Vitaspring Biomedical Co. Ltd 10-K for FY2022
Vitaspring Biomedical Co. Ltd. (VSBC)
About this 10-K
Vitaspring Biomedical Co. Ltd filed this 10-K on May 3, 2022, covering the fiscal year ended January 31, 2022 (FY2022).
Headline figures
Fiscal year ended January 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $5.61M
- up 2161.6% from $248.2K a year earlier
- Net loss
- $1.26M
- compared with net income of $425.38K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| ( |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
| ( |
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
| (Exact name of registrant as specified in its charter) |
| (State or Other Jurisdiction of | (I.R.S. Employer |
| Incorporation or Organization) | Identification Number) |
(Address of principal executive offices)
(Registrant's telephone number, including area code)
|
Securities registered pursuant to Section 12(b) of the Exchange Act: NONE
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| Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, $0.001 Par Value |
| (Title of Each Class) |
Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.
Yes ( )
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ( )
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) has been subject to such
filing requirements for the past 90 days.
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).
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( )
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or, an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company", in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ( ) | Accelerated filer ( ) |
| Smaller reporting company ( | ||
| (Do not check if smaller reporting company) | Emerging growth company ( ) |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ( )
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).
Yes ( )
As of April 27, 2022, the aggregate market
value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity
was last sold was approximately $
The number of shares outstanding of each of the issuer's classes of common stock, as of January 31, 2022 is as follows:
| Class of Securities | Shares Outstanding | |
| Common Stock, $0.0001 par value |
VITASPRING BIOMEDICAL CO. LTD.
TABLE OF CONTENTS
| PART I | ||||
| Item 1. | Business | 1 | ||
| Item 1A. | Risk Factors | 2 | ||
| Item 1B. | Unresolved Staff Comments | 9 | ||
| Item 2. | Properties | 9 | ||
| Item 3. | Legal Proceedings | 9 | ||
| Item 4. | Mine Safety Disclosures | 10 | ||
| PART II | ||||
| Item 5. | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 11 | ||
| Item 6. | Selected Financial Data | 12 | ||
| Item 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 12 | ||
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 14 | ||
| Item 8. | Financial Statements and Supplementary Data | 14 | ||
| Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 14 | ||
| Item 9A. | Controls and Procedures | 14 | ||
| Item 9B. | Other Information | 15 | ||
| PART III | ||||
| Item 10. | Directors, Executive Officers and Corporate Governance | 16 | ||
| Item 11. | Executive Compensation | 18 | ||
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 19 | ||
| Item 13. | Certain Relationships and Related Transactions, and Director Independence | 20 | ||
| Item 14. | Principal Accounting Fees and Services | 20 | ||
| PART IV | ||||
| Item 15. | Exhibits, Financial Statement Schedules | 22 | ||
| SIGNATURES | 23 | |||
| FINANCIAL STATEMENTS | F-1 | |||
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements contained in this annual report include "forward-looking statements" within the meaning of such term in Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause actual financial or operating results, performances or achievements expressed or implied by such forward-looking statements not to occur or be realized. Forward-looking statements made in this annual report generally are based on our best estimates of future results, performances or achievements, predicated upon current conditions and the most recent results of the companies involved and their respective industries. Forward-looking statements may be identified by the use of forward-looking terminology such as "may", "will", "could", "should", "project", "expect", "believe", "estimate", "anticipate", "intend", "continue", "potential", "opportunity" or similar terms, variations of those terms or the negative of those terms or other variations of those terms or comparable words or expressions. Potential risks and uncertainties include, among other things, such factors as:
| · | concentration of our customer base and fulfillment of existing customer contracts; | |
| · | our ability to maintain pricing; | |
| · | deterioration of the credit markets; | |
| · | increased vulnerability to adverse economic conditions due to indebtedness; | |
| · | competition within our industry; | |
| · | asset impairment and other charges; | |
| · | our identifying, making and integrating acquisitions; | |
| · | our plans to identify and acquire products that we believe will be prospective for acquisition and development; | |
| · | loss of key executives; | |
| · | the ability to employ skilled and qualified workers; | |
| · | work stoppages and other labor matters; | |
| · | inadequacy of insurance coverage for certain losses or liabilities; | |
| · | federal legislation and state legislative and regulatory initiatives relating to the energy industry; | |
| · |
costs and liabilities associated with environmental, health and safety laws, including any changes in the interpretation or enforcement thereof; | |
| · | future legislative and regulatory developments; | |
| · | our beliefs regarding the future of our competitors; | |
| · | our expectation that the demand for our products services will eventually increase; and | |
| · | our expectation that we will be able to raise capital when we need it. |
These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" set forth in this Annual Report on Form 10-K for the year ended January 31, 2021, any of which may cause our company's or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks may cause the Company's or its industry's actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.
Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time except as required by law. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.
As used in this Annual Report on Form 10-K and unless otherwise indicated, the terms "we," "us," "our," or the "Company" refer to VITASPRING BIOMEDICAL CO. LTD. Unless otherwise specified, all dollar amounts are expressed in United States dollars.
PART I
ITEM 1. BUSINESS
Overview of Our Business
VitaSpring Biomedical Co. Ltd., formerly Shemn Corp., was incorporated in Nevada on September 6, 2016. We are a start-up business company. We have been engaged in the business of developing and marketing products that promote wellness and a healthy lifestyle since 2019. A change of 100% of Company’s ownership occurred effectively on January 21, 2020. As a result, we changed Company name from Shemn Corp. to VitaSpring Biomedical Co. Ltd. on February 17, 2020.
VitaSpring Biomedical Co., Ltd aims to build a cell medical industry, invest in research and development of stem cell applications in regenerative medicine, establish advanced medical research centers and high standard cell production centers, and provide “GTP” standard stem cell preparations for the development of cellular drugs.
For future business development and medical applications, VitaSpring cooperates with affiliated companies to support the mass production and commercialization of X.msc-related medical projects. Some X.msc-based projects are researches and trials of Investment New Drugs and part of them are related to X.exosome, the critical material in the related skincare products. VitaSpring management also expect X.msc-related medical projects to implement in hospitals from a small scale in the future five years.
Recent Developments
On March 30, 2020, VitaSpring filed a Certificate of Amendment to its Articles of Incorporation (the "Articles of Amendment") with the Secretary of State of the State of Nevada effecting a name change of the Company to VitaSpring Biomedical Co. Ltd. (the "Corporate Action"). The Corporate Action and the Amended Articles became effective on April 21, 2020, following compliance with notification requirements of the Financial Industry Regulatory Authority.
Under new management, VitaSpring has completed the transition from patent technology into the know-how in the mass-production process of the purifying and culturing technology in the allogeneic mesenchymal stem cell production from the maternal-part placenta. The subject know-how can effectively and steadily culture more than 20 generations of sub-culture cells, which maintain the same level of activity index and contain the magnification of one thousand exosomes than other MSCs in terms of per ml. Accordingly, VitaSpring is able to build stem cell bank regulated by US FDA to provide the ready-to-use allogeneic mesenchymal stem cell for the emergent allogeneic stem cell transplantation at the cost the patient can afford.
VitaSpring’s research team has been awarded the 16th, 17 th, 18 th Taiwan National Innovation Award certificates in 2019, 2020, and 2021 and joined the regenerative medicine flagships of the Ministry of Science and Technology from 2007 to 2020, including research projects for the mechanism of human placenta mesenchymal stem cells in different diseases. It highlights the technological foundation for the future clinical application of X.msc.
Business Plan
Through the development of cell medicine, we became a leading international business group in the fields of regenerative medicine applied to the innovative fields of medicine, preventive health care, beauty, and anti-aging. We do not sell products in a form for use by consumers although we may, in the future, develop products for use by consumers.
We have many unique advantages elevating us to be the best in the industry:
1. Discovery and successful isolation of special mesenchymal stem cells (X.msc)
2. Unlike typical MSCs, X.msc do not promote cancer and tumor growth, and is safe to use for the entire body
3. Homogeneous purification technology
4. Viability of X.msc is 1000 time that of the competitor
5. Able to proliferate and maintain stemness of stem cells to 25+ generations
6. Exclusive composition formula of culture medium
7. The exclusive formula of exosomes have a variety of applications
8. Extensive uses of X.msc
9. Immunomodulation and anti-inflammation effect
10. No ethical issues
1
Available Information
We file with the SEC our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to reports to be filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended. The public may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549, on official business days during the hours of 10 a.m. to 3 p.m. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
Our corporate headquarters are located at 400 Spectrum Center Dr. #1620, Irvine, CA 92618. Our telephone number is (949) 202-9235. We maintain a website at www.vitaspringbio.com that links to our electronic SEC filings and contains information about our subsidiaries which is not a part of this report. All the above documents are available free of charge on our website as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the SEC
ITEM 1A. RISK FACTORS
Risks Related to Our Company
COVID-19 Related Risks.
The COVID-19 pandemic has adversely affected the Company’s business, and the ultimate effect on the Company’s operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted.
The effects of the COVID-19 pandemic, including actions taken by businesses and governments, have adversely affected the global economy, disrupted global supply chains and created significant volatility in the financial markets. As a result, there has been a significant reduction in demand for our products and services. If the reduced demand continues for a prolonged period, the Company’s business, financial condition, results of operation and liquidity may be materially and adversely affected. The Company’s operations also may be adversely affected if significant portions of the Company’s workforce are unable to work effectively due to illness, quarantines, government actions or other restrictions in connection with future waves of COVID-19 pandemic.
The extent to which the COVID-19 pandemic adversely affects the Company’s business, financial condition, results of operation and liquidity will depend on future developments, which are uncertain and cannot be predicted. These future developments include, but are not limited to, the scope and duration of the COVID-19 pandemic and actions taken by governmental authorities and other third parties in response to the pandemic. Disruptions and/or uncertainties related to the COVID-19 pandemic for a sustained period of time could result in delays or modifications to the Company’s strategic plans and initiatives and hinder the Company’s ability to achieve its strategic goals. The COVID-19 pandemic, and the volatile regional and global economic conditions stemming from the pandemic, may also have the effect of heightening many of the other risks described in this “Risk Factors” section
There is substantial doubt about our ability to continue as a going concern.
