CORRESP 1 filename1.htm

  

 

JRSIS HEALTH CARE CORPORATION

   

 

August 29, 2014

  

VIA ELECTRONIC MAIL

United States Securities and Exchange Commission

Division of Corporation Finance

100 F Street, NE

Washington, D.C. 20549

 

Attention: Franklin Wyman

Joel Parker

Christina De Rosa

John Krug

Jeffrey P. Riedler, Assistant Director

 

Re: JRSIS Health Care Corporation

Registration Statement on Form S-1

Filed March 6, 2014

File No. 333-194359

 

Ladies and Gentlemen,

 

JRSIS Health Care Corporation (the “Company” or “JRSIS”), hereby furnishes response letter below in italics you will find copies of the Staff’s comments from its letter dated August 19, 2014 (the “Comment Letter”), and information and page references to locations within the Amendment where responsive disclosure can be found.

 

Comment Letter Dated August 19, 2014

 

Consolidated Financial Statements

General

 

1.Please refer to prior comments 3 and 4. Please disclose the following information:

  

·Your compliance with the Company Law of People’s Republic of China and all other “requirements imposed by PRC authorities.”

 

Response:

In response to the Staff’s comments. Up to completion of our legal structures, we compliance with the Company Law of People’s Republic of China and all other requirements imposed by PRC authorities. It is revised within the Prospectus Summary on pages F-7, F-19, F-23 and F-38.

 

·All terms governing the $5.5 million obligation as modified, such as the fact you are not required to pay interest on this obligation.

 

Response:

 

 
 

  

 

JRSIS HEALTH CARE CORPORATION

   

  

In response to the Staff’s comments. According to the amendment of Article of Association (Exhibit 10.5 Agreement on Modification to Contract and Articles of Association), Runteng has the obligation to pay $5,555,556 (35m RMB) within five years after the issuance of the joint venture business license. However, no interest is required to be paid. It is revised within the Prospectus Summary on pages F-7, F-19, F-23 and F-38.

 

·Your planned use of proceeds from the planned IPO and future dividend payouts from Jiarun to fulfill the $5.5 million obligation, as described on pages 5 and 6 of your response.

 

Response:

In response to the Staff’s comments. As described on pages 5 and 6 of prior response is revised within the Prospectus Summary on pages F-7 and F-23.

 

 

2.Please refer to prior comment 5. Please explain how your designation of JHCC as the “acquirer for accounting purposes” is relevant to guidance in ASC 805-50 “Transactions Between Entities Under Common Control.” Revise your disclosures accordingly.

 

Response:

In response to the Staff’s comments. We have deleted “As such, we believe that the acquirer for accounting purposes is the JHCC.” on pages F-8, F-19, F-25 and F-39.

  

 

Consolidated Statements of Shareholders’ Equity, page F-5

 

3.Please refer to prior comment 8. Please explain your basis for determining the amounts in the columns, Retained Earnings, Other Comprehensive Income, and Non-Controlling Interest for each period presented. In addition, provide the following explanations.

 

·The nature of the retained earnings at December 31, 2012, which shows a balance of $1,599,398. It would appear that the vast majority of the retained earnings would be allocated to the non-controlling interest at this time.

 

·The nature of the non-controlling interest at December 31, 2011, which shows a negative balance of $124,793.

 

·Why did net income attributable to non-controlling interests change for both periods from the prior amendment. In addition, explain your basis for allocating net income of $801,566 to the controlling interest for 2012, when the transaction occurred on December 23, 2012.

 

Response:

In response to the Staff’s comments. It is revised within the Prospectus Summary on pages 13, 14, 33, F-3, F-4, F-5, F-8, F-19, F-21, 61 and 62.

 

According to ASC805-50-45-2: The financial statements of the receiving entity shall report results of operations for the period in which the transfer occurs as though the transfer of net assets or exchange of equity interests had

  

 
 

  

 

JRSIS HEALTH CARE CORPORATION

   

 

previously separate entities combined from the beginning of the period to the date the transfer is completed and those of the combined operations from that date to the end of the period. By eliminating the effects of intra-entity transactions in determining the results of operations for the period before the combination, those results will be on substantially the same basis as the results of operations for the period after the date of combination. The effects of intra-entity transactions on current assets, current liabilities, revenue, and cost of sales for periods presented and on retained earnings at the beginning of the periods presented shall be eliminated to the extent possible.

