Sleepaid Holding Co. - FORM 10-Q

Attached files

file	filename
EX-32.1 - CERTIFICATION - Sleepaid Holding Co.	slee_ex321.htm
EX-31.2 - CERTIFICATION - Sleepaid Holding Co.	slee_ex312.htm
EX-31.1 - CERTIFICATION - Sleepaid Holding Co.	slee_ex311.htm

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 September 30, 2017

¨ 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: 000-55446

SLEEPAID HOLDING CO.

(Exact Name of Registrant as Specified in Its Charter)

Nevada		47-3785730
(State of Incorporation)		(IRS Employer Identification No.)

Rm 10, 1/F., Wellborne Commercial Centre 8 JavaRoad, North Point Hong Kong
(Address of Principal Executive Offices)		(Zip Code)

(+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.

Large accelerated filer	¨	Accelerated filed	¨
Non-accelerated filer	¨	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 ¨ No x

As of November 14, 2017, 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 (Unaudited)	3
	Unaudited Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016	3
	Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2017 and 2016	4
	Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended, September 30, 2017 and 2016	6
	Notes to Unaudited Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risks	27

Item 4.	Controls and Procedures	27

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	28

Item 1A.	Risk Factors	28

Item 2.	Unregistered Sales of Equity and Use of Proceeds	28

Item 3.	Default upon Senior Securities	28

Item 4.	Mine Safety Disclosures	28

Item 5.	Other Information	28

Item 6.	Exhibits	29

SIGNATURES		30

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM: 1 FINANCIAL STATEMENT

SLEEPAID HOLDING CO. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	Notes	September 30, 2017			December 31, 2016
ASSETS		(Unaudited)
Current assets:
Cash and cash equivalents		$	85,217		$	86,101
Trade receivable, net of allowance for doubtful accounts of $Nil for Sept 30, 2017 and $Nil for Dec 31, 2016			276,151			768,913
Short-term investments			-			14,377
Inventories, net			847,206			707,087
Advances to suppliers			72,573			79,921
Other receivables	7		66,254			59,517
Total current assets			1,347,401			1,715,916
Non-current assets:
Property, plant and equipment, net	4		16,902			21,059
Intangible assets	5		15,834			18,049
Total non-current assets			32,736			39,108

TOTAL ASSETS		$	1,380,137		$	1,755,024

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	6	$	641,273		$	725,976
Accrued expense			104,491			75,515
Advances from customer			70,129			54,112
Loans from related parties	13		763,795			761,101
Income tax payables			13,760			24,901
Other payables	8		243,209			177,636
Accrued salaries			228			-
Total current liabilities			1,836,885			1,819,241

TOTAL LIABILITIES			1,836,885			1,819,241

Stockholders’ equity
Preferred stock, $0.001 par value, 10,000,000 authorized; none issued and outstanding			-			-
Common stock, $0.001 par value, 65,000,000 authorized; 13,663,322 and 13,663,322 shares issued and outstanding, at September 30, 2017 and December 31, 2016 respectively			13,663			13,663
Additional paid-in capital			155,883			155,883
Accumulated other comprehensive (loss) income			(159,228	)		(178,566	)
(Accumulated loss)/ retained earnings			(467,066	)		(55,197	)
TOTAL STOCKHOLDERS’ EQUITY			(456,748	)		(64,217	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	1,380,137		$	1,755,024

See accompanying notes to unaudited consolidated financial statements

Table of Contents

SLEEPAID HOLDING CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

		(Unaudited)
		Three Months Ended Sept 30,
	Notes	2017			2016

Net revenue		$	326,454		$	488,892
Cost of sales			(280,277	)		(383,270	)
Gross profit			46,177			105,622

Operating expenses:
Selling expenses			70,949			26,939
General and administrative expenses			125,992			165,797
Total operating loss			196,941			192,736
(Loss) Income from operations			(150,764	)		(87,114	)

Non-operating income (expense):
Interest income			46			74
Interest expenses			(2,463	)		-
Other expenses			(83	)		(179	)
Total non-operating income (expense)			(2,500	)		(105	)

(Loss) Income before income taxes			(153,264	)		(87,219	)
Income taxes			-			-
Net (loss) income			(153,264	)		(87,219	)

