-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IQmOzDqYdZ/a9q9XaWPL8AlZPC5/+SQElEsv6JdEKCQ/0pgA7OY2qw/ubkjP/ZKo 2yzN4MNakOogHtkCRYasoQ== 0001004878-08-000255.txt : 20081103 0001004878-08-000255.hdr.sgml : 20081103 20081103114413 ACCESSION NUMBER: 0001004878-08-000255 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20080930 FILED AS OF DATE: 20081103 DATE AS OF CHANGE: 20081103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Tongji Healthcare Group, Inc. CENTRAL INDEX KEY: 0001389518 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-GENERAL MEDICAL & SURGICAL HOSPITALS, NEC [8062] IRS NUMBER: 000000000 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 333-140645 FILM NUMBER: 081156564 BUSINESS ADDRESS: STREET 1: NO.5 BEIJI ROAD, NANNING, CHINA CITY: NANNING STATE: F4 ZIP: ----- BUSINESS PHONE: 0086-771-2020000 MAIL ADDRESS: STREET 1: NO.5 BEIJI ROAD, NANNING, CHINA CITY: NANNING STATE: F4 ZIP: ----- 10-Q/A 1 sep08amd10q11-08.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q/A [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2008 Or [ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 Commission File Number: None TONGJI HEALTHCARE GROUP, INC. Nevada None - ----------------------------------------------- ------------------ State or other jurisdiction of incorporation (I.R.S.) Employer Identification No. No.5 Beiji Road, Nanning, Guangxi, China Address of principal executive offices 0086-771-2020000 ------------------------ Registrant's telephone number, including area code N/A -------------------------- Former address of principal executive offices 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) had been subject to such filing requirements for the past 90 days. Yes ____X_____ No __________ Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check One): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] (Do not check if a smaller reporting company) Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act). Yes _____X____ No _________ - Class of Stock No. Shares Outstanding Date Common 15,812,391 October 31, 2008 TONGJI HEALTHCARE GROUP, INC. CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2008 (UNAUDITED) AND DECEMBER 31, 2007 September 30, December 31, 2008 2007 ------------- ------------- (UNAUDITED) (AUDITED) ASSETS Current Assets Cash and cash equivalents $ 17,219 $ 23,165 Accounts receivable, net 334,263 287,593 Due from related parties 462,483 1,516,026 Inventory, net 154,408 152,242 Prepaid expenses and other current assets 137,596 32,779 ---------- ------------ Total Current Assets $1,105,969 $2,011,805 Property, Plant and Equipment, net 4,097,467 2,148,801 Other Assets Capital lease deposit 154,641 143,945 -------------- ------------- TOTAL ASSETS $ 5,358,077 $ 4,304,551 ============== ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable and accrued expenses 408,876 418,368 Due to related parties 3,113,314 1,563,842 Other payable 230,980 161,350 Short term bank loan - 411,270 Deferred gain on sale & lease back 112,082 104,329 Capital lease obiligation-short term 337,424 293,394 ------------- ------------ Total Current Liabilities 4,202,676 2,952,554 Long Term Liabiliteis Capital lease obligation 434,507 642,968 Deferred gain on sale and lease back 130,763 199,964 ------------ ------------ Total Long Term Liabilities 565,270 842,932 ------------ ------------ Total Liabilities 4,767,946 3,795,486 STOCKHOLDERS' EQUITY Preferred stock; $0.001 par value, 20,000,000 shares authorized and 0 share issued and outstanding - - Common stock; $0.001 par value, 100,000,000 shares authorized and 15,812,391 5,813 5,653 and 15,652,557 shares issued and outstanding as of Sept 30, 2008 and Dec. 31, 2007 respectively 1 1 Additional paid in capital 424,967 347,347 Statutory reserve 1,812 41,812 41,812 Retained earnings 26,719 61,079 Accumulated other comprehensive income 80,820 43,174 ------------ ------------ Total Stockholders' Equity 590,131 509,065 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,358,077 $ 4,304,551 =========== ============ The accompanying notes are an integral part of these consolidated financial statements. F-2 TONGJI HEALTHCARE GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME FOR THE THREE MONTH PERIODS AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2008 AND 2007 (UNAUDITED) For the three month For the nine month periods ended periods ended September 30 September 30 ------------------ ---------------------- 2008 2007 2008 2007 ------------------ ---------------------- PATIENT SERVICE REVENUE $ 682,952 $ 618,998 $ 1,978,261 $1,623,439 Cost of Revenue 276,442 401,692 844,989 929,921 --------- --------- ----------- ---------- GROSS PROFIT 406,510 217,306 1,133,272 693,518 OPERATING EXPENSES Selling expenses 235,019 230,934 577,152 457,256 General and administrative expenses 44,359 27,899 147,911 111,825 Depreciation expenses 98,772 37,714 288,887 111,052 --------- --------- ----------- ---------- Total operating expenses 378,150 296,547 1,013,950 680,133 --------- --------- ----------- ---------- INCOME (LOSS) FROM OPERATIONS 28,360 (79,241) 119,321 13,385 OTHER EXPENSE Other expense (3,300) - (4,098) - Interest expense, net of income (50,756) (1,942) (141,668) (11,504) --------- --------- ----------- ----------- Total Other Expense (54,056) (1,942) (145,766) (11,504) --------- --------- ----------- ----------- INCOME (LOSS) BEFORE INCOME TAXES (25,696) (81,183) (26,444) 1,881 Provision for Income Taxes - - (7,916) (26,694) --------- --------- ----------- ----------- NET LOSS (25,696) (81,183) (34,360) (24,813) Foreign currency translation gain 5,355 5,077 37,646 15,141 --------- --------- ----------- ----------- COMPREHENSIVE INCOME (LOSS) $ (20,341) $(76,106) $ 3,286 $ (9,672) ========= ======== ========== ========== NET INCOME (LOSS) PER BASIC AND DILUTED SHARES $ (0.002) $ (0.005) $ (0.002) $ (0.002) ========= ======== ========== ========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OF OUTSTANDING 15,812,391 15,652,551 15,741,807 15,652,557 ========== ========== ========== ========== Weighted average number of shares for dilutive securities has not been taken since the effect of dilutive securities is anti-dilutive The accompanying notes are an integral part of these consolidated financial statements. F-3 TONJI HEALTHCARE GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2008 AND 2007 (UNAUDITED) 2008 2007 ------------- ------------- Cash flows from operating activities: Net income (loss) $ (34,360) $ (24,813) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 288,887 111,052 Change in assets and liabilities: (Increase) in accounts receivable (24,598) 82,734 Decrease in inventory 8,895 (27,145) (Increase) decrease in prepaid expense and other current assets (144,295) (3,102) (Decrease) in accounts payable and accrued expenses 64,163 17,552 (Decrease) in unearned revenue (81,738) - Increase in other payables 54,984 - --------- ---------- Total adjustment 166,299 181,091 --------- ---------- Net Cash Provided By Operating Activities 131,940 156,278 --------- ---------- Cash flows from investing activities: (Acquisitions) of fixed assets (25,818) (13,953) Payments for construction work in progress (2,002,603) - Decrease (increase) in due from related parties 1,178,713 (298,261) --------- ---------- Net Cash Used in Investing Activities (849,708) (312,214) --------- ---------- Cash flows from financing activities: (Payment) proceeds of note payable (429,620) 394,755 Issurance of stock 76,401 Payments toward capitalized leases (227,547) - Advances from (to) to related parties 1,291,079 (225,124) --------- ---------- Net Cash Provided by Financing Activities 710,314 169,631 --------- ---------- Effects of foreign currency translation 1,508 5,084 --------- ---------- Net Increase (decrease) in Cash and Cash Equivalents (5,946) 18,779 Cash and Cash Equivalents-Beginning of Period 23,165 16,065 --------- ---------- Cash and Cash Equivalents-Ending of Period $ 17,219 $ 34,844 ========= ========= Cash Paid During the Year for: Income taxes $ 7,916 $ - ========= ========= Interest paid $ 84,015 $ 3,891 ========= ========= The accompanying notes are an integral part of these consolidated financial statements. F-4 TONGJI HEALTHCARE GROUP, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY(UNAUDITED) FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2008 AND THE YEARS ENDED DECEMBER 31, 2007,2006 AND 2005 Accumulated Additional Other Total Number Common Paid In Subscription Statutory Retained Comprehensive Shareholders' of Shares Stock Capital Receivable Reserve Earning Income Equity ---------- ------- ---------- ------------ --------- -------- ------------- ------------ Balance December 31, 2005 3,000,000 363,000 - - (130,990) 3,295 235,305 Shares cancelled in merger with Tongji, Inc. (3,000,000) (363,000) - - - - (363,000) Shares issued in reverse merger with Tongji Healthcare Group, Inc. 15,652,557 15,653 347,347 - - - 363,000 Allocation of statutory reserves - - - 36,848 (36,848) - - Net income for the year ended December 31, 2006 - - - - 184,242 7,009 191,251 ---------- ------ ------- -------- -------- -------- ------- -------- Balance December 31, 2006 15,652,557 15,653 347,347 - 36,848 16,404 10,304 426,556 Transfer of statutory reserves - - - 4,964 (4,964) - - Net income for the year ended December 31, 2007 - - - - - 32,870 - ---------- ------ ------- -------- -------- -------- ------- -------- Balance December 31, 2007 15,652,557 $15,653 $347,347 $ - $ 41,812 $ 61,079 $43,174 $509,065 Shares issued for cash 177,834 178 77,602 77,780 Shares cancelled (18,000) (18) 18 0 Transfer of statutory reserves - - - - - Net income for the nine months period ended September 30, 2008 - - - (34,360) 37,646 3,286 ---------- ------- ------- -------- -------- -------- -------- -------- Balance September 30, 2008 15,812,391 $15,813 $424,967 $ - $ 41,812 $ 26,719 $ 80,820 $590,131 ========== ======= ======== ======== ======== ======== ======== ========
The accompanying notes are an integral part of these unaudited consolidated financial statements. F-5 TONGJI HEALTHCARE GROUP, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2008 AND 2007 NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION Nanning Tongji Hospital, Inc. ("NTH") was established in Nanning in the province of Guangxi of the Peoples Republic of China ("PRC") by the Nanning Tongji Medical Co. Ltd. and an individual on October 30, 2003. NTH is an assigned hospital for medical insurance in Nanning and Guangxi. NTH contains specialties in the areas of internal medicine, surgery, gynecology, pediatrics, emergency medicine, ophthalmology, medical cosmetology, rehabilitation, dermatology, otolaryngology, traditional Chinese medicine, medical imaging, anesthesia, acupuncture, physical therapy, health examination, and prevention. On December 19, 2006, the officers of NTH filed Articles of Incorporation in the State of Nevada which was approved December 19, 2006 to create Tongji Healthcare