to suppliers 33,895 95,521
Prepaid taxes 64,554 75,557
Prepaid expense 1,748 2,364
Total current assets 804,273 1,379,004
PROPERTY, PLANT AND EQUIPMENT, net 3,862,130 4,398,832
OTHER ASSETS:    
Intangible assets, net 479,167 521,294
Total other assets 479,167 521,294
Total assets 5,145,570 6,299,130
CURRENT LIABILITIES:    
Accounts payable 45,447 29,419
Advances from customers 31,271 38,034
Other payables 57,761 66,716
Due to related parties 348,453 129,038
Total current liabilities 482,932 263,207
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, 2018 and December 31, 2017 20,054 20,054
Additional paid-in-capital 7,361,665 7,361,665
Statutory reserves 354,052 354,052
Accumulated deficits (3,616,313) (2,503,952)
Accumulated other comprehensive income 543,180 804,104
Total stockholders' equity 4,662,638 6,035,923
Total liabilities and stockholders' equity $ 5,145,570 $ 6,299,130
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.10.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Sep. 30, 2018
Dec. 31, 2017
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
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.10.0.1
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Income Statement [Abstract]        
REVENUES $ 390,465 $ 734,938 $ 1,477,385 $ 2,608,746
COST OF REVENUES 163,193 312,613 650,547 918,760
GROSS PROFIT 227,272 422,325 826,838 1,689,986
Selling expenses 167,921 235,005 663,437 733,799
General and administrative expenses 370,827 447,777 1,258,832 1,333,063
OPERATING EXPENSES 538,748 682,782 1,922,269 2,066,862
LOSS FROM OPERATIONS (311,476) (260,457) (1,095,431) (376,876)
Interest income 76 147 282 566
Other income 1,090 9,880 3,422 15,091
Other expenses (42,240) (20,634) (110,841)
OTHER INCOME (EXPENSE), NET 1,166 (32,213) (16,930) (95,184)
LOSS BEFORE INCOME TAXES (310,310) (292,670) (1,112,361) (472,060)
INCOME BENEFITS (32)
NET LOSS (310,310) (292,670) (1,112,361) (472,028)
OTHER COMPREHENSIVE INCOME (LOSS):        
Foreign currency translation adjustment (188,893) 113,690 (260,924) 270,407
COMPREHENSIVE LOSS $ (499,203) $ (178,980) $ (1,373,285) $ (201,621)
NET LOSS PER COMMON SHARE, BASIC AND DILUTED $ (0.02) $ (0.01) $ (0.06) $ (0.02)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, BASIC AND DILUTED 20,054,000 20,054,000 20,054,000 20,054,000
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.10.0.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (1,112,361) $ (472,028)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities    
Depreciation 321,283 326,896
Amortization 15,666 16,561
Allowance for doubtful accounts 1,316
Loss on sale of assets 6,175 110,841
Changes in operating assets and liabilities:    
Accounts receivable, trade 145 (2,716)
Other receivables 28,127 5,528
Inventories 72,433 19,384
Advances to suppliers 61,626 1,346
Prepaid expense 616 (1,025)
Accounts payable 16,028 (14,935)
Advances from customers (6,763) 99,399
Other payable 194 (5,896)
Salary and welfare payable (9,149) 5,069
Taxes payable 11,003 773
Net cash provided by (used in) operating activities (593,661) 89,197
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchase of property plant and equipment (7,303) (355,765)
Proceeds from sale of equipment 344 74,538
Net cash used in investing activities (6,959) (281,227)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds (repayment) of due to related parties 219,415 (2,707)
Net cash used in financing activities 219,415 (2,707)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (21,691) 59,562
NET DECREASE IN CASH (402,896) (135,175)
CASH, beginning of period 518,535 919,390
CASH, end of period 115,639 784,215
SUPPLEMENTAL DISCLOSURES:    
Income taxes paid
Interest paid
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.10.0.1
Organization
9 Months Ended
Sep. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [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 v3.10.0.1
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2018
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, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2018. 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, 2017 which was filed on April 2, 2018.