 

According to ASC805-50-45-5: Financial statements and financial information presented for prior years also shall be retrospectively adjusted to furnish comparative information. All adjusted financial statements and financial summaries shall indicate clearly that financial data of previously separate entities are combined. However, the comparative information in prior years shall only be adjusted for periods during which the entities were under common control.

 

In our case, JHCC acquires a 70% interest in the common stock of Jiarun Hospital. JHCC did not previously own any of Jiarun Hospital’s common stock. After JHCC’s acquisition of a 70% interest in the common stock of Jiarun Hospital (which is accounted for as a business combination), there remains a 30% non-controlling interest for Junsheng Zhang was presented in JHCC’s consolidated financial statements.

 

However, on June 01, 2013, Junsheng Zhang, the owner of Jiarun Hospital, entered into a supplemental agreement with Runteng for the attribution of accumulated retained earnings of Jiarun. In which, the retained earnings of Jiarun will be 100% attributed to Junsheng Zhang up to June 30, 2013. From July 1, 2013, the net income of operations from Jiarun will be attributed to Runteng and Junsheng Zhang for 70% and 30% respectively.

 

Financial statements is revised as follows:

 

 

PAGE F-5

 

JRSIS HEALTH CARE CORPORATION

CONSOLIDATED STATEMENT OF SHARESHOLDERS’ EQUITY

(AMOUNTS IN USD, EXCEPT SHARES

 

   Common stock   Retained   Other
comprehensive		   Additional paid-in   Non-
Controlling		   Total
Shareholders’		 
   Quantity   Amount   Earnings   income   capital   Interest   equity 
Balance at December 31, 2011   -    -    -    -    -   $772,899   $772,899 
                                    
Distribution to non-controlling interest   -    -    -    -    -    (1,049,077)   (1,049,077)
Net income   -    -    -    -    -    1,145,094    1,145,094 

   

 
 

  

 

JRSIS HEALTH CARE CORPORATION

   

  

Foreign currency translation adjustment   -    -    -    -    -    138,998    138,998 
                                    
Balance at December 31, 2012   -    -    -    -    -   $1,007,914   $1,007,914 
                                    
Net income   -    -    399,977    -    -    922,715    1,322,692 
Distribution to non-controlling interest   -    -    -    -    -    -    - 
Paid-in capital   -    -    -    -    -    702,508    702,508 
Stock Exchange Merger & Acquisition   12,000,000    12,000    -    -    38,000    -    50,000 
Foreign currency translation adjustment   -    -    -    23,859    -    37,927    61,786 
                                    
Balance at December 31, 2013   12,000,000   $12,000   $399,977   $23,859   $38,000   $2,671,064   $3,144,900 

 

 

PAGE 13, F-3, F-20, 61

 

JRSIS HEALTH CARE CORPORATION

CONSOLIDATED BALANCE SHEETS

 

   June 30,
2014
(Unaudited)		   March 31,
2014
(Unaudited)		   December 
31, 2013		   December 
31, 2012		 
Assets                    
Current Assets:                    
Cash and cash equivalents  $1,075,082   $184,163   $631,288   $200,475 
Accounts receivable, net   449,870    406,475    271,427    206,165 
Inventories   92,369    96,559    98,300    60,455 
Other receivables   2,842    7,867    2,699    2,137 
Prepayments   860,286    585,621    61,572    54,059 
Advance to related parties   94,742    136,059    180,930    - 
Amounts due from shareholders   -    903,978    -    - 
Deposits for capital leases - current portion   -    19,142    19,300    19,501 
Total current assets   2,575,191    2,339,864    1,265,516    542,792 
                     
Construction in progress   15,578,995    15,399,841    15,346,873    - 
Property and equipment, net   1,702,323    1,633,558    1,416,732    1,053,280 
Deposits for capital leases   487,195    486,665    490,677    18,682 
Total assets  $20,343,704   $19,859,928   $18,519,798   $1,614,754 