Comprehensive income statement:
Net (loss) income			(153,264	)		(87,219	)
Foreign currency translation adjustment			7,742			(1,707	)
Comprehensive (Loss) Income		$	(145,522	)	$	(88,926	)

Basic (loss) earnings per share of common stock		(1.12 cents		)	(0.64 cents		)
Diluted (loss) earnings per share		(1.12 cents		)	(0.64 cents		)
Weighted average shares used in calculating loss per common stock – basic			13,663,322			13,663,322
Weighted average shares used in calculating loss per common stock – diluted			13,663,322			13,663,322

See accompanying notes to unaudited consolidated financial statements

Table of Contents

SLEEPAID HOLDING CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

		(Unaudited)
		Nine Months Ended Sept 30,
	Notes	2017			2016

Net revenue		$	1,375,654		$	1,484,613
Cost of sales			(1,103,587	)		(1,122,797	)
Gross profit			272,067			361,816

Operating expenses:
Selling expenses			227,842			111,108
General and administrative expenses			445,255			519,456
Total operating loss			673,097			630,564
(Loss) Income from operations			(401,030	)		(268,748	)

Non-operating income (expense):
Interest income			724			371
Interest expenses			(10,758	)		-
Other income			9			1,802
Other expenses			(814	)		(893	)
Total non-operating income (expense)			(10,839	)		1,280

(Loss) Income before income taxes			(411,869	)		(267,468	)
Income taxes	9		-			-
Net (loss) income			(411,869	)		(267,468	)

Comprehensive income statement:
Net (loss) income			(411,869	)		(267,468	)
Foreign currency translation adjustment			19,338			(12,158	)
Comprehensive (Loss) Income		$	(392,531	)	$	(279,626	)

Basic (loss) earnings per share of common stock	12	(3.01 cents		)	(1.96 cents		)
Diluted (loss) earnings per share	12	(3.01 cents		)	(1.96 cents		)
Weighted average shares used in calculating loss per common stock – basic			13,663,322			13,622,144
Weighted average shares used in calculating loss per common stock – diluted			13,663,322			13,622,144

See accompanying notes to unaudited consolidated financial statements

Table of Contents

SLEEPAID HOLDING CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

		(Unaudited)
		Nine Months Ended Sept 30,
	Notes	2017			2016
Cash flows provided by (used for) operating activities:
Net (loss) income	12	$	(411,869	)	$	(267,468	)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation			4,990			6,914
Consultancy fee			11,935			-
Accumulated amortization of intangible assets			2,883			-
Profit on Disposal of Assets			-			(1,802	)
Changes in operating assets and liabilities:
Trade receivable			515,700			(1,718	)
Inventories			(105,741	)		20,781
Advances to suppliers			10,715			(47,512	)
Other receivables			(16,905	)		(23,568	)
Accounts payable			(114,881	)		(23,309	)
Other payables			55,862			86,139
Advances from customer			13,267			22,660
Tax payables			(11,991	)		(15,337	)
Accrued liabilities			27,130			(7,246	)
Net cash (used for) provided by operating activities			(18,905	)		(251,466	)
Cash flows used for investing activities:
Purchases of property, plant and equipment			-			(42,435	)
Proceeds from sale of PPE			-			2,735
Short-term investments			14,690			-
Net cash used for investing activities			14,690			(39,700	)
Cash flows provided by (used for) financing activities:
Loans from related parties			(174	)		219,536
Issuance of common stock			-			67,799
Net cash provided by (used for) financing activities			(174	)		287,335

Net (decrease) increase in cash			(4,389	)		(3,832	)
Effect of foreign currency translation			3,505			(3,771	)
Cash – beginning of period			86,101			184,010
Cash – end of period		$	85,217		$	176,408
Supplemental disclosures of cash flow information:
Interest paid		$	(10,758	)	$	-
Issuance of 3,666,322 shares of common stock at $0.001 par value		$	-		$	67,799

See accompanying notes to unaudited consolidated financial statements

Table of Contents

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:

Name of Subsidiary	Place of Incorporation	Attributable Equity Interest %		Registered Capital
Yugosu Investment Limited (1)	Hong Kong		100	HKD 10,000
Guangzhou Sleepaid Household Supplies Co., Ltd. (2)	PRC		100	RMB 3,000,000
Yuewin Trading Ltd (3)	PRC		100	RMB 500,000

________

Note:	(1)	Wholly owned subsidiary of Sleepaid Holding Company
	(2)	Wholly owned subsidiary of Yugosu Investment Limited
	(3)	Wholly owned subsidiary of Sleepaid Household

Table of Contents

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:

Furniture and fixtures	5 years
Office equipment	2 - 5 years
Motor vehicles	4 - 5 years

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.