 

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,
 
   2018   2017   2017 
Period ended RMB: USD Exchange rate   6.86654    6.8063    6.50739 
Average RMB: USD Exchange rate   6.51368    6.6545    6.75783 

 

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 income (loss) in the consolidated financial statements and totaled $(188,893) and $113,690 for the three months ended September 30, 2018 and 2017, respectively, and $(260,924) and $270,407 for the nine months ended September 30, 2018 and 2017, 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, 2018 and December 31, 2017, the Company allowance $1,316 and $0 for doubtful accounts, 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, 2018 and December 31, 2017, the Company recorded $62,153 and $65,584 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 $33,895 and $95,521 as of September 30, 2018 and December 31, 2017, 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, 2018 and 2017.

 

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 $25,410 and $42,283 for the three months ended September 30, 2018 and 2017, respectively, and $93,698 and $110,116 for the nine months ended September 30, 2018 and 2017, 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 month periods ended September 30, 2018 and 2017.

 

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, 2018 and the year ended December 31, 2017, 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 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

        

In June 2018, the FASB issued ASU 2018-07, “Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” which simplifies the accounting for share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments to nonemployees with the requirements for share-based payments granted to employees. ASU 2018-07 becomes effective for the Company on January 1, 2019. Early adoption is permitted. The adoption of this accounting pronouncement is not expected to have an impact on the Company’s consolidated financial statements. 

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have 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. The Company does not expect the impact on its consolidated financial statements to be material.

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

XML 19 R8.htm IDEA: XBRL DOCUMENT v3.10.0.1
Accounts Receivable
9 Months Ended
Sep. 30, 2018
Receivables [Abstract]  
ACCOUNTS RECEIVABLE

NOTE 3 – ACCOUNTS RECEIVABLE

 

Accounts receivable consisted of the following:

 

   September 30,   December 31, 
   2018   2017 
Accounts receivable  $2,632   $2,777 
Less: allowance for bad debt   (1,316)   - 
   $1,316   $2,777 

 

As of the periods presented, the Company allowance $1,316 and $0 for doubtful accounts, respectively.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.10.0.1
Inventories
9 Months Ended
Sep. 30, 2018
Inventory Disclosure [Abstract]  
INVENTORIES

NOTE 4 – INVENTORIES

 

Inventories consisted of the following:

 

   September 30,   December 31, 
   2018   2017 
Raw materials  $149,093   $219,357 
Finished goods   425,193    425,314 
Low value consumables   37,112    39,160 
Total   611,398    683,831 
Less: impairment loss   (62,153)   (65,584)
Inventory, net  $549,245   $618,247 

 

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, 2018 and December 31, 2017, the Company recognized $62,153 and $65,584, respectively, as a reserve for impairment loss from inventory.

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property, Plant and Equipment
9 Months Ended
Sep. 30, 2018
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, 
   2018   2017 
Building  $5,798,654   $6,118,687 
Operating Equipment   337,152    372,368 
Office furniture and equipment   343,432    360,601 
Vehicles   1,021,911    1,116,010 
Total   7,501,149    7,967,666 
Less: accumulated depreciation   (3,639,019)   (3,568,834)
Property, plant and equipment, net  $3,862,130   $4,398,832 

 

Depreciation expense for the three months ended September 30, 2018 and 2017 amounted to $109,826 and $115,282, respectively, and for the nine months ended September 30, 2018 and 2017 amounted to $321,283 and $326,896, respectively.

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.10.0.1
Intangible Assets
9 Months Ended
Sep. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
INTANGIBLE ASSETS

NOTE 6 – INTANGIBLE ASSETS

 

Intangible assets consisted of the following:

 

   September 30,   December 31, 
   2018   2017 
Land use rights  $601,185   $634,365 
Other intangible assets   76,919    81,164 
Total   678,104    715,529 
Less: accumulated amortization   (198,937)   (194,235)
Intangible assets, net  $479,167   $521,294 

 

Amortization expense of intangible assets for the three months ended September 30, 2018 and 2017 was $4,911 and $5,631, respectively, and for the nine months ended September 30, 2018 and 2017 amounted to $15,666 and $16,561, respectively.

