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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

(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, 2012

 

o   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: 000-53089

 

CHINA NORTHERN MEDICAL DEVICE, INC.

(Exact name of registrant as specified in its charter)

 

     
Nevada   30-0428006
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employee Identification No.)

 

     

70 Daxin Road, Daowai District

Harbin City, Heilongjiang Province

People’s Republic of China

  150020
(Address of principal executive offices)   (Zip Code)

 

(+86) 451- 8228-0845

 (Registrant’s telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since the 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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes x  No o

 

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 x  No o

 

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:

 

Large accelerated filer ¨ Accelerated filer ¨
Non-accelerated filer (Do not check if a smaller reporting company) ¨ 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 x  No o

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock: As of May 11, 2012, 3,550,000 shares, par value $0.0001 per share, of our common stock were issued and outstanding.

 

-1-
 

 

 

 

 

CHINA NORTHERN MEDICAL DEVICE, INC.

 

FORM 10-Q

 

Match 31, 2012

 

INDEX

 

 

   Page Number
PART I - FINANCIAL INFORMATION  
   
Item 1.   Financial Statements. 4.
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations. 12
Item 3.   Quantitative and Qualitative Disclosures About Market Risk. 14
Item 4.   Controls and Procedures. 14
     
PART II - OTHER INFORMATION  
   
Item 6.   Exhibits. 14
     
SIGNATURES 14
     
     
         

 

 

 

 

 

 

 

 

-2-
 

 

 

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

 

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

 

We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

 

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

 

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

 

CERTAIN TERMS USED IN THIS REPORT

 

When this report uses the words “we,” “us,” “our,” and the “Company,” they refer to China Northern Medical Device, Inc. “SEC” refers to the Securities and Exchange Commission.

 

  

 

 

 

 

-3-
 

Part I – Financial Information

 

Item 1. Financial Statements.

 

 

CHINA NORTHERN MEDICAL DEVICE, INC
(A Development Stage Company)
                       
BALANCE SHEETS
 
                       
                March 31,   December 31,  
                2012   2011  
                (unaudited)      
                       
  ASSETS            
  Current Assets:                  
       Cash and cash equivalents         $                    141 $                     35  
            Total Current Assets                              141                       35  
                       
  Total Assets         $                    141 $                     35  
                       
  LIABILITIES AND STOCKHOLDERS' EQUITY            
                       
  Current Liabilities:                  
       Accounts payable and accrued expenses (Note 5)                     6,120                17,099  
       Loan from a shareholder (Note 6)     $             188,500 $            175,000  
            Total Current Liabilities                     194,620              192,099  
                       
  Stockholders' Equity:                  
       Preferred stock, par value $0.0001, 5,000,000 shares authorized;          
              none issued and outstanding as of                             -                         -    
              March 31, 2012 and December 31, 2011              
       Common stock, par value $0.0001, 100,000,000 shares authorized;          
              3,550,000 shares issued and outstanding as of             
              March 31, 2012 and December 31, 2011                          355                     355  
       Additional paid-in capital                       149,645              149,645  
       Deficit accumulated during the development stage     (344,479)   (342,064)  
           Stockholders' deficiency         (194,479)   (192,064)  
  Total Liabilities and Stockholders' Deficiency     $                    141 $                     35  

 

 

-4-
 

CHINA NORTHERN MEDICAL DEVICE, INC
(A Development Stage Company)
                           
STATEMENT OF OPERATIONS
 
                        For the Period  
                        March 26, 2007  
            For the Three Months Ended    (inception) through  
            March 31,   March 31,  
                2012   2011   2012  
                (unaudited)   (unaudited)   (unaudited)  
                           
  Revenues                        
       Sales           $                       -   $                    -   $                        -    
       Costs of Sales                                 -                        -                            -    
            Gross Profit                                 -                        -                            -    
                           
