UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM 10-Q/A
(
Amendment
No. 1
)
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended:
March 31, 2011
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________to
________________
Commission File Number:
333-144888
CHINA SHESAYS MEDICAL COSMETOLOGY INC.
(Exact Name of Registrant as Specified in Its Charter)
Nevada
|
01-0660195
|
(State or Other jurisdiction of Incorporation
or
|
(I.R.S. Employer Identification
No.)
|
Organization)
|
|
Sichuan SHESAYS Cosmetology Hospital Co., Ltd.
|
|
New No. 83, Xinnan Road, Wuhou District,
Chengdu
|
610041
|
City, Sichuan Province, P.R. China
|
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
(86) 028-8548-2277
(Registrants Telephone Number,
Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal
Year, if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
Yes [ ] No [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of large accelerated filer, accelerated
filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [ ]
Accelerated filer [ ] Non-accelerated filer
[ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
As of May 13, 2011, there were a total of 18,600,012 shares of
the registrants common stock outstanding, $0.001 par value.
EXPLANATORY NOTE
China Shesays Medical Cosmetology Inc. (the Company,
SHESAYS or China Shesays) is filing this Amendment No. 1 to its Quarterly
Report on Form 10-Q/A (the "Amended 10-Q") to amend its Quarterly Report on Form
10-Q for the quarter ended March 31, 2011, filed with the Securities and
Exchange Commission (the "SEC") on May 16, 2011 (the "Original 10-Q"). This
Amended 10-Q is being filed to amend and restate our consolidated financial
statements and related disclosures for the quarter ended March 31, 2011 as
discussed in Note 3 to the accompanying restated financial statements.
Background of the Restatement
On July 15, 2011, as a result of the preparation of the
responses to comments the Company received from the Securities and Exchange
Commission (the SEC) in connection with the SECs review of the Companys
Amendment No. 2 to the Registration Statement on Form S-1 filed on May 13, 2011,
after its communications with the Companys auditor, the Company determined
that the Companys financial statements for the year ended December 31, 2010,
and the three months period ended March 31, 2011 should no longer be relied upon
as a result of certain errors regarding: (i) pre-operating expenses wrongly
recorded as other current assets; (ii) under-provisions of rental expenses for
clinics that had not yet commenced business; (iii) income tax expense for the
above items; (iv) foreign currency translation gain or loss for the above items;
and (v) an over statement of payments to acquire property and equipment in cash
flows from investing activities and increases in other payables and accrued
liabilities included in cash flows from operating activities in the statement of
cash flows for the year ended December 31, 2010. An explanation of the error and
its impact on the Company's financial statements is contained in Note 3 to the
financial statements contained in Part I of this report.
Restatement of Other Financial Statements
Along with the filing of this Amended 10-Q, we are concurrently
filing an amendment to our Annual Report on Form 10-K for the year ended
December 31, 2010. The amendment to our Annual Report on Form 10-K is being
filed to restate our audited financial statements and related financial
information for the year ended December 31, 2010 to correct the errors as set
forth above.
Amendments to the Original 10-Q
For the convenience of the reader, this Amended 10-Q sets forth
the Original 10-Q, as modified and superseded where necessary to reflect the
restatement. The following items have been amended principally as a result of,
and to reflect, the restatement:
In accordance with applicable SEC rules, this Amended 10-Q
includes certifications from our Chief Executive Officer and Chief Financial
Officer dated as of the date of this filing. Except for the items noted above,
no other information included in the Original 10-Q is being amended by this
Amended 10-Q. The Amended 10-Q continues to speak as of the date of the Original
10-Q, and we have not updated the filing to reflect events occurring
subsequently to the Original 10-Q date, other than those associated with the
restatement of the Company's financial statements. Accordingly, this Amended
10-Q should be read in conjunction with our filings made with the SEC subsequent
to the filing of the Original 10-Q.
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CHINA SHESAYS MEDICAL COSMETOLOGY INC.
("CHINA SHESAYS") AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
|
|
Unaudited
|
|
|
Audited
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
1,694,751
|
|
$
|
1,029,280
|
|
Inventories, net
|
|
453,627
|
|
|
521,254
|
|
Due from stockholders
|
|
-
|
|
|
52,821
|
|
Other current assets and prepaid
expenses
|
|
743,277
|
|
|
626,877
|
|
Total
Current Assets
|
|
2,891,655
|
|
|
2,230,232
|
|
PROPERTY AND EQUIPMENT, NET
|
|
6,535,425
|
|
|
6,008,198
|
|
DEFERRED TAX ASSETS
|
|
404,988
|
|
|
389,847
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
$
|
9,832,068
|
|
$
|
8,628,277
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
Accounts payable
|
$
|
671,814
|
|
$
|
725,386
|
|
Notes payable
|
|
914,620
|
|
|
910,332
|
|
Deferred revenue
|
|
39,143
|
|
|
24,441
|
|
Other payables and accrued liabilities
|
|
1,958,938
|
|
|
1,757,975
|
|
Income tax payable
|
|
1,021,191
|
|
|
706,450
|
|
Sales tax payable and other taxes
payable
|
|
14,471
|
|
|
13,487
|
|
Due to stockholders
|
|
76,218
|
|
|
-
|
|
Total Current Liabilities
|
|
4,696,395
|
|
|
4,138,071
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
China Shesays Stockholders'
equity
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 5,000,000 shares
authorized, none issued or outstanding as of March 31, 2011 and December
31, 2010 Common stock, $0.001 par value, 65,849,200 shares authorized,
18,600,012 shares issued as of March 31, 2011 and December 31, 2010
|
|
18,600
|
|
|
18,600
|
|
Additional paid-in
capital
|
|
2,166,401
|
|
|
2,160,485
|
|
Retained earnings
|
|
|
|
|
|
|
Unappropriated
|
|
2,273,220
|
|
|
1,640,050
|
|
Appropriated
|
|
429,566
|
|
|
429,566
|
|
Accumulated other
comprehensive income
|
|
125,640
|
|
|
109,892
|
|
Total China Shesays Stockholders'
Equity
|
|
5,013,427
|
|
|
4,358,593
|
|
Noncontrolling
interest
|
|
122,246
|
|
|
131,613
|
|
Total Equity
|
|
5,135,673
|
|
|
4,490,206
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
9,832,068
|
|
$
|
8,628,277
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements
1
CHINA SHESAYS MEDICAL COSMETOLOGY INC.
("CHINA SHESAYS") AND
SUBSIDIARIES
CONDENSED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE
INCOME (UNAUDITED)
|
|
Three months ended March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(Restated)
|
|
|
|
|
|
|
Consolidated
|
|
|
Combined
|
|
REVENUE
|
|
|
|
|
|
|
Customer service revenue
|
|
|
|
|
|
|
Cosmetic surgery
services
|
$
|
1,693,758
|
|
$
|
1,623,430
|
|
Professional medical beauty
services
|
|
1,623,916
|
|
|
1,363,437
|
|
Cosmetic dentistry
services
|
|
27,509
|
|
|
140,853
|
|
Sales of goods
|
|
229,946
|
|
|
120,205
|
|
Total Revenue
|
|
3,575,129
|
|
|
3,247,925
|
|
|
|
|
|
|
|
|
COST OF REVENUE
|
|
|
|
|
|
|
Cost of service revenue
|
|
|
|
|
|
|
Cosmetic surgery
services
|
|
(374,705
|
)
|
|
(427,300
|
)
|
Professional medical beauty
services
|
|
(330,600
|
)
|
|
(139,767
|
)
|
Cosmetic dentistry
services
|
|
(19,985
|
)
|
|
(44,259
|
)
|
Cost of goods sold
|
|
(80,285
|
)
|
|
(49,685
|
)
|
Depreciation
|
|
(123,898
|
)
|
|
(71,447
|
)
|
Total Cost of Revenue
|
|
(929,473
|
)
|
|
(732,458
|
)
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
2,645,656
|
|
|
2,515,467
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
806,792
|
|
|
457,676
|
|
Advertising costs
|
|
688,034
|
|
|
396,284
|
|
Professional and
consultant fees
|
|
107,121
|
|
|
28,056
|
|
Depreciation
|
|
91,292
|
|
|
37,092
|
|
Total Operating
Expenses
|
|
1,693,239
|
|
|
919,108
|
|
|
|
|
|
|
|
|
INCOME FROM OPERATIONS
|
|
952,417
|
|
|
1,596,359
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES)
|
|
|
|
|
|
|
Other income
|
|
7
|
|
|
301
|
|
Interest income
|
|
171
|
|
|
1,563
|
|
Interest expenses
|
|
(7,745
|
)
|
|
(6,564
|
)
|
Imputed interest
|
|
-
|
|
|
(247
|
)
|
Other expenses
|
|
(23,477
|
)
|
|
(52,628
|
)
|
Total Other
Expenses, net
|
|
(31,044
|
)
|
|
(57,575
|
)
|
|
|
|
|
|
|
|
INCOME BEFORE TAXES
|
|
921,373
|
|
|
1,538,784
|
|
Add (less):
|
|
|
|
|
|
|
Income tax expenses
|
|
(297,542
|
)
|
|
(405,120
|
)
|
NET INCOME
|
|
623,831
|
|
|
1,133,664
|
|
Net loss attributable
to noncontrolling interest
|
|
9,339
|
|
|
-
|
|
|
|
|
|
|
|
|
NET INCOME ATTRIBUTABLE TO CHINA
SHESAYS
COMMON STOCKHOLDERS
|
|
633,170
|
|
|
1,133,664
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME
|
|
|
|
|
|
|
Total foreign currency translation
gains
|
|
15,720
|
|
|
399
|
|
Add: foreign currency translation loss
attributable to noncontrolling interest
|
|
28
|
|
|
-
|
|
Foreign currency translation gains attributable to China
Shesays common stockholders
|
|
15,748
|
|
|
399
|
|
COMPREHENSIVE INCOME
ATTRIBUTABLE
TO CHINA SHESAYS COMMON
STOCKHOLDERS
|
$
|
648,918
|
|
$
|
1,134,063
|
|
Net income per share-basic and diluted
|
$
|
0.03
|
|
$
|
0.08
|
|
Weighted average number of shares outstanding during
the period
|
|
|
|
|
|
|
- basic and diluted
|
|
18,600,012
|
|
|
13,500,012
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements
2
CHINA SHESAYS MEDICAL COSMETOLOGY INC.
