Vitaspring Biomedical Co. Ltd 10-Q for FY2022 Q2
Vitaspring Biomedical Co. Ltd. (VSBC)
About this 10-Q
Vitaspring Biomedical Co. Ltd filed this 10-Q on September 15, 2021, covering the quarter ended July 31, 2021 (FY2022 Q2).
Headline figures
Quarter ended July 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.39M
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| ( |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period 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 incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices, Zip Code)
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 ( | |
| 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
in Rule 12b-2 of the Exchange Act). Yes [ ]
The number of shares outstanding of each of the issuer’s classes of common stock, as of July 31, 2021 is as follows:
| Class of Securities | Shares Outstanding | |
| Common Stock, $0.001 par value |
VITASPRING BIOMEDICAL CO. LTD.
Quarterly Report on Form 10-Q
For the Quarter Ended July 31, 2021
TABLE OF CONTENTS
| PART I – FINANCIAL INFORMATION | |||||
| Item 1. | Condensed Consolidated Financial Statements - unaudited | 3 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 | |||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 19 | |||
| Item 4. | Controls and Procedures | 19 | |||
| PART II – OTHER INFORMATION | |||||
| Item 1. | Legal Proceedings | 21 | |||
| Item 1A. | Risk Factors | 21 | |||
| Item 2. | Unregistered Sale of Equity Securities and Use of Proceeds | 21 | |||
| Item 3. | Defaults Upon Senior Securities | 21 | |||
| Item 4. | Mine Safety Disclosures | 21 | |||
| Item 5. | Other Information | 21 | |||
| Item 6. | Exhibits | 21 | |||
| Signatures | 21 | ||||
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
VITASPRING BIOMEDICAL CO., LTD
BALANCE SHEETS
JULY 31, 2021 AND JANUARY 31, 2021
|
July 31, 2021 (Unaudited) |
January 31, 2021 | |||
| ASSETS | ||||
| CURRENT ASSETS | ||||
| Cash and cash equivalents | $ |
$ | ||
| Prepaid expenses | - | |||
| Inventory | - | | ||
| Total current assets | |
| ||
| LONG-TERM ASSETS | ||||
| Property and equipment, net | - | |||
| Deposits | |
- | ||
| Deferred tax asset (Note 9) | - | - | ||
| Total long-term assets | |
- | ||
| Total assets | $ |
$ | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
| CURRENT LIABILITIES | ||||
| Accounts payable and accrued liabilities | $ |
$ - | ||
| Advances from related party | |
| ||
| Total current liabilities | |
| ||
| Total liabilities | |
| ||
| COMMITMENTS AND CONTINGENCIES | - | - | ||
| STOCKHOLDERS' EQUITY | ||||
Common stock, $ par value, and shares, respectively authorized and shares, respectively issued and outstanding |
||||
| Stockholder receivables | ( |
( | ||
| Additional paid-in capital | ||||
| Accumulated deficit | ( |
( | ||
| Total stockholders' equity | |
| ||
| Total liabilities and stockholders' equity | $ |
$ |
See Accompanying Notes to the Condensed Consolidated Financial Statements (Unaudit
3
VITASPRING BIOMEDICAL CO., LTD
STATEMENTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED JULY 31, 2021 AND 2020
(UNAUDITED)
| Three Months Ended July 31, 2021 | Three Months Ended July 31, 2020 |
Six Months Ended July 31, 2021 |
Six Months Ended July 31, 2020 | |||||
| REVENUE |
$ |
|
$ | $ | |
$ | ||
| Cost of goods sold | |
- | |
- | ||||
| Gross profit from operations | ||||||||
| OPERATING EXPENSES | ||||||||
| Selling, general and administrative expenses (Schedule I) | ||||||||
|
Income (loss) from operations before provision for income tax benefit (expense) |
( |
( | ||||||
| Provision for income tax benefit (expense) | ( |
|||||||
| Net income (loss) | $ | $ | ( |
$ | $ | ( | ||
| Net income (loss) per share: Basic and diluted | $ | $ | $ | $ | ||||
| Weighted average number of shares outstanding: Basic and diluted |
See Accompanying Notes to the Condensed Consolidated Financial Statements (Unaudit
4
VITASPRING BIOMEDICAL CO., LTD
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JULY 31, 2021 AND 2020
(UNAUDITED)
|
Six month ended July 31, 2021 |
Six months end July 31, 2020 | |||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||
| Net income (loss) | $ |
$ ( | ||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||
| Depreciation expense | |
- | ||
| Stock-based compensation | |
- | ||
| Deferred tax (benefit) expense | |
- | ||
| Changes in assets and liabilities: | ||||
| Prepaid expenses | ( |
- | ||
| Inventory | |
- | ||
| Deposits | ( |
- | ||
| Accounts payable and accrued liabilities | |
| ||
| Credit card liabilities | - | | ||
| Income tax payable | |
|||
| Advances from related party | |
| ||
| Net cash provided by operating activities | |
| ||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||
| Purchase of fixed assets | ( |
- | ||
| Cash used in investing activities | ( |
- | ||
| Net increase in cash and cash equivalents | |
| ||
| CASH AND CASH EQUIVALENTS, February 1 | |
- | ||
| CASH AND CASH EQUIVALENTS, July 31 | $ |
$ | ||
| Supplemental cash flow disclosures: | ||||
| Income taxes paid | $ - | $ - | ||
| Interest expense paid | $ - | $ - | ||