  Operating Expenses                      
       Office rent                           1,200                 1,200                  23,200  
       Office expenses                                95                    280                  12,231  
       Consultancy Fees                                 -                        -                    25,000  
       Professional fees                           1,120                 2,000                284,267  
            Total Operating Expenses                           2,415                 3,480                344,698  
                           
  Income (Loss) from Operation                          (2,415)               (3,480)               (344,698)  
                           
  Other Income (Expenses)                      
       Interest Income                                 -                        -                         219  
            Total Other Income (Expenses)                                 -                        -                         219  
                           
  Income (Loss) before Provision for Income Tax                          (2,415)               (3,480)               (344,479)  
                           
  Provision for Income Tax                                 -                        -                            -    
                           
  Net Income (Loss)         $                (2,415) $             (3,480) $             (344,479)  
                           
  Basic and fully diluted earnings (loss) per share         $                  (0.00) $               (0.00) $                   (0.10)  
                           
  Weighted average shares outstanding                    3,550,000          3,550,000             3,444,583  

 

-5-
 

 

CHINA NORTHERN MEDICAL DEVICE, INC
(A Development Stage Company)
                           
STATEMENT OF CASH FLOWS
                           
 
                        For the Period  
                        March 26, 2007  
                For the Three Months Ended    (inception) through  
                March 31,   March 31,  
                2012   2011   2012  
                (unaudited)   (unaudited)   (unaudited)  
  Operating Activities                      
                           
  Net income (loss)         $              (2,415) $              (3,480) $          (344,479)  
                           
  Adjustments to reconcile net income (loss) to                      
       net cash provided (used) by operating activities:                      
                           
  Changes in operating assets and liabilities:                      
                           
       Decrease (Increase) in prepaid office rent                               -                       400                       -    
       Increase (decrease) in accounts payable and accrued expenses                  (10,979)                (1,950)                  6,120  
  Net cash provided (used) by operating activities                      (13,394)                (5,030)            (338,359)  
                           
  Investing Activities                      
                           
  Net cash (used) by investing activities                               -                         -                         -    
                           
  Financing Activities                      
                           
  Proceeds from issuance of common stock                               -                         -     150,000  
  Loans from a shareholder                        13,500                  5,000   188,500  
  Net cash provided (used) by financing activities                        13,500                  5,000   338,500  
                           
  Increase (decrease) in cash                             106                     (30)                     141  
                           
  Cash at beginning of period                               35                       99                       -    
  Effects of exchange rates on cash                               -                         -                         -    
  Cash at end of period         $ 141 $ 69 $ 141  
                           
  Supplemental Disclosures of Cash Flow Information:                      
     Cash paid (received) during year for:                      
         Interest           $                     -   $                     -   $                     -    
         Income taxes         $                     -   $                     -   $                     -    

 

-6-
 

Note 1- BASIS OF PRESENTATION

 

The accompanying unaudited financial statements as of March 31, 2012 and for the three months ended March 31, 2012 and 2011 have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information. They do not include all of the information and footnotes for complete financial statements as required by GAAP. In management's opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the three months ended March 31, 2012 and 2011 presented are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the fiscal year ended December 31, 2011.

 

 

Note 2- ORGANIZATION AND BUSINESS BACKGROUND

 

China Northern Medical Device, Inc. ("CNMD" or the "Company") was incorporated on March

26, 2007 under the laws of the State of Nevada. The Company has selected December 31 as its fiscal year ending.

 

The Company has not yet generated revenues from planned principal operations and is considered a development stage company as defined in the Accounting Standards Codification ("ASC") 915, "Development Stage Entities", issued by the Financial Accounting Standards Board ("FASB") . The Company plans on becoming involved in the business of marketing medical devices and providing consulting services to medical device manufactures in the People's Republic of China ("PRC") and North America . There is no assurance, however, that the Company will achieve its objectives or goals.