("CHINA SHESAYS") AND
SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
Three months ended March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(Restated)
|
|
|
|
|
|
|
Consolidated
|
|
|
Combined
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES
|
|
|
|
|
|
|
Net income
|
$
|
623,831
|
|
$
|
1,133,664
|
|
Adjusted to reconcile net income to cash
provided by operating activities:
|
|
|
|
|
|
|
Depreciation - cost of service revenue
|
|
123,898
|
|
|
71,447
|
|
Depreciation - operating expenses
|
|
91,292
|
|
|
37,092
|
|
Deferred income taxes
|
|
(13,114
|
)
|
|
-
|
|
Loss on disposal of property and equipment
|
|
482
|
|
|
-
|
|
Imputed interest
|
|
-
|
|
|
247
|
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
(Increase) decrease in:
|
|
|
|
|
|
|
Inventories
|
|
69,867
|
|
|
35,508
|
|
Other current assets and prepaid expenses
|
|
(254,635
|
)
|
|
(346,830
|
)
|
Increase (decrease) in:
|
|
|
|
|
|
|
Accounts payable
|
|
(56,812
|
)
|
|
(25,032
|
)
|
Deferred revenue
|
|
14,541
|
|
|
416
|
|
Other payables and accrued liabilities
|
|
333,707
|
|
|
41,439
|
|
Income tax payable
|
|
310,453
|
|
|
350,683
|
|
Sales tax payable and other taxes payable
|
|
918
|
|
|
9,854
|
|
Net cash provided by operating activities
|
|
1,244,428
|
|
|
1,308,488
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
(842,231
|
)
|
|
(1,038,655
|
)
|
Proceeds from disposal
of property and equipment
|
|
129,171
|
|
|
-
|
|
Due from stockholders
|
|
52,821
|
|
|
(177,837
|
)
|
Net cash used in investing activities
|
|
(660,239
|
)
|
|
(1,216,492
|
)
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES
|
|
|
|
|
|
|
Bank loan borrowed
|
|
911,799
|
|
|
877,702
|
|
Bank loan repaid
|
|
(911,799
|
)
|
|
(18,285
|
)
|
Due to a related company
|
|
-
|
|
|
(768
|
)
|
Due to stockholders
|
|
75,983
|
|
|
-
|
|
Contribution by stockholders
|
|
5,916
|
|
|
-
|
|
Net cash provided by financing activities
|
|
81,899
|
|
|
858,649
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATES ON
CASH
|
|
(617
|
)
|
|
210
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH
EQUIVALENTS
|
|
665,471
|
|
|
950,855
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD
|
|
1,029,280
|
|
|
1,371,732
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END
OF PERIOD
|
$
|
1,694,751
|
|
$
|
2,322,587
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
|
|
|
|
|
|
|
Cash paid for interest expenses
|
$
|
7,745
|
|
$
|
6,564
|
|
Cash paid for income
tax
|
$
|
203
|
|
$
|
54,438
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements
3
CHINA SHESAYS MEDICAL COSMETOLOGY INC.
AND
SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1
|
BASIS OF PRESENTATION
|
|
|
|
The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with generally
accepted accounting principles (GAAP) in the United States of America
for interim financial information and rules and regulations of the U.S.
Securities and Exchange Commission (SEC). Accordingly, they do not
include all of the information and footnotes required by GAAP for complete
financial statements.
|
|
|
|
In the opinion of management, the unaudited condensed
consolidated financial statements contain all adjustments consisting only
of normal recurring accruals considered necessary to present fairly the
Company's financial position as of March 31, 2011 (restated), the results
of operations for the three months ended March 31, 2011 (consolidated)
(restated) and 2010 (combined) and cash flows for the three months ended
March 31, 2011 (consolidated) (restated) and 2010 (combined). The results
for the three months ended March 31, 2011 are not necessarily indicative
of the results to be expected for a full year. These financial statements
should be read in conjunction with the audited financial statements and
footnotes of the Company for the years ended December 31, 2010 (restated)
and 2009 appearing in the Companys Form 10-K/A as filed with the SEC.
|
|
|
NOTE 2
|
ORGANIZATION
|
|
|
|
SN Strategies Corp. was incorporated under the laws of
the State of Nevada on January 18, 2002.
|
|
|
|
Perfect Support Limited (Perfect Support) was
incorporated in the British Virgin Islands (BVI) on January 15, 2010 as
an investment holding company. Through its wholly owned subsidiary,
Chengdu Boan Investment Management Co., Limited (Chengdu Boan), the
Company is principally engaged in providing consultancy services on
medical beauty services, cosmetic surgery services and cosmetic dentistry
services in the Peoples Republic of China (PRC). Chengdu Boan was
incorporated in the PRC as a wholly-owned foreign enterprise on April 27,
2010. In accordance with the business permit, Chengdu Boans right of
operation expires on April 27, 2040 and is renewable on expiry.
|
|
|
|
Sichuan Shesays Cosmetology Hospital Company Limited
(Sichuan Shesays) was incorporated in the PRC on May 30, 2005 as a
limited liability company. Sichuan Shesays is a clinic for providing
professional medical beauty services, cosmetic surgery services and
cosmetic dentistry services to customers in PRC. In accordance with its
business permit, the Companys right of operation expires on May 30, 2025.
|
|
|
|
On April 27, 2010, Chengdu Boan entered into a series of
contractual agreements (collectively known as the Restructuring Agreements
and see note 2) with Sichuan Shesays and the stockholders of Sichuan
Shesays in which Chengdu Boan assumed the management of the business
activities of Sichuan Shesays and its subsidiaries, if any, from time to
time, Sichuan Shesays and its subsidiaries agreed to pay 100% of its
residual return to Chengdu Boan. Through this arrangement, Sichuan Shesays
and its subsidiaries, if any, became contractually controlled subsidiaries
of Chengdu Boan. Based on these contractual arrangements, the Company
considers Sichuan Shesays and its subsidiaries to be Variable Interest
Entities (VIEs) under ASC 810 "Consolidation of Variable Interest
Entities, an Interpretation of ARB No.51and Perfect Support through
Chengdu Boan is the primary beneficiary of Sichuan Shesays and its
subsidiaries (See note 2). Accordingly, Sichuan Shesays and its
subsidiaries should be consolidated under ASC 810. Immediately prior to
the transaction completed on April 27, 2010, the five individuals who
owned 90% of Perfect Support, the 100% stockholder of Chengdu Boan also
owned 100% of the registered capital of Sichuan Shesays. As Perfect
Support, Chengdu Boan, Sichuan Shesays and its subsidiaries were under
common control, the contractual arrangements have been accounted for as a
reorganization of entities under common control and Chengdu Boan
consolidates Sichuan Shesays and its subsidiaries in accordance with FASB
ASC 805-40-45 and Regulation S-X 3A-02 were accounted for as if the
reorganization occurred at the beginning of the first period presented.
|
4
On June 6, 2010, SN Strategies Corp.,
the Parent, China Shesays Medical Cosmetology Inc., the Merger Sub, a Nevada
corporation, wholly owned by the Parent and incorporated on May 20, 2010,
Perfect Support, known as the Acquired Sub, and the stockholders of the Acquired
Sub, entered into an Agreement and Plan of Merger pursuant to which the Merger
Sub agreed to acquire 100% of the common stock of the Acquired Sub. In
connection with the merger, the Merger Sub issued to the stockholders of the
Acquired Sub 10 shares of its common stock of $0.001 each amounting to $0.01 for
50,000 shares of the Acquired Subs common stock of $1 each amounting to $50,000
which represents 100% of the outstanding shares of the Acquired Subs common
stock. The 10 shares of common stock of the Merger Sub were subsequently
converted to 13,500,012 shares of common stock of the Parent Company.