| Supplemental schedule of non-cash operating and financing activities | ||||
| Accrued unfunded security deposit | $ - | $ | ||
See Accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited)
5
VITASPRING BIOMEDICAL CO., LTD
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
SIX MONTHS ENDED JULY 31, 2021
(UNAUDITED)
| Numbers of Shares | Common Stock | Stockholder Receivables | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders' Equity | |
| Balance,January 31, 2021 | $ |
$ ( |
$ |
$ ( |
$ | |
| Repurchase of Common stock | ( |
( |
||||
| Issuance of Common Stock | ( |
|||||
|
Issuance of stock-based compensation - Common Stock |
||||||
| Net income | - | |||||
| Balance, July 31, 2020 | $ |
$ ( |
$ |
$ ( |
$ |
See Accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited)
6
VITASPRING BIOMEDICAL CO. LTD.
Six months ended July 31, 2021 and 2020
Notes to the Financial Statements
(Unaudited)
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 an accumulated deficit of $21,439 and a positive cash flow from operations amounting to $618,450 for the six months ended July 31, 2021. The Company had $1,390,400 and $1,924,200 in revenues for the three and six months ended July 31, 2021, respectively. The Company currently earned profit for the period and is in the process of completing its efforts to establish a stabilized source of revenue sufficient to cover operating costs over an extended period. Therefore, there is still a substantial doubt about the Company’s ability to continue as a going concern. 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 $614,063 of cash and cash equivalents as of July 31, 2021.
Prepaid Expenses and Deposits
Prepaid Expenses are recorded at cost less amortized value. The Company had $36,454 in prepaid expenses and deposits as of July 31, 2021.
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 in finished goods inventory as of July 31, 2021.
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.
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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 $47 in accounts payable and accrued liabilities as of July 31, 2021.
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 in credit card liability as of July 31, 2021.
Fair Value of Financial Instruments
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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.
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 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.
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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 three and six months ended July 31, 2021, the Company generated $1,390,400 and $1,924,200 in revenue, respectively.
The Company computes income (loss) per share in accordance with ASC Topic 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 period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. As of July 31, 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, exclusive of transactions with owners, such as capital investments. Comprehensive income (loss) includes net income (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 July 31, 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 – Stock Compensation. 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.
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 Topic 830, Foreign Currency 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 (losses) arising on translation or settlement of foreign currency denominated transactions or balances are included in the statement of operations.
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
9
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.
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 six months ended July 31, 2021, one of the Company's major shareholders, a related party, had outstanding advances to the Company. Advances are unsecured, non-interest bearing and due on demand and amounted to $93,647 as of July 31, 2021.
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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.
Effective on January 21, 2020, Liu Shan Shan, the previous sole officer and director and a majority shareholder of the Company owning a total of 82.55% of the issued and outstanding shares of common stock of the Company, together with all other minority shareholders (31) of the Company owning an aggregate of 17.45% of the issued and outstanding shares of common stock of the Company, entered into stock purchase agreement for the sale of 100% of the outstanding shares of common stock of the Company (10,902,006 shares), to a group of purchasers (32), including Li-Li Chu (2,666,666 shares); the incoming CEO, Chu Pao-Chi (1,666,667 shares); and the incoming Secretary, Kao Chen-Hsiang (800,000 shares).
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 1,000,000 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 7,135,015 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 209,670,030 and 10,902,006 shares of common stock issued and outstanding as of January 31, 2021 and 2020, respectively.
There were shares of common stock issued and outstanding as of July 31, 2021.