We have not generated any profit from operations since our inception. Based on our average monthly expenses and current burn rate, we estimate we will need to raise an additional $10,000,000 to 30,000,000 over the next 24 months. This amount could increase if we encounter difficulties that we cannot anticipate at this time or if we acquire other businesses. As of the date of this filing, we had cash and cash equivalents of approximately $107,212. We do not expect to raise significant capital through debt financing from traditional lending sources since we are not currently generating a profit from operations. Therefore, we only expect to raise money through equity financing via the sale of our common stock or equity-linked securities such as convertible debt. If we cannot raise the money that we need in order to continue to operate our business, we will be forced to delay, scale back or eliminate some or all of our proposed operations. If any of these were to occur, there is a substantial risk that our business would fail. If we are unsuccessful in raising additional financing, we may need to curtail, discontinue or cease operations.
We have limited operating history of the new line of business. As such, no assurance that we will be profitability.
We have a limited operating history and, accordingly, have a limited operating history on which to base an evaluation of our business. Our business must be considered in light of the risks, expenses and problems frequently encountered by companies in their early stages of development, particularly companies in new and rapidly evolving markets which involve technology. Our proposed operations are subject to all of the risks inherent in the establishment of a new business enterprise. Accordingly, the likelihood of our success must be considered in the light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the starting and expansion of a business and the relatively competitive environment in which we will operate.
Unanticipated delays, expenses and other problems such as setbacks in product development, product manufacturing, and market acceptance are frequently encountered in establishing a new business such as ours. There can be no assurance that the Company will be successful in addressing such risks, and any failure to do so could have a material adverse effect on the Company's business, results of operations and financial condition.
2
Because of our limited operating history, we have limited historical financial data on which to base planned operating expenses. Accordingly, our expense levels, which are, to a large extent, variable, will be based in part on our expectations of future revenues. As a result of the variable nature of many of our expenses, we may be unable to adjust spending in a timely manner to compensate for any unexpected delays in the development and marketing of our products or any subsequent revenue shortfall. Any such delays or shortfalls will have an immediate adverse impact on our business, operating results and financial condition.
The Company has not achieved profitability on a quarterly or annual basis to date. To the extent that net revenue does not grow at anticipated rates or that increases in its operating expenses precede or are not subsequently followed by commensurate increases in net revenue, or that the Company is unable to adjust operating expense levels accordingly, the Company's business, results of operations and financial condition will be materially and adversely affected. There can be no assurance that the Company's operating losses will not increase in the future or that the Company will ever achieve or sustain profitability.
We may need to raise additional funds in the future that may not be available on acceptable terms or at all.
We may need to raise additional funds via the sale of our common stock or equity-linked securities such as convertible debt in the future to fund our business plan, for potential acquisitions or investments, or for general corporate purposes. When we issue equity or convertible debt securities to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. If we incur additional debt, it may increase our leverage relative to our earnings or to our equity capitalization, requiring us to pay additional interest expenses. We may not be able to obtain financing on favorable terms, or at all, in which case, we may not be able to develop or enhance our products, execute our business plan, take advantage of future opportunities or respond to competitive pressures.
Our margins fluctuate which leads to further uncertainty in our profitability model.
While the Company will have the potential ability to negotiate prices that benefit its clients and affect its profitability as it garners market-share and increases its book of business, margins in the energy business are fluid, and the Company's margins vary based upon the supplier and the customer. This will lead to continued uncertainty in margins from quarter to quarter.
If demand for our products does not develop as expected our projected revenues and profits will be affected.
Our future profits are influenced by many factors, including economics, and will be predicated on a stable and/or growing market and consumption of X-exesome and X-MSC products. We believe, and our growth expectations assume, that the markets for our suite of products will continue to grow, that we will increase our penetration of these markets and that our anticipated revenue from selling into this market will continue to increase.
If our expectations as to the size of these markets and our ability to sell our products and services in this market are not correct, our revenue may not materialize and our business will be harmed.
Operating results may fluctuate and may fall below expectations in any fiscal quarter.
Our operating results are difficult to predict and are expected to fluctuate from quarter to quarter due to a variety of factors, many of which are outside of our control. Factors that may cause our operating results to fluctuate include:
| · | our ability to arrange financing for operations; | |
| · | our ability to acquire products to resell to our customers; | |
| · | changes in federal, state and local government policies and programs | |
| · | the timing of orders where we recognize revenue on a percentage of completion basis; | |
| · | a customer's decision to delay our work, on or other risks involved with, a particular order; | |
| · | availability and costs of labor and equipment; |
3
| · | the addition of new customers or the loss of existing customers; | |
| · | the size and scale of new customers; | |
| · | our ability to control costs, including operating expenses; | |
| · | changes in the mix of our products; | |
| · | the length of our sales cycle; | |
| · | the productivity and growth of our sales force; | |
| · | changes in pricing by us or our competitors, or the need to provide discounts to win business; | |
| · | costs related to the acquisition and integration of companies or assets; | |
| · | general economic trends or geopolitical events such as war or incidents of terrorism; and | |
| · | future accounting pronouncements and changes in accounting policies. |
As a result, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results or future predictions prepared by the Company as an indication of our future performance. If our revenue or operating results fall in any period, the value of our common stock would likely decline.
Our business is at risk if we lose key personnel or is unable to attract and integrate additional skills personnel.
The success of our business depends in large part on the skill of our personnel. Accordingly, it is critical that we maintain, and continue to build, a highly experienced management team and specialized workforce, including engineers, project management, and business development and sales professionals. Competition for personnel, particularly those with expertise in the consumer goods industries, is high, and identifying candidates with the appropriate qualifications can be costly and difficult. We may not be able to hire the necessary personnel to implement our business strategy given our anticipated hiring needs, or we may need to provide higher compensation or more training to our personnel than we currently anticipate.
In the event, we are unable to attract, hire and retain the requisite personnel and subcontractors, we may experience delays in completing orders in accordance with customer schedules and pricing, which may have an adverse effect on our financial results, harm our reputation and cause us to curtail our pursuit of new customers/orders. Further, any increase in demand for personnel may result in higher costs, which in turn may have an adverse effect on our business, financial condition and operating results and harm our relationships with our customers.
Our future success is particularly dependent on the vision, skills, experience and effort of our senior management team, including our executive officers and our president and chief executive officer. If we were to lose the services of any of our executive officers or key employees, our ability to effectively manage our operations and implement our strategy could be harmed and our business may suffer.
We operate in a highly competitive industry and competitors may compete more effectively.
Many of our competitors have longer operating histories and greater resources than us, and could focus their substantial financial resources to develop a competing business model, develop products or services that are more attractive to potential customers than what we offer or convince our potential customers that they should require financing arrangements that would be impractical for smaller companies to offer. Our competitors may also offer products at prices below cost and/or devote significant sales forces to competing with us or attempt to recruit our key personnel by increasing compensation, any of which could improve their competitive positions. Any of these competitive factors could make it more difficult for us to attract and retain customers; cause us to lower our prices in order to compete, and reduce our market share and revenue, any of which could have a material adverse effect on our financial condition and operating results. We can provide no assurance that we will continue to effectively compete against our current competitors or additional companies that may enter our markets.
We may be unable to manage our growth effectively.
We expect our business and operations to expand rapidly and we anticipate that further expansion of our organization and operations will be required to achieve our expectations for future growth. In addition, in order to manage our expanding operations, we will also need to improve our management, operational and financial controls and our reporting systems and procedures. All of these measures will require significant expenditures and will demand the attention of management. If we do not continue to enhance our management personnel and our operational and financial systems and controls in response to growth in our business, we could experience operating inefficiencies that could impair our competitive position and could increase our costs more than we had planned. If we are unable to manage growth effectively, our business, financial condition and operating results could be adversely affected.
We plan to expand our business, in part, through future acquisitions.
We plan to use acquisitions of companies or assets to expand our capabilities, expand our geographic markets, add experienced management and increase our product offerings. However, we may be unable to implement this growth strategy if we cannot identify suitable acquisition candidates, reach agreement with acquisition targets on acceptable terms or arrange required financing for acquisitions on acceptable terms. In addition, the time and effort involved in attempting to identify acquisition candidates and consummate acquisitions may divert members of our management from the operations of our company.
4
Any future acquisitions could disrupt business.
Historically, we have not made any acquisitions as part of our growth strategy. However, we plan to use acquisitions of companies or assets to expand our project skill-sets and capabilities, expand our geographic markets, add experienced management and increase our product and service offerings. Yet, we may be unable to implement this growth strategy if we cannot identify suitable acquisition candidates, reach agreement with acquisition targets on acceptable terms or arrange required financing for acquisitions on acceptable terms. In addition, the time and effort involved in attempting to identify acquisition candidates and consummate acquisitions may divert members of our management from the operations of our company.
If we are successful in consummating acquisitions, those acquisitions could subject us to a number of risks, including:
| · | the purchase price we pay could significantly deplete our cash reserves or result in dilution to our existing stockholders; | |
| · | we may find that the acquired company or assets do not improve our customer offerings or market position as planned; | |
| · | we may have difficulty integrating the operations and personnel of the acquired company; | |
| · |
key personnel and customers of the acquired company may terminate their relationships with the acquired company as a result of the acquisition; | |
| · |
we may experience additional financial and accounting challenges and complexities in areas such as tax planning and financial reporting; | |
| · |
we may assume or be held liable for risks and liabilities as a result of our acquisitions, some of which we may not discover during our due diligence or adequately adjust for in our acquisition arrangements; | |
| · | we may incur one-time write-offs or restructuring charges in connection with the acquisition; | |
| · |
we may acquire goodwill and other intangible assets that are subject to amortization or impairment tests, which could result in future charges to earnings; and | |
| · | we may not be able to realize the cost savings or other financial benefits we anticipated. |
These factors could have a material adverse effect on our business, financial condition and operating results.
We may incur a variety of costs to engage in future acquisitions of companies, products or technologies, and the anticipated benefits of those acquisitions may never be realized.
