TONGJI HEALTHCARE GROUP, INC. – 10-Q – Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and the related condensed notes included elsewhere in this report. Our financial statements have been prepared in accordance with U.S. GAAP. 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
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. We treated NTH as the continuing operating entity.
<p>NTH was established in
NTH is a designated hospital for medical insurance in both
According to the PRC Regulation of Healthcare Institutions, hospitals are required to register with the health department of the local government to obtain business license for hospital services. We received our renewed business license from
We must register with and maintain an operating license from the local health department due to the fact that we currently maintain a facility with over 100 beds. We are subject to review by the local health department at least once every three years. If we fail to meet their standards, our business license may be revoked. We are also obligated to provide free services or dispatch our physicians or other employees in the event of a need for public assistance. We dedicate a very small percentage of our resources to providing public services.
We have two sources of operating revenues: in-patient service revenues and out-patient service revenues. In addition to providing services to our patients, we also sell pharmaceutical drugs to our patients. Revenues from such sales are included in either our in-patient service revenues or our out-patient service revenues. Our revenues come from individuals as well as third-party payers, including PRC government programs and insurance providers, under which the hospital is paid based upon the rates established by the local government. Revenues are recorded at estimated net amounts due from patients or third-party payers. Revenues from pharmaceutical drug sales are recognized upon the drug being administered to a patient or at the time a prescription by a registered physician is filled.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued
Patient revenues are recorded based on pre-established rates set by the local government. The Company bills for services provided to
We had two major suppliers for the six month period ended
We had one major customer for the six month period ended
Difference in the Medical System between the U.S. and
In
For financial reporting purposes, hospitals in
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 the PRC is different from that in
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued
Since we only deal with the
Results of Operation - Three months ended
Material changes of items in our Statement of Operations for the three months ended
Operating Revenue - Operating revenue for the three month period ended
Operating Expenses - Operating expenses were
Income from Operations - Operating income was
Interest Expense - Interest expense for the three-month period ended
Net Loss - As a result of the forgoing, the Company had a net loss of
Results of Operation - Six months ended
Material changes of items in our Statement of Operations for the six months ended
Operating Revenue - Operating revenue for the six month period ended
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued
Operating Expenses - Operating expenses were
Loss from Operations - Operating loss was
Interest Expense - Interest expense for the six month period ended
Net Loss - As a result of the forgoing, the Company had a net loss of
Trends, Events and Uncertainties
We are in the process of building a new 600-bed hospital building in
We plan to acquire other hospitals and companies involved in the healthcare industry in the PRC using cash and shares of our common stock. Substantial capital may be needed for these acquisitions and we may need to raise additional funds through the sale of our common stock, debt financing or other arrangements. We do not have any commitments or arrangements from any person to provide us with any additional capital. Additional capital may not be available to us, or if available, on acceptable terms, in which case we would not be able to acquire other hospitals or businesses in the healthcare industry.
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.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued
Accounting Estimates
In
For financial reporting purposes, hospitals in
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 the PRC is different from that in
Since we only deal with the
Liquidity and Capital Resources
We generally finance our operations through our operating profits and borrowings from related parties. As of the date of this report, we have not experienced any difficulty in raising funds from related parties, and we have not experienced any liquidity problems in settling our payables in our ordinary course of business. We believe that we have adequate funds and capital with respect to conducting its business over the next twelve months.
The following shows our material sources and (uses) of cash during the six month periods ended
2013 2012 Cash provided by (used in) operating activities$ (32,194) $ 203,914 Cash (used in) investing activities$ (465,421) $ (1,628,965) Cash provided by financing activities$ 445,855 $ 1,425,698 25
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued
The Company carefully monitors and controls the amount of cash used to fund operating activities. However, substantial funds are required to fund the construction costs on the new hospital building and a lawsuit settlement (see Note 5 to the Financial Statements accompanying this Report). Financing of operations has come primarily from advances from related parties. We are dependent on related parties to provide working capital and pay our management team until such time as our operations are profitable. There can be no assurances that related parties will continue to provide additional capital. Without additional capital, we may be forced to cease operations and liquidate.
Operating Activities
Net cash used in operating activities primarily consists of net loss, as adjusted by depreciation, stock option, and changes in operating assets and liabilities such as accounts receivable, medical supplies, capital lease deposits, prepaid expense and other current assets, accounts payables and accrued liabilities , and other payables.
Net cash used in operating activities was
Investing Activities
Net cash used in investing activities primarily consists of acquisition of equipment and purchases of construction in progress.
Net cash used in investing activities was
Financing Activities
Net cash provided by financing activities primarily consists of proceeds from related party loans.
Net cash provided by financing activities was
Working Capital
Working capital is current liabilities deducted from current assets.
Our working capital was negative
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued
Rental Commitments
The Company has entered into a lease agreement for its hospital building with
Related Party Non-Related Party Total 1-5 years$ 47,875 $ 2,309,609$ 2,357,484 6-10 years - 2,952,740 2,952,740 11-15 years - 3,357,225 3,357,225 16-20 years - 3,664,633 3,664,633 Total$ 47,875 $ 12,284,207 $ 12,332,082 Going Concern
The accompanying consolidated financial statements have been prepared in conformity with US GAAP, which contemplate continuation of the Company as a going concern. However, the Company has negative working capital of
Management has taken certain restructuring steps to provide the necessary capital to continue its operations. These steps included: 1) plan to convert existed related parties' loans into equity, 2) to complete construction of the new hospital and begin generating revenue by the end of the next year, 3) plan to increase sales revenue with additional medical equipments. No assurances can be given that the steps taken will provide necessary capital for the Company to continue its operations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet items reasonably likely to have a material effect on our financial condition.
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INTEGRATED HEALTHCARE HOLDINGS INC – 10-Q – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
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