 

 

Note 3- GOING CONCERN

 

The Company incurred net losses of $2,415 for the three months ended March 31, 2012, and

$23,398 for the year ended December 31, 2011. In addition, the Company had a working capital deficiency of $194,479 and a stockholders' deficiency of $194,479 at March 31, 2012. These factors raise substantial doubt about the Company's ability to continue as a going concern.

 

 

There can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company's existing stockholders.

 

 

The accompanying financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

 

 

During the period March 26, 2007 (inception) through March 31, 2012, the Company relied heavily for its financing needs on its CEO/director, Mr. Wu, Jinzhao, as more fully disclosed in Note 7.

 

 

 

Note 4- CONTROL BY PRINCIPAL STOCKHOLDER/OFFICER

 

The chief executive officer owns beneficially and in the aggregate, the majority of the voting power of the Company. Accordingly, the chief executive officer has the ability to control the approval of most corporate actions, including approving significant expenses, increasing the authorized capital stock and the dissolution, merger or sale of the Company's assets.

 

 

Note 5- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP") and are presented in U.S. dollars.

 

-7-
 

Subsequent Events

 

The Company evaluated subsequent events through the date of the issuance of these financial statements. We are not aware of any significant events that occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on our financial statements.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles 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 revenue and expenses during the reporting period. Actual results when ultimately realized could differ from these estimates.

 

 

Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand, deposits in banks with maturities of three months or less, and all highly liquid investments which are unrestricted as to withdrawal or use, and which have original maturities of three months or less.

 

 

Concentrations of Credit Risk

 

Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains its cash and cash equivalents with high- quality institutions. Deposits held with banks in PRC may not be insured or exceed the amount of insurance provided on such deposits. Generally these deposits may be redeemed upon demand and therefore bear minimal risk.

 

 

Note 5- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Fair Value of Financial Instruments

 

The carrying value of financial instruments including cash and cash equivalents, receivables, prepaid expenses, accounts payable, and accrued expenses, approximates their fair value due to the relatively short-term nature of these instruments.

 

 

Impairment of Long-life Assets

 

Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

 

 

Revenue Recognition

 

The Company recognizes revenue when the earnings process is complete and persuasive evidence of an arrangement exists. This generally occurs when products are shipped to unaffiliated customer or picked up by unaffiliated customers in the Company's warehouse, both title and the risks and rewards of ownership are transferred or services have been rendered and accepted, the selling price is fixed or determinable, and collectability is reasonably assured.

 

 

Advertising Costs

 

The Company expenses advertising costs as incurred or the first time the advertising takes place, whichever is earlier, in accordance with the FASB ASC 720-35. Advertising costs were immaterial for the three months ended March 31, 2012 and 2011, respectively.

 

-8-
 

 

Research and Development Costs

 

The Company charges research and development costs to expense when incurred in accordance with the FASB ASC 730, Research and Development”. Research and development costs were immaterial for the three months ended March 31, 2012 and 2011, respectively.

 

Related parties

 

For the purposes of these financial statements, parties are considered to be related if one party has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

 

 

 

 

Income Taxes

 

The Company accounts for income tax in accordance with FASB ASC 740, "Income Taxes", which requires the asset and liability approach for financial accounting and reporting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance related to deferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

 

 

The Company has accumulated deficiency in its operation. Because there is no certainty that we will realize taxable income in the future, we did no record any deferred tax benefit as a result of these losses.

 

Effective January 1, 2007, the Company adopted a new FASB guidance, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The new FASB guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The new FASB guidance also provides guidance on de-recognition of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure, and transition. In accordance with the new FASB guidance, the Company performed a self- assessment and concluded that there were no significant uncertain tax positions requiring recognition in its financial statements.

 

 

The Company accounts for income taxes in interim periods in accordance with FASB ASC 740-

270, "Interim Reporting". The Company has determined an estimated annual effect tax rate. The rate will be revised, if necessary, as of the end of each successive interim period during the Company’s fiscal year to its best current estimate. The estimated annual effective tax rate is applied to the year-to-date ordinary income (or loss) at the end of the interim period.