  

 
 

  

 

JRSIS HEALTH CARE CORPORATION

   

  

Liabilities and shareholders’ equity                    
Current Liabilities:                    
Accounts payable  $114,636   $103,355   $84,469   $45,435 
Deposits received   6,701    13,188    9,208    5,969 
Due to related parties   4,816    70,261    -    301,324 
Other payable   18,597    18,398    18,569    168 
Payroll payable   29,463    26,806    26,975    44,455 
Capital lease obligations - current portion   971,927    749,698    211,459    135,365 
Total current liabilities   1,146,140    981,706    350,680    532,716 
Capital lease obligations   14,598,853    14,582,985    15,024,218    74,124 
Total liabilities  $15,744,993   $15,564,691   $15,374,898   $606,840 
                     
Shareholders’ equity                    
Common stock; $0.001 par value, 100,000,000 shares authorized ; 13,589,000 and 12,000,000 issued and outstanding at March 31,2014 and December 31,2013, respectively   13,589    13,589    12,000    - 
Additional paid-in capital   946,114    946,114    38,000    - 
Retained earnings   772,450    568,417    399,977    - 
Other comprehensive income   8,149    5,184    23,859    - 
Total shareholders’ equity of the Company   1,740,302    1,533,304    473,836    - 
Non-controlling interest   2,858,409    2,761,933    2,671,064    1,007,914 
Total shareholders’ equity   4,598,711    4,295,237    3,144,900    1,007,914 
Total liabilities and shareholders’ equity  $20,343,704   $19,859,928   $18,519,798   $1,614,754 

 

 

PAGE 14, 33, F-6, F-21, 62

 

JRSIS HEALTH CARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME  

 

   For the Three Months Ended
March 31,		   For the Years Ended
December 31,		 
   2014
(Unaudited)		   2013
(Unaudited)		   2013   2012 
Revenue:                    
Medicine  $782,442   $505,175   $2,084,492   $1,767,902 
Patient services   747,148    525,408    2,266,744    1,713,198 
Total revenue   1,529,590    1,030,583    4,351,236    3,481,100 
Operating costs and expenses:                    
Cost of medicine sold   464,415    300,195    1,247,915    1,029,180 
Medical consumables   97,518    64,590    307,493    192,502 

   

 
 

  

 

JRSIS HEALTH CARE CORPORATION

   

   

Salaries and benefits   261,300    193,949    890,780    692,620 
Office supplies   19,562    15,430    65,472    75,482 
Vehicle expenses   13,348    11,671    60,353    42,335 
Utilities expenses   24,118    23,612    67,474    49,124 
Rentals and leases   42,321    40,567    165,667    132,915 
Advertising and promotion expenses   1,942    -    5,344    13,103 
Interest expense   250,834    3,210    12,765    14,200 
Professional fee   62,746    44,010    93,776    - 
Depreciation   32,819    26,818    116,378    92,294 
Total operating costs and expenses   1,270,923    724,052    3,033,417    2,333,755 
Earnings from operations before other income and income taxes   258,667    306,531    1,317,819    1,147,345 
Other income   9,968    41    6,857    (264)
Earnings from operations before income taxes   268,635    306,572    1,324,676    1,147,081 
Income tax   781    580    1,984    1,987 
Net income   267,854    305,992    1,322,692    1,145,094 
Less: net income attributable to non-controlling interests   99,414    305,992    922,715    1,145,094 
Net income attributable to the Company  $168,440   $-   $399,977   $- 
                     
Comprehensive income:                    
Foreign currency translation adjustment                    
Foreign currency translation adjustment attributable to non-controlling interests   (8,545)   5,108    37,927    138,998 
Foreign currency translation adjustment attributable to the Company   (18,675)   -    23,859    - 
                     
Comprehensive income  $240,634   $311,100   $1,384,478   $1,284,092 
Less: Comprehensive income attributable to non-controlling interests  $90,869   $311,100   $960,642   $1,284,092 
Comprehensive income attributable to the Company   149,765    -    423,836    - 
Basic and diluted earnings per share  $0. 0128   $-   $0. 2897   $- 
Weighted average number of shares outstanding   13,200,578    -    1,380,822    - 