Table of Contents

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:

	9/30/2017		12/31/2016		9/30/2016
Nine months and Year end HKD: USD exchange rate		7.8116		7.7565		7.7550
Average period and yearly HKD: USD exchange rate		7.7872		7.7622		7.7658

	9/30/2017		12/31/2016		9/30/2016
Nine months and Year end RMB: USD exchange rate		6.6549		6.9557		6.6702
Average period and yearly RMB: USD exchange rate		6.8073		6.6433		6.5809

Table of Contents

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 Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, clarifying the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business.

The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments provide a more robust framework to use in determining when a set of assets and activities is a business. They also provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable.

For public companies, the amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. For all other companies and organizations, the amendments are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019.

The FASB has issued Accounting Standards Update No. 2017-06, Plan Accounting: Defined Benefit Pension Plans (Topic 960); Defined Contribution Pension Plans (Topic 962); Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting. The amendments relate primarily to the reporting by an employee benefit plan (a plan) for its interest in a master trust. A master trust is a trust for which a regulated financial institution (bank, trust company, or similar financial institution that is regulated, supervised, and subject to periodic examination by a state or federal agency) serves as a trustee or custodian and in which assets of more than one plan sponsored by a single employer or by a group of employers under common control are held.

The amendments are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The amendments should be applied retrospectively to each period for which financial statements are presented. The amendments apply to reporting entities within the scope of Topic 960, Plan Accounting - Defined Benefit Pension Plans, Topic 962, Plan Accounting - Defined Contribution Pension Plans, or Topic 965, Plan Accounting - Health and Welfare Benefit Plans.

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SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(k) Recently implemented standards (continued)

Under Topic 960, investments in master trusts are presented in a single line item in the statement of net assets available for benefits. Similar guidance is not provided in Topic 962 or 965, which has resulted in diversity in practice. For each master trust in which a plan holds an interest, the amendments require a plan’s interest in that master trust and any change in that interest to be presented in separate line items in the statement of net assets available for benefits and in the statement of changes in net assets available for benefits, respectively.

Topics 960 and 962 require plans to disclose their percentage interest in the master trust and a list of the investments held by the master trust, presented by general type, within the plan’s financial statements. The amendments remove the requirement to disclose the percentage interest in the master trust for plans with divided interests and require that all plans disclose the dollar amount of their interest in each of those general types of investments.

Current U.S. GAAP does not require disclosure by plans of the master trust’s other assets and liabilities. Examples of those balances include amounts due from brokers for securities sold, amounts due to brokers for securities purchased, accrued interest and dividends, and accrued expenses. The amendments require all plans to disclose: (a) their master trust’s other asset and liability balances; and (b) the dollar amount of the plan’s interest in each of those balances.

Lastly, investment disclosures (e.g., those required by Topics 815 and 820) relating to 401(h) account assets are generally provided in both the defined benefit pension plan financial statements and the health and welfare benefit plan financial statements. Stakeholders noted that the disclosures are redundant. The amendments remove that redundancy and do not require that the investment disclosures relating to the 401(h) account assets be provided in the health and welfare benefit plan’s financial statements. The amendments will require the health and welfare benefit plan to disclose the name of the defined benefit pension plan in which those investment disclosures are provided, so that participants can easily access those statements for information about the 401(h) account assets, if needed.

The FASB has issued Accounting Standards Update (ASU) No. 2017-07, Compensation — Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The amendments apply to all employers, including not-for-profit entities, that offer to their employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715, Compensation — Retirement Benefits.

The amendments require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed.

The amendments also allow only the service cost component to be eligible for capitalization when applicable (e.g., as a cost of internally manufactured inventory or a self-constructed asset).

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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 amendments are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. For other entities, the amendments are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance.

The FASB has issued Accounting Standards Update (ASU) No. 2017-09, Compensation—Stock Compensation (Topic 718) — Scope of Modification Accounting. ASU 2017-09 applies to entities that change the terms or conditions of a share-based payment award.

