Yubo International Biotech Ltd 10-Q for FY2021 Q3
Yubo International Biotech Ltd (YBGJ)
About this 10-Q
Yubo International Biotech Ltd filed this 10-Q on November 15, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $336.58K
- compared with a net loss of $304.71K a year earlier
U.S. 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:
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to __________
Commission File Number
(Exact name of registrant as specified in its charter) |
(State or other jurisdiction of |
| (I.R.S. Employer |
incorporation or organization) |
| Identification No.) |
(Address of principal executive offices and Zip code)
+86 (
(Registrant’s telephone number, including area code)
February 29, 2020
(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 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 fi ler,” “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
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer’s classes of common equity as of the latest practicable date – November 12, 2021
Class A Common Stock, $0.001 Par Value |
| 118,177,885 |
Class B Common Stock, $0.001 Par Value |
| 4,447 |
Class |
| Shares |
YUBO INTERNATIONAL BIOTECH LIMITED (formerly Magna-Lab, Inc.)
TABLE OF CONTENTS
In this quarterly report, unless otherwise specified, the terms “we,” “our,” “us,” the “Company,” or the “Registrant” refer to Yubo International Biotech Limited, a New York corporation formerly known as Magna-Lab, Inc., and its wholly owned subsidiaries, including without limitation, Platinum International Biotech Co., Ltd., a company organized under the laws of the Cayman Islands, and Yubo International Biotech (Beijing) Limited, a company organized under the laws of the People’s Republic of China.
2 |
| Table of Contents |
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
YUBO INTERNATIONAL BIOTECH LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the three-months and nine-months periods ended September 30, 2021 and 2020
Table of Contents
| F-1 |
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Consolidated Statements of Operations and Comprehensive Loss |
| F-2 |
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| F-4 |
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| F-5 |
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3 |
| Table of Contents |
YUBO INTERNATIONAL BIOTECH LIMITED
CONSOLIDATED BALANCE SHEETS
(Expressed in US Dollars)
(Unaudited)
|
| September 30, |
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| December 31, |
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| 2021 |
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| 2020 |
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| (Unaudited) |
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ASSETS | ||||||||
Current assets |
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Cash |
| $ |
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| $ |
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Receivables |
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Prepaid expenses |
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Inventory |
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Due from related parties |
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Total Current Assets |
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Property and equipment, net |
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Intangible assets, net |
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Operating lease right of use asset |
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Lease security deposit |
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Total Assets |
| $ |
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| $ |
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LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities |
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Accounts payable and accrued expenses (including accounts payable and accrued expenses of VIE without recourse to the Company of $ |
| $ |
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| $ |
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Customer deposits (including customer deposits of VIE without recourse to the Company of $ |
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Advances from prospective customers/distributors (including advances from prospective customers/distributors of VIE without recourse to the Company of $ |
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Due to related parties (including due to related parties without recourse to the Company of $ |
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| 987,252 |
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Operating lease liabilities – current (including operating lease liabilities - current of VIE without recourse to the Company of $ |
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Total Current Liabilities |
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Non-current liabilities |
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Operating lease liabilities - non-current (including operating lease liability – non- current of VIE without recourse to the Company of $ |
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| 1,789,349 |
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Total Liabilities |
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Commitments and contingencies |
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Shareholders' Equity: |
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Preferred stock, par value $ |
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Common stock, Class A par value $ |
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Common stock, Class B, par value $ |
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Additional Paid in Capital |
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Accumulated deficit |
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Accumulated other comprehensive income (loss) |
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Total Shareholders' Equity |
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Total Liabilities and Shareholders' Equity |
| $ |
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| $ |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-1 |
| Table of Contents |
YUBO INTERNATIONAL BIOTECH LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Expressed in US Dollars)
(Unaudited)
|
| For the three months ended September 30, |
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| For the nine months ended September 30, |
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| 2021 |
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| 2020 |
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| 2021 |
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| 2020 |
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Revenue |
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Sales |
| $ |
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| $ |
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| $ |
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| $ |
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Cost of Goods Sold |
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Gross Profit |
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Operating expenses: |
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Sales commissions |
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Employee compensation |
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Occupancy |
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Depreciation and amortization of property and equipment |
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Amortization of intangible assets |
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Other operating expenses |
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Total Operating Expenses |
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Income (loss) from operations |
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Other Income (Expenses) |
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Other expense (income) net |
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Total Other Income (Expenses) |
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Loss before Provision for Income Tax |
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Provision for Income Tax |
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| - |
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Net loss |
| $ | ( | ) |
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| $ | ( | ) |
| $ | ( | ) |
Net loss per share basic and diluted |
| $ | ( | ) |
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| ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Weighted average common shares outstanding basic and diluted |
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Comprehensive income (loss) |
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Net loss |
| $ | ( | ) |
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| $ | ( | ) |
| $ | ( | ) |
Foreign currency translation adjustment |
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Total comprehensive income (loss) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
The accompanying notes are an integral part of these consolidated financial statement.