Group, Inc. a Nevada corporation (the "Company") and also established Tongji, Inc., a Colorado corporation ("Tongji") a wholly owned subsidiary of the Company. On December 27, 2006, Tongji acquired 100% of the equity in NTH pursuant to an Agreement and Plan of. Pursuant to the acquisition of NTH, it became the wholly owned subsidiary of Tongji. The Company incorporated with 50,000,000 shares of common stock and 20,000,000 shares of preferred stock both with a par value of $0.001. The Company issued 15,652,557 shares of common stock to the shareholders of NTH in exchange for 100% of the issued and outstanding shares of NTH. Thereafter and for purposes of these consolidated financial statements the "Company" and "NTH" are used to refer to the operations of Nanning Tongji Hospital Co. Ltd. The acquisition of NTH was accounted for as a reverse acquisition under the purchase method of accounting since the shareholders of NTH obtained control of the consolidated entity. Accordingly, the reorganization of the two companies was recorded as a recapitalization of NTH, with NTH being treated as the continuing operating entity. According to the PRC Regulation of Healthcare Institutions, hospitals shall be subject to register with the Administration of Health of the local government to obtain their license for hospital service operation. The Company received its renewed operation license from Nanning's government in May of 2005, and this license remains valid until the next scheduled renewing date of May 2009. Other existing regulations having material effects on the Company's business include those dealing with physician's licensing, usage of medicine and injection, public security in health and medical advertising. As the Company maintains a facility with an excess of 100 beds, it must have its license renewed at least every three years. The Company is also obligated to provide free service or dispatch their physicians or employees for public assistance. The Company has a very small percentage of its service for this area. F-6 NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods are not necessarily indicative of the results for any future period. These statements should be read in conjunction with the Company's audited financial statements and notes thereto for the fiscal year ended December 31, 2007. The results of the nine month periods ended September 30, 2008 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2008. Principles of Consolidation The consolidated financial statements include the accounts of Tongji Healthcare Group, Inc. and its wholly owned subsidiaries Tongji, Inc. and Nanning Tongji Hospital, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, the Company evaluates its estimates, including, but not limited to, those related to depreciation, bad debts, income taxes and contingencies. Actual results could differ from those estimates. Foreign Currency Translation The Company's functional currency is that of the PRC which is the Chinese Renminbi (RMB). The reporting currency is that of the US Dollar. Capital accounts of the consolidated financial statements are translated into United States dollars from RMB at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of the balance sheet date. Income and expenditures are translated at the average exchange rate of the year. The RMB is not freely convertible into foreign currency and all foreign currency exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US dollar at the rates used in translation. The Company records these translation adjustments as accumulated other comprehensive income (loss). Gains and losses from foreign currency transactions are included in other income (expense) in the results of operations. For the nine month periods ended September 30, 2008 and 2007, the Company recorded approximately $37,646 and $15,141 in transaction gains as a result of currency translation. Revenue Recognition The Company's revenue recognition policies are in compliance with Staff Accounting Bulletin (SAB) 104. Sales revenue is recognized at the date of shipment to customers or services has been rendered when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other F-7 significant obligations of the Company exist and collectibility is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. The Company generates revenue from the individuals as well as third-party payers, including PRC government programs and insurance providers, under which the hospital is paid based upon several methodologies including established charges, the cost of providing services, predetermined rates per diagnosis, fixed per diem rates or discounts from established charges. Revenues are recorded at estimated net amounts due from patients, third-party payers and others for healthcare services provided at the time the service is provided. Revenues for pharmaceutical drug sales are recognized upon the drug being administered to a patient or at the time a prescription is filled for a patient that contain an executed prescription slip by a registered physician. Revenues are recorded at estimated net amounts due from patients and government Medicare funds. The Company's accounting system calculates the expected amounts payable by the government Medicare funds. The Company bills for services provided to Medicare patients through a medical card (the US equivalent to an insurance card). The Company normally receives 90% of the billed amount within 90 days with the remaining 10% upon approval by