As a part of our business strategy, we may make acquisitions of, or significant investments in, complementary companies, products or technologies, although no acquisitions or investments are currently pending. Any future acquisitions would be accompanied by risks such as:
| · | difficulties in assimilating the operations and personnel of acquired companies; | |
| · | diversion of our management's attention from ongoing business concerns; | |
| · |
our potential inability to maximize our financial and strategic position through the successful incorporation of acquired technology and rights into our products; | |
| · | additional expense associated with amortization of acquired assets; |
| · | charges at the time of acquisitions related to the expensing of process research and development; | |
| · | the exposure to additional debt to fund an acquisition; | |
| · | dilution to existing shareholders should the Company raise additional equity; | |
| · | maintenance of uniform standards, controls, procedures and policies; and | |
| · |
impairment of existing relationships with employees, suppliers and customers as a result of the integration of new management personnel. |
We cannot guarantee that we will be able to successfully integrate any business, products, technologies or personnel that we might acquire in the future, and our failure to do so would have a material adverse effect on our business, financial condition and operational results.
International operations could expose business to additional risks.
We expect to generate a portion of sales outside the United States in the future. International expansion and sales is one of our growth strategies, and we expect our revenue and operations outside of North America will expand in the future. These operations will be subject to a variety of risks that we do not face in the United States including:
| · | increased travel, infrastructure and legal and compliance costs associated with multiple international locations; | |
| · | additional withholding taxes or other taxes on our foreign income, and tariffs or other restrictions on foreign trade or investment; | |
| · | imposition of, or unexpected adverse changes in, foreign laws or regulatory requirements, many of which differ from those in the United States; | |
| · | increased exposure to foreign currency exchange rate risk; | |
| · | longer payment cycles for sales in some foreign countries and potential difficulties in enforcing contracts and collecting accounts receivable; | |
| · | difficulties in repatriating overseas earnings; | |
| · | general economic conditions in the countries in which we operate; and | |
| · | political unrest, war, incidents of terrorism or responses to such events. |
5
Our overall success in international markets will depend, in part, on our ability to succeed in differing legal, regulatory, economic, social and political conditions. We may not be successful in developing and implementing policies and strategies that will be effective in managing these risks in each country where we do business. Our failure to manage these risks successfully could harm our international operations, reduce our international sales and increase our costs, thus adversely affecting our business, financial condition and operating results.
Insurance and contractual protections may not always cover lost revenue.
Although we possess insurance, warranties from suppliers, and subcontractors obligations to meet certain performance levels and attempt, where feasible, to pass risks we cannot control to our customers, the proceeds of such insurance, warranties, performance guarantees or risk sharing arrangements may not be adequate to cover lost revenue, increased expenses or liquidated damages payments that may be required in the future.
We rely on outside consultants, employees, manufacturers and suppliers.
We will rely on the experience of outside consultants, employees, manufacturers and suppliers. In the event that one or more of these consultants or employees terminates employment with the Company, or becomes unavailable, suitable replacements will need to be obtained and there is no assurance that such employees or consultants could be obtained under conditions favorable to us.
We rely on Strategic relationships to promote our products.
We will rely on strategic partnerships with outside companies and individuals to promote and supply certain of our products, thus making the future success of our business particularly contingent on the efforts of other parties. An important part of our strategy is to promote acceptance of our products through technology and product alliances with certain distributors who we feel could assist us with our promotion strategies. Our dependence on outside distributors, however, raises potential risks with respect to the future success of our business. Our success is dependent on the successful completion and commercial deployment of our products and services and on the future commitment of our distributors to our products and technology.
We rely on our suppliers.
We will rely on key vendors and suppliers to provide high quality products and services on a consistent basis. The Company uses outside assembly facilities and contract manufacturers to produce quantities of materials these include, manufacturing facilities, warehouses, shippers, testing facilities and other critical vendor partners. The future success of the Company is contingent on the efforts and performance of these suppliers. Although in the past we have obtained adequate quantities of raw materials and finished product on acceptable terms to meet our requirements, we may have difficulty in locating or using alternative resources should supply problems arise with the current suppliers. An interruption or reduction in the source of supply of any of the component materials, or an unanticipated increase in vendor prices, could materially affect our operating results and damage customer relationships as well as our business.
There can be no assurance that we will generate sufficient revenues to support our operation or a positive cash flow.
There can be no assurance that our proposed operations will result in sufficient revenues to enable us to operate at profitable levels or to generate positive cash flow. As a result of the Company's limited operating history and the nature of the markets in which it competes, the Company may not be able to accurately predict its revenues. Any failure by the Company to accurately make such predictions would have a material adverse effect on the Company's business, results of operations and financial condition. Further, the Company's current and future expense levels are based largely on its investment plans and estimates of future revenues. The Company expects operating results to fluctuate significantly in the future as a result of a variety of factors, many of which are outside of the Company's control. Factors that may adversely affect the Company's operating results include, among others, demand for the products of the Company, the budgeting cycles of potential customers, lack of enforcement of or changes in governmental regulations or laws, the amount and timing of capital expenditures and other costs relating to the expansion of the Company's operations, the introduction of new or enhanced products and services by the Company or its competitors, the timing and number of new hires, changes in the Company's pricing policy or those of its competitors, the mix of products, increases in the cost of raw materials, technical difficulties with the products, incurrence of costs relating to future acquisitions, general economic conditions, and market acceptance of the company's products. As a strategic response to changes in the competitive environment, the Company may from time to time make certain pricing, service or marketing decisions or business combinations that could have a material adverse effect on the Company's business, results of operations and financial condition. Any seasonality is likely to cause quarterly fluctuations in the Company's operating results, and there can be no assurance that such patterns will not have a material adverse effect on the Company's business, results of operations and financial condition. The Company may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall.
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If we are unable to successfully recruit and retain qualified personnel, we may not be able to continue our operations.
In order to successfully implement and manage our business plan, we will depend upon, among other things, successfully recruiting and retaining qualified personnel having experience in the consumer goods industry. Competition for qualified individuals is intense. We may not be able to find, attract and retain qualified personnel on acceptable terms. If we are unable to find, attract and retain qualified personnel with technical expertise, our business operations could suffer.
If we fail to protect our intellectual property, our planned business could be adversely affected.
Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or obtain and use information that we regard as proprietary. Unauthorized use of our proprietary technology could harm our business. Litigation to protect our intellectual property rights can be costly and time-consuming to prosecute, and there can be no assurance that we will have the financial or other resources necessary to enforce or defend a patent infringement or proprietary rights violation action.
We may be subject to lawsuits related to products we purchase from our suppliers or the services performed by our providers.
In the future, we may be a party to, or may be otherwise responsible for, pending or threatened lawsuits or other claims related to products we purchase from our approved manufacturers and suppliers. We intend to require our approved providers to have product liability insurance, but there can be no assurance that such product liability insurance will be sufficient to protect us against potential liability. Additionally, there is no certainty that we will not be named in an action for product liability. Such cases and claims may raise difficult and complex factual and legal issues and may be subject to many uncertainties and complexities, including, but not limited to, the facts and circumstances of each particular case or claim, the jurisdiction in which each suit is brought, and differences in applicable law. Upon resolution of any pending legal matters or other claims, we may incur charges in excess of established reserves. Product liability lawsuits and claims, safety alerts or product recalls in the future, regardless of their ultimate outcome, could have a material adverse effect on our business and reputation and on our ability to attract and retain customers and joint venture partners. Our business, profitability and growth prospects could suffer if we face such negative publicity.
Risks Related to Our Products
We face a risk of defective products and, as a result, a damaged reputation.
If any of our products contain defects, or have reliability, quality or compatibility problems, our reputation could be damaged significantly and customers might be reluctant to use our products, which could result in the loss of revenues. We may have to invest significant capital and other resources to correct these problems. Such expenditures to correct defects and the effect on our reputation could have a material adverse effect on the business, financial condition and results of operations of the Company.
We face the risk of product liability claims and uninsured losses.
We face an inherent business risk of exposure to product liability claims in the event that the use of our technology or products is alleged to have resulted in adverse effects. To date, no claim for damages has been asserted against the Company. There can be no assurance that liability claims will not exceed the coverage limits of any policies purchased by the Company or that such insurance will continue to be available on commercially reasonable terms or at all. If the Company does not or cannot maintain sufficient liability insurance, its ability to operate may be significantly impaired. In addition, liability claims could have a material adverse effect on the business, financial condition and results of operations of the Company.
We have comprehensive insurance, including liability, fire, and extended coverage. Certain losses of a catastrophic nature such as from floods, tornadoes, thunderstorms and earthquakes are uninsurable or not economically insurable. Such "Acts of God," work stoppages, regulatory actions or other causes, could interrupt operations and adversely affect our business.
It is incumbent upon us to keep up with technological change so that our products can maintain their demand in the marketplace.
There can be no assurance that our competitors will not succeed in developing or marketing products or technologies that are more effective and/or less costly and which render the Company's products obsolete or non-competitive. In addition, new technologies and procedures could be developed that replace or reduce the value of our products. Our success will depend in part on our ability to respond quickly to technological changes through the development and introduction of new products and to successfully market these products. There can be no assurance that new product development efforts will result in any commercially successful products. A failure to develop and successfully market new products could have a material adverse effect on our business, financial condition and results of operations.
7
Risks Relating to Our Common Stock
If we issue additional securities in the future, it will result in the dilution of our existing stockholders.
Our articles of incorporation authorize the issuance of up to 75,000,000 shares of our common stock, with a par value of $0.001 per share. Our board of directors may choose to issue some or all of such shares to acquire one or more companies or products and to fund our overhead and general operating requirements. The issuance of any such shares will reduce the book value per share and may contribute to a reduction in the market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will reduce the proportionate ownership and voting power of all current stockholders. Further, such issuance may result in a change of control of our company.
Trading of our stock is restricted by the Securities Exchange Commission's penny stock regulations, which may limit a stockholder's ability
to buy and sell our common stock.
The Securities and Exchange Commission has adopted regulations which generally define "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.