Concurrent with the merger, the Merger
Sub merged with and into the Parent at the effective time of the merger. The Merger Sub no longer exists, and the
Parents name was subsequently changed to the Merger Subs name.
For financial reporting purposes, the
merger has been accounted for as a recapitalization of the Parent whereby the
historical financial statements and operations of the Acquired Sub become the
historical financial statements of the Company, with no adjustments to the
carrying values of the assets and liabilities. Share and per share amounts
reflect the effects of the recapitalization for all periods presented. In
addition, the presentation for all periods includes equity transactions of the
Acquired Sub as adjusted for the effects of the recapitalization.
On July 8, 2010, Sichuan Shesays
established a PRC limited liability company, Leshan Jiazhou Shesays Junge
Cosmetology Company Limited (Leshan Jiazhou Shesays) with a registered capital
of $736,594 to which Sichuan Shesays contributed $265,984 in cash and a set of
machinery totaling $470,610 in lieu of cash. Leshan Jiazhou Shesays is a clinic
for providing professional medical beauty services and cosmetic surgery services
to customers in PRC. In accordance with its business permit, the Companys right
of operation expires on June 17, 2014.
On August 18, 2010, Sichuan Shesays
together with a third party established a PRC limited liability company, Yibin
Shesays Junge Cosmetology Clinic Company Limited (Yibin Shesays) with a
registered capital of $734,981. Sichuan Shesays contributed $587,985 in cash to
the registered capital of Yibin Shesays, representing 80% of the equity of Yibin
Shesays. Yibin Shesays is a clinic for providing professional medical beauty
services and cosmetic surgery services to customers in PRC. In accordance with
its business permit, the Companys right of operation expires on December 31,
2014.
On October 20, 2010, Sichuan Shesays
established a PRC limited liability company, Zigong Shesays Junge Cosmetology
Clinic Company Limited (Zigong Shesays) with a registered capital of $751,213.
Sichuan Shesays contributed $244,219 in cash and a set of machinery totaling
$506,994 in lieu of cash. Zigong Shesays is a clinic for providing professional
medical beauty services and cosmetic surgery services to customers in PRC. In
accordance with its business permit, the Companys right of operation expires on
October 19, 2014.
China Shesays, Perfect Support,
Chengdu Boan, Sichuan Shesays, Leshan Jiazhou Shesays, Yibin Shesays and Zigong
Shesays are hereinafter referred to as (the Company).
5
NOTE 3.
|
RESTATEMENTS OF CONSOLIDATED FINANCIAL
STATEMENTS AND PREVIOUSLY REPORTED FINANCIAL STATEMENTS
|
|
|
|
Restatement of consolidated financial
statements
|
|
|
|
On July 15, 2011, China Shesays (the Company)
determined that the Companys financial statements as of March 31, 2011
and for the three months period then ended should no longer be relied upon
and should be restated as a result of certain errors contained therein
regarding: (i) pre-operating expenses wrongly recorded as other current
assets; (ii) under-provisions of rental expenses for clinics not yet
commenced business; (iii) income tax expense for the above items; and (iv)
foreign currency translation gain or loss for the above items.
|
|
|
|
As a result, the accompanying consolidated
condensed financial statements as of March 31, 2011 and for the three
months then ended have been restated from the amounts previously reported.
The information in the data table below represents only those income
statement, balance sheet, cash flow and comprehensive income statement
line items affected by the restatements.
|
|
|
|
The following tables present the condensed
consolidated balance sheet, statement of operations and statement of cash
flows accounts and financial statement line items as reported herein that
were impacted by the restatements:
|
|
|
|
As of and for the three
months
|
|
|
|
|
period ended March 31, 2011
|
|
|
|
|
As previously
|
|
|
|
|
|
|
|
|
|
|
stated
|
|
|
Adjustments
|
|
|
As restated
|
|
|
Consolidated balance
sheet accounts impacted by restatements:
|
|
|
|
|
|
|
|
|
Other current assets and prepaid expenses
|
$
|
1,812,886
|
|
$
|
(1,069,609
|
)
|
$
|
743,277
|
|
|
Total current assets
|
|
3,961,264
|
|
|
(1,069,609
|
)
|
|
2,891,655
|
|
|
Deferred tax assets
|
|
137,586
|
|
|
267,402
|
|
|
404,988
|
|
|
Total assets
|
|
10,634,275
|
|
|
(802,207
|
)
|
|
9,832,068
|
|
|
Other payables and accrued liabilities
|
|
1,825,048
|
|
|
133,890
|
|
|
1,958,938
|
|
|
Total current liabilities
|
|
4,562,505
|
|
|
133,890
|
|
|
4,696,395
|
|
|
Retained earnings - unappropriated
|
|
3,184,653
|
|
|
(911,433
|
)
|
|
2,273,220
|
|
|
Accumulated other comprehensive
income
|
|
150,304
|
|
|
(24,664
|
)
|
|
125,640
|
|
|
Total China Shesays stockholders' equity
|
|
5,949,524
|
|
|
(936,097
|
)
|
|
5,013,427
|
|
|
Total equity
|
|
6,071,770
|
|
|
(936,097
|
)
|
|
5,135,673
|
|
|
Total liabilities and stockholders' equity
|
|
10,634,275
|
|
|
(802,207
|
)
|
|
9,832,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of operations accounts
impacted by restatements:
|
|
|
|
|
|
|
|
|
Selling, general and administrative
expenses
|
$
|
632,428
|
|
$
|
174,364
|
|
$
|
806,792
|
|
|
Total operating expenses
|
|
1,518,875
|
|
|
174,364
|
|
|
1,693,239
|
|
|
Income from operations
|
|
1,126,781
|
|
|
(174,364
|
)
|
|
952,417
|
|
|
Income before taxes
|
|
1,095,737
|
|
|
(174,364
|
)
|
|
921,373
|
|
|
Income tax expenses
|
|
(358,799
|
)
|
|
61,257
|
|
|
(297,542
|
)
|
|
Net income
|
|
736,938
|
|
|
(113,107
|
)
|
|
623,831
|
|
|
Net income attributable to China Shesays
common stockholders
|
|
746,277
|
|
|
(113,107
|
)
|
|
633,170
|
|
|
Total foreign currency translation gains
|
|
19,927
|
|
|
(4,207
|
)
|
|
15,720
|
|
|
Foreign currency translation gains
attributable to China Shesays common stockholders
|
|
19,955
|
|
|
(4,207
|
)
|
|
15,748
|
|
|
Comprehensive income attributable to China Shesays common
stockholders
|
|
766,232
|
|
|
(117,314
|
)
|
|
648,918
|
|
|
Net income per share-basic and
diluted
|
|
0.04
|
|
|
(0.01
|
)
|
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of cash flows
accounts impacted by restatements:
|
|
|
|
|
|
|
|
|
Net income
|
$
|
746,277
|
|
$
|
(122,446
|
)
|
$
|
623,831
|
|
|
Deferred income taxes
|
|
47,994
|
|
|
(61,108
|
)
|
|
(13,114
|
)
|
|
Minority interest
|
|
(9,339
|
)
|
|
9,339
|
|
|
-
|
|
|
Increase in other current assets and
prepaid expenses
|
|
(358,335
|
)
|
|
103,700
|
|
|
(254,635
|
)
|
|
Increase in other payables and accrued liabilities
|
|
263,043
|
|
|
70,664
|
|
|
333,707
|
|
|
Net cash provided by operating
activities
|
|
1,244,279
|
|
|
149
|
|
|
1,244,428
|
|
|
Effect of exchange rate on cash
|
|
(468
|
)
|
|
(149
|
)
|
|
(617
|
)
|
6
NOTE 3.
|
RESTATEMENT OF CONSOLIDATED FINANCIAL
STATEMENTS AND PREVIOUSLY REPORTED FINANCIAL STATEMENTS
|
|
|
|
Restatement of previously issued
financial statements
|
|
|
|
On July 15, 2011, the Company determined that the
Companys financial statements as of December 31, 2010 and for the year
then ended should no longer be relied upon and should be restated as a
result of certain errors contained therein regarding the accounting for:
(i) pre-operating expenses wrongly recorded as other current assets; (ii)
under-provision of rental expenses for clinics not yet commenced business;
(iii) income tax expense for the above items; and (iv) foreign currency
translation gain/loss for the above items.