 

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

 

Estimated amortization expense for
the year ending December 31,

   Amount 
2018  $22,240 
2019  $22,240 
2020  $22,240 
2021  $22,240 
2022  $22,240 
Thereafter  $410,094 
XML 23 R12.htm IDEA: XBRL DOCUMENT v3.10.0.1
Related Party Transactions
9 Months Ended
Sep. 30, 2018
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, 
   2018   2017 
Shenyang Joway Industrial Development Co., Ltd.  $2,121   $2,239 
Jinghe Zhang   346,332    126,799 
Total  $348,453   $129,038 

 

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 $789,512 has been repaid. For the nine months ended September 30, 2018 and 2017, the Company both repaid $0 of these advances. But the exchange rate fluctuation affected $118 of decrease in the balance of these advances for the nine months ended September 30, 2018. As of September 30, 2018, the total unpaid principal balance due Shenyang Joway for advances was $2,121.

 

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 $4,390,422 has been repaid. For the nine months ended September 30, 2018 and 2017, the Company received $219,533 and repaid $2,707 of these advances, respectively. As of September 30, 2018, the total unpaid principal balance due Jinghe Zhang for advances was $346,332.

 

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

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.10.0.1
Income Taxes
9 Months Ended
Sep. 30, 2018
Income Tax Disclosure [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,
 
   2018   2017 
Tax computed at China statutory rates   25%   25%
Effect of losses   (25)%   (25)%
Effective rate   0%   0%

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.10.0.1
Statutory Reserves
9 Months Ended
Sep. 30, 2018
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, 2018, the Company had allocated $354,052 to statutory reserves.

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.10.0.1
Segments
9 Months Ended
Sep. 30, 2018
Segment Reporting [Abstract]  
SEGMENTS

NOTE 10 – SEGMENTS

 

In 2018 and 2017, 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, 2018

 

   Sales   COGS   Gross profit   Loss from operations   Depreciation and amortization   Assets 
Healthcare Knit Goods Series  $56,159   $15,306   $40,853   $(36,571)  $16,502   $131,356 
Daily Healthcare and Personal Care Series   130,115    53,697    76,418    (101,319)   38,234    253,988 
Wellness House and Activated Water Machine Series   204,191    94,190    110,001    (173,586)   60,001    158,548 
Segment Totals  $390,465   $163,193   $227,272    (311,476)  $114,737    543,892 
Other Income, net                  1,166           
Income Tax                 -           
Unallocated Assets                            4,601,678 
Net Loss                 $(310,310)          
Total Assets                           $5,145,570 

  

For the three months ended September 30, 2017

 

   Sales   COGS   Gross profit   Loss from operations   Depreciation and amortization   Assets 
Healthcare Knit Goods Series  $162,297   $55,115   $107,182   $(44,882)  $26,705   $165,363 
Daily Healthcare and Personal Care Series   225,437    82,004    143,433    (62,034)   37,095    216,318 
Wellness House and Activated Water Machine Series   347,204    175,494    171,710    (153,541)   57,131    260,605 
Segment Totals  $734,938   $312,613   $422,325    (260,457)  $120,931    642,286 
Other Expense, net                  (32,213)          
Income Taxes                  -           
Unallocated Assets                            5,938,286 
Net Loss                 $(292,670)          
Total Assets                           $6,580,572 

 

For the nine months ended September 30, 2018

 

   Sales   COGS   Gross profit   Loss from operations   Depreciation and amortization   Assets 
Healthcare Knit Goods Series  $210,259   $70,480   $139,779   $(133,796)  $47,954   $131,356 
Daily Healthcare and Personal Care Series   428,935    186,541    242,394    (315,706)   97,828    253,988 
Wellness House and Activated Water Machine Series   838,191    393,526    444,665    (645,929)   191,167    158,548 
Segment Totals  $1,477,385   $650,547   $826,838    (1,095,431)  $336,949    543,892 
Other Expenses, net                  (16,930)          
Income Tax                  -           
Unallocated Assets                            4,601,678 
Net Loss                 $(1,112,361)          
Total Assets                           $5,145,570 

 

For the nine months ended September 30, 2017

 

   Sales   COGS   Gross profit   Loss from operations   Depreciation and amortization   Assets 
Healthcare Knit Goods Series  $600,136   $156,481   $443,655   $(31,817)  $79,012   $165,363 
Daily Healthcare and Personal Care Series   726,099    206,892    519,207    (56,071)   95,595    216,318 
Wellness House and Activated Water Machine Series   1,282,511    555,387    727,124    (288,988)   168,850    260,605 
Segment Totals  $2,608,746   $918,760   $1,689,986    (376,876)  $343,457    642,286 
Other Expense, net                  (95,184)          
Income Benefits                  (32)          
Unallocated Assets                            5,938,286 
Net Loss                 $(472,028)          
Total Assets                           $6,580,572 