the end of the year by the PRC government. However, there have not been significant differences between the amounts the Company bills the government Medicare funds and the amounts collected from the Medicare funds. Accounts Receivable Accounts receivable are recorded at the estimated net realizable amounts from government units, insurance companies and patients. Generally, the third-party payers reimburse the Company on a 30-day cycle, so collections for the Company has historically not been considered to be an area that exposes the Company to additional risk. Hospital staff does perform verification of patient coverage prior to examinations and/or procedures taking place. For any Medicare patient who visits the hospital that is qualified for acceptance, the hospital will only include the portion that the social insurance organization in the accounts receivable and collects the self-pay portion in cash at the time of the service. At times, the pre-determined rate the hospital F-8 will charge may be different than the approved Medicare rate, thus the likelihood of some bad debt can occur. Management continues to evaluate this estimate on an ongoing basis. The Company has established a reserve for uncollectibles of $58,603 and $54,549 as of September 30, 2008 and December 31, 2007. Prepaid expenses and other current assets Prepaid expenses and other current assets consisted of the following as of September 30, 2008 and December 31, 2007: September 30, 2008 December 31,2007 Other receivable $109,585 $935 Advance to suppliers 28,011 31,844 ---------- ------ Total $137,596 $32,779 Advertising Costs The Company expenses the costs associated with advertising as incurred. Advertising expenses for the nine month periods ended September 30, 2008 and 2007 of $165,850 and $289,466, respectively are included in selling and promotional expenses in the statements of income. Advertising costs include marketing brochures and an advertising campaign to the public. Earnings (Loss) Per Share of Common Stock Earnings per share is calculated in accordance with the Statement of financial accounting standards No. 128 (SFAS No. 128), "Earnings per share". SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15). Net loss per share for all periods presented has been restated to reflect the adoption of SFAS No. 128. Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. The Company has not granted any options or warrants during 2008 or 2007, and there are no options or warrants outstanding as of September 30, 2008 and December 31, 2007. Income Taxes The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which F-9 the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. In accordance with the relevant tax laws and regulations of PRC and US, the corporation income tax rate would typically be 33% in the PRC. The Company has received a waiver (duty free certificate) from the taxing authorities in the PRC for corporate enterprise income tax for the year ended 2004 through 2006. Effective 2007, the Company will be taxed at the rate of 33%. Beginning January 1, 2008, the new Enterprise Income Tax (EIT) law will replace the existing laws for Domestic Enterprises (DES) and Foreign Invested Enterprises (FIEs). The new standard EIT rate of 25% will replace the 33% rate currently applicable to both DES and FIEs. In addition, companies in the PRC are required to pay business taxes consisting of 5% of income they derive from providing medical treatment and city construct taxes, and educational taxes are based on 7% and 3% of the business taxes, and the Company had accrued these taxes for 2005. The Company has received notification that they are exempt from these taxes for the years ending 2006 through 2008. Segment Information Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure About Segments of an Enterprise and Related Information" requires use of the "management approach" model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. SFAS 131 has no effect on the Company's consolidated financial statements as the Company consists of one reportable business segment. All revenue is from customers in People's Republic of China. All of the Company's assets are located in People's Republic of China. Recent Accounting Pronouncements In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements", which is an amendment of Accounting Research Bulletin ("ARB") No. 51. This statement clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This statement changes the way the consolidated income statement is presented, thus requiring consolidated net income to be reported at amounts that include the amounts attributable to both parent and the noncontrolling interest. This statement is effective for the fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Based on current conditions, the Company does not expect the adoption of SFAS 160 to have a significant impact on its results of operations or financial position. In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations." This statement replaces FASB Statement No. 141, "Business Combinations." This statement retains the fundamental requirements in SFAS 141 F-10 that the acquisition method of accounting (which SFAS 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This statement defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. This statement requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the statement. This statement applies prospectively to 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, 