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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 2020 Stock 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 at their 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 | ( |
- | ||||
| July 31, 2021 | $ | - | 1 | |||
A summary of the status of the Company’s nonvested shares for the six months ended as of July 31, 2021, and changes during the three months ended July 31, 2021 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 July 31, 2021 | 53,931,440 | $ | 0.005 | |
| Expected to vest | 53,931,440 | $ | 0.005 |
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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 July 31, 2021, there was $198,924 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 three and six months ended July 31, 2021 amounted to $44,023 and $79,127, respectively.
Note 7 – SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
For the three and six months ended July 31, 2021, the Company incurred $90,323 and $150,713 in selling, general and administrative expenses, respectively. See financial statements – supplementary information Schedule I for details.
Note 8 – COMMITMENTS AND CONTINGENCIES
Operating Lease Commitment
On July 2021, the Company entered into a non-cancelable operating lease to lease an office facility in Irvine, California. The lease agreement requires 36 monthly lease payments that range from $14,796 to $16,013 per month, effective in August 2021 and expires in July 2024.
Future non-cancelable minimum lease payments for the office facility as of July 31, 2021 are as follows:
| Fiscal Year | ||
| 2022 | $ | 88,776 |
| 2023 | 369,505 | |
| 2024 | 96,076 | |
| 2025 | - | |
| 2026 | - | |
| Thereafter | - | |
| Total | $ | 554,357 |
Facility expense amounted to $0 for the three and six months ended July 31, 2021.
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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:
| July 31, 2021 |
January 31, 2021 | |||
| Income taxes (payable)/receivable currently |
$ |
- | $ | - |
| Federal State | (800) |
- | ||
| Total income taxes payable currently | (800) |
- | ||
| Deferred income tax | ||||
|
Federal Deferred tax benefit (liability) – end of period/year |
(3,648) |
93,929 | ||
| Valuation allowance | - |
(93,929) | ||
| Total deferred tax benefit (liability) – end of period/year | (3,648) |
- | ||
|
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) | (3,648) |
- | ||
|
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) | (3,648) |
- | ||
| Provision for income tax benefit (expense) | $ | (4,448) | $ | - |
| Deferred tax asset (liability) - long-term | $ | (3,648) |
- |
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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 six months ended July 31, 2021. The one customer represented $1,924,200 and 100% in aggregate of total sales for the six months ended July 31, 2021.
The Company had one vendor that accounted for more than 10% of the Company’s total purchases for the six months ended July 31, 2021. The one vendor represented $1,199,200 and 100% of the Company’s total purchases for the six months ended July 31, 2021. If the Company lost this one vendor, this could have a negative impact upon the financial well-being of the Company.
Note 11 – SUBSEQUENT EVENTS
In accordance with ASC Subtopic 855-10, Subsequent Events, the Company has evaluated subsequent events for potential recognition and/or disclosure through September 13, 2021, 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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SUPPLEMENTARY INFORMATION
VITASPRING BIOMEDICAL CO., LTD
SUPPLEMENTARY INFORMATION
SCHEDULE I - SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
THREE MONTHS AND SIX MONTHS ENDED JULY 31, 2021 AND 2020
(UNAUDITED)
| Three months ended | Six months ended | |||||||
| July 31, 2021 | July 31, 2020 | July 31, 2021 | July 31, 2020 | |||||
| Bank charges | $ 962 | $ 15 | $ 1,537 | $ 100 | ||||
| Depreciation expense | 830 | - | 830 | - | ||||
| Facility expense | - | 60,500 | - | 60,500 | ||||
| Meals and entertainment | 421 | - | 421 | - | ||||
| Office expense | 669 | 1,077 | 1,107 | 1,587 | ||||
| Professional fees | 38,628 | 29,023 | 62,878 | 46,173 | ||||
| Stock-based compensation | 44,023 | - | 79,127 | - | ||||
| Taxes and licenses | 255 | - | 255 | - | ||||
| Travel expense | 4,535 | - | 4,558 | - | ||||
| Total selling, general and administrative expenses | $ 90,323 | $ 90,615 | $ 150,713 | $ 108,360 | ||||
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Caution Regarding Forward-Looking Information
This Quarterly Report on Form 10-Q, including, without limitation, statements containing the words "believes", "anticipates", "expects" and words of similar import, constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Such factors include, among others, the following: international, national and local general economic and market conditions: demographic changes; the ability of the Company to sustain, manage or forecast its growth; the ability of the Company to successfully make and integrate acquisitions; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-Q and investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.