FINRA sales practice requirements may also limit a stockholder's ability to buy and sell our stock.
In addition to the "penny stock" rules described above, the Financial Industry Regulatory Authority ("FINRA") has rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our stock.
The price of our common stock may be negatively impacted by factors that are unrelated to our operations.
Although our common stock is currently listed for quotation on the OTC Markets and a market is established and trading has begun, trading through the OTCQB is frequently thin and highly volatile. There is no assurance that a sufficient market will continue in our stock, in which case it could be difficult for stockholders to sell their stock. The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of our competitors, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.
Because we may not be able to attract the attention of major brokerage firms, it could have a material impact upon the price of our common stock.
It is not likely that securities analysts of major brokerage firms will provide research coverage for our common stock since the firm itself cannot recommend the purchase of our common stock under the penny stock rules referenced in an earlier risk factor. The absence of such coverage limits the likelihood that an active market will develop for our common stock. It may also make it more difficult for us to attract new investors at times when we require additional capital.
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Our bylaws contain provisions indemnifying our officers and directors against all costs, charges and expenses incurred by them.
Our bylaws contain provisions with respect to the indemnification of our officers and directors against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by them, including an amount paid to settle an action or satisfy a judgment in a civil, criminal or administrative action or proceeding to which they are made parties by reason of their being or having been our directors or officers.
We do not intend to pay dividends on the shares of stock of our company and any gain on an investment in our company will need to come through an increase in our stock's price, which may never happen.
We have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may prohibit the payment of a dividend. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through an increase in the stock's price. This may never happen and investors may lose all of their investment in our company.
Due to factors beyond our control, our stock price may be volatile.
The market price for our common stock has been highly volatile at times. As long as the future market for our common stock is limited, shareholders may only be able to sell them at a loss.
In addition, the stock markets have experienced extreme price and volume fluctuations in recent years that have affected and continue to affect the market prices of equity securities of many technology companies. Stock prices of many such companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. These broad market fluctuations may adversely affect the trading price of our common stock. In the past, following periods of volatility in the market price of a company's securities, class action litigation has often been instituted against such company. Any litigation of this type brought against us could result in substantial costs and a diversion of our management's attention and resources, which would harm our business, operating results and financial condition.
We do not intend to pay dividends on any investment in the shares of common stock of our company and any gain on an investment in our common stock will need to come through an increase in our stock’s price, which may never happen.
We have never paid any cash dividends and currently do not intend to pay any dividends on our common stock for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may prohibit the payment of a dividend. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through an increase in our common stock’s price. This may never happen and investors may lose all of their investment in our company.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We maintain our head office at 400 Spectrum Center Dr. #1620, Irvine, CA 92618. This property is leased until March 21, 2024 at a rate of $ 15.125 per month. We believe that all our property has been adequately maintained, is generally in good condition, and is suitable and adequate for our business.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business.
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ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
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PART II
| ITEM 5. |
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Market for Our Common Stock
Since approximately October 3, 2019, our common stock has been quoted on the OTC Pink Market, which is part of the OTC Market Group's quotation system. We were initially traded under the symbol "SHNC" but beginning in April 2020, our stock began trading under the symbol "VSBC".
The following table sets forth, for the periods indicated, the high and low closing prices of our common stock. These prices reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
| Closing Prices (1) | ||
| High | Low | |
| FISCAL YEAR ENDED JANUARY 31, 2022 | ||
| Fourth Quarter | $ 19.50 | $ 14.00 |
| Third Quarter | $ 15.80 | $ 15.10 |
| Second Quarter | $ 15.80 | $ 11.04 |
| First Quarter | $ 13.19 | $ 10.90 |
(1) The above tables set forth the range of high and low closing prices per share of our common stock as reported by www.finance.yahoo.com for the periods indicated.
Approximate Number of Holders of Our Common Stock
As of January 31, 2022, the Company had approximately 450 stockholders of record at Empire Stock Transfer Inc., and 206,520,030
shares of common stock were issued and outstanding.
Our registrar and transfer agent for our common stock is Empire Stock Transfer Inc. Its address is 1859 Whitney Mesa Dr. | Henderson, NV 89014, and their telephone number and facsimile are +(702) 818-5898 and +(702) 974-1444, respectively.
Dividend Policy
The Company has not declared any dividends since incorporation and does not anticipate doing so in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.
Our board of directors has discretion on whether to pay dividends unless the distribution would render us unable to repay our debts as they become due. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.
Securities Authorized for Issuance Under Equity Compensation Plans
See Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, "Securities Authorized for Issuance Under Equity Compensation Plans".
Recent Sales of Unregistered Securities
On November 24, 2020, the Board of Directors of the Company approved the issuance of approximately 6,223,520 shares of common stock at a deemed price of $0.005 per share for services to certain non-US founders of the Company.
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On July 14, 2020, the Board of Directors of the Company approved the issuance of approximately16,468,400 shares of common stock to certain non-U.S. accredited investors at a purchase price of $0.005 per share.
In addition, on July 14, 2020, the Board of Directors approved the issuance of 131,891,600 shares of common stock at par value to non-U.S. based consultants, directors, and employees.
Purchases of Our Equity Securities
No repurchases of our common stock were made during fiscal 2021.
ITEM 6. SELECTED FINANCIAL DATA
Smaller reporting companies are not required to provide the information required by this item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Results of Operations for the year ended January 31, 2021 and January 31, 2022:
Revenue and cost of goods sold
For the years ended January 31, 2021 and January 31, 2022 the Company generated total revenue of $248,200 and $5,613,200 from selling products to the customer. The cost of goods sold for the year ended January 31, 2021 and January 31, 2022 was $136,000 and $3,545,200, which represent the cost of raw materials.
Operating expenses
Total operating expenses for the year ended January 31, 2021 and January 31, 2022 were $537,582 and $586,894. The operating expenses for the year ended January 31, 2022 included professional fees relating to our status as a public company and rent expense, stock-based compensation of $167,173 and office expense of $28,935.
Net Loss
The net income (loss) for the year ended January 31, 2022 and January 31, 2021 was $1,264,002 and $(425,382) accordingly.
Liquidity and Capital Resources and Cash Requirements
At year ended January 31, 2022, the Company had cash of $107,212. The Company had a working capital of $1,505,087.
During the year ended January 31, 2022, the Company used $84,811 of cash in operating activities due to stock-based compensation, inventory, account receivable and account payable and accrued liabilities.
During the year ended January 31, 2022 the Company used $72.997 in investing activities due to purchase of fixed assets.
During the year ended January 31, 2022, the Company generated $50,000 of cash in financing activities.
We cannot guarantee that we will manage to sell all the shares required. We will attempt to raise the necessary funds to proceed with all phases of our plan of operation.
As of the date of this report, the current funds available to the Company will not be sufficient to continue maintaining a reporting status.
Our auditors have issued a “going concern” opinion, meaning that there is substantial doubt we can continue as an on-going business for the next twelve months unless we obtain additional capital. Our only sources for cash at this time are investments by others in this offering, selling our paper dung products and loans from our director. We must raise cash to implement our plan and stay in business.
Management believes that current trends toward lower capital investment in start-up companies pose the most significant challenge to the Company’s success over the next year and in future years. Additionally, the Company will have to meet all the financial disclosure and reporting requirements associated with being a publicly reporting company. The Company’s management will have to spend additional time on policies and procedures to make sure it is compliant with various regulatory requirements, especially that of Section 404 of the Sarbanes-Oxley Act of 2002. This additional corporate governance time required of management could limit the amount of time management has to implement is business plan and impede the speed of its operations.
12
Limited operating history; need for additional capital
There is no historical financial information about us upon which to base an evaluation of our performance. We are in a start-up stage of operations and have generated limited revenues since inception. We cannot guarantee that we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns due to price and cost increases in services and products.
Off-Balance Sheet Arrangements
We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon our financial condition or results of operations.
Going Concern
The consolidated financial statements have been prepared assuming we will continue as a going concern, which contemplates, the realization of assets and satisfaction of liabilities in the normal course of business. We incurred losses from operations of $(425,382) and income of $1,264,002 for the years ended January 31, 2021 and 2022, respectively, and had an retained earnings of $816,724 at January 31, 2022. In addition, we used cash from operating activities of $84,811 for the year ended January 31, 2022.
The Company will require additional funding to execute its future strategic business plan. Successful business operations and its transition to attaining profitability are dependent upon obtaining additional financing and achieving a level of revenue adequate to support its cost structure. These conditions raise substantial doubt about the Company's ability to continue as a going concern.
While the Company is attempting to establish an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern, the Company’s cash position may not be adequate to support the Company’s daily operations. Management intends to raise additional funds by seeking equity and/or debt financing; however there can be no assurances that it will be successful in those efforts. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to obtain financing, further implement its business plan, and generate revenues.
There are significant risks and uncertainties which could negatively affect the Company’s operations. These are principally related to the existence of events of default under the Company’s outstanding debt obligations, which could trigger penalties. Furthermore, if our current indebtedness is not restructured, paid or converted into equity, which is at the debt holder’s discretion, our current operations do not generate sufficient cash to pay interest and principal on these obligations when they become due. Accordingly, there can be no assurance that we will be able to pay these or other obligations which we may incur in the future. In the event we are unable to restructure, pay or convert into equity the balance of our outstanding indebtedness, the holders may obtain judgments against us and seek to enforce such judgments against our assets, in which event we will be required to cease our business activities and the equity of our stockholders will be effectively wiped out.
Our only sources of additional funds to meet continuing operating expenses, fund additional research and development and fund additional working capital are through the sale of securities, and/or debt instruments. We are actively seeking additional debt or equity financing, but no assurances can be given that such financing will be obtained or what the terms thereof will be. We may need to discontinue a portion or all of our operations if we are unsuccessful in generating positive cash flow or financing for our operations through the issuance of securities.
Recent Accounting Pronouncements
In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted.
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In February 2016, the FASB issued ASU 2016-02, Leases, which will amend current lease accounting to require lessees to recognize (i) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.