2008. The Company does not expect the adoption of SFAS 160 to have a significant impact on its results of operations or financial position. In March, 2008, the FASB issued FASB Statement No. 161, "Disclosures about Derivative Instruments and Hedging Activities". The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The new standard also improves transparency about the location and amounts of derivative instruments in an entity's financial statements; how derivative instruments and related hedged items are accounted for under Statement 133; and how derivative instruments and related hedged items affect its financial position, financial performance, and cash flows. FASB Statement No. 161 achieves these improvements by requiring disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also provides more information about an entity's liquidity by requiring disclosure of derivative features that are credit risk-related. Finally, it requires cross-referencing within footnotes to enable financial statement users to locate important. Based on current conditions, the Company does not expect the adoption of SFAS 161 to have a significant impact on its results of operations or financial position. In May 0f 2008, FSAB issued SFASB No.162, The Hierarchy of Generally Accepted Accounting Principles. The pronouncement mandates the GAAP hierarchy reside in the accounting literature as opposed to the audit literature. This has the practical impact of elevating FASB Statements of Financial Accounting Concepts in the GAAP hierarchy. This pronouncement will become effective 60 days following SEC approval. The company does not believe this pronouncement will impact its financial statements. In May of 2008, FASB issued SFASB No. 163, Accounting for Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No. 60. The scope of the statement is limited to financial guarantee insurance (and reinsurance) contracts. The pronouncement is effective for fiscal years beginning after December 31, 2008. The company does not believe this pronouncement will impact its financial statements. F-11 NOTE 3- PROPERTY & EQUIPMENT Property & equipment as of September 30, 2008 and December 31, 2007 comprised of following: Estimated September 30, December 31, Useful Lives 2008 2007 (Years) Office equipment 5-10 $ 80,043 $ 67,652 Medical equipment 5 1,091,856 994,968 Fixtures 10 107,077 103,172 Vehicles 5 41,008 38,171 Construction in progress 3,221,550 1,081,640 --------- ---------- 4,541,534 2,285,603 Less: accumulated depreciation (444,067) (136,802) --------- --------- Property and equipment, net $4,097,467 $2,148,801 ========== ========== Depreciation expense charged to operations was $288,887 and $111,052 for the nine month periods ended September 30, 2008 and 2007, respectively. NOTE 4- INVENTORIES Inventories consisted of the following as of September 30, 2008 and December 31, 2007: September 30, 2008 December 31,2007 Western medicine $ 4,392 $141,082 Traditional Chinese medicine 150,016 11,160 ------- -------- Total $154,408 $152,242 NOTE 5- CAPITAL LEASE OBLIGATIONS: Lease Deposit The lease deposit as September 30, 2008 and December 31, 2007 were $154,641 and $143,945 respectively. It is due on November 2010. Deferred Gain on sale and lease back The total gain on sale and lease back was $336,246. According to SFAS 13 "Accounting for Leases" this gain is deferred and amortized over the Lease term. Accordingly, $81,738 and $0 were amortized for the nine month periods ended September 30, 2008 and 2007 respectively. F-12 The deferred revenue outstanding as of September 30, 2008 and December 31, 2007 were as follows: September 30, 2008 December 31, 2007 Current $ 112,082 $104,329 Long term 130,763 199,964 ---------- -------- $242,845 $304,293 ---------- -------- Capital Lease Obligations In 2007, the Company leased various equipments under capital leases expiring in 2010. The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. The assets are depreciated over the lesser of their related lease terms or their estimated productive lives. Depreciation of assets under capital leases was included in depreciation expense for the nine month periods ended September 30, 2008. Aggregate minimum future lease payments under capital leases for next five years after September 30, 2008 are as follows: 1 year after September 30, 2008 $ 393,981 2 year after September 30, 2008 393,981 3 year after September 30, 2008 65,663 ---------- Total $ 853,625 =========== Capital lease obligations represent the following at September 30, 2008 and December 31, 2007: September 30, December 31, 2008 2007 -------------- ------------ Total minimum lease payments $ 853,624 $ 1,069,623 Less : Interest expense relating to future periods 81,693 (133.261) ----------- ----------- Present value of the minimum lease payments 771,931 936,362 Less: current portion 337,424 293,394 ---------- ----------- Non-current portion $ 434,507 $ 642,968 =========== =========== Following is a summary of fixed assets held under capital leases at September 30, 2008 and December 31, 2007: September 30, December 31, 2008 2007 -------------- ------------ Medical Equipment $ 1,030,943 $ 959,630 Less: accumulated depreciation (291,360) (27,959) ------------ ------------ Net 739,583 931,671 ------------ ------------ F-13 NOTE 6- OTHER PAYABLE Other payable as of September 30, 2008 and December 31, 2007 consists of the following: September 30, December 31, 2008 2007 ------------ ------------- Advance from customers $ 6,041 $ 17,325 Welfare payable 84,565 78,873 Other payable 140,374 65,152 --------- ---------- Total $ 230,980 $ 161,350 ========= ========= NOTE 7- STOCKHOLDERS' EQUITY Common Stock As of September 30, 2008 and December 31, 2007, the Company has 100,000,000 shares of common stock authorized with a par value of $0.001. During the period ended September 30, 2008, the company issued 177,834 shares for $77,780.and cancelled 18,000 previously issued shares as such shares were issued in error. The Company has not granted any options or warrants during 2008 or 2007, and there are no options or warrants outstanding as of September 30, 2008 and December 31, 2007. Preferred Stock As of September 30, 2008 and December 31, 2007, the Company has 20,000,000 shares of preferred stock authorized with a par value of $0.001. There are no shares issued and outstanding. Statutory Reserves As stipulated by the Company Law of the People's Republic of China (PRC), net income after taxation can only be distributed as dividends after appropriation has been made for the following: i. Making up cumulative prior years' losses, if any; ii. Allocations to the "Statutory surplus reserve" of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company's registered capital; F-14 iii. Allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Company's "Statutory common welfare fund", which is established for the purpose of providing employee facilities and other collective benefits to the Company's employees; and iv. Allocations to the discretionary surplus reserve, if approved in the stockholders' general meeting. Pursuant to the new Corporate Law effective on January 1, 2006, there is now only one "Statutory surplus reserve" requirement. The reserve is 10 percent of income after tax, not to exceed 50 percent of registered capital. The Company did not appropriate reserve for the statutory surplus reserve for the nine month periods ended September 30, 2008, and 2007. NOTE 8- PROVISION FOR INCOME TAXES In accordance with the relevant tax laws and regulations of PRC, the corporate income tax rate is 25%. As noted, the corporate income tax for 2004 through 2006 was 0% due to the Company's receipt of a waiver (tax relief) from the PRC government as they acquired a previous government-owned hospital and privatized it and improved it. Commencing, 2008, the corporate tax rate will be 25%. Income tax for the nine month periods ended September 30, 2008 and 2007 is summarized as follows: 2008 2007 ------------------------- U.S. Federal and State Current $ - $ - U.S. Federal and State Deferred - - PRC - Current 7,916 26,694 -------- --------- PRC - Deferred - - -------- --------- Less: Valuation allowance - - -------- --------- Income tax expense (benefit) $ 7,916 $ 26,694 ======== ========= F-15 A reconciliation of the effective income tax rate is as follows: 2008 2007 ----- ----- Tax at U.S. Federal rate 34% 34% U.S. tax exemption (34)% (34)% ------- ----- 0% 0% PRC Tax rate 25% 33% Valuation allowance - - Current tax provision 25% 33% The Company does not have any significant deferred tax asset or liabilities in the PRC tax jurisdiction as of September 30, 2008. NOTE 9- RELATED PARTY TRANSACTIONS Due from/to Related Party The Company has entered into agreements with Nanning Tongji Chain Pharmacy Co. Ltd. and Guangxi Tongji Medicine Co. Ltd. whereby the Company from time to time will advance amounts to assist them in their operations. The three companies have common major shareholders. The advanced amounts accrue interest at a rate of 6% per annum. The amount of receivable as of September 30, 2008 and December 31, 2007 were $416,467 and $1,516,026. Interest incomes for the nine month periods ended September 30, 2008 and 2007 were $46,015and $23,685, respectively. The Company has entered into an agreement with the Chairman and the shareholder of the Company whereby the Company from time to time will be advanced amounts to assist them in their operations. The advanced amounts accrue interest at a rate of 6% per annum. As of September 30, 2008 and December 31, 2007, $3,007,837, and $1,563,842 were payable to their Chairman, shareholder and Guangxi Tongji Medicine Co. Ltd. respectively. Interest expenses for the nine month periods ended September 30, 2008 and 2007 were $105,478 and $78,491, respectively. Rental The Company has entered into a lease agreement for their hospital with Guangxi Tongji Medicine Co. Ltd that expires December 2008. Monthly rentals are 16,438.86 per month (RMB). Based on the exchange rate at September 30, 2008, minimum future lease payments are as follows: 1 year after September 30, 2008 $7,263 F-16 NOTE 10 - MAJOR CUSTOMERS AND SUPPLIERS The Company had three suppliers that accounted for 60%, 16% and 13% of purchase for the nine month periods ended September 30, 2008. Accounts payable from these major suppliers were $0, $47,217 and $26,195 as of September 30, 2008. The Company did not have any major customers for the nine month periods ended September 30, 2008 as the customers are mostly patients. F-17 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATION You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our financial statements and the related notes included elsewhere in this filing. Our financial statements have been prepared in accordance with U.S. GAAP. In addition, our financial statements and the financial data included in this filing reflect our reorganization and have been prepared as if our current corporate structure had been in place throughout the relevant periods. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. Overview We were organized as a Nevada corporation on December 19, 2006. On December 27, 2006 we issued 15,652,557 shares of our common stock to acquire all outstanding shares of Nanning Tongji Hospital Co., Ltd., which we refer to as "Tongji Hospital," a PRC company which was formed in October 30, 2003. The purpose of the transaction was to redomicile us as a Nevada corporation. Unless otherwise indicated, all references to us throughout this filing include the operations of Tongji Hospital. Our critical accounting policies, as well as recent accounting pronouncements which apply to us, are described in Note 2 to our financial statements which are included as part of this prospectus. Results of Operation Material changes of items in our Statement of Operations for the three and nine month periods ended September 30, 2008, as compared to the nine month periods ended September 30, 2007, are discussed below: Patient Service Revenue: The increase in revenues was the result of more patients being treated by our hospital, due to our increased reputation as being a preferred provider of health care services in the region, and a change in our patient mix Generally, we receive greater revenue from an inpatient, as opposed to an outpatient, due to the length of the stay and the services provided to an inpatient. Gross profit: Our gross profit, as a percentage of our gross revenue, was 57% during the nine month period ended September 30, 2008, as compared to our gross profit percentage of 43% during nine month period ended September 30, 2007. Operating Expenses: Selling expenses increased mainly because the salary expense was recorded as selling expense in 2008 but was recorded as cost of revenue in 2007. Also we spent more amounts on repairing our medical equipment. General and administrative expenses increased due to increased professional fees. Depreciation, amortization expenses increased mainly due to the depreciation and amortization of new leased medical equipments. 1 Trends, Events and Uncertainties The China Ministry of Health, as well as other related agencies, has proposed changes to the prices we can charge for medical services, drugs and medications. We cannot predict the impact of these proposed changes since the changes are not fully defined and we do not know whether those proposed changes will ever be implemented or when they may take effect. In accordance with the relevant laws and regulations of PRC our income tax rate would typically be 33%. However we have received a waiver from the taxing authorities in the PRC for corporate income tax for the years ended 2004, 2005 and 2006. Beginning in 2007, we are taxed at the normal rate of 33%. Commencing 2008, the corporate income tax rate is 25%. In addition, we would normally be required to pay a business tax of 5% of the income derived from providing medical treatment plus city construction and educational taxes equal to 7% and 3% respectively, of the business tax. We are exempt from these taxes for 2006, 2007 and 2008. Other than the factors listed above we do not know of any trends, events or uncertainties that have had or are reasonably expected to have a material impact on our net sales or revenues or income from continuing operations. Our business is not seasonal in nature. Accounting Estimates In the United States most hospitals have contracts with health insurance companies which provide that patients with health insurance will be charged reduced rates for healthcare services. Reduced rates are also charged for Medicare and Medicaid patients. Although the patient is billed for the services provided by the hospital at the higher rate normally charged to patients without insurance the amount billed is reduced by the charges paid by the insurance carrier and by the difference (sometimes known as the "contractual allowance") between the normal rate for the services and the reduced rate which the hospital estimates it will receive from Medicare, Medicaid and insurance companies. 2 For financial reporting purposes, hospitals in the United States record revenues based upon established billing rates less adjustments for contractual allowances. Revenues are recorded based upon the estimated amounts due from the patients and third-party payers, including federal and state agencies (under the Medicare and Medicaid programs) managed care health plans, health insurance companies, and employers. Estimates of contractual allowances under third-party payer arrangements are based upon the payment terms specified in the related contractual agreements. Third-party payer contractual payment terms are generally based upon predetermined rates per diagnosis, per diem rates, or discounted fee-for-service rates. Due to the complexities involved in determining amounts ultimately due under reimbursement arrangements with a large number of third-party payers, which are often subject to interpretation, the reimbursement actually received by U.S. hospitals for health care services is sometimes different from their estimates. The medical system in China is different than that in the United States. Private medical insurance is not generally available to the Chinese population and as a result services and medications provided by our hospital are usually paid for in cash or by the Medicare agencies of the Nanning municipal government and the Guangxi provincial government. Our billing system