|
|
|
|
As a result, the accompanying consolidated financial
statements as of December 31, 2010 have been restated from the amounts
previously reported. The information in the data table below represents
only those balance sheet line items affected by the restatements.
|
|
|
|
The following tables present the consolidated balance
sheet and financial statement line items as reported herein that were
impacted by the restatements:
|
|
|
|
As of December 31, 2010
|
|
|
|
|
As
|
|
|
|
|
|
|
|
|
|
|
previously
|
|
|
|
|
|
As
|
|
|
|
|
stated
|
|
|
Adjustments
|
|
|
restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated balance
sheet accounts impacted by restatements:
|
|
|
|
|
|
|
|
|
Other current assets and prepaid expenses
|
$
|
1,446,837
|
|
$
|
(819,960
|
)
|
$
|
626,877
|
|
|
Total current assets
|
|
3,050,192
|
|
|
(819,960
|
)
|
|
2,230,232
|
|
|
Deferred tax assets
|
|
184,857
|
|
|
204,990
|
|
|
389,847
|
|
|
Total assets
|
|
9,243,247
|
|
|
(614,970
|
)
|
|
8,628,277
|
|
|
Other payables and accrued liabilities
|
|
1,554,162
|
|
|
203,813
|
|
|
1,757,975
|
|
|
Total current liabilities
|
|
3,934,258
|
|
|
203,813
|
|
|
4,138,071
|
|
|
Retained earnings - unappropriated
|
|
2,438,376
|
|
|
(798,326
|
)
|
|
1,640,050
|
|
|
Accumulated other comprehensive
income
|
|
130,349
|
|
|
(20,457
|
)
|
|
109,892
|
|
|
Total stockholders' equity
|
|
5,177,376
|
|
|
(818,783
|
)
|
|
4,358,593
|
|
|
Total China Shesays equity
|
|
5,308,989
|
|
|
(818,783
|
)
|
|
4,490,206
|
|
|
Total liabilities and stockholders' equity
|
|
9,243,247
|
|
|
(614,970
|
)
|
|
8,628,277
|
|
NOTE 4
|
PRINCIPLES OF CONSOLIDATION /
COMBINATION
|
|
|
|
The accompanying unaudited condensed consolidated
financial statements for the three months ended March 31, 2011 include the
financial statements of China Shesays, its wholly owned subsidiaries,
Perfect Support and Chengdu Boan and the contractually controlled
affiliate, Sichuan Shesays and its wholly owned subsidiaries, Leshan
Jiazhou Shesays , Zigong Shesays and 80% owned subsidiary, Yibin Shesays,
The noncontrolling interests represent the noncontrolling stockholders
20% proportionate share of the results of Yibin Shesays.
|
|
|
|
The accompanying unaudited condensed combined financial
statements for the three months ended March 31, 2010 include the financial
statements of China Shesays and its contractually controlled affiliate,
Sichuan Shesays for the three months ended March 31, 2010.
|
|
|
|
All significant inter-company balances and transactions
have been eliminated in consolidation / combination.
|
7
NOTE 5
|
USE OF ESTIMATES
|
|
|
|
The preparation of the consolidated financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidation financial statements and the
reported amounts of revenues and expenses during the reporting period.
|
|
|
|
Customer reward program
|
|
|
|
The Company measures the cost of the credit point by
reference of services redeemed in the prior years and the probability of
redemption are estimated by the directors based on the past history.
Actual results may be different from the estimation.
|
|
|
|
Variable interest entities
|
|
|
|
Current PRC laws and regulations require any foreign
entities that invest directly in the medical services industry to have
direct operations in the medical industry outside of China. In addition,
foreign entity is not allowed in China to setup wholly-owned medical
institute although the foreign entity is permitted to set a joint venture
medical institute at maximum of 70%.
|
|
|
|
The Company does not currently directly operate medical
services outside of China and cannot qualify under PRC regulations before
the Company commences any such operations outside of China. While the
Companys indirect PRC operating subsidiaries are eligible for the
required licenses for providing medical services in China and some of the
indirect PRC operating subsidiaries have obtained such licenses, the
Company has been using and is expected to continue to use the PRC
operating affiliates and their subsidiaries.
|
|
|
|
Management estimated that the risk of loss in respect of
the Companys current ownership structure or the contractual arrangements
is remote.
|
|
|
|
|
NOTE 6
|
RECENT ACCOUNTING STANDARDS AND PRONOUNCEMENTS
|
|
|
|
In December 2010, FASB issued ASU 2010-29 Business
Combinations (Topic 805)-Disclosure of Supplementary Pro Forma Information
for Business Combinations. The objective of this Update is to address
diversity in practice about the interpretation of the pro forma revenue
and earnings disclosure requirements for business combinations. The
amendments in this Update specify that if a public entity presents
comparative financial statements, the entity should disclose revenue and
earnings of the combined entity as though the business combination(s) that
occurred during the current year had occurred as of the beginning of the
comparable prior annual reporting period only. The amendments also expand
the supplemental pro forma disclosures to include a description of the
nature and amount of material, nonrecurring pro forma adjustments directly
attributable to the business combination included in the reported pro
forma revenue and earnings. The amendments in this Update are effective
prospectively for business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning
on or after December 15, 2010. Early adoption is permitted. The adoption
of this standard is not expected to have material impact on the Companys
consolidated financial statements.
|
|
|
|
In February 2010, FASB issued ASU 2010-9 Subsequent
Events (Topic 855) Amendments to Certain Recognition and Disclosure
Requirements ("ASU 2010-9"). ASU 2010-9 amends disclosure requirements
within Subtopic 855-10. An entity that is an SEC filer is not required to
disclose the date through which subsequent events have been evaluated.
This change alleviates potential conflicts between Subtopic 855-10 and the
SEC's requirements. ASU 2010-9 is effective for interim and annual periods
ending after June 15, 2010. The adoption of this standard is not expected
to have material impact on the Companys consolidated financial
statements.
|
|
|
|
In October 2009, the FASB issued ASU 2009-13,
Multiple-Deliverable Revenue Arrangements, now codified under FASB ASC
Topic 605, Revenue Recognition, (ASU 2009-13). ASU 2009-13 requires
entities to allocate revenue in an arrangement using estimated selling
prices of the delivered goods and services based on a selling price
hierarchy. The amendments eliminate the residual method of revenue
allocation and require revenue to be allocated using the relative selling
price method. ASU 2009-13 should be applied on a prospective basis for
revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010, with early adoption permitted. The
adoption of this standard is not expected to have material impact on the
Companys consolidated financial statements.
|
|
|
NOTE 7
|
VARIABLE INTEREST ENTITIES
|
|
|
|
The Company accounts for Variable Interest Entities
(VIE) in accordance with ASC 810. As a result of the adoption of ASU
2009-17, consolidations (Topic 810) Improvements to Financial Reporting
by Enterprises Involved with Variable Interest Entities, effective January
1, 2010, ASC 810 requires the consolidation of VIEs in which a company has
both the power to direct the activities of the
VIEs that most significantly impact the VIEs economic performance and the
obligation to absorb losses or the right to receive the benefits from the VIEs
that could potentially be significant to the VIEs. The Company has applied the
requirements of ASC 810 on a prospective basis from the date of adoption.
The Company assesses all newly created
entities and those with which the Company becomes involved to determine whether
such entities are VIEs and, if so, whether or not the Company is their primary
beneficiary.
|
8
On April 27, 2010, the Company through
its PRC subsidiary, Chengdu Boan entered into a series of contractual
arrangements consisting of four agreements with Sichuan Shesays and the
stockholders of Sichuan Shesays. Those four agreements and their consequences
are described below.
|
(i)
|
an exclusive service agreement, pursuant to which Sichuan
Shesays and its subsidiaries irrevocably entrust to Chengdu Boan the right
of management and operation of Sichuan Shesays and its subsidiaries and
the responsibilities and authorities of their stockholders and directors
of Sichuan Shesays and its subsidiaries. In return, Sichuan Shesays and
its subsidiaries agreed to pay 100% of its residual return, if any, from
time to time, as management fee to Chengdu Boan.