 

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.10.0.1
Franchise Revenues
9 Months Ended
Sep. 30, 2018
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,
 
   2018   2017   2018   2017 
                 
Sales to franchise customers  $292,306   $585,722   $1,038,238   $1,901,033 
Sales to non-franchise customers   98,159    149,216    439,147    707,713 
                     
Total sales  $390,465   $734,938   $1,477,385   $2,608,746 
XML 28 R17.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2018
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, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2018. 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, 2017 which was filed on April 2, 2018.

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,
 
   2018   2017   2017 
Period ended RMB: USD Exchange rate   6.86654    6.8063    6.50739 
Average RMB: USD Exchange rate   6.51368    6.6545    6.75783 

 

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 income (loss) in the consolidated financial statements and totaled $(188,893) and $113,690 for the three months ended September 30, 2018 and 2017, respectively, and $(260,924) and $270,407 for the nine months ended September 30, 2018 and 2017, 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, 2018 and December 31, 2017, the Company allowance $1,316 and $0 for doubtful accounts, 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, 2018 and December 31, 2017, the Company recorded $62,153 and $65,584 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 $33,895 and $95,521 as of September 30, 2018 and December 31, 2017, 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, 2018 and 2017.

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 $25,410 and $42,283 for the three months ended September 30, 2018 and 2017, respectively, and $93,698 and $110,116 for the nine months ended September 30, 2018 and 2017, 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 month periods ended September 30, 2018 and 2017.

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, 2018 and the year ended December 31, 2017, 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 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

        

In June 2018, the FASB issued ASU 2018-07, “Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” which simplifies the accounting for share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments to nonemployees with the requirements for share-based payments granted to employees. ASU 2018-07 becomes effective for the Company on January 1, 2019. Early adoption is permitted. The adoption of this accounting pronouncement is not expected to have an impact on the Company’s consolidated financial statements. 

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have 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. The Company does not expect the impact on its consolidated financial statements to be material.

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.10.0.1
Organization (Tables)
9 Months Ended
Sep. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Summary of 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

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies (Tables)
9 Months Ended
Sep. 30, 2018
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,
 
   2018   2017   2017 
Period ended RMB: USD Exchange rate   6.86654    6.8063    6.50739 
Average RMB: USD Exchange rate   6.51368    6.6545    6.75783 

Summary of estimated useful lives of 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 v3.10.0.1
Accounts Receivable (Tables)
9 Months Ended
Sep. 30, 2018
Receivables [Abstract]  
Summary of accounts receivable

   September 30,   December 31, 
   2018   2017 
Accounts receivable  $2,632   $2,777 
Less: allowance for bad debt   (1,316)   - 
   $1,316   $2,777 
XML 32 R21.htm IDEA: XBRL DOCUMENT v3.10.0.1
Inventories (Tables)
9 Months Ended
Sep. 30, 2018
Inventory Disclosure [Abstract]  
Summary of inventories

   September 30,   December 31, 
   2018   2017 
Raw materials  $149,093   $219,357 
Finished goods   425,193    425,314 
Low value consumables   37,112    39,160 
Total   611,398    683,831 
Less: impairment loss   (62,153)   (65,584)
Inventory, net  $549,245   $618,247 
XML 33 R22.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property, Plant and Equipment (Tables)
9 Months Ended
Sep. 30, 2018
Property, Plant and Equipment [Abstract]  
Summary of property, plant and equipment

   September 30,   December 31, 
   2018   2017 
Building  $5,798,654   $6,118,687 
Operating Equipment   337,152    372,368 
Office furniture and equipment   343,432    360,601 
Vehicles   1,021,911    1,116,010 
Total   7,501,149    7,967,666 
Less: accumulated depreciation   (3,639,019)   (3,568,834)
Property, plant and equipment, net  $3,862,130   $4,398,832 
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.10.0.1
Intangible Assets (Tables)
9 Months Ended
Sep. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Summary of intangible assets