The FASB adopted ASU 2017-09 to provide clarity and reduce diversity in practice as well as cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to the modification of the terms and conditions of a share-based payment award.

Diversity in practice has arisen in part because some entities apply modification accounting under Topic 718 for modifications to terms and conditions that they consider substantive, but do not when they conclude that particular modifications are not substantive. Others apply modification accounting for any change to an award, except for changes that they consider purely administrative in nature. Still others apply modification accounting when a change to an award changes the fair value, the vesting, or the classification of the award. In practice, it appears that the evaluation of a change in fair value, vesting, or classification may be used to evaluate whether a change is substantive.

Although the Master Glossary of the FASB Accounting Standards Codification™ currently defines the term modification as “a change in any of the terms or conditions of a share-based payment award,” Topic 718 does not contain guidance on what changes are substantive or purely administrative.

The amendments in ASU 2017-09 include guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718.

These amendments require the entity to account for the effects of a modification unless all of the following conditions are met:

	·	The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or value using an alternative measurement method) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification;

	·	The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and

	·	The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified.

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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 amendments are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017.

Early adoption is permitted, including adoption in any interim period for: (a) public business entities for reporting periods for which financial statements have not yet been issued, and (b) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments should be applied prospectively to an award modified on or after the adoption date.

The FASB has issued Accounting Standards Update (ASU) No. 2017-13.This ASU adds, amends, and supersedes SEC paragraphs of the Accounting Standards Codification (ASC) related to the adoption and transition provisions of ASU No. 2014-09, Revenue From Contracts with Customers and ASU 2016-02, Leases, for public business entities. The ASU is titled ASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments.

ASU 2017-13 codifies portions of an SEC Staff Announcement made at the July 20, 2017 Emerging Issues Task Force (EITF) meeting essentially delaying the effective date of the revenue recognition and leases standards for a subset of public entities . The SEC Observer made the following SEC Staff Announcement, “Transition Related to Accounting Standards Updates No. 2014-09 and 2016-02,” at the July 20, 2017 EITF meeting:

The SEC staff would not object to a public business entity that otherwise would not meet the definition of a public business entity except for a requirement to include or the inclusion of its financial statements or financial information in another entity’s filing with the SEC adopting (1) ASC Topic 606, Revenue from Contracts with Customers for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019, and (2) ASC Topic 842, Leases for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.

A public business entity that otherwise would not meet the definition of a public business entity except for a requirement to include or the inclusion of its financial statements or financial information in another entity’s filing with the SEC may still elect to adopt ASC Topic 606 and ASC Topic 842 according to the public business entity effective dates.

This announcement is applicable only to public business entities that otherwise would not meet the definition of a public business entity except for a requirement to include or the inclusion of its financial statements or financial information in another entity’s filing with the SEC. This announcement is not applicable to other public business entities.

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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.

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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 nine months ended Sept 30, 2017 and 2016 were $50,571 and $49,136, 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 $8,749 and $22,953 for the nine months ended Sept 30, 2017 and 2016 respectively. Advertising expense is included in selling, general and administrative expense in the accompanying consolidated statements of income.

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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 $22,351 and $30,139 for the nine months ended Sept 30, 2017 and 2016, 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.

(w) Basic and diluted earnings (loss) per share

In accordance with ASC No. 260 (formerly SFAS No. 128), “Earnings Per Share,” the basic earnings (loss) per common share is computed by dividing net earnings (loss) available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings (loss) per common share is computed similarly to basic earnings (loss) per common 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.

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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 Sept 30, 2017 and December 31, 2016. The Company performs ongoing evaluations of its cash position and credit evaluations to ensure sound collections and minimize credit losses exposure.