|
|
|
|
|
(ii)
|
a voting rights proxy agreement, pursuant to which the
stockholders of Sichuan Shesays and its subsidiaries have granted the
personnel designated by Chengdu Boan the right to appoint directors and
senior management of Sichuan Shesays and its subsidiaries and to exercise
all of their other voting rights as stockholders of Sichuan Shesays and
its subsidiaries, as the case may be, as provided under the articles of
association of each such entity;
|
|
|
|
|
(iii)
|
a call option agreement, pursuant to
which:
|
|
(a)
|
neither Sichuan Shesays nor any of its subsidiaries may
enter into any transaction that could materially affect its assets, liabilities, equity or operations
without the prior written consent of Chengdu Boan;
|
|
|
|
|
(b)
|
neither Sichuan Shesays nor any of its subsidiaries will
distribute any dividends without the prior written consent of Chengdu Boan; and
|
|
|
|
|
(c)
|
Chengdu Boan or its designee has an exclusive option to
purchase all or part of the equity interests in Sichuan Shesays, all or part of the equity interests in
subsidiaries owned by Sichuan Shesays or its nominee holders, or all or part of the assets of Sichuan
Shesays, in each case when and to the extent permitted by PRC law. In case of Chengdu Boan exercising
the call option in its sole discretion upon the occurrence of the situation in which such call option
exercise become feasible under the relevant laws in PRC, any additional consideration paid other than $1
which may be required under the laws of PRC to effect such purchase to comply with such legal
formalities shall be either cancelled or returned to Sichuan Shesays immediately with no additional compensation to
the owners; and
|
|
(iv)
|
an equity pledge agreement pursuant to which each of
stockholders of Sichuan Shesays has pledged his or her equity interest in
Sichuan Shesays and its subsidiaries, as the case may be, to Chengdu Boan
to secure their obligations under the relevant contractual control
agreements, including but not limited to, the obligations of Sichuan
Shesays and its subsidiaries under the exclusive services agreement, the
call option agreement, the voting rights proxy agreement described above,
and each of them has agreed not to transfer, sell, pledge, dispose of or
create any encumbrance on their equity interest in Sichuan Shesays or its
subsidiaries without the prior written consent of Chengdu
Boan.
|
In the PRC restructuring transaction
described above, the Company gained indirect control of Sichuan Shesays and its
subsidiaries and Sichuan Shesays and its subsidiaries are considered VIEs of the
Company.
As required by ASC 810-10, the Company
performs a qualitative assessment to determine whether the Company is the
primary beneficiary of Sichuan Shesays and its subsidiaries which are identified
as VIEs of the Company. A quality assessment begins with an understanding of the
nature of the risks in the entity as well as the nature of the entitys
activities including terms of the contracts entered into by the entity,
ownership interests issued by the entity and the parties involved in the design
of the entity. The Companys assessment on the involvement with Sichuan Shesays
and its subsidiaries reveals that the Company has the absolute power to direct
the most significant activities that impact the economic performance of Sichuan
Shesays and its subsidiaries. Under the accounting guidance, the Company is
deemed to be the primary beneficiary of Sichuan Shesays and its subsidiaries and
the results of Sichuan Shesays and its subsidiaries are consolidated in the
Companys consolidated financial statements for financial reporting purposes. As
of March 31, 2011, Sichuan Shesays and
its subsidiaries had total assets of $9,605,885 (restated) and total liabilities
of $5,305,554 (restated). As of December 31, 2010, Sichuan Shesays and its
subsidiaries had total assets of $7,621,593 (restated) and total liabilities of
$4,059,585 (restated).
9
NOTE 8
|
PRIVATE PLACEMENT
|
|
|
|
Securities Purchase Agreement
|
|
|
|
On November 5, 2010, the Company completed on a
private placement financing pursuant to a Securities Purchase Agreement
(the Purchase Agreement) with a group of accredited investors
(investors). The Company received $1,200,000 from the investors (as
defined under Rule 501 (a) of Regulation D promulgated under the
Securities Act) for an issue of 600,000 shares of restricted common stock
of the Company at $2 each.
|
|
|
|
Under the Purchase Agreement, if the Companys
after-tax net income for the fiscal year ending December 31, 2011 is less
than the Companys after-tax net income for the fiscal year ended December
31, 2010, or if any Chinese governmental agency challenges or otherwise
takes any action that adversely affects the Companys listing of
securities and the Company is unable to address such adverse effect to the
reasonable satisfaction of the investors, then the Company must pay to
each investor, as liquidated damages, an amount equal to that investors
purchase price plus compound interest at a rate of 8%. In addition, for a
period of three years after the Closing, if the Company issues any shares
of common stock for less than $2 per share or for no consideration (the
Additional Shares), then the per share price under the Purchase
Agreement shall be reduced to the lowest price per share at which such
Additional Shares are issued, granted or sold. As of December 31, 2010,
the Company believes that it is not probable that the Company will issue
any shares of common stock at a price less than $2 per share; the
Companys after-tax net income for the fiscal year ending December 31,
2011 will be less than the Companys after-tax net income for the fiscal
year ended December 31, 2010; and there will be Chinese governmental
agency challenges or otherwise takes any action that adversely affects the
Companys listing of securities. Accordingly, the Company has not accrued
for any liquidated damages.
|
|
|
|
Make Good Escrow
|
|
|
|
In connection with the private placement, a
majority stockholder of the Company together with the Company entered into
a make good escrow agreement with the investors, pursuant to which a total
of 600,000 shares of common stock of the Company owned by the majority
stockholder were placed with an escrow agent to secure the Companys
obligation under the Purchase Agreement. If the Company fails to achieve
$6,400,000 in net after tax income for the fiscal year ending December 31,
2011, the majority stockholder of the Company is obligated to transfer
600,000 shares of common stock of the Company to the investors as
additional consideration under the private placement.
|
|
|
|
Warrants
|
|
|
|
In November 2010, the Company issued a warrant
to a financial advisor to purchase 48,000 shares of common stock of the
Company at an exercise price of $2 per share. The warrant is exercisable
any time from the date of issue to June 2012.
|
|
|
NOTE 9
|
INVENTORIES, NET
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Medical materials
|
$
|
306,920
|
|
$
|
386,634
|
|
|
Finished goods - merchandise
|
|
146,707
|
|
|
134,620
|
|
|
Less: Provision for obsolescence
|
|
-
|
|
|
-
|
|
|
|
$
|
453,627
|
|
$
|
521,254
|
|
10
NOTE 10
|
OTHER CURRENT ASSETS AND PREPAID EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Other receivables
|
$
|
95,945
|
|
$
|
79,290
|
|
|
Advances to staff
|
|
94,198
|
|
|
-
|
|
|
Advances to suppliers
|
|
64,239
|
|
|
98,574
|
|
|
Prepaid expenses
|
|
488,895
|
|
|
449,013
|
|
|
|
$
|
743,277
|
|
$
|
626,877
|
|
|
|
NOTE 11
|
PROPERTY AND EQUIPMENT, NET
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Buildings
|
$
|
112,330
|
|
$
|
111,804
|
|
|
Leasehold improvements
|
|
1,335,449
|
|
|
1,314,016
|
|
|
Medical equipment
|
|
3,349,850
|
|
|
3,319,221
|
|
|
Motor vehicles
|
|
162,549
|
|
|
290,751
|
|
|
Office equipment
|
|
581,021
|
|
|
582,302
|
|
|
Deposits paid for property and equipment
|
|
2,298,250
|
|
|
1,482,309
|
|
|
|
|
7,839,449
|
|
|
7,100,403
|
|
|
Less: Accumulated depreciation
|
|
(1,304,024
|
)
|
|
(1,092,205
|
)
|
|
|
$
|
6,535,425
|
|
$
|
6,008,198
|
|
Depreciation expenses for the three
months ended March 31, 2011 and 2010 were $215,190 and $108,539 respectively.
As of March 31, 2011 and December 31,
2010, included in deposits paid for property and equipment are advance payments
of renovation costs paid on behalf of the subsidiary which is still in the
process of incorporation amounting to $2,298,250 and $1,482,309 respectively.
11
Notes payable consisted of the
following:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Note payable to a bank, interest rate of 5%
per annum, guaranteed by a third party, a director and a director's
spouse, due March 2012
|
$
|
914,620
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Note payable to a bank, interest rate of 6%
per annum, guaranteed by a third party, due February 2011
|
|
-
|
|
|
910,332
|
|
|
|
$
|
914,620
|
|
$
|
910,332
|
|
|
Interest expense paid for the three
months ended March 31, 2011 and 2010 were $7,745 and $6,564 respectively.
|
|
|
|
The guarantee provided by the third party is secured by
the buildings of the Company with net book value totaling $99,226 as of
March 31, 2011. Fees paid to the third party guarantor for the three
months ended March 31, 2011 and 2010 was $20,971 and $17,554 respectively.
|
|
|
NOTE 13
|
OTHER PAYABLES AND ACCRUED LIABILITIES
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Other payables
|
$
|
554,139
|
|
$
|
599,724
|
|
|
Deposits from customers
|
|
252,209
|
|
|
231,390
|
|
|
Deposits from membeship reward
program
|
|
304,095
|
|
|
277,010
|
|
|
Accrued liability for membership reward program
|
|
87,147
|
|
|
18,586
|
|
|
Accrued liabilities
|
|
761,348
|
|
|
631,265
|
|
|
|
$
|
1,958,938
|
|
$
|
1,757,975
|
|
|
Deposits from customers represent money received in
advance for cosmetic surgery, beauty and other related services.
|
|
|
|
Included in other payables are equipment and renovation
costs totaling $317,991 and $363,333 owed to suppliers as of March 31,
2011 and December 31, 2010 respectively.
|
|
|
NOTE 14
|
INCOME TAX
|
|
|
|
The Company is subject to income taxes on an entity basis
on income arising in or derived from the tax jurisdiction in which each
entity is domiciled.
|
|
|
|
China Shesays was incorporated in the United States and
has incurred operating loss as for income tax purposes for the three
months ended March 31, 2011 and 2010. As of March 31, 2011, China Shesays
had federal and state net operating loss carry forwards of approximately
$177,000 which can be used to offset future federal income tax. The
federal and state net operating loss carry forwards expire at various
dates through 2030. Deferred tax assets resulting from the net operating
losses are reduced by a valuation allowance, when, in the opinion of
management, utilization is not reasonably assured.
|
|
|
|
Perfect Support was incorporated in the BVI and under
current laws of the BVI, income earned is not subject to income tax.
|
|
|
|
Chengdu Boan, Sichuan Shesays, Leshan Jiazhou Shesays,
Yibin Shesays and Zigong Shesays were incorporated in the PRC and are
subject to PRC income tax which is computed according to the relevant laws
and regulations in the PRC. The applicable tax rate is 25%. Tax losses, if
any, are allowed to carry forward to offset future net income for five
years. As of March 31, 2011, Yibin Shesys and Zigong Shesays have total
tax losses of $126,184 which will be expired on December 31, 2015.
|
12
The income tax expenses for the three
months ended 2011 and 2010 are summarized as follows:
|
|
|
(Unaudited)
|
|
|
|
|
For the three months ended
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
(Restated)
|
|
|
|
|
|
Current - PRC
|
$
|
310,656 $
|
|
|
405,120
|
|
|
Deferred - PRC
|
|
(13,114
|
)
|
|
-
|
|
|
|
$
|
297,542 $
|
|
|
405,120
|
|
The tax effects of significant items
comprising deferred tax assets as of March 31, 2011 and December 31, 2010 are as
follows:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
Property related, net
|
$
|
(50,757
|
)
|
$
|
67,034
|
|
|
Deferred revenue
|
|
68,299
|
|
|
42,981
|
|
|
Pre-operating expenses
|
|
267,402
|
|
|
204,990
|
|
|
Accrued liabilities
|
|
88,401
|
|
|
57,724
|
|
|
Tax losses
|
|
31,643
|
|
|
17,118
|
|
|
Total
deferred tax assets
|
$
|
404,988
|
|
$
|
389,847
|
|
The reconciliation of income taxes
computed at the statutory income tax rate to total income taxes for the three
months ended March 31, 2011 and 2010 is as follows:
|
|
|
(Unaudited)
|
|
|
|
|
For the three months ended
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
(Restated)
|
|
|
|
|
|
Income before taxes
|
$
|
921,373
|
|
$
|
1,538,784
|
|
|
|
|
|
|
|
|
|
|
Computed at PRC tax rate of 25%
|
$
|
230,343
|
|
$
|
384,696
|
|
|
Expenses not deductible for tax purposes
|
|
45,021
|
|
|
-
|
|
|
Others
|
|
22,178
|
|
|
20,424
|
|
|
Total
|
$
|
297,542
|
|
$
|
405,120
|
|
On November 12, 2010, the Company
issued 48,000 warrants with an exercise price of $2 per share in conjunction
with the issuance of 600,000 shares of common stock in a private placement to a
professional service provider pursuant to a Financial Advisory Service Agreement
entered into on June 12, 2010. The warrants are exercisable at any time from
June 12, 2010 to June 12, 2012. As of March 31, 2011, no warrants have been
exercised or cancelled.
The Company evaluates these warrants
provided in connection with the private placement in accordance with ASC 815 and
has concluded that equity classification is appropriate for these warrants, due
to the fact that these warrants are required to be physically settled in shares
of the common stock of the Company and there are no provisions that could
require net-cash settlement. Accordingly, the fair value of the warrants of
$7,911 was recognized as additional paid-in capital and as a reduction of
additional paid-in capital at the date of grant. The fair value of the warrants
was estimated using Black-Scholes Option Pricing Model.
The following assumptions are used to
calculate the fair value of the warrants:
13
|
Market price and estimated fair
value of common stock
|
$
|
2.00
|
|
|
Exercise price
|
$
|
2.00
|
|
|
Remaining contractual life (years)
|
|
1.6
|
|
|
Dividend yield
|
|
-
|
|
|
Expected volatility
|
|
16.25%
|
|
|
Risk-free interest rate
|
|
0.45%
|
|
|
Expected volatility is based primarily on historical
volatility. Historical volatility was computed using daily pricing
observations for recent periods that correspond to the term of the
warrants. The Companys management believes this method produces an
estimate that is representative of the expectations of future volatility
over the expected term of these warrants. The Company has no reason to
believe future volatility over the expected remaining life of these
warrants will likely differ materially from historical volatility. The
expected life is based on the remaining term of the warrants. The
risk-free interest rate is based on U.S. Treasury securities according to
the remaining term of the financial instruments.
|
|
|
NOTE 16
|
COMMITMENTS AND CONTINGENCIES
|
|
(a)
|
Capital commitments
|
|
|
|
|
|
As of March 31, 2011 and December 31, 2010, the Company
had commitments for capital expenditures on acquisition of property and
equipment amounting to approximately $1,933,000 and $1,610,000
respectively.
|
|
|
|
|
(b)
|
Operating leases commitment
|
|
|
|
|
|
The Company leases clinic spaces and staff quarters from
third parties under fifty-five separate operating leases which expire
between April 9, 2011 and January 1, 2020.
|
|
|
|
|
|
As of March 31, 2011, the Company had outstanding
commitments with respect to the above operating leases, which are due as
follows:
|
|
For the fiscal years ending March 31
|
|
|
|
|
2011
|
$
|
1,714,692
|
|
|
2012
|
|
1,698,683
|
|
|
2013
|
|
1,668,915
|
|
|
2014
|
|
1,655,972
|
|
|
2015
|
|
1,417,512
|
|
|
Thereafter
|
|
356,330
|
|
|
Total
|
$
|
8,512,104
|
|
|
(c)
|
Loss contingencies
|
|
|
|
|
|
The Company has not recorded an accrued loss contingency
under ASC 450 in connection with the contingent liability related to the
warranties made to investors in the private placement. Accounting for loss
contingencies pursuant to ASC 450 involves the existence of a condition,
situation or set of circumstances involving uncertainty as to possible
loss that will ultimately be resolved when one or more future event(s)
occur or fail to occur. Additionally, accounting for a loss contingency
requires management to assess each event as probable, reasonably possible
or remote. Probable is defined as the future event or events are likely to
occur. Reasonably possible is defined as the chance of the future event or
events occurring is more than remote but less than probable, while remote
is defined as the chance of the future event or events occurring is
slight. An estimated loss in connection with a loss contingency shall be
recorded by a charge to current operations if both of the following
conditions are met: first, the amount can be reasonably estimated; and
second, the information available prior to issuance of the financial
statements indicates that it is probable that a liability has been
incurred at the date of the financial statements.
|
|
|
|
|
|
The Company has assessed the contingent liability related
to the warranties made to investors in our private placement in accordance
with ASC 450 (1) for a period of three years, if the Company issues any
shares of Common Stock for less than $2.00 per share or for no
consideration (the Additional Shares), then the per share price under
the Securities Purchase Agreement shall be reduced to the lowest price per
share at which such Additional Shares are issued, granted or sold
(Guarantee A); and (2) if the after-tax net income for the fiscal year
ending December 31, 2011 is less than the after-tax net income for the
fiscal year ending December 31, 2010, or if any Chinese government agency
challenges or otherwise takes any action that adversely affects the
listing of securities and the Company is unable to address such adverse
effect to the reasonable satisfaction of the investors, then the Company
must pay to each investor, as liquidated damages, an amount equal to that
investors purchase price plus compound interest at a rate of 8%
(Guarantee B).
|
|
|
|
|
|
The Company has determined that the occurrence of the
contingency of Guarantee A is remote. The Company expects the operating
cash flows are adequate to finance the daily operations and the Company is
not required toissue new shares at a price below
$2.00. However, the Company may issue new shares at a price below $2.00, when
the Company is facing financial distress. Since the Company is unable to
estimate the chance of violating Guarantee A, the Company did not disclose the
estimated loss. The Company did not violate Guarantee A as of the date of this
report. The maximum potential amount of future estimated loss pertinent to
Guarantee A is $1,200,000.