 

 

Earnings (Loss) Per Share

 

The Company reports earnings per share in accordance with FASB ASC 260, Earnings Per Share.” FASB ASC 260 requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There are no potentially dilutive securities outstanding (options and warrants) for the three months ended March 31, 2012 and 2011, respectively.

 

 

 

Comprehensive Income

 

FASB ASC 220, Comprehensive Income", establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources.

 

 

-9-
 

Segment Reporting

 

FASB ASC 820Segments Reporting establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in financial statements. The Company currently plans on operating in one principal business segment.

 

 

Fair Value of Measurements

 

Accounting principles generally accepted in the United States define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Additionally, the inputs used to measure fair value are prioritized based on a three-level hierarchy. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

 

               Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.

 

 

               Level 2. Input other than quoted market prices that are observable, either directly or indirectly, and reasonably available. Observable inputs reflect the

                            assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources

                             independent of the Company.

 

               Level 3:Unobservable inputs. Unobservable inputs reflect the assumptions that the Company develops based on available information about what market

                            participants would use in valuing the asset or liability.

 

 An asset or liability’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Availability of observable inputs can vary and is affected by a variety of factors. The Company uses judgment in determining fair value of assets and liabilities and Level 3 assets and liabilities involve greater judgment than Level 1 and Level 2 assets or liabilities.

 

Recent Accounting Pronouncements

 

In September 2011, the Financial Accounting Standards Board (FASB) issued a revised standard on testing for goodwill impairment. The revised standard allows an entity to first assess qualitatively whether it is necessary to perform step one of the two-step annual goodwill impairment test. An entity is required to perform step one only if the entity concludes that it is more likely than not that a reporting unit’s fair value is less than its carrying amount, a likelihood of more than 50 percent. An entity can choose to perform the qualitative assessment on none, some, or all of its reporting units. Moreover, an entity can bypass the qualitative assessment for any reporting unit in any period and proceed directly to step one of the impairment test, and then perform the qualitative assessment in any subsequent period. The revised standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December

15, 2011 and early adoption is permitted. The adoption of this new guidance did not have a material effect on the Company’s financial position, results of operations, and cash flows.

 

 

 

In June 2011, the FASB issued amended disclosure requirements for the presentation of comprehensive income. The amended guidance eliminates the option to present components of other comprehensive income (OCI) as part of the statement of changes in equity. Under the amended guidance, all changes in OCI are to be presented either in a single continuous statement of comprehensive income or in two separate but consecutive financial statements. The changes are effective January 1, 2012. Early application is permitted. The adoption of this new guidance did not have a material effect on the Company’s financial position, results of operations, and cash flows. .

 

 

In January 2011, the FASB temporarily deferred the disclosures regarding troubled debt restructurings which were included in the disclosure requirements about the credit quality of financing receivables and the allowance for credit losses which was issued in July 2010. In April 2011, the FASB issued additional guidance and clarifications

to help creditors in determining whether a creditor has granted a concession, and whether a debtor is experiencing financial difficulties for purposes of determining whether a restructuring constitutes a troubled debt restructuring. The new guidance and the previously deferred disclosures are effective July 1, 2011 applied retrospectively to January 1, 2011. Prospective application is required for any new impairments identified as a result of this guidance. The adoption of this new guidance did not have a material effect on the Company’s financial position, results of operations, and cash flows.

 

 

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In December 2010, FASB issued an amendment to the disclosure of supplementary pro forma information for business combinations. The amendments in this ASU 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 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 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 new guidance did not have a material effect on the Company’s financial position, results of operations, and cash flows.