As of Sept 30, 2017 and December 31, 2016, 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 nine months ended Sept 30, 2017 and year ended December 31, 2016, 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:

Customer	As at Sept 30, 2017				As at December 31, 2016
A	$	139,675	51	%	$	372,009	48	%
B		38,218	14	%		196,915	26	%
C		24,454	9	%		36,323	5	%
D		15,207	6	%		32,249	4	%
Total	$	217,554	80	%	$	637,596	83	%

Accounts Payable:

Supplier	As at Sept 30, 2017				As at December 31, 2016
AA	$	174,625	27	%	$	167,075	23	%
BB		162,101	25	%		155,093	21	%
CC		96,497	15	%		118,124	16	%
DD		48,881	8	%		64,696	9	%
EE		46,502	7	%		46,768	6	%
Total	$	528,606	82	%	$	551,756	75	%

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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:

	Sept 30, 2017			December 31, 2016
At cost
Furniture and fixtures	$	8,062		$	7,714
Office equipment		21,249			20,385
Motor vehicles		24,794			23,722
		54,105			51,821
Less: accumulated depreciation		(37,203	)		(30,762	)
	$	16,902		$	21,059

Depreciation expense included in the general and administrative expenses for the nine months ended Sept 30, 2017 and 2016 were $4,990 and $6,914 respectively.

Depreciation expense for the three months ended Sept 30, 2017 and 2016 were $2,149 and $3,522 respectively.

NOTE 5. INTANGIBLE ASSETS

Intangible assets, net comprise the following:

	Sept 30, 2017			December 31, 2016
At cost
Trademark	$	1,537		$	1,548
Computer software		20,697			19,801
		22,234			21,349
Less: accumulated depreciation		(6,400	)		(3,300	)
	$	15,834		$	18,049

Amortization expense included in the general and administrative expenses for the nine months ended Sept 30, 2017 and 2016 were $2,883 and $Nil respectively.

Amortization expense included in the general and administrative expenses for the three months ended Sept 30, 2017 and 2016 were $980 and $Nil respectively.

NOTE 6. ACCOUNT PAYABLES

Account payables were comprised of the following:

Sept 30,

2017

December 31, 2016

Trade payables

641,273

725,976

NOTE 7. OTHER RECEIVABLES

Other receivables were comprised of the following:

	Sept 30, 2017		December 31, 2016

Disbursement and advances to employees	$	19,919	$	12,536
Deposit paid		46,335		46,981
	$	66,254	$	59,517

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SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8. OTHER PAYABLES

Other payables were comprised of the following:

	Sept 30, 2017		December 31, 2016

Loan advances from unrelated parties	$	218,247	$	170,712
Deposit received		9,016		6,644
Sundries		15,946		280
	$	243,209	$	177,636

NOTE 9. 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 nine-months ended September 30, 2017 and year ended December 31, 2016.

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:

	Sept 30, 2017			December 31, 2016
Loss before income tax	$	(20,935	)	$	(50,915	)
Temporary Difference		-			-
Permanent Difference		-			-
Taxable income	$	(20,935	)	$	(50,915	)
Federal Income Tax rate		34	%		34	%
Current tax credit	$	7,118		$	17,311
Less: Valuation allowance		(7,118	)		(17,311	)
Income tax expenses	$	-		$	-

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:

	Sept 30, 2017			December 31, 2016
Loss before income tax	$	(42,014	)	$	(55,135	)
Temporary Difference		-			-
Permanent Difference		-			-
Taxable income	$	(42,014	)	$	(55,135	)
Hong Kong Profit Tax rate		16.5	%		16.5	%
Current tax credit	$	6,932		$	9,100
Less: Valuation allowance		(6,932	)		(9,100	)
Income tax expenses	$	-		$	-

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SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9. INCOME TAXES (CONTINUED)

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 nine-months and year ended September 30, 2017 and December 31, 2016.

Loss before income tax of $(213,121) and $(58,295) for the nine-months and year ended Sept 30, 2017 and December 31, 2016, respectively, were attributed to operations in China. The income tax expenses consisted of the following:

	Sept 30, 2017			December 31, 2016
Loss before income tax	$	(348,920	)	$	(58,295	)
Temporary Difference		-			69,312
Permanent Difference		-			(6,609	)
Taxable income	$	(348,920	)	$	4,408
China Enterprise Income Tax rate		25	%		25	%
Current tax credit	$	87,230		$	1,102
Less: Valuation allowance		(87,230	)		-
Income tax expenses	$	-		$	1,102

No deferred tax has been provided as there are no material temporary differences arising during the nine-months and year ended September 30, 2017 and December 31, 2016.