Management has considered all recent accounting pronouncements issued since and their potential effect on our financial statements. The Company's management believes that these recent pronouncements will not have a material effect on the Company's consolidated financial statements.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The follow discussion about our market risk disclosures involves forward-looking statements. Actual results could differ from those projected in the forward-looking statements. We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. We do not use derivative financial instruments for speculative or trading purposes.
Interest Rate Sensitivity
We have no significant interest-bearing assets and our convertible promissory notes and short-term loans are fixed rate securities. Our current exposure to market risk for changes in interest rates relates primarily to the interest income generated by our cash deposits in banks and the fair value of our invested securities. Although we do not believe that interest rate has had a material impact on our financial position or results of operations to date, increase in interest rates in the future could increase interest cost on our new debt and could adversely impact our ability to refinance existing debt and limit our acquisition and development activities.
Foreign Currency Exchange Risk
We currently have no significant exposure to foreign exchange risk.
Inflation Risk
Inflationary factors such as increases in the costs to acquire advertising rights and overhead costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of revenues if the selling prices of our services do not increase with these increased costs.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements
The financial statements required by this item begin on page F-1 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including the Company's president and chief executive officer (who is the Company's principal executive officer) and the Company's chief financial officer, treasurer, and secretary (who is the Company's principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure. In designing and evaluating the Company's disclosure controls and procedures, the Company's management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and the Company's management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The ineffectiveness of the Company's disclosure controls and procedures was due to material weaknesses identified in the Company's internal control over financial reporting, described below.
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Management's Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over the Company's financial reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002. Our management, with the participation of the Company's principal executive officer and principal financial officer has conducted an assessment, including testing, using the criteria in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") (2013). Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. This assessment included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation.
Based on this evaluation, the Company's management concluded its internal control over financial reporting was effective as of January 31, 2021.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the year ended January 31, 2021, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any company have been detected.
ITEM 9B. OTHER INFORMATION
Not applicable
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
The following table sets forth the names, ages and positions held with respect to each Director and Executive Officer of the Company as of the date of this Annual Report.
| Name | Age | Position | Director Since |
| Chu Pao-Chi | Chairperson of the Board | January 21, 2020 | |
| Kao Cheng-Hsiang | Chief Executive Officer | January 21, 2020 | |
| Lin Che-Li | Chief Technical Officer | January 21, 2020 | |
| Chen Yen-Hsun | Technical Vice-President | January 21, 2020 |
Each Director serves until our 2022 annual stockholders meeting and until their respective successors are duly elected and qualified or earlier resignation or removal.
Chu Pao-Chi
Chu Pao-Chi has been the Chairman of Mucho Biotech Co., Ltd., Chairman of Mucho Furich Co., Ltd. and Chairman of Mucho Biomedical Co., Ltd. from 2006 until the present. He is a graduate of Fu Jen Catholic University, Taipei, Taiwan.
Kao Cheng-Hsiang
Kao Cheng-Hsiang has been the CEO of , Mucho Furich Co., Ltd. From 2004 until 2016 he was a CEO of Mucho Biotech Co., Ltd. He is a graduate of National Chengchi University, Department of Diplomacy.
Lin Che-Li
Lin Che-Li has been the Tech. VP of Mucho Biotech Co., Ltd. since 2017. From 2010 until 2016 he was a Project manager of Da Jer Biotech Co., Ltd. He is a graduate of National Taiwan University, MS, Institute of Biochemistry
Chen Yen Hsun
Chen Yen Hsun has been the Tech. VP of Mucho Biotech Co., Ltd. since 2017. From 2010 until 2016 he was a Supervisor of Taiwan Cordyceps Association. He is a graduate of National Taiwan University, MS, Institute of Fisheries Science.
Identification of Certain Significant Employees
We have no employees who are not executive officers, but who are expected to make a significant contribution to our business.
Family Relationships
There are no family relationships between any directors or officers of the Company.
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Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
| 1. | had any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; |
| 2. | been convicted in a criminal proceeding or is a named subject to a pending criminal (excluding traffic violations and other minor offenses); |
| 3. | been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, futures, commodities or banking activities; or |
| 4. | been found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. |
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers, directors and beneficial owner of more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission statements of ownership and changes in ownership. The same persons are required to furnish us with copies of all Section 16(a) forms they file. We believe that, during fiscal 2018, all of our executive officers, directors and beneficial owner of more than 10% of a registered class of our equity securities complied with the applicable filing requirements.
In making these statements, we have relied upon examination of the copies of all Section 16(a) forms provided to us and the written representations of our executive officers, directors and beneficial owner of more than 10% of a registered class of our equity securities.
Code of Business Conduct and Ethics
A Code of Business Conduct and Ethics is a written standard designed to deter wrongdoing and to promote (a) honest and ethical conduct, (b) full, fair, accurate, timely and understandable disclosure in regulatory filings and public statements, (c) compliance with applicable laws, rules and regulations, (d) prompt reporting of violations of the code to an appropriate person and (e) accountability for adherence to the Code. We are not currently subject to any law, rule or regulation requiring that we adopt a Code of Business Conduct and Ethics.
Committees of Board of Directors
There are currently no committees of the Board of Directors. Our board of directors is of the view that it is appropriate for us not to have a standing nominating or audit committee because the current size of our board of directors does not facilitate the establishment of a separate committee. Our board of directors has performed, and will perform adequately, the functions of any specific committee.
Board Oversight of Risk
Our Board of Directors recognizes that, although risk management is a primary responsibility of the Company's management, the Board plays a critical role in oversight of risk. The Board, in order to more specifically carry out this responsibility, has assigned certain task focusing on reviewing different areas including strategic, operational, financial and reporting, compensation, compliance, corporate governance and other risks to the relevant Board Committees as summarized above. Each Committee then reports to the full Board ensuring the Board's full involvement in carrying out its responsibility for risk management.
17
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning all compensation awarded to, earned by or paid during fiscal years 2019 and 2020, to the Named Executive Officers:
|
SUMMARY COMPENSATION TABLE
| |||||||||
|
Name and Principal Position |
Year |
Salary ($) |
Bonus ($) |
Stock Awards ($) |
Option Awards ($) |
Non-Equity Incentive Plan Compensation ($) |
Nonqualified Deferred Compensation Earnings ($) |
All Other Compensation ($) |
Total ($) |
| Chu Pao-Chi President and Director (1) | 2022 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 2021 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| 2020 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Kao Cheng-Hsiang, CEO (1) | 2022 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 2021 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| 2020 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Lin Che-Li, Chief Technology Officer (1) | 2022 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 2021 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| 2020 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Chen Yen Hsun, Technical Vice-President (1) | 2022 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 2021 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| 2020 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| (1) | Appointed January 21, 2020 |
| (1) |
As required by SEC rules, amounts in the column "Stock Awards" present the aggregate grant date fair value of awards made each year computed in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification™ 718 Compensation—Stock Compensation ("FASB ASC 718"). The grant date fair value of each of the executives' award is measured based on the closing price of our common stock on the date of grant.
These amounts do not reflect whether the recipient has actually realized or will realize a financial benefit from the awards. Under generally accepted accounting principles, compensation expense with respect to stock awards granted to our employees, executives and directors is generally recognized over the requisite services period. The SEC's disclosure rules previously required that we present stock award information based on the amount recognized during the corresponding year for financial statement reporting purposes with respect to these awards. However, the recent changes in the SEC's disclosure rules require that we now present stock award amounts using the grant date fair value of the awards granted during the corresponding year. |
Currently, we do not provide any employees, including our named executive officers any company sponsored retirement benefits.
Employment Agreements
The Company has not entered into employment agreements with our Named Executive Officers.
18
Grants of Plan-Based Awards
None Outstanding Equity Awards at Fiscal Year-End
None
Director Compensation
Compensation paid to the Directors of the Company in 2020, 2021 and 2022 is disclosed above.
All the compensation packages for each of directors are proposed by an executive and approved by the Board of Directors. Director compensation packages in 2022 may or will be adopted and will generally consist of cash compensation and long-term incentive equity compensation.
Limitation of Liability and Indemnification of Officers and Directors
Our bylaws provide for the indemnification of our present and prior directors and officers or any person who may have served at our request as a director or officer of another corporation in which we own shares of capital stock or of which we are a creditor, against expenses actually and necessarily incurred by them in connection with the defense of any actions, suits or proceedings in which they, or any of them, are made parties, or a party, by reason of being or having been director(s) or officer(s) of us or of such other corporation, in the absence of negligence or misconduct in the performance of their duties. This indemnification policy could result in substantial expenditure by us, which we may be unable to recoup.
Insofar as indemnification by us for liabilities arising under the Securities Exchange Act of 1934, as amended, may be permitted to our directors, officers and controlling persons pursuant to provisions of the Articles of Incorporation and Bylaws, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy and is, therefore, unenforceable. In the event that a claim for indemnification by such director, officer or controlling person of us in the successful defense of any action, suit or proceeding is asserted by such director, officer or controlling person in connection with the securities being offered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
At the present time, there is no pending litigation or proceeding involving a director, officer, employee or other agent of ours in which indemnification would be required or permitted. We are not aware of any threatened litigation or proceeding which may result in a claim for such indemnification.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following tables set forth information as of January 31, 2021, regarding the beneficial ownership of our common stock (a) by each stockholder who is known by the Company to own beneficially in excess of 5% of our outstanding common stock; (b) by each of the Company's officers and directors; (c) and by the Company's officers and directors as a group. Except as otherwise indicated, all persons listed below have (i) sole voting power and investment power with respect to their shares of common stock, except to the extent that authority is shared by spouses under applicable law, and (ii) record and beneficial ownership with respect to their shares of stock.