Overview
VitaSpring Biomedical Co. Ltd., formerly Shemn Corp., was incorporated in Nevada on September 6, 2016. We are a start-up business company. From inception, we have produced leather fashion design items. Our former President and Director, Liu Shan Shan, showcased our items with potential clients and wholesale purchasers.
Recent Developments
Effective January 21, 2020, Liu Shan Shan, the previous sole officer and director and majority shareholder the Company, entered into stock purchase agreements for the sale of an aggregate of 9,000,000 shares of Common Stock of the Company, representing approximately 82.55% of the issued and outstanding shares of Common Stock of the Company as of such date, to twenty-five (25) purchasers, included Li-Li Chu (2,666,666 shares), a 10% shareholder, and the incoming CEO, Chu Pao-Chi (1,666,667 shares), and the incoming Secretary, Kao Cheng-Hsiang (800,000 shares).
Also effective January 21, 2020, Liu Shan Shan appointed Chu Pao-Chi Chairman of the Board of Directors, and Chief Executive Officer Officer of the Company, Kao Cheng-Hsiang Secretary of the Company, Lin Jer-Li Chief Technical Officer of the Company and Chen Yen Xun Technical Vice-President of the Company.
On March 30, 2020, the Company 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.
Business Plan
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. Under new management, we ceased producing and distributing leather products. Our sole objective is to develop new drugs of cell medicine. We also plan to establish a GTP cell production center in Taiwan for the production of X.MSC cytopharmaceuticals. The estimated annual output is the amount sufficient for 10,000 people (20 million cells/ does). The GTP cell center is currently under construction. Trial production is expected to begin in June, 2020. Mass production in August, 2020.
We do not sell products in a form for use by consumers although we may, in the future, develop products for use by consumers.
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Results of Operations for the Six months ended July 31, 2021 Compared to the Six months ended July 31, 2020
Revenue and cost of goods sold
For the Six months ended July 31, 2021 and July 31, 2020 the Company generated total revenue of $1,390,400 and $0 from selling products to the customer. The cost of goods sold for the quarter ended July 31, 2021 and July 31, 2020 was $1,049,200 and $0, which represent the cost of raw materials.
Operating expenses
Total operating expenses for the quarter ended July 31, 2021 and July 31, 2020 were $90,323 and $90,615. The operating expenses for the Six months ended July 31, 2021 included Selling, general and administrative expenses.
Net Income
The net income/(loss) for the quarter ended July 31, 2021 and July 31, 2020 was $250,877 and ($90,615), respectively.
Liquidity and Capital Resources and Cash Requirements
At July 31, 2021, the Company had cash of $614,063. The Company had a working capital of $538,409.
During the quarter ended July 31, 2021, the Company generated $618,450 of cash in operating activities.
During the quarter ended July 31, 2021 the Company used $49,785 in investing activities.
During the quarter ended July 31, 2021, the Company used no 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.
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 Company has an accumulated deficit of $21,439 and a positive cash flow from operations amounting to $425,839 for the six months ended July 31, 2021. The Company had $1,924,200 in revenues for the six months ended July 31, 2021. The Company currently earned profit for the period and is in the process of completing its efforts to establish a stabilized source of revenue sufficient to cover operating costs over an extended period. Therefore, there is still a substantial doubt about the Company’s ability to continue as a going concern. 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.
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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. .
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 3 - Quantitative and Qualitative Disclosures About Market Risk
In future periods, the Company may become subject to certain market risks, including changes in interest rates and currency exchange rates. At the present time, the Company has no identified exposure and does not undertake any specific actions to limit exposures, if any.
Item 4 - 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.
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 July 31, 2021.
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Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended July 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.
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PART II
OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 1A – Risk Factors
Item 2 - Sales of Unregistered Equity Securities and Use of Proceeds
None
Item 3 - Defaults upon Senior Securities
None
Item 4 - Mine Safety Disclosures
N/A
Item 5 - Other Information
None
Item 6 - Other EXHIBITS
The following exhibits are filed as part of this report or incorporated by reference:
| Exhibit No. | Description |
| 31.1* | Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.2* | Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32.1* | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2* | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101 | Materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2018 formatted in Extensible Business Reporting Language (XBRL). |
* Filed herewith
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: September 15, 2021 | VITASPRING BIOMEDICAL CO. LTD. | |
| By: | /s/ Kao Cheng-Hsiang | |
|
Kao, Cheng-Hsiang Chief Executive Officer | ||
| (Principal Executive Officer) | ||
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