The Company has determined that the
occurrence of the contingency of Guarantee B is reasonably possible, since the
Companys performance is subjected to impact of economic factors and many other
risk factors. In accordance with ASC 450, the Company is required to record a
charge to current operations. However, since the Company is unable to estimate
the chance of having the after-tax net income for the fiscal year ending
December 31, 2011 is less than the after-tax net income for the fiscal year
ending December 31, 2010 or those challenges stated above, the Company did not
disclose the estimated loss. The Company did not violate Guarantee B as of the
date of this report. Guarantee B did not provide the limitation to the maximum
potential future payments and it stated that the Company is required to pay
investors for violation of Guarantee B, liquidated damages, an amount equal to
that investors purchase price ($1,200,000) plus compound interest at a rate of
8%.
The Company also considered if the
guarantees were accounted for according to ASC 460. Pursuant to ASC
460-10-15-7-i, the guarantees discussed above were excluded from the ASC 460.
|
14
NOTE 17
|
DEFINED CONTRIBUTION RETIREMENT PLANS
|
|
|
|
As stipulated by the regulations of the PRC
government, companies operating in the PRC have defined contribution
retirement plans for their employees. The PRC government is responsible
for the pension liability to these retired employees. The Company was
required to make specified contributions to the state-sponsored retirement
plan based on the basic salary cost of their staff. Each of the employees
of the PRC subsidiaries is also required to contribute certain percentage
of his/her basic salary.
|
|
|
|
Contributions to defined contribution
retirement plan for the three months periods ended March 31, 2011 and 2010
were $62,747 and $35,937 respectively.
|
|
|
NOTE 18
|
RELATED PARTY TRANSACTIONS
|
|
|
|
As of March 31, 2011 and December 31, 2010,
certain stockholders owed the Company $0 and $52,821 respectively which
are unsecured, interest free and repayable on demand. These amounts were
advanced prior to the reverse merger and were fully repaid in January
2011.
|
|
|
|
As of March 31, 2011 and December 31, 2010, the
Company owed $76,218 and $0 respectively to two stockholders for advances
made on an unsecured basis, repayable on demand and interest free.
|
|
|
|
During the three months ended March 31, 2011
and 2010, total imputed interest expenses recorded as additional paid-in
capital amounted to $0 and $247 respectively.
|
|
|
NOTE 19
|
CONCENTRATIONS AND RISKS
|
|
|
|
As of March 31, 2011 and December 31, 2010,
100% of the Companys assets were located in the PRC and Hong Kong and
100% of the Companys revenues were derived from customers located in the
PRC.
|
|
|
|
As of March 31, 2011, financial instruments
which potentially expose the Company to concentrations of credit risk are
cash and cash equivalents. The Company performs ongoing evaluations of its
cash position and credit evaluations to ensure collections and minimize
losses.
|
|
|
|
Details of the suppliers accounting for
10% or more of the Company's purchases are as follows:
|
|
|
|
Supplier A
|
|
|
Supplier B
|
|
|
Supplier C
|
|
|
Supplier D
|
|
|
Supplier E
|
|
|
For the three months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
15%
|
|
|
13%
|
|
|
12%
|
|
|
0%
|
|
|
0%
|
|
|
March 31, 2010
|
|
0%
|
|
|
0%
|
|
|
0%
|
|
|
12%
|
|
|
11%
|
|
As of March 31, 2011, the total amount
owed to those suppliers was $34,418.
No single customer accounted for more
than 10% of the service revenue for the three months ended March 31, 2011 and
2010.
15
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Business Overview
Overview
We are a Nevada holding company operating in the cosmetology industry. Substantially all of our operations are conducted in China through BOAN, our wholly-owned subsidiary in China, and through our contractual arrangements with several of our
consolidated affiliated entities in China, including SHESAYS and its subsidiaries.
SHESAYS was established in May 2005 and specializes in cosmetology treatments, integrating medical treatment and education. At present, we have such core clinical departments as cosmetic surgery, cosmetic dermatology, cosmetic dentistry, cosmetic
Traditional Chinese Medicine (“TCM”). Services provided in cosmetic surgery include eye shaping, facial contour, rhinoplasty, face shaping, wrinkles elimination, breast surgery,
chiloplasty, liposuction slimming, ear reshaping,
gynecology / male plastic surgery. Cosmetic dermatology department provides services of laser depilation, acne/pock removal, facelift and wrinkle decrease of Cutera Titan, laser whitening, pore minimizing, skin rejuvenation etc. Cosmetic dentistry
includes the services of optical fluoride whitening, repair of uneven denture, porcelain teeth / cercon, orthodontic treatment, comfortable painless teeth cleaning, complex tooth extraction face-lift surgery, orthodontic caries-prevention and
correction for children, adult orthodontics invisible. Traditional Chinese Medicine, also known as TCM, is the medical theory and practices of Chinese culture, especially herbal medicine, acupuncture and osteopathy, for preventing or treating
illness, or promoting health and well-being. Cosmetic TCM is to use traditional Chinese medicine, such as acupuncture and moxibustion, to provide cosmetic service, such as to dispel freckle, lose weight, as well as to enhance the endocrine system.
The major difference of Chinese medicine from Western medicine is that it focuses on "health" rather than on "healing" because Chinese medicine promotes overall wellness of an individual, as opposed to the approach of Western medicine in treating
the symptoms of an illness.
Headquartered in Chengdu, Sichuan province, P.R. China, SHESAYS aims to expand its business outside of Chengdu. In 2010, SHESAYS established three new outpatient clinics in the cities of Yibin, Leshan and Zigong, Sichuan province, and is
constructing a new flagship store, a comprehensive cosmetology hospital in Chengdu.
For three months ended March 31, 2011, we generated revenues of $3,575,129, which represents a growth of 10.1% compared to $3,247,925 for three months ended March 31, 2010. This increase in revenue is attributed to our increased sale to the
existing and new customers in 2011. During the first quarter of 2011, 7,181 customers visited our hospital and clinics, compared to 7,296 in the first quarter of 2010, and we provided services to 4,620 and 4,285 customers in the first quarter of
2011 and 2010, respectively. Our net income decreased from $1,133,664 for the three months ended March 31, 2010 to $633,170 for the three months ended March 31, 2011, a 44.1% decline. The decrease in net income was mainly due to our
increased marketing efforts and expense related to maintenance cost of listing on OTCBB.
Our business operates in China and financial statements are denominated in Chinese Renminbi (RMB), but we report our financial results in our SEC filings in U.S. dollars. The conversion of our financial statements from RMB to U.S. dollars results in
translation adjustments, which are reported as a line item after net income and before comprehensive income. The net income is added to the retained earnings on our balance sheet; while the translation adjustment is added to a line item on our balance sheet labeled
accumulated other comprehensive income, because it is more reflective of
changes in the relative values of U.S. and Chinese currencies than of the
success of our business. For three months ended March 31, 2011 and 2010, we
recorded foreign currency translation gains of $15,720 and $399 respectively.
Results of Operations
Three Months Ended March 31, 2011, Compared to the Three
Months Ended March 31, 2010:
|
|
Three months ended
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
$
|
|
|
%
|
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
Change
|
|
Revenue
|
$
|
3,575,129
|
|
$
|
3,247,925
|
|
$
|
327,204
|
|
|
10.1%
|
|
Cost of revenue
|
|
929,473
|
|
|
732,458
|
|
|
197,015
|
|
|
26.9%
|
|
Gross profit
|
|
2,645,656
|
|
|
2,515,467
|
|
|
130,189
|
|
|
5.2%
|
|
Operation expenses
|
|
1,693,239
|
|
|
919,108
|
|
|
774,131
|
|
|
84.2%
|
|
Total other income (expenses)
|
|
(31,044
|
)
|
|
(57,575
|
)
|
|
26,531
|
|
|
-46.1%
|
|
Income from operations before tax
|
|
921,373
|
|
|
1,538,784
|
|
|
(617,411
|
)
|
|
-40.1%
|
|
Income tax expenses
|
|
297,542
|
|
|
405,120
|
|
|
(107,578
|
)
|
|
-26.6%
|
|
Net income attributable to SHESAYS stockholders
|
|
633,170
|
|
|
1,133,664
|
|
|
(500,494
|
)
|
|
-44.1%
|
|
Foreign currency translation gain
|
|
15,720
|
|
|
399
|
|
|
15,321
|
|
|
3,839.8%
|
|
Comprehensive income attributable to SHESAYS
stockholders
|
|
648,918
|
|
|
1,134,063
|
|
|
(485,145
|
)
|
|
-42.8%
|
|
Total Revenues
Total revenues for the three months ended March 31, 2011
increased by approximately $0.3 million or 10.1% to $3.6 million as compared to
$3.2 million for the three months ended March 31, 2010. Our revenue growth was
driven by continued efforts to attract new customers at three clinics in Leshan,
Yibin and Zigong. We did not increase our prices from period to period.