 

 

 

Note 6- ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consist of the following:

 

                                                                                                                            March 31, December 31,

      2012                 2011

(unaudited)

                     Accrued professional fees                                                                           $ 4,120           $ 10,580

                     Accrued office rent                                                                                                    -                   3,900

                      Accrued office expenses                                                                                   2,000                 2,619

  

                     Total accounts payable and accrued expenses                                          $ 6,120              $ 17,099

 

Note 7- LOAN FROM A SHAREHOLDER

 

Loan from a shareholder are loans from a shareholder/CEO, Mr. Wu, Jinzhao, to finance the Company’s operation due to lack of cash resources. These loans are unsecured, non-interest bearing and have no fixed terms of repayment, therefore, deemed payable on demand. Cash flow from this activity is classified as cash flows from financing activity. The total borrowing from Mr. Wu was $175,000 for the period March 26, 2007 (inception) through December 31, 2011, and

$13,500 and $5,000 for the three months ended March 31, 2012 and 2011, respectively.

 

 

Note 8- CAPITAL STOCK

 

The Articles of Incorporation authorized the Company to issue 5,000,000 shares of preferred stock with a par value of $0.0001, and 100,000,000 shares of common stock with a par value of $0.0001. No shares of preferred stock have been issued. Upon formation of the Company, 3,000,000 shares of common stock were issued for $40,000.

 

The Company completed a public offering on March 14, 2008. The Company issued 550,000 shares of common stock to 40 PRC citizen shareholders for $110,000. The number of common stocks issued and outstanding immediately after the offering was 3,550,000.

 

 

Note 9- COMMITMENTS AND CONTINGENCIES

 

The Company faces a number of risks and challenges not typically associated with companies in North America and Western Europe, since its assets exist solely in the PRC, and its revenues are derived from its operations therein. The PRC is a developing country with an early stage market economic system, overshadowed by the state. Its political and economic systems are very different from the more developed countries and are in a state of change. The PRC also faces many social, economic and political challenges that may produce major shocks and instabilities and even crises, in both its domestic arena and in its relationships with other countries, including the United States. Such shocks, instabilities and crises may in turn significantly and negatively affect the Company's performance.

 

 

 

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Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations.

 

The following discussion and analysis of the results of operations and financial condition of China Northern Medical Device, Inc. for the period ended March 31, 2012 and 2011 shall be read in conjunction with the financial statements and notes. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results of the timing of events could differ materially from those projected in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Special Note Regarding Forward-Looking Statements and Business sections in our Form 10-K as filed with the Securities and Exchange Commission on March 31, 2011. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

 

BUSINESS OVERVIEW

 

We were incorporated on March 26, 2007 under the laws of Nevada. Our activities have been limited to develop our business plan. We intend to sell medical devices with an emphasis on portable medical devices designed for home treatments. Our initial focus will be in the northern regions of China. We intend to seek strategic relationships with medical device manufacturers both in China and North America with the aim to be their sales and distribution agent in Northern China. We also intend to assist Chinese medical device manufacturers on the development of the North American market. Eventually, we may seek to acquire an existing medical device manufacturer to enhance our operations.

 

Our internal marketing research indicates that the population in Northern China is often subject to ordinary and ineradicable illness due to the geographic and climate factors of the region. We believe the local health care system is not postured to provide home medical devices to those in need in a timely manner. We believe that current enterprises employ poor marketing techniques and have not exploited the potential market for medical devices. We intend to implement a strong marketing program and establish our brand. We intend to conduct detailed research to understand the purchasing behavior in Northern China which will be followed by an advertising regime consisting of TV advertisement, outdoor advertisement, promotions in shopping malls and other methods of advertising.

 

In addition to implementing a strong marketing and branding campaign, we intend to establish multiple venues for the sale of our products including an e-commerce platform, establish a sales network in major cities and cooperate with local sops and business entities to sell our products.