NOTE 10. COMMITMENTS AND CONTINGENCIES

The Company has operating lease agreements for office premises, which expiring through December 31, 2017. Future minimum rental payments under agreements classified as operating leases with non-cancellable terms for the next one year and thereafter as follows:

	Sept 30, 2017		December 31, 2016
2017	$	7,602	$	41,546
2018 and thereafter		-		-
	$	7,602		41,546

Rental expense, for the nine-months ended Sept 30, 2017 and 2016 were $50,571 and $34,610 respectively.

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SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. 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 2017, 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.

NOTE 12. 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:

	Sept 30, 2017			Sept 30, 2016
Numerator
Net (loss)/income	$	(411,869	)	$	(267,468	)

Denominator
Weighted average shares – Basic EPS		13,663,322			13,622,144
Weighted average shares – Diluted EPS		13,663,322			13,622,144

Net income (loss) per share – Basic and Diluted
EPS - basic and diluted	(3.01 cents		)	(1.96 cents		)

NOTE 13. RELATED PARTY TRANSACTIONS

Related party transactions comprised of loans from related parties and from director by director current account. As of Sept 30, 2017 and December 31, 2016, the loans from related parties were $763,795 and $761,101; 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:

	Sept 30, 2017		December 31, 2016

Cheung, Kuen Harry (a)	$	463,299	$	460,306
Cheung, Hang Dennis (b)		49,588		48,104
Yugosu International Limited (c)		250,908		252,691

Total loans from related parties	$	763,795	$	761,101

________

(a)	Major shareholders of Amax Deluxe Ltd (major shareholder of Sleepaid Holding Co.)
(b)	Close family member of Cheung Kuen, Harry.
(c)	With common shareholder Cheung Kuen, Harry

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SLEEPAID HOLDING CO. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14. GOING CONCERN

As of Sept 30, 2017, the Company has accumulated deficits of $467,066, and its current liabilities exceed its current assets resulting in negative working capital of $489,484. In view of the matters described above, recoverability of a major portion of the recorded asset amounts and realization of the portion of current liabilities into revenue shown in the accompanying balance sheets are dependent upon continued operations of the Company, which in turn are dependent upon the Company's ability to raise additional financing and to succeed in its future operations. The Company may need additional cash resources to operate during the upcoming 12 months, and the continuation of the Company may be dependent upon the continuing financial support of investors, directors and/or stockholders of the Company. However, there is no assurance that equity or debt offerings will be successful in raising sufficient funds to assure the eventual profitability of the Company. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Management has taken the following steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern. The Company is actively pursuing additional funding which would enhance capital employed and strategic partners which would increase revenue bases or reduce operation expenses. Management believes that the above actions will allow the Company to continue its operations throughout this fiscal year.

NOTE 15. SUBSEQUENT EVENTS

The Company has evaluated all other subsequent events through November 14, 2017, 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.

Subsequent the period ended September 30, 2017, a lawsuit is still remain under proceedings between the Company (“the defendant”) and Zhangjiagang Coolist Life Technology Co., Ltd. (“the plaintiff”) regarding the unpaid amount for the goods purchased from the plaintiff. No provision has been made for any material loss that is probable from the lawsuit currently pending (Case No. (2017) 粵0113民初字683號). Under the latest instruction from the court, both parties are suggested to conclude for a settlement between the parties by the end of October 2017. If such settlement cannot be concluded, the court will carry out the final judgement procedures in the next two months.

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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 nine months ended Sept 30, 2017, the retail industry in China had not yet recovered and competition was furious. Traditional retail share has been eaten by E-commerce platform trading and O2O business. We are continuous in restructuring and modifying our business by rearrangement of our marketing resources to our brand and widen our products range and sourcing for new health enhancement products, and also involving more trading via the E-Commerce channel.

Adapting to the current market situation, our company changed the sales strategy, doing more promotion and kicked started to our O2O marketing channel, so that we can still control the decline of our sales volume. In the nine months ended Sept 30, 2017, our total revenue was $1,375,654. Of this total revenue, the revenue generated by our self-managed store was $1,000,762, the revenue generated by the franchised stores totaled $65,193, the revenue generated by direct sales was totaled $227,112, and the revenue generated by E-commerce sales was $82,587. Our revenues by brand for the nine months ended Sept 30, 2017 were as follows: Revenue of SleepAid was $461,774, BEMCO was $890,109, and Whinny was $23,771.