The address for the director and named executive officers is 400 Spectrum Center Dr. #1620, Irvine, CA 92618.
| Number of Shares | Percentage of | |||||||
| of Common Stock | Common Stock | |||||||
| Beneficially Owned(1) | Owned(2) | |||||||
| Directors and Executive Officers | ||||||||
| Chu Pao-Chi | 25,000,000 | 12.09 | % | |||||
| Kao Cheng-Hsiang | 12,000,000 | 5.81 | % | |||||
| Executive officers and directors as a group (2 persons) | 15,000,020 | 7.26 | % | |||||
| 5% or more stockholders | ||||||||
| Li-Li Chu | 39,999,980 | 24.50 | % | |||||
| Lin-Lin Chu | 17,000,000 | 8.22 | % | |||||
| Tsai-Ting Han | 13,680,000 | 6.62 | % | |||||
| Yi-Ting Han | 13,692,015 | 6.62 | % |
| (1) | Beneficial ownership is determined in accordance with the rules of the Commission and generally includes voting or investment power with respect to securities. Beneficial ownership also includes shares of Common Stock subject to options and warrants currently exercisable or convertible, or exercisable or convertible. |
| (2) | Based solely on review of stockholders positions as reflected on the transfer agents records as of January 31, 2022. |
Securities Authorized for Issuance Under Equity Compensation Plans
None
19
Changes in Control
There are no arrangements known to us, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in control of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Related Party Transactions
None
Promoters and Certain Control Persons
We did not have any promoters at any time during the past five fiscal years.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Kho & Patel, Certified Public Accountants, is our Principal Independent Registered Public Accountants engaged to audit our financial statements for the fiscal year ended January 31, 2021 and 2022.
Audit Fees
This category consists of fees for professional services rendered by our principal independent registered public accountant for the audit of our annual financial statements, review of financial statements included in our quarterly reports and services that are normally provided by the independent registered public accounting firms in connection with statutory and regulatory filings or engagements for those fiscal years
| Year Ended | |||
| January 31, 2022 | |||
| Audit fees:(1) | $ | 55,290 | |
| Audit related fees: | — | ||
| Tax fees: | — | ||
| All other fees: | $ | --- | |
| Total | $ | 55,290 | |
Audit-Related Fees
This category consists of fees for assurance and related services by our principal independent registered public accountant that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under "Audit Fees". The services for the fees disclosed under this category include consultations concerning financial accounting and reporting standards.
Tax Fees
This category consists of fees for professional services rendered by our principal independent registered public accountant for tax compliance, tax advice, and tax planning.
20
All Other Fees
This category consists of fees for services provided by our principal independent registered public accountant other than the services described above.
21
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) The following consolidated financial statements are filed as a part of this Form 10-K:
(i) Reports of Independent Registered Public Accounting Firm
(ii) Consolidated Balance Sheets as of January 31, 2021 and 2022
(iii) Consolidated Statements of Operations and Comprehensive Loss for the years ended January 31, 2020 and 2022
(iv) Consolidated Statement of Stockholders' Equity for the years ended January 31, 2021 and 2022
(v) Consolidated Statements of Cash Flows for the years ended January 31, 2021 and 2022
(vi) Notes to Consolidated Financial Statements
(b) The following Exhibits are filed as part of this Annual Report on Form 10-K:
* Filed herewith
22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| VITASPRING BIOMEDICAL CO. LTD. | ||
| By: | /s/ Kao Cheng-Hsiang | |
| Kao Cheng-Hsiang | ||
| Chief Executive Officer | ||
| (Principal Executive Officer, Principal Financial and Accounting Officer) | ||
| Date: May 2, 2022 | ||
23
VITASPRING BIOMEDICAL CO. LTD.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Contents | Page | |
| Report of Independent Registered Public Accounting Firm (PCAB ID: |
F-2, F-3 | |
| Consolidated Balance Sheets as of January 31, 2021 and 2022 | F-4 | |
| Consolidated Statements of Operations and Comprehensive Loss for the years ended January 31, 2021 and 2022 | F-5 | |
| Consolidated Statements of Stockholders' Deficit for the years ended January 31, 2021 and 2022 | F-6 | |
| Consolidated Statements of Cash Flows for the years ended January 31, 2021 and 2022 | F-7 | |
| Notes to Consolidated Financial Statements | F-8 – F-17 |
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of VitaSpring Biomedical Co., Ltd
Opinion on the Financial Statements
We have audited the accompanying balance sheets of VitaSpring Biomedical Co., Ltd (the “Company”) as of January 31, 2022 and 2021, and the related statements of operations, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended January 31, 2022, and the related notes and schedules (collectively referred to as the “Financial Statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended January 31, 2022, in conformity with the accounting principles generally accepted in the United States of America.
Going Concern Uncertainty
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s recurring losses from operations, available cash and accumulated deficit raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis of Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provides a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current year audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. We determined that there are no critical audit matters.
F-2
Supplementary Information
The supplemental information contained in Schedule I has been subjected to audit procedures performed in conjunction with the audit of the Company’s financial statements. The supplemental information is the responsibility of the Company’s management. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information, we evaluated whether the supplemental information, including its form and content, is presented in conformity with accounting principles generally accepted in the United States of America. In our opinion, the supplemental information is fairly stated, in all material respects, in relation to the financial statements as a whole.
Very truly yours,
Kho & Patel, Certified Public Accountants
A Professional Corporation
March 31, 2022
We have served as the Company’s auditor since 2020.
F-3
VITASPRING BIOMEDICAL CO., LTD
BALANCE SHEETS
JANUARY 31, 2022 AND 2021
| 2022 | 2021 | |||
| ASSETS | ||||
| CURRENT ASSETS | ||||
| Cash and cash equivalents | $ | $ | ||
|
Accounts receivable, net of allowance for doubtful accounts of $0 in 2021 and $0 in 2020 (Note 1) |
||||
| Prepaid expenses | ||||
| Inventory | ||||
| Total current assets | ||||
| LONG-TERM ASSETS | ||||
| Property and equipment, net | ||||
| Operating lease right-of-use asset | ||||
| Deposits | ||||
| Total long-term assets | ||||
| Total assets | $ | $ | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
| CURRENT LIABILITIES | ||||
| Accounts payable | $ | $ | ||
| Income tax payable | ||||
| Advances from related party | ||||
| Total current liabilities | ||||
| LONG-TERM LIABILITIES | ||||
| Operating lease liabilities, net of current | ||||
| Deferred tax liability (Note 9) | ||||
| Total long-term liabilities | ||||
| Total liabilities | ||||
| COMMITMENTS AND CONTINGENCIES | ||||
| STOCKHOLDERS' EQUITY | ||||
|
Common stock, $0.0001 par value, 500,000,000 and 500,000,000 shares, respectively authorized 206,520,030 and 209,670,030 shares, respectively issued and outstanding |
||||
| Stockholder receivables | ( |
( | ||
| Additional paid-in capital | ||||
| Retained earnings (accumulated deficit) | |
( | ||
| Total stockholders' equity | |
| ||
| Total liabilities and stockholders' equity | $ | $ |
See accompanying notes and independent accountant's review report.
F-4
VITASPRING BIOMEDICAL CO., LTD
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JANUARY 31, 2022 AND 2021
| 2022 | 2021 | |||
| Revenues | $ | |
$ | |
| Cost of goods sold | | |||
| Gross profit from operations | |
| ||
| Operating Expenses | ||||
| Selling, general and administrative expenses (Schedule I) | |
| ||
| Income (loss) from operations | |
( | ||
| Provision for income tax benefit (expense) | ( |
- | ||
| Net income (loss) | $ | |
$ | ( |
| Net income per share: Basic and diluted | $ | - | $ | - |
|
Weighted average number of shares outstanding: Basic and diluted |
||||
See accompanying notes and independent auditor's report.
F-5
VITASPRING BIOMEDICAL CO., LTD
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD ENDED JANUARY 31, 2022 AND 2021
| Number of Shares | Common Stock | Shareholder Receivables | Additional Paid-In Capital | Retained Earnings (Accumulated Deficit) | Total Stockholders' Equity (Deficit) | |||||||
| Balance, January 31, 2020 | |
$ | |
$ | - | $ | |
$ | ( |
$ | - | |
| 5:1 stock split | |
- | - | - | - | - | ||||||
| Purchase of treasury stock | ( |
( |
- | ( |
- | (3,498) | ||||||
| Issuance of Common Stock | |
|
- | |
- | 82,342 | ||||||
| Issuance of stock-based compensation - Common Stock | |
|
( |
|
- | 442,902 | ||||||
| Net loss | - | - | - | - | ( |
(425,382) | ||||||
| Balance, January 31, 2021 | |
$ | |
$ | ( |
$ | |
$ | ( |
$ | 96,364 | |
| Repurchase of Common stock | ( |
( |
- | |
- | - | ||||||
| Issuance of Common Stock | |
|
- | |
- | 50,000 | ||||||
Issuance of stock-based compensation - Common Stock |
|
|
|
|
- | 167,173 | ||||||
| Net income | - | - | - | - | |
1,264,002 | ||||||
| Balance, January 31, 2022 | |
$ | |
$ | ( |
$ | |
$ | |
$ | 1,577,539 |
See accompanying notes and independent auditor's report.
F-6
VITASPRING BIOMEDICAL CO., LTD
STATEMENTS OF CASH FLOWS
FOR THE PERIOD ENDED JANUARY 31, 2022 AND 2021
| 2022 | 2021 | |||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||
| Net inco me (loss) | $ | |
$ | ( |
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||
| Depreciation expense | |
- | ||
| Stock-based compensation | |
| ||
| Deferred tax (benefit) expense | |
- | ||
| Changes in assets and liabilities: | ||||
| Accounts receivable | ( |
- | ||
| Prepaid expenses | ( |
- | ||
| Inventory | |
( | ||
| Deposits | ( |
- | ||
| Accounts payable and accrued liabilities | |
- | ||
| Other current liabilities | |
- | ||
| Income tax payable | |
- | ||
| Advances from related party | |
| ||
| Cash provided by (used in) operating activities | |
( | ||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||
| Purchase of fixed assets | ( |
- | ||
| Cash provided by (used in) investing activities | ( |
- | ||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||
| Purchase of treasury stock | - | ( | ||
| Issuance of stock-based compensation - common stock | - | | ||
| Proceeds from sale of common stock | |
| ||
| Cash provided by (used in) financing activities | |
| ||
| Net increase (decrease) in cash and cash equivalents | |
| ||
| CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR | |
- | ||
| CASH AND CASH EQUIVALENTS, END OF THE YEAR | $ | |
$ | |
| Supplemental cash flow disclosures: | ||||
| Income taxes paid | $ | |
$ | - |
| Interest expense paid | $ | - | $ | - |
| Supplemental schedule of non-cash investing and financing activities | ||||
| Common stock issuance in lieu of shareholder receivables | $ | |
$ | |
See accompanying notes and independent auditor's report.