   September 30,   December 31, 
   2018   2017 
Land use rights  $601,185   $634,365 
Other intangible assets   76,919    81,164 
Total   678,104    715,529 
Less: accumulated amortization   (198,937)   (194,235)
Intangible assets, net  $479,167   $521,294 
Summary of estimated amortization expense

Estimated amortization expense for
the year ending December 31,

   Amount 
2018  $22,240 
2019  $22,240 
2020  $22,240 
2021  $22,240 
2022  $22,240 
Thereafter  $410,094 
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.10.0.1
Related Party Transactions (Tables)
9 Months Ended
Sep. 30, 2018
Related Party Transactions [Abstract]  
Summary of payables due to related parties

   September 30,   December 31, 
   2018   2017 
Shenyang Joway Industrial Development Co., Ltd.  $2,121   $2,239 
Jinghe Zhang   346,332    126,799 
Total  $348,453   $129,038 
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.10.0.1
Income Taxes (Tables)
9 Months Ended
Sep. 30, 2018
Income Tax Disclosure [Abstract]  
Summary of differences between the PRC statutory federal rate and effective tax rate

   For the nine months ended
September 30,
 
   2018   2017 
Tax computed at China statutory rates   25%   25%
Effect of losses   (25)%   (25)%
Effective rate   0%   0%

XML 37 R26.htm IDEA: XBRL DOCUMENT v3.10.0.1
Segments (Tables)
9 Months Ended
Sep. 30, 2018
Segment Reporting [Abstract]  
Summary of segment reporting

For the three months ended September 30, 2018

 

   Sales   COGS   Gross profit   Loss from operations   Depreciation and amortization   Assets 
Healthcare Knit Goods Series  $56,159   $15,306   $40,853   $(36,571)  $16,502   $131,356 
Daily Healthcare and Personal Care Series   130,115    53,697    76,418    (101,319)   38,234    253,988 
Wellness House and Activated Water Machine Series   204,191    94,190    110,001    (173,586)   60,001    158,548 
Segment Totals  $390,465   $163,193   $227,272    (311,476)  $114,737    543,892 
Other Income, net                  1,166           
Income Tax                 -           
Unallocated Assets                            4,601,678 
Net Loss                 $(310,310)          
Total Assets                           $5,145,570 

  

For the three months ended September 30, 2017

 

   Sales   COGS   Gross profit   Loss from operations   Depreciation and amortization   Assets 
Healthcare Knit Goods Series  $162,297   $55,115   $107,182   $(44,882)  $26,705   $165,363 
Daily Healthcare and Personal Care Series   225,437    82,004    143,433    (62,034)   37,095    216,318 
Wellness House and Activated Water Machine Series   347,204    175,494    171,710    (153,541)   57,131    260,605 
Segment Totals  $734,938   $312,613   $422,325    (260,457)  $120,931    642,286 
Other Expense, net                  (32,213)          
Income Taxes                  -           
Unallocated Assets                            5,938,286 
Net Loss                 $(292,670)          
Total Assets                           $6,580,572 

 

For the nine months ended September 30, 2018

 

   Sales   COGS   Gross profit   Loss from operations   Depreciation and amortization   Assets 
Healthcare Knit Goods Series  $210,259   $70,480   $139,779   $(133,796)  $47,954   $131,356 
Daily Healthcare and Personal Care Series   428,935    186,541    242,394    (315,706)   97,828    253,988 
Wellness House and Activated Water Machine Series   838,191    393,526    444,665    (645,929)   191,167    158,548 
Segment Totals  $1,477,385   $650,547   $826,838    (1,095,431)  $336,949    543,892 
Other Expenses, net                  (16,930)          
Income Tax                  -           
Unallocated Assets                            4,601,678 
Net Loss                 $(1,112,361)          
Total Assets                           $5,145,570 

 

For the nine months ended September 30, 2017

 

   Sales   COGS   Gross profit   Loss from operations   Depreciation and amortization   Assets 
Healthcare Knit Goods Series  $600,136   $156,481   $443,655   $(31,817)  $79,012   $165,363 
Daily Healthcare and Personal Care Series   726,099    206,892    519,207    (56,071)   95,595    216,318 
Wellness House and Activated Water Machine Series   1,282,511    555,387    727,124    (288,988)   168,850    260,605 
Segment Totals  $2,608,746   $918,760   $1,689,986    (376,876)  $343,457    642,286 
Other Expense, net                  (95,184)          
Income Benefits                  (32)          
Unallocated Assets                            5,938,286 
Net Loss                 $(472,028)          
Total Assets                           $6,580,572 
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.10.0.1
Franchise Revenues (Tables)
9 Months Ended
Sep. 30, 2018
Franchise Revenues [Abstract]  
Summary of revenue between franchise and non-franchise customers