automatically calculates the reimbursements to which we are entitled based upon regulations promulgated by the Medicare agencies. We bill the Medicare agencies directly for services provided to patients coved by the Medicare programs. Since we bill the Medicare agencies directly, our gross revenues are not reduced by contractual allowances. Since we only deal with the Nanning municipal and the Guangxi provincial Medicare agencies we are familiar with their regulations pertaining to reimbursements. As a result, there is normally no material difference between the amounts we bill and the amounts we receive for services provided to Medicare patients. Liquidity and Capital Resources Our material sources and (uses) of cash during the nine month period ended September 30, 2008 and 2007 were presented as follows: 2008 2007 ---- ---- Cash provided by operations $ 131,940 $156,278 Collections from (advances to) related parties 1,178,713 (298,261) Construction costs of new hospital and cost of new medical equipment (2,002,603) - Payments of Notes Payable (429,620) - Loan from third parties - 394,755 Payments toward capitalized leas obligations (227,547) - Advances(from (to) related parties 1,291,079 (225,124) 3 Future payments due on our material contractual obligations as of September 30, 2008 are as follows: Item Total 2009 2010 2011 Thereafter Capital Leases $853,625 $393,981 $393,981 $65,663 - Except as shown above, as of September 30, 2008 we did not have any material capital requirements. Virtually all of our accounts receivable at September 30, 2008 were due from the Nanning and Guangxi Medicare agencies. The age of our accounts receivable as of September 30, 2008 and December 31, 2007 is shown below: September 30, 2008 December 31, 2007 Less than 30 days old 26% 37% 31 to 60 days old 25% 26% 61 to 90 days old 24% 21% Over 90 days old 24% 16% A receivable is recorded as a bad debt and is written off if it is more than 90 days old and we consider it to be uncollectible. During the nine month periods ended September 30, 2008 and 2007 we did not write off any bad debts. Income from our operations has been, and is expected to be in the future, our primary source of cash. We do not have any off-balance sheet items reasonably likely to have a material effect on our financial condition. ITEM 4T. CONTROLS AND PROCEDURES Yun-Hui Yu, our Principal Executive Officer, and Wei-Dong Huang, our Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report; and in their opinion our disclosure controls and procedures were effective. Our management is responsible for establishing and maintaining adequate internal control over financial reporting as required by Sarbanes-Oxley (SOX) Section 404.A. Our internal control over financial reporting is a process designed under the supervision of its Chief Executive and Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with Generally Accepted Accounting Principles. As of the end of the period covered by this report, our management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based on that evaluation, our management concluded that during the period covered by this report our internal controls and procedures were effective. 4 There were no changes in our internal controls over financial reporting that occurred during the quarter ended September 30, 2008 that have affected, or are reasonably likely to materially affect, our internal control over financial reporting. PART II OTHER INFORMATION Item 6. Exhibits Exhibit Number Exhibit Name 31 Rule 13a-14(a) Certifications 32 Section 1350 Certifications 5 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TONGJI HEALTHCARE GROUP, INC. October 31, 2008 By: /s/ Yun-hui Yu ------------------------------ Yun-hui Yu, Principal Executive Officer October 31, 2008 By: /s/ Wei-dong Huang ------------------------------ Wei-dong Huang, Principal Financial and Accounting Officer EX-31 2 sep08amd10q11-08ex31.txt EXHIBIT 31 CERTIFICATIONS I, Yun-hui Yu, certify that: 1. I have reviewed this quarterly report on Form 10-Q/A of Tongji Healthcare Group, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have significant role in the registrant's internal control over financial reporting. October 31, 2008 /s/ Yun-hui Yu ------------------------------ Yun-hui Yu, Principal Executive Officer CERTIFICATIONS I, Wei-dong Huang, certify that: 1. I have reviewed this quarterly report on Form 10-Q/A of Tongji Healthcare Group, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have significant role in the registrant's internal control over financial reporting. October 31, 2008 /s/ Wei-dong Huang ------------------------------------ Wei-dong Huang, Principal Financial Officer EX-32 3 sep08amd10q11-08ex32.txt EXHIBIT 32 In connection with the Quarterly Report of Tongji Healthcare Group, Inc. (the "Company") on Form 10-Q/A for the period ended September 30, 2008 as filed with the Securities and Exchange Commission (the "Report"), Yun-hui Yu, the Company's Principal Executive Officer and Wei-dong Huang, the Company's Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of their knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects the financial condition and results of the Company. TONGJI HEALTHCARE GROUP, INC. October 31, 2008 By: /s/ Yun-hui Yu -------------------------------- Yun-hui Yu, Principal Executive Officer October 31, 2008 By: /s/ Wei-dong Huang ------------------------------- Wei-dong Huang, Principal Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----