Result of the Three months ended Sept 30, 2017 and 2016

Net Revenue

In the three months ended Sept 30, 2017, our revenue was $326,454, compared to $488,892 the same period in 2016. In three months ended, the revenue decreased by 33.2% from the same period in 2016. The revenue generated by our self-managed store was $316,755, by the franchised stores was $3,899, by the direct sales was $4,983 and E-commerce sales was $817. Our revenues by brand for the three months ended Sept 30, 2017 were as follows: Revenue of SleepAid was $237,639, BEMCO was $84,347 and Whinny was $4,468. Because of the slow recovery in the retail market in China, the sales revenue decrease against the comparable period.

Cost of Sales

In the three months ended Sept 30, 2017, the cost was $280,277 compared to the same period in 2016 decreased 26.87% from $383,270. The change of cost of sales reflects the decrease in sales revenue with a decreasing rate less than that of the decrease rate in revenue. This was caused by the special promotion campaign with lower profit margin ratio to simulate sales activities during this slowed down retail business.

Selling expense

In the three months ended Sept 30, 2017 and 2016, the selling expense was $70,949 and $26,939 respectively. The increase of 163.37% which reflected that spending ratio to sales volume was increasing to defend against the slow economy and more promotion activities to stimulate more revenue.

General and administrative expense

General and administrative expense for the three months ended Sept 30, 2017 was $125,992 compared to the same period in 2016 decrease 24.01% from $165,797, the decrease was attributed to our management continuous to work hard in controlling the general and administration expenses.

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Income Tax

During the three months ended Sept 30, 2017 and 2016, the company incurred no tax and its subsidiary has paid $Nil and $Nil tax respectively as a foreign corporation.

Net Loss

The Company recorded a net loss of $153,264 for the three months ended Sept 30, 2017 compared to the net loss of $87,219 for the same period in 2016. The net loss increased by 75.72%. This continuous decline was due to the slowdown of retail market with resulted of significant decrease in gross profit with the increase in selling expenses.

Interest expenses

In the three months ended Sept 30, 2017 and 2016, the interest expenses was $2,463 and $Nil respectively. The increased of interest expenses was caused by the company pay to Yugosu International Limited in this quarter.

Result of the Nine months ended Sept 30, 2017 and 2016

Net Revenue

In the nine months ended Sept 30, 2017, our revenue was $1,375,654, compared to $1,484,613 the same period in 2016. In nine months ended, the revenue decreased by 7.34% from the same period in 2016. The revenue generated by our self-managed store was $1,000,762, by the franchised stores was $65,193, by the direct sales was $227,112, and by the E-commerce sales was $82,587. Our revenues by brand for the nine months ended Sept 30, 2017 were as follows: Revenue of SleepAid was $461,774, BEMCO was $890,109 and Whinny was $23,771. Because of the slow recovery in the retail market in China, the sales revenue decrease against the comparable period.

Cost of Sales

In the nine months ended Sept 30, 2017, the cost was $1,103,587 compared to the same period in 2016 decreased 1.71% from $1,122,797. The change of cost of sales reflects a decreasing rate less than that of the decrease rate in revenue. This was caused by the special promotion campaign with lower profit margin ratio to simulate sales activities during this slowed down retail business.

Selling expense

In the nine months ended Sept 30, 2017 and 2016, the selling expense was $227,842 and $111,108 respectively. The increase of 105.06% which reflected that spending ratio to sales volume was increasing in order to defend against the slow economy and more promotion activities to stimulate more revenue.

General and administrative expense

General and administrative expense for the nine months ended Sept 30, 2017 was $445,255 compared to the same period in 2016 decrease 14.28% from $519,456, the decrease was attributed to our management continuous to work hard in controlling the general and administration expenses.

Income Tax

During the nine months ended Sept 30, 2017 and 2016, the company incurred no tax and its subsidiary has paid $Nil and $Nil tax respectively as a foreign corporation.

Net Loss

The Company recorded a net loss of $411,869 for the nine months ended Sept 30, 2017 compared to the net loss of $267,468 for the same period in 2016. The net loss increased by 53.99%. This continuous decline was due to the slowdown of retail market with resulted of significant decrease in gross profit with the increase in selling expenses.

Interest expenses

In the nine months ended Sept 30, 2017 and 2016, the interest expenses was $10,758 and $Nil respectively. The increased of interest expenses was caused by the company pay to Yugosu International Limited in the nine months period of 2017.

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Liquidity and Capital Resources

The Company’s liquidity and capital is dependent on the company continuing to increase its revenues and the capital can be raised 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 fourth quarter of 2017.

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, 2016, the Company had negative working capital of ($103,325) with current assets of $1,715,916 and current liabilities of $1,819,241. The current assets consisted cash and cash equivalents of $86,101, short-term investment of $14,377, inventory of $707,087, trade receivables of $768,913, advance to supplies of $79,921, and other receivables of $59,517. The current liabilities of the Company at December 31, 2016 were composed of loans from related parties of $761,101, accounts payable of $725,976, advances from customers of $54,112, accrued expenses of $75,515, income tax payable of $24,901, and other payable of $177,636.

As at September 30, 2017, the Company had negative working capital of ($489,484) with current assets of $1,347,401 and current liabilities of $1,836,885. The current assets consisted cash and cash equivalents of $85,217, inventory of $847,206, trade receivables of $276,151, advance to supplies of $72,573, and other receivables of $66,254. The current liabilities of the Company as at September 30, 2017 were composed of accounts payable of $641,273, accrued expenses of $104,491, loans from related parties of $763,795, advances from customer of $70,129, tax payable of $13,760, other payable of $243,209, and accrued salaries of $228.

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 Suppliers 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 Yugosu Investment Limited (“Yugosu”) in Hong Kong Dollars, which is not subject and restriction on its conversion into any foreign currency.

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Operating activities

Net cash used in operating activities during the nine months period ended Sept 30, 2017, was $18,905 compared to net cash used in operation of $251,466 for the same period in 2016. This represents a decrease of $232,561.

During the nine months period ended Sept 30, 2017, the $18,905 cash used was mainly resulted of cash used by net loss of $411,869, increased inventories of $105,741, and decreased accounts payable of $114,881 while offset against cash provided by decreased trade receivables of $515,700, increased other payables of $55,862.

During the nine months period ended Sept 30, 2016, the $251,466 cash used was mainly resulted by net loss of $267,468, and increased advances to suppliers of $47,512, while offset against cash provided by increased other payable of $86,139.

Investing Activities

Net cash provided by investing activities was $14,690 for the nine months period ended Sept 30, 2017 as compared to the cash used by investing activities of $39,700 for the same period in 2016. Net cash provided by investing activities increased was the result of disposal of short-term investment.

Financing Activities:

Net cash used in financing activities was $174 for the nine months period ended Sept 30, 2017 compared to net cash provided of $287,335 for the same period in 2016. This change was primarily due to comparatively lesser cash provided from related parties in the nine months period of 2017.

As of September 30, 2017, the Company had total assets of $1,380,137 and total liabilities of $1,836,885. Stockholder’s equity as of Sept 30, 2017 was negative equity of ($456,748) compared to a negative equity of ($64,217) at December 31, 2016.

Off-Balance Sheet Arrangements and Contractual Obligations

As at September 30, 2017, 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.

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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 Sept 30, 2017 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 Sept 30, 2017. 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 nine months ended Sept 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

A lawsuit is still remain under proceedings between the Company (“the defendant”) and Zhangjiagang Coolist Life Technology Co., Ltd. (“the plaintiff”) regarding the unpaid amount for the goods purchased from the plaintiff. No provision has been made for any material loss that is probable from the lawsuit currently pending (Case No. (2017) 粵0113民初字683號). Under the latest instruction from the court, both parties are suggested to conclude for a settlement between the parties by the end of October 2017. If such settlement cannot be concluded, the court will carry out the final judgement procedures in the next two months.

Except from the issue mentioned, there being no other legal proceedings

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 March 31, 2017.

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.

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ITEM 6: EXHIBITS

Exhibit No.		Description

31.1		Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101		Interactive data files pursuant to Rule 405 of Regulation S-

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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.

	SLEEPAID HOLDING CO.

Date: November 14, 2017	By:	/s/ Tao Wang
		Tao Wang
		Chief Executive Officer

Date: November 14, 2017	By:	/s/ Riggs Cheung
		Riggs Cheung
		Chief Financial Officer and Chief Accounting Officer

Sleepaid Holding Co. - FORM 10-Q - November 14, 2017

Attached files

Sleepaid Holding Co. Reports