   For the three months ended
September 30,
   For the nine months ended
September 30,
 
   2018   2017   2018   2017 
                 
Sales to franchise customers  $292,306   $585,722   $1,038,238   $1,901,033 
Sales to non-franchise customers   98,159    149,216    439,147    707,713 
                     
Total sales  $390,465   $734,938   $1,477,385   $2,608,746 
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.10.0.1
Organization (Details) - USD ($)
9 Months Ended
Sep. 30, 2018
Dec. 31, 2017
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 $ 200  
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 $ 7,216,141  
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 $ 142,073  
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 $ 292,368  
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  
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 v3.10.0.1
Organization (Details Textual) - $ / shares
1 Months Ended 9 Months Ended
Jul. 20, 2010
Sep. 30, 2018
Nov. 13, 2016
Sep. 21, 2010
Jul. 28, 2010
Jul. 25, 2010
Jul. 09, 2010
May 17, 2007
Organization (Textual)                
Percentage of shares acquired by Dynamic Elite International Limited from Joway Health       76.08%        
Jingshe Zhang [Member]                
Organization (Textual)                
Ownership percentage     85.90%          
Common stock shares     17,233,920          
Joway Shengshi To CGL [Member]                
Organization (Textual)                
Percentage of right to purchase of shares 100.00%              
Call Option expiration term under VIE Agreements 5 years              
Options exercise price per share $ 2.00              
CGL [Member]                
Organization (Textual)                
Call option, description   <p style="margin: 0pt">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.</p>            
CGL [Member] | Jingshe Zhang [Member]                
Organization (Textual)                
Percentage of right to purchase of shares     99.00%          
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 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%  
Tianjin Joway Shengshi Group Co., Ltd. [Member]                
Organization (Textual)                
Ownership percentage               99.00%
Business acquisition percentage of remaining voting interests acquired               1.00%
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies (Details)
Sep. 30, 2018
Dec. 31, 2017
Sep. 30, 2017
Period ended RMB: USD Exchange rate [Member]      
Summary of gains and losses from foreign currency transactions      
Gains and losses from foreign currency transactions 6.86654 6.50739 6.8063
Average RMB: USD Exchange rate [Member]      
Summary of gains and losses from foreign currency transactions      
Gains and losses from foreign currency transactions 6.51368 6.75783 6.6545
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies (Details 1)
9 Months Ended
Sep. 30, 2018
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 v3.10.0.1
Summary of Significant Accounting Policies (Details Textual)
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2018
USD ($)
Sep. 30, 2017
USD ($)
Sep. 30, 2018
USD ($)
Segment
Sep. 30, 2017
USD ($)
Dec. 31, 2017
USD ($)
Segment
Summary of Significant Accounting Policies (Textual)          
Foreign currency translation adjustments $ (188,893) $ 113,690 $ (260,924) $ 270,407  
Valuation allowance for inventories 62,153   62,153   $ 65,584
Allowance for doubtful accounts 1,316   1,316   0
Advances to suppliers 33,895   $ 33,895   $ 95,521
Land use rights granted to amortized using the straight-line method over     50 years    
Other intangible assets are software programs that are amortized over estimated useful life     10 years    
Wellness House construction period     5 days    
Shipping costs included in selling expenses 163,193 312,613 $ 650,547 918,760  
Income tax examination, likelihood upon ultimate settlement, description     The largest amount of benefit that is greater than 50% likelihood of being realized upon ultimate settlement.    
Number of reportable business segments | Segment     3   3
Shipping Costs [Member]          