Compared to the same period of 2010, cosmetic surgery service
revenue increased 4.3% to $1.7 million, professional medical beauty service
revenue increased 19.1% to $1.6 million, cosmetic dentistry service revenue
decreased 80.5% to $27,509 and sales of goods increased 91.3% to $0.2 million.
We have been enhancing marketing of professional medical beauty service as well
as efforts on sales of goods which have higher year-over-year increases.
REVENUES
|
|
Three Months Ended March 31
|
|
|
|
2011
|
|
|
2010
|
|
|
Increase/
|
|
|
%
|
|
(in US dollars)
|
|
|
|
|
|
|
|
(Decrease)
|
|
|
Change
|
|
Cosmetic surgery services
|
$
|
1,693,758
|
|
$
|
1,623,430
|
|
$
|
70,328
|
|
|
4.3%
|
|
Professional medical beauty services
|
|
1,623,916
|
|
|
1,363,437
|
|
|
260,479
|
|
|
19.1%
|
|
Cosmetic dentistry services
|
|
27,509
|
|
|
140,853
|
|
|
(113,344
|
)
|
|
-80.5%
|
|
Sales of goods
|
|
229,946
|
|
|
120,205
|
|
|
109,741
|
|
|
91.3%
|
|
Total revenue
|
$
|
3,575,129
|
|
$
|
3,247,925
|
|
$
|
327,204
|
|
|
10.1%
|
|
For the first quarter of 2011, revenues of our current
headquarter hospital increased by 0.7% to $3.3 million, from $3.2 million in the
first quarter of 2010. Three new clinics launched in the second half of 2010
contributed approximately $0.3 million to revenues.
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
Location
|
|
|
|
|
|
|
|
|
|
|
|
|
Sichuan Shesays
|
$
|
3,269,864
|
|
|
91.5%
|
|
$
|
3,247,925
|
|
|
100.0%
|
|
Leshan Jiazhou Shesays
|
|
129,673
|
|
|
3.6%
|
|
|
-
|
|
|
-
|
|
Yibin Shesays
|
|
96,978
|
|
|
2.7%
|
|
|
-
|
|
|
-
|
|
Zigong Shesays
|
|
78,614
|
|
|
2.2%
|
|
|
-
|
|
|
-
|
|
Total revenue
|
$
|
3,575,129
|
|
|
100.0%
|
|
$
|
3,247,925
|
|
|
100.0%
|
|
Cost of Revenue
Our cost of revenue for the three months ended March 31, 2011
was $0.9 million, an increase of $0.2 million, or 26.9% from $0.7 million for
the three months ended March 31, 2010. The increase in cost of revenue in 2010
was due to the increase in customer service revenue. In addition, we had a
promotion for a specific medical beauty service during the first quarter of 2011
which has higher costs of revenue compared to other services. Cost of revenue as
a percentage of revenue increased from 22.6% to 26.0% as compared to the prior
comparative period due to cost of revenues for professional medical beauty
service increased by $0.2 million or 136.5% from $0.1 million to $0.3
million.
Gross Profit
Our gross profit for the three months ended March 31, 2011 was
$2.6 million, an increase of $0.1 million or 5.2% from $2.5 million for the
three months ended March 31, 2010. The increase in gross profit in the first
quarter of 2011 was due to the increase in total revenues. Our overall gross
profit margin as a percentage of revenue was 74.0% for the three months ended
March 31, 2011 compared to 77.4% of the same period of the previous year. The
gross margin was slightly lower in the first quarter of 2011 due to the increase
in costs of professional medical beauty service.
Operating Expenses
Our operating expenses increased by approximately $0.8 million
to $1.7 million for the three months ended March 31, 2011 from $0.9 million for
the same period of the previous year. This 84.2% increase was mainly
attributable to the increase in the expense associated with advertising
activities and professional and consultant fees related to the listing on OTCBB,
as well as pre-operating expenses of our new flagship hospital.
Other Income (Expense):
Other expense for the three months ended March 31, 2011 was
$31,044 compared to other expenses of $57,575 for the same period of the
previous year. The decrease was mainly due to the bank charges of $23,460 for
the load we secured in the first quarter of 2010.
Net Income attributable to the Company
As a result of the factors described above, we had net income
attributable to the Company
in the amount of $0.5 million for the
three months ended March 31, 2011, as compared with $1.1 million for the three
months ended March 31, 2010. The decrease in net income was mainly attributed to
the significant increase of operating expenses in the three months ended March
31, 2011.
Foreign currency translation gains
Our business operates primarily in Chinese Renminbi (RMB),
but we report our results in U.S. Dollars. The conversion of our accounts from
RMB to U.S. Dollars results in translation adjustments. As a result of a
currency translation adjustment gain, our other comprehensive income was $15,720
for the three months ended March 31, 2011, as compared with $399 for the three
months ended March 31, 2010. The increase is due to currency exchange
fluctuation of Chinese RMB to US Dollars for the period.
Comprehensive Income attributable to the common stockholders
As a result of the factors described above, we had
comprehensive income attributable to the common stockholders in the amount of
$0.6 million for the three months ended March 31, 2011, as compared with $1.1
million for the three months ended March 31, 2010.
Off-Balance Sheet Arrangements
There were no off-balance sheet arrangements during the three
months ended March 31, 2011, that have, or are reasonably likely to have, a
current or future affect on our financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
is material to our interests.
Liquidity and Capital Resources
As of March 31, 2011, we had cash and cash equivalents of $1.7
million. We had a working capital deficit of $1.8 million, that is, our current
assets were $2.9 million and our current liabilities were $4.7 million as of
March 31, 2011. Our net working capital deficit may initially raise substantial
doubt as to our ability to continue as a going concern. However, we believe that
our strong net cash flow from operating activities, cost reduction and delay on
capital expenditure will provide sufficient liquidity to finance our anticipated
working capital and capital expenditure requirements for the next 12 months.
Total stockholders' equity as of March 31, 2011 was $5.1
million. The following table provides detailed information regarding our net
cash flow for all financial statement periods presented in this report.
|
|
March 31,
|
|
(in US dollars)
|
|
2011
|
|
|
2010
|
|
Net cash provided by operating
activities
|
$
|
1,244,428
|
|
$
|
1,308,488
|
|
Net cash used in investing activities
|
|
(660,239
|
)
|
|
(1,216,492
|
)
|
Net cash provided by financing
activities
|
|
81,899
|
|
|
858,649
|
|
Effect of exchange rates on cash
|
|
(617
|
)
|
|
210
|
|
Net increase in cash and cash
equivalents
|
|
665,471
|
|
|
950,855
|
|
Cash and cash equivalents beginning of period
|
|
1,029,280
|
|
|
1,371,732
|
|
Cash and cash equivalents end of
period
|
|
1,694,751
|
|
|
2,322,587
|
|
Operating Activities
Cash provided by operating activities totaled $1.2 million for
the three months ended March 31, 2011 as compared with $1.3 million provided by
operating activities for the three months ended March 31, 2010. Compared with
the same period in 2010, the slight decrease in net cash provided by operating
activities was primarily due to the decrease in net income.
Investing Activities
Cash used in investing activities was $0.7 million for the
three months ended March 31, 2011 as compared to $1.2 million used for the three
months ended March 31, 2010. The decrease in cash used in investing activities
is mainly because we have decreased our investment in property and equipment in
the first quarter of 2011 by $0.2 million as compared to the first quarter of
2010, as well as a proceed from disposal of property and equipment of $129,171
in the first quarter of 2011.
Financing Activities
Cash provided in financing activities was $81,899 for the three
months ended March 31, 2011 as compared to $0.9 million provided by financing
activities for the three months ended March 31, 2010. The decrease was mainly
due to a bank loan of $0.9 million was secured in the first quarter of 2010
while there was no new bank loan obtained in the first quarter of 2011.
Based on our current operating plan, we believe that our
existing resources, including cash generated from operations, as well as bank
loans, will be sufficient to meet our working capital requirement for our
current operations. However, in order to fully implement our business plan and
continue our growth, we will require additional capital either from our
stockholders or from outside sources.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
|
CHINA SHESAYS MEDICAL COSMETOLOGY
INC.
|
|
|
Date: August 2, 2011
|
By:
/s/ Yixiang Zhang
|
|
Name: Yixiang Zhang
|
|
Title: Chief Executive Officer and
Chairman
|
|
|
Date: August 2, 2011
|
By:
/s/ Wenbin Zhu
|
|
Name: Wenbin Zhu
|
|
Title: Chief Financial Officer
|
China SheSays Medical Co... (GM) (USOTC:CSAY)
過去 株価チャート
から 5 2024 まで 6 2024
China SheSays Medical Co... (GM) (USOTC:CSAY)
過去 株価チャート
から 6 2023 まで 6 2024