F-7
Note 1 – ORGANIZATION AND NATURE OF BUSINESS
VitaSpring Biomedical Co., Ltd (formerly Shemn Corp.) (“the Company”) was incorporated in the State of Nevada on September 6, 2016. The Company aims to build a cell medical industry, invest in research and development of stem cell applications in regenerative medicine, establish advanced medical research centers and high standard cell production centers, and provide “GTP” standard stem cell preparations for the development of cellular drugs. Through the development of cell medicine, it will become a leading international business group in the fields of regenerative medicine applied to the innovative fields of medicine, preventive health care, beauty, and anti-aging. The “GTP Cell Center” is basis for its business, which is cross-domain in biotechnology medical treatment, medicine and medical materials, and focuses on the development of cell medical treatment.
Note 2 – GOING CONCERN
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has retained earnings of $816,724 and a cash flow from operations amounting to $134,811 for year ended January 31, 2022. The Company has an accumulated deficit of $447,278 and a negative cash flow from operations amounting to $42,130 for year ended January 31, 2022. The Company had $5,613,200 and $248,200 in revenues for the years ended January 31, 2022 and 2021, respectively. There is substantial doubt about the Company’s ability to continue as a going concern due to the limited operating history of the business. As such, no assurance that the Company will continue to be profitable. Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. The Company intends to position itself so that it will be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America. The Company’s year-end is January 31.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting year. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents. The Company had $107,212 and $45,398 of cash equivalents as of January 31, 2022 and 2021, respectively.
Allowance for Doubtful Accounts
The allowance for doubtful accounts represents an estimate by the Company's management of specific accounts deemed uncollectible. The estimate takes into account prior bad debt experience and customer receivables outstanding for 90 days or more. Allowance for doubtful accounts was $0 as of January 31, 2022.
Prepaid Expenses and Deposits
Prepaid Expenses are recorded at cost less amortized value. The Company had $2,634 and $0 in prepaid expenses and deposits as of January 31, 2022 and 2021, respectively.
F-8
Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventories
Inventories are stated at the lower of cost or market. Cost is principally determined using the first-in, first out (FIFO) method. The Company had $0 and $144,000 in finished goods inventory as of January 31, 2022 and 2021, respectively.
Depreciation, Amortization, and Capitalization
The Company records depreciation and amortization when appropriate using straight-line balance method over the estimated useful life of the assets. The Company estimates that the useful life of necessary equipment is 5 years. Expenditures for maintenance and repairs are charged to expense as incurred. Additions, major renewals, and replacements that increase the property's useful life are capitalized. Property sold or retired, together with the related accumulated depreciation is removed from the appropriated accounts and the resultant gain or loss is included in net income.
Accounts Payable and Accrued Liabilities
Accounts payable discloses a liability to a creditor, carried on open account, usually for purchases of goods and services. Accrued liabilities represent unpaid goods and services. The Company had $1,251,500 and $0 in accounts payable and accrued liabilities as of January 31, 2022 and 2021, respectively.
Credit Card Liability
Credit card liability represents amounts owed to credit card issuers for money borrowed to pay merchants for goods and services based on the cardholder’s promise to pay the card issuer borrowed amounts plus other agreed upon charges. The Company had $0 and $0 in credit card liability as of January 31, 2022 and 2021, respectively.
Fair Value of Financial Instruments
ASC topic 820 "Fair Value Measurements and Disclosures" establishes a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.
These tiers include:
| Level 1: | defined as observable inputs such as quoted prices in active markets; |
| Level 2: |
defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; |
| Level 3: |
defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
The carrying value of cash and the Company’s loan from shareholder approximates its fair value due to their short-term maturity.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
F-9
Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers”. The core principle of ASC 606 is that an entity recognizes 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. An entity recognizes revenue in accordance with that core principle by applying the following steps: Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. Specifically, Section 606-10-50 requires an entity to provide information about: a. Revenue recognized from contracts with customers, including the disaggregation of revenue into appropriate categories; b. Contract balances, including the opening and closing balances of receivables, contract assets, and contract liabilities; c. Performance obligations, including when the entity typically satisfies its performance obligations and the transaction price that is allocated to the remaining performance obligations in a contract; d. Significant judgments, and changes in judgments, made in applying the requirements to those contracts. For the years ended January 31, 2022 and 2021, the Company generated $5,613,200 and $248,200 in revenue, respectively.
The Company computes income (loss) per share in accordance with FASB ASC 260 “Earnings per Share”. Basic loss per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of outstanding common shares during the year.
Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the year. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. As of January 31, 2022 and 2021, there were no potentially dilutive debt or equity instruments issued or outstanding.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as all changes in stockholders’ equity (deficit), exclusive of transactions with owners, such as capital investments. Comprehensive income (loss) includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. As of January 31, 2022 and 2021, there were no differences between our comprehensive income (loss) and net income (loss).
The Company measures all stock-based awards granted to employees, directors and non-employees based on the fair value on the date of grant in accordance with ASC Topic 718. Compensation expense of those awards is recognized over the requisite service period, which is generally the vesting period of the respective award. Generally, the Company issues awards with either service-only vesting conditions and records the expense using the straight-line method or service and performance vesting conditions and records the expense when achievement of the performance condition becomes probable using the graded-vesting method. The Company accounts for forfeitures as they occur.
The fair value of stock-based grant awards is estimated using the fair value of the Company’s most recent historical transaction with third parties. The Company classifies stock-based compensation expense in its statements of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.
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Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Foreign Currency Translation
The Company’s functional and reporting currency is the U.S. dollar. Transactions may occur in foreign currencies and management has adopted ASC 830, “Foreign Currency Translation Matters”. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the statement of operations.
Leases
The Company determines whether a contract is or contains a lease at contract inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities on our balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities on the Company’s balance sheets.
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate, we use the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that
option. Operating lease expense for fixed lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are generally expensed as incurred and may include certain index-based changes in rent and other non-fixed payments for services provided by the lessor. The Company’s leases do not contain any material residual guarantees or material restrictive covenants.
Lease arrangements with lease and non-lease components are generally accounted for separately. For certain equipment leases, such as vehicles, the Company will account for the lease and non-lease components as a single lease component. Additionally, for certain equipment leases, the Company will apply a portfolio approach to effectively account for the operating lease ROU assets and liabilities.
Risk Factors
The following risks could adversely affect the Company’s business, financial condition, cash flows, and results of operations. These risk factors do not identify all risks that we face; our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future years.
The COVID-19 pandemic has adversely affected significant portions of our business and could have a material adverse effect on our financial condition and results of operations. The Company is subject to numerous pandemic-related risks, including those described below. The degree to which COVID-19 impacts the results will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and severity of the pandemic, the actions taken to contain the virus or treat its impact, other actions taken by governments, businesses, and individuals in response to the virus and resulting economic disruption, and how quickly and to what extent normal economic and operating conditions can resume. We are similarly unable to predict the extent of the impact of the pandemic on our customers, suppliers, vendors, and other partners, and their financial conditions, but a material effect on these parties could also materially adversely affect us.
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Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The pandemic has resulted in authorities imposing, and businesses and individuals implementing, numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, and shutdowns. These measures have impacted and may further impact our workforce and operations, the operations of our customers, and those of our respective vendors, suppliers, and partners.
There is considerable uncertainty regarding the business impacts from such measures and potential future measures. Shelter-in-place orders and other measures, including work-from-home and social distancing policies implemented to protect employees.
The pandemic has caused the Company to modify its business practices, including with respect to employee travel; employee work locations; cancellation of physical participation in meetings, events, and conferences; and social distancing measures. The Company may take further actions as required by government authorities or others, or that we determine are in the best interests of our employees, customers, suppliers, vendors, and partners. Work-from-home and other measures introduce additional operational risks, including cybersecurity risks, and have affected the way we conduct our product development, validation, and qualification, customer support, and other activities, which could have an adverse effect on our operations. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, and illness and workforce disruptions could lead to unavailability of key personnel and harm our ability to perform critical functions.
Note 4 – ADVANCES FROM RELATED PARTY
For the year ended January 31, 2021, one of the Company's major shareholders, a related party, advanced to the Company advances that amounted to $93,034. Advances are unsecured, non-interest bearing and due on demand. The shareholder advances amounted to $ as of January 31, 2022.
Note 5 – COMMON STOCK
The number of authorized shares of common stock under the Certificate of Incorporation was 75,000,000, $0.001 par value, when the Company was incorporated on September 6, 2016. The number of authorized shares of common stock under the Certificate of Incorporation was amended to 225,000,000 shares on November 29, 2018. The number of authorized shares of common stock under the Certificate of Incorporation was amended to 500,000,000 shares, $0.0001 par value, on May 22, 2020.
On May 12, 2020, the Company amended its articles of incorporation to affect the following: (a) the number of authorized shares of common stock under the Certificate of Incorporation was amended to 500,000,000 shares, having a $0.0001 par value; (b) a stock split on a 1:5 basis, such that each share of the issued and outstanding Common stock of the Corporation be forward split into five (5) shares of Common stock of the Corporation, effective on June 8, 2020 (the “Record Date”).
On July 14, 2020, the Company filed an 8-K Form regarding the Board of Directors approvals of the following, as amended via Form 8-K filed on August 4, 2020: (1) the issuance of up to 16,468,400 shares of common stock to certain non-U.S. accredited investors, at a purchase price of $0.005 per share, and (2) the issuance of up to 131,891,600 shares of common stock, at par value, to non-U.S. consultants, directors, and employees.