 

We intend to seek and obtain marketing agreements and licenses from various sources so we can in turn sell home medical devices in the Northern China region. We will focus on both American and Chinese medical device manufacturers with the goal being a marketing or sales agreement that allows us to market their products. We expect any agreements we may enter will provide us a reasonable commission for product sales.

 

We have initiated questionnaires and market sampling to determine consumer demands for home medical devices in Northern China. Once our market analysis is complete, we intend to acquire sales licenses to the products our research indicates is most in demand.

 

Once we have obtained marketing and sales agreements, we intend to promote our products through a number of venues. We have commenced efforts to establish an electronic commerce platform for promotion and sales of products through the Internet. We have also begun to design advertisements for our products which will be posted on websites established by professionals in the medical communities as well as for use in television and outdoor media advertisements. We hope to establish relationships with such prominent Chinese advertisers such as Acorn International, Inc. and Focus Media Advertisement Col., Ltd. to promote the sales of various healthcare medical devices.

 

We further intend to offer our services as a consultant to current Chinese medical device manufacturers whereby we would assist companies on the development of markets in North America, application of relevant patent rights and approval documents. Additionally, we will offer consulting services for medical device market promotion and planning.

 

We intend to initially target three to five medical and healthcare manufacturers in Northern China with capacity and brand recognition and seek to enter consulting arrangements. We would provide such manufacturers with long-term consultation services for management and product promotion. We expect such services will include advertising and public relations for the targeted brand, construction of sales nets and tunnels and sales team training.

 

At some point in the future, once operations have commenced and the company is positioned favorably, we may consider acquiring a business or businesses that complement our business model.

 

RESULTS OF OPERATIONS

 

Results of Operations for the Three Months ended March 31, 2012 Compared to the Three months ended March 31, 2011

 

We have experienced losses since inception. We generated $0 in revenues from operations for the three months ended March 31, 2012 and March 31, 2011. Expenses for the three months ended March 31, 2012 were $2,415 which consisted of office rent, office expenses and professional fees giving us a net loss of $2,415. For the same period in 2011, our expenses were $3,480 consisting of office rent, office expenses, and professional fees resulting in a net loss of $3,480 from operation.

  

CAPITAL RESOURCES AND LIQUIDITY

 

At March 31, 2012, we had $141 in available cash on hand which is our only asset at this time. We had liabilities of $194,620 consisting of $6,120 in accounts payable and accrued expenses and a loan from a shareholder in the amount of $188,500.

 

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Our sole officer and director, Mr. Wu, has financed our operations to date by making loans to the Company. These loans are unsecured, non-interest bearing and have no fixed terms of repayment, therefore, deemed payable on demand. Cash flow from this activity is classified as cash flows from financing activity. The total borrowing from Mr. Wu was $175,000 for the period March 26, 2007 (inception) through December 31, 2011, and $13,500 and $5,000 or the three months ended March 31, 2012 and 2011, respectively.

 

GOING CONCERN

  

The Company incurred net losses of $2,415 for the three months ended March 31, 2012, and $23,398 for the year ended December 31, 2011. In addition, the Company had a working capital deficiency of $194,479 and a stockholders' deficiency of $194,479 at March 31, 2012. These factors raise substantial doubt about the Company's ability to continue as a going concern.

 

There can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force us to substantially curtail or cease operations and would, therefore, have a material adverse effect on our business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on our existing stockholders.

 

NEED FOR ADDITIONAL FINANCING

 

Costs associated with being a public company are much higher than those of a private company. China Northern, a new start-up in early development, has chosen public registration before the business has developed a predictable cash flow. There are present registration expenses and future legal and accounting expenses, future reporting requirements to the SEC, future exchange listing requirements, and future investor relation costs that must be borne by a public company but not by a private company. These costs can be a burdensome expense which could adversely affect our financial survival. The ongoing regulatory costs, reporting requirements, and management details, which must be met when registering and maintaining a public company, may make the economic viability of China Northern very doubtful.