   

 

   Three Months Ended
June 30,		    Six Months Ended
June 30,		 
    2014    2013    2014    2013 
Revenue:                    
Medicine  $766,939   $529,331   $1,549,381   $1,034,506 
Patient services   769,845    546,278    1,516,993    1,071,686 

  

 
 

  

 

JRSIS HEALTH CARE CORPORATION

   

  

Total revenue   1,536,784    1,075,609    3,066,374    2,106,192 
Operating costs and expenses:                    
Cost of medicine sold   439,214    320,205    903,629    620,400 
Medical consumables   118,122    68,067    215,640    132,657 
Salaries and benefits   283,835    209,114    545,135    403,063 
Office supplies   30,709    19,666    50,271    35,096 
Vehicle expenses   7,224    11,988    20,572    23,659 
Utilities expenses   14,252    13,529    38,370    37,141 
Rentals and leases   41,852    41,193    84,173    81,760 
Advertising and promotion expenses   593    1,067    2,535    1,067 
Interest expense   248,295    3,666    499,129    6,876 
Professional fee   16,956    2,473    79,702    46,483 
Depreciation   37,672    26,687    70,491    53,505 
Total operating costs and expenses   1,238,724    717,655    2,509,647    1,441,707 
Earnings from operations before other income and income taxes   298,060    357,954    556,727    664,485 
Other income   1,791    258    11,759    299 
Earnings from operations before income taxes   299,851    358,212    568,486    664,784 
Income tax   665    418    1,446    998 
Net income   299,186    357,794    567,040    663,786 
Less: net income attributable to non-controlling interests   95,153    357,794    194,567    663,786 
Net income attributable to the Company  $204,033   $-   $372,473   $- 
                     
Comprehensive income:   　    　    　    　 
Foreign currency translation adjustment attributable to non-controlling interests   1,323    22,573    (7,222)   27,681 
Foreign currency translation adjustment attributable to the Company   2,965    -　    (15,710)   -　 
                     
Comprehensive income  $303,474   $380,367   $544,108   $691,467 
Less: Comprehensive income attributable to non-controlling interests   96,476   $380,367    187,345    691,467 
                     
Comprehensive income attributable to the Company  $206,998   $-   $356,763   $- 
Basic and diluted earnings per share  $0.0150   $-   $0.0278   $- 
Weighted average number of shares outstanding   13,589,000    -    13,394,789    - 

 

·The basis for computing the $1,049,077 distribution to the non-controlling interest in 2012, for which you have not provided disclosure comparable to the

$1,639,185 distribution in 2013.

·As previously requested, explain why you believe the $1,639,185 of non- controlling interest should be recorded as paid in capital and cite the authoritative accounting literature used to reach your conclusion.

 

Response:

In response to the Staff’s comments. It is revised within the Prospectus Summary on pages F-5, F-6

 

 
 

  

 

JRSIS HEALTH CARE CORPORATION

   

 

According to US GAAP Balance Sheet concepts: Contributed capital or paid-in Capital is the amount of equity invested in a corporation by its owners. It consists of capital stock and additional paid-in capital. Contributed capital arises from the issuance of common and preferred stock to investors, from transactions by the corporation in its own stock (for example, treasury stock, stock dividends, conversion of convertible bonds) from the donation of assets or services.

 

According to definition of paid-in capital, which is the payments received from investors in exchange for an entity's stock. This stock can be either common stock or preferred stock. These funds only come from the sale of stock directly to investors by the issuer; it is not derived from the sale of stock on the secondary market between investors (http://www.accountingtools.com/questions-and-answers/what-is-paid-in-capital.html). Paid in capital is only comprised of funds received from the sale of stock; it does not include proceeds from ongoing company operations, which means the paid-in capital does not include retained earnings from the company operations.