On September 9, 2020, the Company issued 6,800,000 shares of common stock related to its stock-based compensation plan to various marketing advisors, technical advisors, sales distributors, brokers, and sales representatives of the Company.
On October 4, 2020, the Company issued 131,891,600 shares of common stock related to its stock-based compensation plan to certain non-U.S. consultants, directors, and employees of the Company.
On October 4, 2020, the Company issued 16,468,400 shares of common stock to investors for cash proceeds of $82,342 at a price of $0.005 per share.
On November 24, 2020, the Company issued 6,233,520 shares of common stock related to its stock-based compensation plan to certain non-U.S. founders of the Company.
On May 12, 2021, the Company issued shares of common stock to investors for cash proceeds of $50,000 at a price of $0.005 per share.
On May 12, 2021, the Company issued shares of common stock related to its stock-based compensation plan to certain non-U.S. consultants, directors, and employees of the Company.
There were and shares of common stock issued and outstanding as of January 31, 2022 and 2021, respectively.
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The Company’s stock-based compensation programs are long-term retention programs that are intended to attract, retain and provide incentives for employees, officers and directors, and to align stockholder and employee interests.
Under the stock-based compensation plan, the Company grants Incentive Stock Options (“ISO”), Nonstatutory Stock Options (“NSO”), Restricted Stock (“RS”) and Restricted Stock Units (“RSU). ISO and NSO are granted under service conditions. RS and RSU are granted under vesting criteria set by the Administrator and could be based upon the achievement of Company-wide, business unit, or individual goals (including, but not limited to, continued employment or service), or any other basis determined by the Administrator in its discretion. Stock options granted to employees generally vest over a four-year period, although certain grants may vest over a longer or shorter period. Stock options granted to non-employees generally vest over a one-year period.
Valuation of Stock-Based Compensation
Stock-based compensation cost is measured at the grant date based on the fair value of the award. The fair value of the awards are fixed at grant date and amortized over the longer of the remaining performance or service period. The fair value of stock-based grant awards is estimated using the fair value of the Company’s most recent historical transaction with third parties.
| Number of Shares |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Life (Years) | ||||
| January 31, 2021 | $ | - | 1 | |||
| Granted | - | |||||
| Exercised | - | - | ||||
| Forfeited | ( |
- | ||||
| January 31, 2022 | $ | - | 1 | |||
A summary of the status of the Company’s nonvested shares for the year ended as of January 31, 2022, and changes during the year ended January 31, 2022 are as follows:
| Number of Shares |
Weighted Average Grant Date Fair Value | |||
| Nonvested at January 31, 2021 | 58,081,440 | $ | 0.005 | |
| Granted | 7,135,015 | 0.005 | ||
| Vested | - | - | ||
| Forfeited | (11,285,015) | 0.005 | ||
| Nonvested at January 31, 2022 | 53,931,440 | $ | 0.005 | |
| Expected to vest | 53,931,440 | $ | 0.005 | |
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Stock-based compensation: Common stock activity for the year ended January 31, 2022 are as follows:
|
Number of Stock-Based Compensation: Common Stock |
Weighted Average Exercise Price |
Weighted Average Grant Date Fair Value |
Weighted Average Remaining Contractual Life (Years) | |||||
| January 31, 2021 | - | $ | - | $ | ||||
| Granted | 144,925,120 | - | 0.005 | 1 | ||||
| Exercised | - | - | ||||||
| Canceled | - | - | ||||||
| January 31, 2022 | 144,925,120 | $ | - | $ | 0.005 | 1 | ||
| Expected to vest | 144,925,120 | $ | $ | 0.005 | 1 |
Compensation Costs
The Company recognizes the estimated compensation cost of all stock-based awards generally on a straight-line basis over the requisite service period of the entire award, which is generally the vesting period. The estimated compensation cost is based on the fair value of the common stock on the date of grant. The Company accounts for forfeitures as they occur.
As of January 31, 2022, there was $138,702 of unrecognized compensation cost related to non-vested stock-based awards which will be recognized over a weighted average period of one year. Total unrecognized compensation cost will be adjusted for future changes based on actual forfeitures.
Share-based compensation recognized for the year ended January 31, 2022 amounted to $. Share-based compensation recognized for the year ended January 31, 2021 amounted to $0 as no stock-based compensation was issued.
Note 7 – SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
For the years ended January 31, 2022 and
2021, the Company incurred $
Note 8 – COMMITMENTS AND CONTINGENCIES
Operating Lease Commitment
In July 2021, the Company entered into a non-cancelable operating lease for an office facility in Irvine, California. The lease agreement requires 36 monthly lease payments that range from $14,796 to $16,013 per month. The lease commences in August 2021 and expires in July 2024. The lease has a remaining lease term of less than three years, with no options to extend.
The components of lease expense are as follows:
For the year ended January 31, 2022, operating
lease costs amounted to $
Other information related to leases are as follows:
Supplemental Cash Flows Information: for the year ended January 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
| · | Operating cash flows from operating leases: $88,776 |
Right-of-use assets obtained in exchange for lease obligations:
| · | Operating leases: $551,650 |
Weighted Average Remaining Lease Term for operating leases: 2.5 years
Weighted Average Discount Rate for operating leases: 0.330%
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Note 8 – COMMITMENTS AND CONTINGENCIES (Continued)
Operating Lease Commitment (Continued)
Future minimum lease payments under non-cancelable leases as of January 31, 2022 are as follows:
| Fiscal Year | Operating Leases | |
| 2023 | $ | |
| 2024 | ||
| 2025 | ||
| 2026 | ||
| Thereafter | ||
| Total future minimum lease payments | ||
| Less imputed interest | ( | |
| Total | $ |
| January 31, 2022 | ||
| Operating lease liabilities | $ | |
| Operating lease liabilities, net of current | $ |
Note 9 – INCOME TAXES
There are inherent uncertainties related to the interpretation of tax regulations in the jurisdictions in which the Company transacts business. The judgments and estimates made at a point in time may change based on the outcome of tax audits, as well as changes to, or further interpretations of, regulations. The Company adjusts its income tax expense in the period in which these events occur. If such changes take place, there is a risk that the tax rate may increase or decrease in any period.
The FASB guidance contained in ASC Topic 740, Income Taxes, addresses the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a threshold of “more likely than not” for recognition and derecognition of tax positions taken or expected to be taken in a tax return.
The Company adopted this guidance and is now required to recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being recognized. Additionally, previously recognized tax positions that no longer meet the more-likely-than-not threshold should be derecognized in the first financial reporting period in which that threshold is no longer met. Changes in recognition or measurement will be reflected in the period in which the change in judgment occurs.
The Company’s income tax filings are subject to audit by various taxing authorities. The Company’s open audit periods are three years for federal and four years for California. In evaluating the Company’s tax provisions and accruals, future taxable income, and the reversal of temporary differences, interpretations, and tax planning strategies are considered. The Company had no material adjustments to its liabilities for unrecognized income taxes under the guidelines of the ASC Topic 740 for uncertainty in income taxes and believes their estimates are appropriate based on current facts and circumstances.
The components of provision for income taxes are:
|
January 31, 2022 |
January 31, 2021 | |||
| Income taxes (payable)/receivable currently: | ||||
| Federal | $ | ( |
$ | |
| State | ||||
| Total income taxes payable currently | ( |
|||
| Deferred income tax | ||||
| Federal | ||||
| Deferred tax benefit (liability) – end of period/year | ( |
| ||
| Valuation allowance | - | ( | ||
| Total deferred tax benefit (liability) – end of period/year | ( |
|||
| Deferred tax benefit (liability) – beginning of period/year | 93,929 | 4,598 | ||
| Valuation allowance | (93,929) | (4,598) | ||
| Total deferred tax benefit (liability) – beginning of period/year | - | - | ||
| Total federal deferred tax benefit (liability) | (6,181) | - | ||
| State | ||||
| Deferred tax benefit (liability) – end of period/year | $ | - | $ | - |
| Deferred tax benefit (liability) – beginning of period/year | - | - | ||
| Total state deferred tax benefit (liability) | - | - | ||
| Total deferred tax income (expense) | ( |
- | ||
| Provision for income tax benefit (expense) | $ | ( |
$ | - |
| Deferred tax asset (liability) - long-term | $ | ( |
$ | - |
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Note 10 – CONCENTRATION OF CREDIT RISK
The Company had one customer that accounted for more than 10% of the Company’s total sales for the year ended January 31, 2022. The customer represented $5,613,200 and 100% in aggregate of total sales for the year ended January 31, 2022. The Company’s had no significant customer sales concentration for the year ended January 31, 2021.
The Company had one vendor that accounted for more than 10% of the Company’s total purchases for the year ended January 31, 2022. The one vendor represented $3,545,200 and 100% of the Company’s total purchases for the year ended January 31, 2022. If the Company lost one this vendor, this could have a negative impact upon the financial well-being of the Company. The Company had no significant vendor concentration for the year ended January 31, 2021.
Note 11 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has evaluated subsequent events for potential recognition and/or disclosure through March 31, 2022, the date these financial statements were issued and has determined that there were no material subsequent events to disclose in these financial statements.
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VITASPRING BIOMEDICAL CO., LTD
SUPPLEMENTARY INFORMATION
SCHEDULE I - SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
FOR THE PERIOD ENDED JANUARY 31, 2022 AND 2021
| 2022 | 2021 | |||
| Auto and truck expense | $ | 1,811 | $ | - |
| Bank charges | 2,360 | 670 | ||
| Depreciation expense | 8,361 | - | ||
| Insurance | 3,781 | - | ||
| Meals and entertainment | 1,654 | - | ||
| Office expense | 28,935 | 7,936 | ||
| Outside service | 14,116 | - | ||
| Payroll | 30,804 | - | ||
| Professional fees | 216,722 | 93,958 | ||
| Repairs and maintenance | 5,840 | - | ||
| Rent | 92,393 | - | ||
| Stock-based compensation | 167,173 | 434,218 | ||
| Tax and license | 1,405 | 800 | ||
| Travel | 11,539 | - | ||
| Total selling, general and administrative expenses | $ | 586,894 | $ | 537,582 |
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