Jishanye, Inc.

7

---

 

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of accounts receivable. Credit risk concentration with respect to accounts receivables is reduced because a diverse number of customers make up the Company’s customer base.

Basic earnings (loss) per share of common stock is computed by dividing net income (loss) available to common stockholders (numerator) by the weighted average number of shares of common stock outstanding (denominator) during the period. Diluted earnings per share gives effect to all dilutive potential shares of common stock outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted earnings per share, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Dilutive potential shares are excluded from the computation of diluted earnings per share if their effect is anti-dilutive. There were no options, warrants or other instruments convertible into common stock outstanding for the three and nine months ended September 30, 2015 and 2014; therefore, basic and diluted earnings or loss per share of common stock are the same.

Notes to Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2015 and 2014 (unaudited)

During the third quarter of 2015, the Company leased three office premises from the chief executive officer, Taiwan Life Enterprise Co., Ltd. ("Taiwan Life"), and a director of Jishanye Taiwan for a monthly rent of NTD15,000 (approximately $476),  NTD9,524  (approximately $302) and NTD15,000 (approximately $476), respectively. The Company's chief executive officer owns 20% equity interest in Taiwan Life and he is the chairman of Taiwan Life. During the three and nine months ended September 30, 2015, the Company recorded the rental expenses for the affiliates for $2,853 and $2,853, respectively.

 

Pursuant to a five-year  lease agreement for a funeral parlor entered into by the Company in May 2015, Taiwan Life issued a promissory note to guarantee the payment of NTD500,000 (approximately $15,100) as security to the lessor in the event the Company terminates the lease prior to expiration.

Jishanye, Inc.

The Company has obtained the relevant government approval to operate funeral management business in Taiwan. However, funeral parlors in Taiwan, including the ones operated by the Company, are generally unable to fully comply with the strict statutory requirements, for example, about the locations of funeral parlors relative to other public facilities like schools and hospitals. The non-compliance may result in fines and suspension of business. The Company believes the non-compliance would not have significant impact on the Company’s operations or its operating results.

Note 9 – Subsequent events

In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred after September 30, 2015 up through the filing date of these condensed consolidated financial statements. Except as disclosed in Note 3, the Company did not have any material recognizable subsequent events.

11

---

We sold enzymes products to public consumers in Taiwan through June 2014.  In June 2014, we switched our focus from selling enzyme products to engaging business in the funeral management services, initially in Taiwan.  We are currently engaged in one business segment – funeral management services.  The funeral management services business in Taiwan involves offering a range of services to grieving families, which include providing a place for mourners to visit, maintaining the body during the mourning period in a manner consistent with both religious and cultural practices and health and safety regulations, and providing burial or, more frequently, cremation, which, because of the scarcity of land in Taiwan, is preferred to burial.  In addition, funeral management services includes providing the necessary setting and personnel to meet the grieving family's religious and cultural preferences.  Since June 2015, we expanded the funeral management business by increasing our personnel, renting premises for a funeral parlor and offering additional services. As a result of these efforts, we increased the revenues during the third quarter of 2015. We plan to continue to expand our marketing and related activities. Although we are optimistic about our ability to generate revenues from this business, we can give no assurance that we can or will generate any significant revenue from this business or operate profitably.  The Company's chief executive officer has experience in the funeral services business in Taiwan and owns a company which is engaged in the funeral management services business.

 

On October 2, 2015, we determined to completely cease our enzyme products operations and treat it as a discontinued operation.

12

---

We used $34,741 of cash in our operations for the nine months ended September 30, 2015, and our operations provided $12,455 of cash for the nine months ended September 30, 2014.  For the nine months ended September 30, 2015, our cash flow used in operating activities principally reflected our net loss of $141,869 partially offset by the increase in accounts payable of $23,014 and accrued expenses and other payables of $99,044.  For the nine months ended September 30, 2014, cash used in our operations reflected principally our net loss of $88,087, partially offset by increase in our accrued expenses of $66,713.

 

We did not generate cash flows from investing activities in the nine months ended September 30, 2015.  For the nine months ended September 30, 2014, we generated $29,673 of cash in investing activities, which represents the net proceeds from the sale of our fixed assets related to our enzyme business. 

13

---

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, our management, with the participation of Mr. Chun-Hao Chang, our principal executive officer, and Ms. Mei-Chun Lin, our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2015. Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures.

Based on that evaluation, management concluded that our disclosure controls and procedures were not effective as of September 30, 2015.

As we disclosed in our Annual Report on Form 10-K, during our assessment of the effectiveness of internal control over financial reporting as of December 31, 2014, management identified the following material weaknesses in our internal control over financial reporting: