U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number: 000-1643319

(+852) 28062312

(Registrant's Telephone Number, Including Country Code)

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) been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated file, non-accelerated filer, or a smaller reporting company.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of August 15, 2016, the Registrant had 13,663,322 shares of common stock issued and outstanding.

SLEEPAID HOLDING CO.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

ITEM:1 FINANCIAL STATEMENT

SLEEPAID HOLDING CO. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See accompanying notes to unaudited consolidated financial statements

SLEEPAID HOLDING CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to unaudited consolidated financial statements

SLEEPAID HOLDING CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to unaudited consolidated financial statements

SLEEPAID HOLDING CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes to unaudited consolidated financial statements

SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND PRINCIPAL ACTIVITY

Organization

Sleepaid Holding Co. ("Sleepaid") and its subsidiaries are referred to herein collectively and on a consolidated basis as the "Company" or "we", "us" or "our" or similar terminology.

Sleepaid, a Nevada Corporation, was incorporated under the laws of the State of Nevada on December 17, 2014. Yugosu Investment Limited ("Yugosu") was incorporated in Hong Kong on March 28, 2007 and established a fiscal year end of December 31.

Guangzhou Smartfame Co., Ltd ("Guangzhou Smartfame"), the wholly owned subsidiary of the Yugosu, was incorporated under the laws of the PRC in Guangzhou, as a limited company on June 25, 2013. On May 11, 2016, Guangzhou Smartfame changed the name to Guangzhou Sleepaid Household Supplies Co., Ltd. ("Sleepaid Household") and expanded the business activities to including the wholesale and manufacturing of household supplies and furniture.

Yuewin Trading Ltd ("Yuewin"), the wholly owned subsidiary of Sleepaid Household, was incorporated under the laws of the PRC as a limited company on March 24, 2008.

The Company and its subsidiaries (hereinafter, collectively referred to as the "Group") are engaged in operating mattress and bedroom products retail outlets.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Method of Accounting

The Company maintains its general ledger and journals with the accrual method accounting for financial reporting purposes. The consolidated financial statements and notes are representations of management. Accounting policies adopted by the Company conform to generally accepted accounting principles in the United States of America and have been consistently applied in the presentation of consolidated financial statements.

(b) Principles of consolidation

The consolidated financial statements are presented in US Dollars and include the accounts of the Company and its subsidiary. All significant inter-company balances and transactions are eliminated in consolidation.

The following table depicts the identity of the subsidiary:

Note: 

SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c) Use of estimates

The preparation of consolidated financial statements that conform with generally accepted accounting principles 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time, however, actual results could differ materially from those estimates.

(d) Economic and political risks

The Company's operations are conducted in Hong Kong and China and a large number of customers are located in Southern China. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environment in Hong Kong and China, and by the general state of the economy in Hong Kong and China.

The Company's operations and customers in Hong Kong and Southern China are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments, and foreign currency exchange. The Company's results may be adversely affected by changes in the political and social conditions in Hong Kong and China, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.

(e) Property, plant and equipment

Plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method with 5% scrape value.

Estimated useful lives of the plant and equipment are as follows:

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of operation.

SLEEPAID HOLDING CO. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f) Accounting for the impairment of long-lived assets

The Company periodically evaluates the carrying value of long-lived assets to be held and used, including intangible assets subject to amortization, when events and circumstances warrant such a review, pursuant to the guidelines established in ASC No. 360. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair market values are reduced for the cost to dispose.

During the reporting periods, there was no impairment loss.

(g) Cash and concentration of risk

The Group considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Group maintains bank accounts in HK and the PRC.

(h) Income taxes         

The Company accounts for income tax using an asset and liability approach and allows for recognition of deferred tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future realization is uncertain.

(i) Foreign currency translation

The accompanying consolidated financial statements are presented in United States dollars (USD). The functional currencies of the Company's operating business based in Hong Kong and PRC are the Hong Kong Dollar (HKD) and Renminbi (RMB) respectively. The consolidated financial statements are translated into USD from HKD and RMB at period-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred..

The exchange rates used to translate amounts in HK$ and RMB into USD for the purposes of preparing the consolidated financial statements were as follows:

SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(i) Foreign currency translation (continued)

The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into USD at the rates used in translation. In addition, the current foreign exchange control policies applicable in PRC also restrict the transfer of assets or dividends outside the PRC.

(j) Comprehensive income

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other consolidated financial statements. The Company's current component of comprehensive income is the net income and foreign currency translation adjustment.

(k) Recently implemented standards

The FASB has issued No. 2016-07 "Topic 323, Investments—Equity Method and Joint Ventures: Simplifying the Transition to the Equity Method of Accounting," which aims to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The amendments in this Update affect all entities that have an investment that becomes qualified for the equity method of accounting as a result of an increase in the level of ownership interest or degree of influence. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Earlier application is permitted.

The FASB has issued No. 2016-08 "Topic 606, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net)," which requires the entity to determine whether the nature of its promise is to provide good or service to the customer (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). This determination is based upon whether the entity controls the good or the service before it is transferred to the customer. The amendments in this Update affect entities with transactions included within the scope of Topic 606. The core principle of the guidance in Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this Update affect the guidance in Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements of Update 2014-09. Accounting Standards Update No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of Update 2014-09 by one year.

SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(k) Recently implemented standards (continued)

The FASB has issued No. 2016-09 "Topic 718, Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting," which aims to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The amendments in this Update affect all entities that issue share-based payment awards to their employees. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments eliminate the guidance in Topic 718 that was indefinitely deferred shortly after the issuance of FASB Statement No. 123 (revised 2004), Share-Based Payment. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For all other entities, the amendments are effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for any entity in any interim or annual period.

The FASB has issued No. 2016-10 "Topic 606, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing." The amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. The amendments in this Update clarify that contractual provisions that, explicitly or implicitly, require an entity to transfer control of additional goods or services to a customer (for example, by requiring the entity to transfer control of additional rights to use or rights to access intellectual property that the customer does not already control) should be distinguished from contractual provisions that, explicitly or implicitly, define the attributes of a single promised license (for example, restrictions of time, geographical region, or use). The amendments in this Update affect the guidance in Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective.

The FASB has issued Accounting Standards Update (ASU) 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting. This ASU rescinds SEC paragraphs pursuant to two SEC Staff Announcements at the March 3, 2016 Emerging Issues Task Force (EITF) meeting.

The FASB has issued Accounting Standards Update No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The amendments do not change the core revenue recognition principle in Topic 606. The amendments provide clarifying guidance in certain narrow areas and add some practical expedients. These amendments are effective at the same date that Topic 606 is effective. Topic 606 is effective for public entities for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Topic 606 is effective for nonpublic entities one year later. Following is a summary of the clarifying guidance and practical expedients in the amendments.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company's consolidated financial statements upon adoption.

SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(l) Account receivable

The Company is operating retail outlet stores in a cash or credit environment which rent space from various shopping malls controlling by the shopping mall owners. All customers pay for their purchases at the cashier counters operating by the owners. Upon confirmation of the transaction by the shopping mall, the shopping mall deducts the sales tax due to the government, the sales portion due to the shopping mall and remits the balance to the Company. It typically takes the shopping mall approximately 30 to 45 days to confirm the transaction, and settles net proceeds within the next 45 days. The Company's accounts receivable are the receivables due from the shopping malls for the sale of the products for which the shopping mall owner collected the payments from the customers and are holding to remit to the Company.

Accounts receivable is recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance for doubtful accounts is maintained for all customers based on a variety of factors, including the length of time the receivables are past due, significant one-time events and historical experience. Management reviews and adjusts this allowance periodically based on historical experience and its evaluation of the collectability of outstanding accounts receivable. The Company evaluates the credit risk of its customers utilizing historical data and estimates of future performance. Bad debts are written off as incurred. During the reporting years, there were no bad debts occurred.

Outstanding accounts balances are reviewed individually for collectability. The Company does not charge any interest income on trade receivables. Accounts balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. To date, the Company has not charged off any balances as it has yet to exhaust all means of collection.

(m) Inventories

Inventories primarily consist of merchandise inventories and are stated at lower of cost or market and net realizable value. Cost of inventories is calculated on the weighted average basis which approximates cost.

Management regularly reviews inventories and records valuation reserves for damaged and defective returns, inventories with slow-moving or obsolescence exposure and inventories with carrying value that exceeds market value. Because of its product mix, the Company has not historically experienced significant occurrences of obsolescence.

Inventory shrinkage is accrued as a percentage of revenues based on historical inventory shrinkage trends. The Company performs physical inventory count of its stores once per quarter and cycle counts inventories at its distribution centers once per quarter throughout the year. The reserve for inventory shrinkage represents an estimate for inventory shrinkage for each store since the last physical inventory date through the reporting date.

These reserves are estimates, which could vary significantly, either favorably or unfavorably, from actual results if future economic conditions, consumer demand and competitive environments differ from expectations.

SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(n) Revenue recognition

The Company earns revenue by selling merchandise through self-managed retail stores inside shopping malls, franchise stores and wholesale agent.

Revenue from self-managed retail stores inside shopping malls is recognized when merchandise is purchased by and delivered to the customer, confirmed, fixed and reconciled with the shopping malls and collectability is reasonably assured.

Revenue from franchised stores is recognized after goods delivered and cash collected (normally cash on delivery) from the franchise retail stores.

Revenue from wholesale agent is recognized after goods delivered, amount fixed or determined and collectability is reasonably assured.

All revenues are shown net of estimated returns during the relevant period represented by estimated allowance for sales returns based upon historical experience.

The Company records sales tax collected from its customers on a net basis, and therefore excludes it from revenue as defined in ASC 605, Revenue Recognition.

(o) Cost of sales

Cost of sales includes the cost of merchandise, collecting and handling charges based on store sales deducted by landlord, related cost of packaging and shipping cost and the distribution center costs.

(p) Operating lease rental

The Company did not have a lease that met the criteria of a capital lease. Leases that do not qualify as a capital lease are classified as an operating lease. Operating lease rental expenses included in selling, general and administrative expenses for the six months ended June 30, 2016 and 2015 were $33,907 and $16,400, respectively

(q) Selling expenses

Selling expenses include store-related expense, other than store occupancy costs, as well as advertising, depreciation and amortization, and certain expenses associated with operating the Company's corporate headquarters.

(r) Advertising costs

The Company expensed all advertising costs as incurred. Advertising expenses, net of reimbursement from suppliers, amounted to $21,881 and $Nil for the six months ended June 30, 2016 and 2015 respectively. Advertising expense is included in selling expense in the accompanying consolidated statements of income.

SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(s) Concentration of Credit Risk

The Company maintains cash in bank deposit accounts in Hong Kong and PRC. The Company performs ongoing evaluations of this institution to limit its concentration risk exposure.

The Company operates retail stores located in the PRC. Because of this, the Company is subject to regional risks, such as the economy, regional financial conditions and unemployment, weather conditions, power outages, and other natural disasters specific to the region in which the Company operates.

(t) Retirement Benefit Plans

Full time employees of the Company in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require the Company to make contributions to the government for these benefits based on certain percentages of the employees' salaries. The Company accounts the mandated defined contribution plan under the vested benefit obligations approach based on the guidance of ASC 715, Compensation—Retirement Benefits.

The total amounts for such employee benefits which were expensed were $21,277 and $19,855 for the six months ended June 30, 2016 and 2015, respectively.

(u) Segment reporting

In accordance with ASC 280-10, Segment Reporting ("ASC 280-10"), the Company's chief operating decision makers rely upon consolidated results of operations when making decisions about allocating resources and assessing performance of the Company. As a result of the assessment made by the chief operating decision makers, the Company has only one single operating and geographic segment. The Company does not distinguish between markets or segments for the purpose of internal reporting

(v) Product warranty

The company is the legal obligor for the warranties of the products sold to customers but believed that the likelihood that we would not recover all warranty costs from the manufacturer to be remote based on our past operating history, manufacturers' cooperation and their reputation and history of honoring all their warranty obligations. Since our inception to present, we have not incurred any direct warranty expenses and accordingly, the accrual and associated expenses recognized in the financial statements has been recorded as zero.

SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS

Financial instruments that potentially expose the company to concentrations of credit risk, consists of cash and accounts receivable as of June 30, 2016 and December 31, 2015. The Company performs ongoing evaluations of its cash position and credit evaluations to ensure sound collections and minimize credit losses exposure.

As of June 30, 2016 and December 31, 2015, the Company's bank deposits conducted with banks in the PRC where there is currently no rule or regulation mandated on obligatory insurance of bank accounts.

For the six months ended June 30, 2016 and year ended December 31, 2015, all of the Company's sales were generated from the PRC.

The maximum amount of loss exposure due to credit risk that the Company would bear if the counter parties of the financial instruments failed to perform represents the carrying amount of each financial asset on the balance sheet.

Normally, the Company does not require collateral from customers or debtors.

Accounts Receivable

Accounts Payable

SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4. PROPERTY, PLANT AND EQUIPMENT, NET

Details of property, plant and equipment are as follows:

Depreciation expense for the six months ended June 30, 2016 and 2015 were $3,392 and $1,818 respectively.

Depreciation expense for the three months ended June 30, 2016 and 2015 were $1,520 and $1,044 respectively.

NOTE 5. ACCOUNT PAYABLES

Account payables were comprised of the following:

NOTE 6. OTHER RECEIVABLES

Other receivables were comprised of the following:

NOTE 7. OTHER PAYABLES

Other payables were comprised of the following:

SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8. INCOME TAXES

The Company is subject to the Federal Income tax rate of 34% and Hong Kong profits tax rate of 16.5%. No provision for income taxes in the United States and Hong Kong or elsewhere has been made as the Company had no taxable income for the six-months ended June 30, 2016 and year ended December 31, 2015.

A reconciliation of the provision for income taxes with amount determined by applying the statutory Federal income tax rate of 34% to income before income taxes is as follow:

A reconciliation of the provision for income taxes with amounts determined by applying the Hong Kong profit rate of 16.5% to income before income taxes is as follows:

Sleepaid Household and Yuewin were incorporated in the PRC and are subjected to income taxes under the current laws of the PRC. The EIT rate of PRC was 25% for the six-months and year ended June 30, 2016 and December 31, 2015.

SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8. INCOME TAXES (CONTINUED)

Profit (loss) before income tax of $(129,952) and $120,478 for the six-months and year ended June 30, 2016 and December 31, 2015, respectively, were attributed to operations in China. The income tax expenses consisted of the following:

No deferred tax has been provided as there are no material temporary differences arising during the six-months and year ended June 30, 2016 and December 31, 2015.

NOTE 9. COMMITMENTS AND CONTINGENCIES

The Company has operating lease agreements for office premises, which expiring through December 31, 2016 and December 31, 2018. Future minimum rental payments under agreements classified as operating leases with non-cancellable terms for the next one year and thereafter as follows:

Rental expense paid for the six-months ended June 30, 2016 and 2015 were $22,949 and $8,200 respectively.

NOTE 10. SEGMENT INFORMATION

FASB Accounting Standard Codification Topic 280 (ASC 280) "Segment Reporting" establishes standards for reporting information about operating segments in financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.

In 2016, the Company is regarded as a single operating segment, being engaged in the operating of mattress and bedroom products retail outlets. This principal activity and geographical market are substantially based in Hong Kong and the Mainland China, accordingly, no operating or geographical segment information are presented.

SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. NET INCOME (LOSS) PER SHARE

A reconciliation of the numerator and denominator of basic and diluted net income (loss) per share ("EPS") is provided as follows:

NOTE 12. RELATED PARTY TRANSACTIONS

Related party transactions comprised of loans from related parties and from director by director current account. As of June 30, 2016 and December 31, 2015, the loans from related parties were $768,155 and $593,723; All of these loans were provided for the Company's working capital, did not have collateral, bear no interest and repayable on demand.

Detailed loans from related parties are listed as below:

NOTE 13. SUBSEQUENT EVENTS

The Company has evaluated all other subsequent events through August 15, 2016, the date these financial statements were issued, and determined that there were no other subsequent events or transactions that require recognition or disclosures in the financial statements.

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERTIONS

This report contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. The Company's actual results could differ materially from those set forth on the forward looking statements as a result of the risks set forth in our filings with the Securities and Exchange Commission, general economic conditions, and changes in the assumptions used in making such forward looking statements.

Unless indicated otherwise, or the context otherwise requires, references in this report to "Sleepaid Holdings," the "Company," "we," "us" and "our" or similar terms are to Sleepaid Holding Co..

Overview

Our principle line of business is developing, producing and selling our mattress, pillow, and bedding products. In the six months ended June 30, 2016, the retail industry in China had significantly slowed down and competition was furious. Traditional retail share has been eaten by E-commerce. We have to restructure our business by rearrangement of our marketing resources to our brand and widen our products range and sourcing for new health enhancement products .

According to the current decline retail market situation, our company changed the sales strategy, doing more promotion in E-business, and continuous to develop our O2O marketing channel, which believed will lead to sales in advance and the result will be expected to recover in the next two quarters, in order to slow down the decline as much as possible. In the six months ended June 30, 2016, , our revenue was $995,721, which generated by our self-managed store was $914,732, the revenue generated by the franchised stores totaled $80,989.  Our revenues by brand for the six months ended June 30, 2016 were as follows: Revenue of SleepAid was $427,229, BEMCO was $337,409, and Whinny was $231,081.

Within this quarter, we have implanted an innovative program for category management, retail store decoration, products display, information processing, promotion of our brands, and close down of the low profitability retail shops, etc. We will ensure our new retail system—leaded by target customers' interests, and merchandises management—can be applied correctly and quickly. This new retail system would help our stores to improve their sales volume, revenue, and competitive edge.

Supply chain management system: we will enhance our supply chain with quick response, at the same time; we increase our inventory turnover ratio. This fast reacting supply chain management system will decrease supply shortage of our best selling products.

Result of the Three months ended June 30, 2016 and 2015

Net Revenue

In the three months ended June 30, 2016, our revenue was $363,149, compared to $646,883 the same period in 2015. In three months ended, the revenue decreased by 43.86% from the same period in 2015. The revenue generated by our self-managed store was $311,402, by the franchised stores was $51,747. Our revenues by brand for the three months ended June 30, 2016 were as follows: Revenue of SleepAid was $117,231, BEMCO was $148,985 and Whinny was $96,933. Because of the continuous decline in retail market, we record a significant decrease in the quarterly sales turnover.

Cost of Sales

In the three months ended June 30, 2016, the cost was $274,045 compared to the same period in 2015 decreased 44.31% from $492,090. The change of cost of sales reflects a decreasing rate slightly more than that of the decrease rate in revenue. This was caused by the significant slowed down of retail business in China, and resulted that the profit margin was more or less the same with the comparative quarter although decrease in the sales volume.

Selling expense

In the three months ended June 30, 2016 and 2015, the selling expense was $24,979 and $27,788 respectively. The decrease of 10.11% which reflected that spending ratio to sales volume was increasing to defend against the slow economy, and in the same time our management continuous to work hard in controlling the related selling expenses.

General and administrative expense

General and administrative expense for the three months ended June 30, 2016 was $176,694 compared to the same period in 2015 increase 53.79% from $114,894, the increase was attributed to the increase in management staffs expenses and office administration expenses.

Income Tax

During the three months ended June 30, 2016 and 2015, the company incurred no tax and its subsidiary has paid $Nil and $5,522 tax respectively as a foreign corporation.

Net Income

The Company recorded a net loss of $110,977 for the three months ended June 30, 2016 compared to the net income of $1,837 for the same period in 2015. The net income decreased by 6,141.21%. This continuous decline was due to the slowdown of retail market with resulted of significant decrease in sales turnover and gross profit, and the increase in G&A expenses.

Interest expenses

In the three months ended June 30, 2016 and 2015, the interest expenses was $Nil and $4,862 respectively.. The decreased of interest expenses was caused by the company pay off the bank loan in the first half year of 2015.

Result of the Six months ended June 30, 2016 and 2015

Net Revenue

In the six months ended June 30, 2016, our revenue was $995,721, compared to $1,399,550 the same period in 2015. In six months ended, the revenue decreased by 28.85% from the same period in 2015. The revenue generated by our self-managed store was $914,732, by the franchised stores was $80,989. Our revenues by brand for the six months ended June 30, 2016 were as follows: Revenue of SleepAid was $427,229, BEMCO was $337,409 and Whinny was $231,081. Because of the continuous decline in retail market, we record a significant decrease in the half year sales turnover.

Cost of Sales

In the six months ended June 30, 2016, the cost was $739,527 compared to the same period in 2015 decreased 27.32% from $1,017,464. The change of cost of sales reflects a decreasing rate slightly less than that of the decrease rate in revenue. This was caused by the significant slowed down of retail business in China, and resulted that the profit margin was less than the comparative period with the decrease in the sales volume.

Selling expense

In the six months ended June 30, 2016 and 2015, the selling expense was $84,169 and $84,861 respectively. The decrease of 0.82% which reflected that spending ratio to sales volume was increase a lot in order to defend against the slow economy, and in the same time our management continuous to work hard controlling the expenses spending.

General and administrative expense

General and administrative expense for the six months ended June 30, 2016 was $353,659 compared to the same period in 2015 increase 33.65% from $264,617, the increase was attributed to the increase in management staffs expenses and office administration expenses.

Income Tax

During the six months ended June 30, 2016 and 2015, the company incurred no tax and its subsidiary has paid $Nil and $30,844 tax respectively as a foreign corporation.

Net Income

The Company recorded a net loss of $180,249 for the six months ended June 30, 2016 compared to the net income of $52,092 for the same period in 2015. The net income decreased by 446.02%. The cause of going down was due to the increase in G&A expenses and slow market growth with resulted of significant decrease in sales turnover and gross profit.

Interest expenses

In the six months ended June 30, 2016 and 2015, the interest expenses was $Nil and $12,363 respectively.. The decreased of interest expenses was caused by the company pay off the bank loan in the first half year of 2015.

Liquidity and Capital Resources

The Company's liquidity and capital is dependent on the company continuing to increase its revenues and the capital it can raise to continue the Company's development and expansion of its product lines. The Company estimates that its current and available capital resources are sufficient to fund its planned operations through the third quarter of 2016.

The operation had been financed by the current beneficiary shareholders through not only the injection of capital, but also by loans to the Company. The loans are unsecured, non-interest bearing and repayable at demand. Going forward, the current beneficiary shareholders will continue to finance the company's operations, and we also plan to secure additional financing through private placements of equity and short-term borrowings from banks.

Working Capital: as at December 31, 2015, the company has working capital of $59,552 with current assets of $1,258,498 and current liabilities of $1,198,946. The current assets consisted of cash of $184,010, inventory of $806,443, trade receivables of $159,118, advance to supplies of $14,791, other receivables of $26,135 and loans to related parties of $68,001. The current liabilities of the Company at December 31, 2015 are composed primarily of loans from related parties of $593,723, accounts payable of $423,121, advances from customers of $72,139, tax payable of $31,382 and other payables of $41,108.

At June 30, 2016, the Company had negative working capital of ($99,203) with current assets of $1,183,532 and current liabilities of $1,282,735. The current assets consisted of cash of $78,912, inventory of $779,715, trade receivables of $132,987, advance to supplies of $93,591, other receivables of $16,989, loans to related parties of $39,551 and prepaid expenses of $41,787. The current liabilities of the Company as at June 30, 2016 were composed primarily of accounts payable of $371,811, loans from related parties of $768,155, advances from customer of $53,322, tax payable of $18,923, and other payable of $41,126.

Our business generates revenue in the currency of the PRC, Renminbi ("RMB"). RMB is still not a freely exchangeable currency. Since 1998, the State Administration of Foreign Exchange of China has promulgated a series of circulars and rules in order to enhance verification of foreign exchange payments under a Chinese entity's current account items, and has imposed strict requirements on borrowing and repayments of foreign exchange debts from and to foreign creditors under the capital account items and on the creation of foreign security in favor of foreign creditors.

This may complicate foreign exchange payments to foreign creditors under the current account items and thus may affect the ability to borrow under international commercial loans, the creation of foreign security, and the borrowing of RMB under guarantees in foreign currencies. Moreover, the value of RMB may become subject to supply and demand, which could be largely impacted by international economic and political environments. Any fluctuations in the exchange rate of RMB could have an adverse effect on the operational and financial condition of the Company and its subsidiaries in China.

In an effort to eliminate concerns over the ability to transfer cash between entities, cross border and to U.S. investor, Guangzhou Sleepaid Household Supplies Co., Ltd. ("Sleepaid Household"), our subsidiary and parent company to Yuewin Trading. ("Yuewin"), is incorporated in China as a wholly-owned foreign enterprise ("WOFE"). Because of such WOFE status, and profit (after tax) distribution received by Sleepaid Household from Yuewin can be freely transferred back to YIL in Hong Kong Dollars, which is not subject and restriction on its conversion into any foreign currency.

Operating Activities: Net cash used by operating activities during the six months period ended June 30, 2016, was $339,580 compared to net cash used by operation of $36,707 for the same period in 2015. This represents a decrease of $302,873.

During the six months period ended June 30, 2016, the $339,580 cash used was mainly resulted by net loss of $180,249, increased advances to suppliers of $80,447, increased prepaid expenses of $41,787 and decreased accounts payable of $42,777.

During the six months period ended June 30, 2015, the $36,707 cash used was primarily derived from net loss of $52,092, decreased accounts receivable of $20,736, decreased other receivables of $128,099, decreased advances to suppliers of $42,521, while used by increased inventory of $88,773, decreased accounts payable of $44,350, decreased advances from customers of $20,709, and decreased loans from related parties of $138,179.

Investing Activities: Net cash used in investing activities was $38,207 for the six month period ended June 30, 2016 and $2,522 for the same period in 2015. Net cash used in investing activities was increased by $35,685 was the result of newly purchase of PPE in the half year of 2016.

Financing Activities: Net cash provided by financing activities was $274,192 for the six months period ended June 30, 2016 compared to net cash used of $255,835 for the same period in 2015. This change was primarily comprised of the increase in loans from related parties of $206,393 and the newly issuance of common stock of $67,799 in the first six months period of 2016, compared to repayment of bank loans of $255,835 in the same period of 2015.

As of June 30, 2016, the Company had total assets of $1,228,985 and total liabilities of $1,282,735. Stockholder's equity as of June 30, 2016 was negative ($53,750) compared to an equity of $69,150 at December 31, 2015.

Off-Balance Sheet Arrangements and Contractual Obligations

As at June 30, 2016, our material off-balance sheet arrangements are operating lease obligations. We excluded these items from the balance sheet in accordance with generally accepted accounting principles in the United States of America ("GAAP"). Operating lease commitments consist principally of leases for our office and warehouse. These leases frequently include options which permit us to extend the terms beyond the initial fixed lease term. With respect to most of those leases, we intend to renegotiate those leases as they expire.

ITEM 3: QUANTITATIVE AND QUALITAIVE DISCLOSURE ABOUT MARKET RISK

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a "smaller reporting company," as defined by Rule 229.10(f)(1).

ITEM 4: CONTROLS AND PROCEDURES

Under the supervision and the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation as of June 30, 2016 of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our CEO and our CFO concluded that our disclosure controls and procedures were not effective as of June 30, 2016. Such conclusion reflects the identification of material weakness as follows: (1) lack of accounting proficiency of our chief financial officer which has resulted in a reliance on part-time outside consultants to perform substantially all of our accounting functions, (2) a lack of adequate segregation of duties and necessary corporate accounting resources in our financial reporting process and accounting function, and (3) lack of control procedures that include multiple levels of review. Until we are able to remedy these material weaknesses, we have engaged third party consultants and accounting firm to assist with financial reporting.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the six months ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

None

ITEM 1A: RISK FACTORS

There have been no material changes to Sleepaid Holdings' risk factors as previously disclosed in our most recent Form 10-K filing on June 30, 2016.

ITEM 2: SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None

ITEM 3: DEFAULTS UPON SENIOR SECURITIES.

None

ITEM 4: MINE SAFETY DISCLOSURES

None

ITEM 5: OTHER INFORMATION

None.

ITEM 6: EXHIBITS

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.