Summary of Significant Accounting Policies (Textual)          
Shipping costs included in selling expenses $ 25,410 $ 42,283 $ 93,698 $ 110,116  
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.10.0.1
Accounts Receivable (Details) - USD ($)
Sep. 30, 2018
Dec. 31, 2017
Receivables [Abstract]    
Accounts receivable $ 2,632 $ 2,777
Less: allowance for bad debt (1,316)
Accounts receivable, total $ 1,316 $ 2,777
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.10.0.1
Accounts Receivable (Details Textual) - USD ($)
Sep. 30, 2018
Dec. 31, 2017
Accounts Receivable (Textual)    
Allowance for doubtful accounts $ 1,316 $ 0
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.10.0.1
Inventories (Details) - USD ($)
Sep. 30, 2018
Dec. 31, 2017
Summary of inventories    
Raw materials $ 149,093 $ 219,357
Finished goods 425,193 425,314
Low value consumables 37,112 39,160
Total 611,398 683,831
Less: impairment loss (62,153) (65,584)
Inventory, net $ 549,245 $ 618,247
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.10.0.1
Inventories (Details Textual) - USD ($)
9 Months Ended 12 Months Ended
Sep. 30, 2018
Dec. 31, 2017
Inventories (Textual)    
Impairment loss from inventory $ 62,153 $ 65,584
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property, Plant and Equipment (Details) - USD ($)
Sep. 30, 2018
Dec. 31, 2017
Summary of property, plant and equipment    
Total $ 7,501,149 $ 7,967,666
Less: accumulated depreciation (3,639,019) (3,568,834)
Property, plant and equipment, net 3,862,130 4,398,832
Building [Member]    
Summary of property, plant and equipment    
Total 5,798,654 6,118,687
Operating Equipment [Member]    
Summary of property, plant and equipment    
Total 337,152 372,368
Office furniture and equipment [Member]    
Summary of property, plant and equipment    
Total 343,432 360,601
Vehicles [Member]    
Summary of property, plant and equipment    
Total $ 1,021,911 $ 1,116,010
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property, Plant and Equipment (Details Textual) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Property, Plant and Equipment (Textual)        
Depreciation expense $ 109,826 $ 115,282 $ 321,283 $ 326,896
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.10.0.1
Intangible Assets (Details) - USD ($)
Sep. 30, 2018
Dec. 31, 2017
Summary of intangible assets    
Land use rights $ 601,185 $ 634,365
Other intangible assets 76,919 81,164
Total 678,104 715,529
Less: accumulated amortization (198,937) (194,235)
Intangible assets, net $ 479,167 $ 521,294
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.10.0.1
Intangible Assets (Details 1)
Sep. 30, 2018
USD ($)
Estimated amortization expense for the year ending December 31,  
2018 $ 22,240
2019 22,240
2020 22,240
2021 22,240
2022 22,240
Thereafter $ 410,094
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.10.0.1
Intangible Assets (Details Textual) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Intangible Assets (Textual)        
Amortization expense of intangible assets $ 4,911 $ 5,631 $ 15,666 $ 16,561
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.10.0.1
Related Party Transactions (Details) - USD ($)
Sep. 30, 2018
Dec. 31, 2017
Summary of payables due to related parties    
Total $ 348,453 $ 129,038
Shenyang Joway Industrial Development Co., Ltd. [Member]    
Summary of payables due to related parties    
Total 2,121 2,239
Jinghe Zhang [Member]    
Summary of payables due to related parties    
Total $ 346,332 $ 126,799
XML 54 R43.htm IDEA: XBRL DOCUMENT v3.10.0.1
Related Party Transactions (Details Textual) - USD ($)
1 Months Ended 9 Months Ended
Dec. 31, 2010
Sep. 30, 2018
Sep. 30, 2017
Related Party Transactions (Textual)      
Repayments of related party advances   $ 219,415 $ (2,707)
Shenyang Joway      
Related Party Transactions (Textual)      
Ownership percentage, description   More than 50% of the equity.  
Advanced an aggregate amount $ 791,701 $ 4,736,754  
Repayments of related party advances $ 789,512 0 0
Exchange rate fluctuation   118  
Total unpaid principal balance   2,121  
Jinghe Zhang [Member]      
Related Party Transactions (Textual)      
Advanced an aggregate amount   4,481,557  
Repayments of related party advances   4,481,557  
Total unpaid principal balance   346,332  
Received cash advances in the aggregate principal amount   4,390,422  
Joway Shengshi [Member]      
Related Party Transactions (Textual)      
Repayments of related party advances   $ 219,533 $ 2,707
XML 55 R44.htm IDEA: XBRL DOCUMENT v3.10.0.1
Income Taxes (Details)
9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Summary of differences between the PRC statutory federal rate and 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 56 R45.htm IDEA: XBRL DOCUMENT v3.10.0.1
Income Taxes (Details Textual)
1 Months Ended 9 Months Ended
Jan. 31, 2008
Sep. 30, 2018
Sep. 30, 2017
Income Taxes (Textual)      
Statutory rate   25.00% 25.00%
Enterprise Income Tax [Member]      
Income Taxes (Textual)      
Statutory rate 25.00%    
XML 57 R46.htm IDEA: XBRL DOCUMENT v3.10.0.1
Statutory Reserves (Details) - USD ($)
Sep. 30, 2018
Dec. 31, 2017
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 58 R47.htm IDEA: XBRL DOCUMENT v3.10.0.1
Segments (Details) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Dec. 31, 2017
Reportable business segments          
Sales $ 390,465 $ 734,938 $ 1,477,385 $ 2,608,746  
COGS 163,193 312,613 650,547 918,760  
Gross profit 227,272 422,325 826,838 1,689,986  
Loss from operations (311,476) (260,457) (1,095,431) (376,876)  
Depreciation and amortization 114,737 120,931 336,949 343,457  
Assets   642,286   642,286  
Other Income (Expense), net 1,166 (32,213) (16,930) (95,184)  
Income Tax (Benefits) (32)  
Unallocated Assets 4,601,678 5,938,286 4,601,678 5,938,286  
Net Loss (310,310) (292,670) (1,112,361) (472,028)  
Total Assets 5,145,570 6,580,572 5,145,570 6,580,572 $ 6,299,130
Healthcare Knit Goods Series [Member]          
Reportable business segments          
Sales 56,159 162,297 210,259 600,136  
COGS 15,306 55,115 70,480 156,481  
Gross profit 40,853 107,182 139,779 443,655  
Loss from operations (36,571) (44,882) (133,796) (31,817)  
Depreciation and amortization 16,502 26,705 47,954 79,012  
Assets 131,356 165,363 131,356 165,363  
Daily Healthcare and Personal Care Series [Member]          
Reportable business segments          
Sales 130,115 225,437 428,935 726,099  
COGS 53,697 82,004 186,541 206,892  
Gross profit 76,418 143,433 242,394 519,207  
Loss from operations (101,319) (62,034) (315,706) (56,071)  
Depreciation and amortization 38,234 37,095 97,828 95,595  
Assets 253,988 216,318 253,988 216,318  
Wellness House and Activated Water Machine Series [Member]          
Reportable business segments          
Sales 204,191 347,204 838,191 1,282,511  
COGS 94,190 175,494 393,526 555,387  
Gross profit 110,001 171,710 444,665 727,124  
Loss from operations (173,586) (153,541) (645,929) (288,988)  
Depreciation and amortization 60,001 57,131 191,167 168,850  
Assets $ 158,548 $ 260,605 $ 158,548 $ 260,605  
XML 59 R48.htm IDEA: XBRL DOCUMENT v3.10.0.1
Segments (Details Textual) - Segment
9 Months Ended 12 Months Ended
Sep. 30, 2018
Dec. 31, 2017
Segments (Textual)    
Number of reportable business segments 3 3
XML 60 R49.htm IDEA: XBRL DOCUMENT v3.10.0.1
Franchise Revenues (Details) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Schedule of franchise and non-franchise customers        
Total sales $ 390,465 $ 734,938 $ 1,477,385 $ 2,608,746
Sales to franchise customers [Member]        
Schedule of franchise and non-franchise customers        
Total sales 292,306 585,722 1,038,238 1,901,033
Sales to non-franchise customers [Member]        
Schedule of franchise and non-franchise customers        
Total sales $ 98,159 $ 149,216 $ 439,147 $ 707,713
XML 61 R50.htm IDEA: XBRL DOCUMENT v3.10.0.1
Franchise Revenues (Details Textual)
9 Months Ended
Sep. 30, 2018
Franchise Revenues (Textual)  
Franchising agreements, description <p style="margin: 0pt"><font style="font: 10pt Times New Roman, Times, Serif">The franchising agreements are generally for terms of three years and are renewable at the mutual agreement of both parties.</font></p>
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