 

According to State Administration for Industry & Commerce of the People’s Republic of China Document No.11: Administration of Registration of Company Registered Capital Provisions:

Article 15 The capital verification certificate for a change in registered capital shall specify the following particulars:

5. The details of the actual payment of the increase in registered capital. If the capital contribution is made in the form of currency, the amount of capital contribution of the shareholders or promoters, the time of capital contribution, the bank at which the account is opened, the temporary account and account number shall be specified. If the capital contribution is made in the form of physical objects, industrial property rights, non-patented technology or leaseholds, the details of the shareholders' handling of procedures for transfer of property rights, and of the appraisal shall be specified. If an increase in registered capital is resulted from a conversion of capital reserve, surplus reserve or undistributed profits, the amount converted for the increase, the base date on which company effected the conversion, the adjustments to the financial statements, the actual details of the relevant items on the financial statements before and after the conversion for the increase, and the amount of capital contribution of the shareholders after the conversion for the increase shall be specified (http://www.saic.gov.cn/zwgk/zyfb/zjl/xxzx/200907/t20090703_67860.html).

 

From Chinese regulation, we can conclude that retained earnings can be recorded to paid-in capital, in contrast, USGAAP has no literature can be used for reach retained earnings contribute to paid-in capital. Therefore, we have revised as follows:

    

Non-Controlling Interest
   Before adjustment   Adjustment   After adjustment 
             
Balance at December 31, 2012  $1,007,914    -   $1,007,914 
　   　    　    　 
Net income   922,715    　    922,715 

  

 
 

  

 

JRSIS HEALTH CARE CORPORATION

   

 

 

Distribution to non-controlling interest   (1,639,185)   1,639,185    - 
Paid-in capital   2,341,693    (1,639,185)   702,508 
Stock Exchange Merger & Acquisition   -    -    - 
Foreign currency translation adjustment   37,927    -    37,927 
                
Balance at December 31, 2013  $2,671,064   $-    2,671,064 

 

 

PAGE 34, F-6

JRSIS HEALTH CARE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(AMOUNTS IN USD, EXCEPT SHARES)

 

   For The Years Ended
December 31,		 
   2013   2012 
Cash Flows From Operating Activities          
Net income  $1,322,692   $1,145,094 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation   116,378    92,294 
Loss on disposal of fixed assets   5,959    11,594 
           
Changes in operating assets and liabilities:          
Accounts receivable, net   (57,653)   (32,224)
Inventories   (35,360)   1,088 
Prepayments and other current assets   37,843    (42,571)
Accounts payable   37,023    7,534 
Due to related parties   (417,976)   62,773 
Deposits received   3,000    2,348 
Accrued expenses and other current liabilities   (18,692)   (11,843)
Net cash provided by operating activities   993,214    1,236,087 
           
Cash Flows From Investing Activities          
Purchases of fixed assets   (701,504)   (33,519)
Prepayment for fixed assets acquisition   (42,916)   - 
Proceeds from disposal of fixed assets   95,351    5,538 
Net cash used in investing activities   (649,069)   (27,981)
           
Cash Flows From Financing Activities          
Proceeds from non-controlling shareholder   702,670    - 
Payments on capital lease obligation   (627,659)   (209,133)

  

 
 

  

 

JRSIS HEALTH CARE CORPORATION

   

  

Distribution paid   -    (916,163)
Net cash provided by (used in) financing activities   75,011    (1,125,296)
           
Effect of exchange rate fluctuation on cash and cash equivalents   11,657    950 
           
Net increase in cash and cash equivalents   430,813    83,760 
           
Cash and cash equivalents, beginning of period   200,475    116,715 
           
Cash and cash equivalents, ending of period  $631,288   $200,475 
           
Supplemental disclosure of cash flow information          
Cash paid for income taxes  $(1,984)  $(1,987)
Cash paid for interest  $(11,539)  $(14,200)
           
Non-cash investing and financing activities:          
Rent waived from non-controlling interest  $-   $132,914 
Purchases of fixed assets under capital lease obligations  $15,185,032   $203,815 

    

 

 

Securities and Exchange Commission

August 29, 2014

 

 
 

  

 

JRSIS HEALTH CARE CORPORATION

   

 

 

 

 

Please advise us if you have any further questions or comments.

 

Respectfully submitted

 

 

/s/ Jun Sheng Zhang

      Jun Sheng Zhang

      President