 

We have no material commitments for the next twelve months. In the past we have relied on advances from our president to cover our operating costs. Management anticipates that they have sufficient capital to meet our needs through the next 12 months. However, there can be no assurances to that effect. Our need for capital may change dramatically if we acquire an interest in a business opportunity during that period. At present, we have no understandings, commitments or agreements with respect to the acquisition of any business venture, and there can be no assurance that we will identify a business venture suitable for acquisition in the future. Further, we cannot assure that we will be successful in consummating any acquisition on favorable terms or those we will be able to profitably manage any business venture we acquire. Should we require additional capital, we may seek additional advances from officers, sell common stock or find other forms of debt financing.

 

CRITICAL ACCOUNTING POLICIES

 

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use if estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

 

Our significant accounting policies are summarized in Note 5 of our financial statements for the quarter ended March 31, 2012. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.

 

Recent Accounting Pronouncements

 

In September 2011, the Financial Accounting Standards Board (FASB) issued a revised standard on testing for goodwill impairment. The revised standard allows an entity to first assess qualitatively whether it is necessary to perform step one of the two-step annual goodwill impairment test. An entity is required to perform step one only if the entity concludes that it is more likely than not that a reporting unit’s fair value is less than its carrying amount, a likelihood of more than 50 percent. An entity can choose to perform the qualitative assessment on none, some, or all of its reporting units. Moreover, an entity can bypass the qualitative assessment for any reporting unit in any period and proceed directly to step one of the impairment test, and then perform the qualitative assessment in any subsequent period. The revised standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 and early adoption is permitted. The adoption of this new guidance did not have a material effect on the Company’s financial position, results of operations, and cash flows.

In June 2011, the FASB issued amended disclosure requirements for the presentation of comprehensive income. The amended guidance eliminates the option to present components of other comprehensive income (OCI) as part of the statement of changes in equity. Under the amended guidance, all changes in OCI are to be presented either in a single continuous statement of comprehensive income or in two separate but consecutive financial statements. The changes are effective January 1, 2012. Early application is permitted. The adoption of this new guidance did not have a material effect on the Company’s financial position, results of operations, and cash flows. .

In January 2011, the FASB temporarily deferred the disclosures regarding troubled debt restructurings which were included in the disclosure requirements about the credit quality of financing receivables and the allowance for credit losses which was issued in July 2010. In April 2011, the FASB issued additional guidance and clarifications to help creditors in

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determining whether a creditor has granted a concession, and whether a debtor is experiencing financial difficulties for purposes of determining whether a restructuring constitutes a troubled debt restructuring. The new guidance and the previously deferred disclosures are effective July 1, 2011 applied retrospectively to January 1, 2011. Prospective application is required for any new impairments identified as a result of this guidance. The adoption of this new guidance did not have a material effect on the Company’s financial position, results of operations, and cash flows.

In December 2010, FASB issued an amendment to the disclosure of supplementary pro forma information for business combinations. The amendments in this ASU 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 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 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 new guidance did not have a material effect on the Company’s financial position, results of operations, and cash flows.

OFF BALANCE SHEET TRANSACTIONS

 

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable because we are a smaller reporting company.

 

Item 4. Controls and Procedures.

 

(a) Evaluation of disclosure controls and procedures. Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

 

(b) Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting that occurred during the last quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II - OTHER INFORMATION

 

Item 6. Exhibits.

 

     
Exhibit Number   Description
31.1   Certification of the Principal Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  
32.1   Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101   Interactive Data File (Form 10-Q for the quarterly period ended March 31, 2012 furnish in XBRL).

In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed. 

 

 

 

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 NORTHERN MEDICAL DEVICE, INC.
   
Date: May 11, 2012 By:  /s/  Jinzhao Wu
    Jinzhao Wu
    Chief Executive Officer and Chief Financial Officer
    (Duly Authorized Officer, Principal Executive Officer and Principal Financial Officer)
     

 

 

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