| F-2 |
| Table of Contents |
YUBO INTERNATIONAL BIOTECH LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Expressed in US Dollars)
(Unaudited)
|
| Common Stock |
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| Accumulated |
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Nine Months Ended September 30, 2021 |
| Class A |
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| Class B |
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| Additional paid in |
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| Accumulated |
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| Other Comprehensive |
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| Total Stockholders' |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| capital |
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| Deficit |
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| Income (loss) |
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| Deficit |
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BALANCE, December 31, 2020 |
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| $ |
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| - |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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Capital contributions to Yubo Beijing |
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| - |
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| - |
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Reverse acquisitions of Yubo International Biotech Limited by Plantium International Biotech Co. Ltd. |
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Net loss for the three months ended March 31, 2021 |
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| - |
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| - |
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Foreign currency adjustment |
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BALANCE, March 31, 2021 |
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Net loss for the three months ended June 30, 2021 |
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| - |
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Foreign currency adjustment |
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BALANCE, June 30, 2021 |
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Net loss for the three months ended September 30, 2020 |
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Foreign currency adjustment |
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BALANCE, September 30, 2021 |
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| $ |
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| $ | ( | ) |
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Nine Months Ended September 30, 2020 |
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BALANCE, December 31, 2019 |
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| $ |
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Capital contributions to Yubo Beijing |
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Net loss for the three months ended March 31, 2020 |
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Foreign currency adjustment |
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BALANCE, March 31, 2020 |
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| $ |
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Net loss for the three months ended June 30, 2020 |
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Foreign currency adjustment |
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BALANCE, June 30, 2020 |
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| $ |
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| - |
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Net loss for the three months ended September 30, 2020 |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
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|
|
| ( | ) | ||||
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|
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|
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|
Foreign currency adjustment |
|
| - |
|
|
|
|
|
| - |
|
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| ||||||
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|
BALANCE, September 30, 2020 |
|
|
|
| $ |
|
|
| - |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
| ||||||
The accompanying notes are an integral part of these consolidated financial statement.
| F-3 |
| Table of Contents |
YUBO INTERNATIONAL BIOTECH LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in US Dollars)
(Unaudited)
|
| For the nine months ended |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
| (Unaudited) |
|
| (Unaudited) |
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
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|
|
Depreciation and amortization |
|
|
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|
|
| ||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Receivables |
|
| ( | ) |
|
| ( | ) |
Prepaid expense |
|
| ( | ) |
|
|
| |
Inventory |
|
| ( | ) |
|
| ( | ) |
Due from related parties |
|
|
|
|
| ( | ) | |
Lease security deposit |
|
| ( | ) |
|
|
| |
Accounts payable and accrued expenses |
|
| ( | ) |
|
|
| |
Customer deposits |
|
| ( | ) |
|
|
| |
Advances from prospective customers/distributors |
|
| ( | ) |
|
|
| |
Due to related parties |
|
|
|
|
| ( | ) | |
Net cash used in operating activities |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| ( | ) |
|
| ( | ) |
Purchases of intangible assets |
|
|
|
|
| ( | ) | |
Net cash used in investing activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Capital Contributions to Yubo Beijing |
|
|
|
|
|
| ||
Sales of ordinary shares on September 11, 2020 |
|
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| ||
Net cash provided by financing activities |
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| ||
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|
Effect of exchange rate changes |
|
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|
| ( | ) | |
|
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|
|
Net increase (decrease) in cash |
|
| ( | ) |
|
|
| |
Cash at beginning of period |
|
|
|
|
|
| ||
Cash at end of period |
| $ |
|
| $ |
| ||
Supplemental Cash Flow Information: |
|
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|
|
|
|
Income taxes paid |
|
|
|
|
|
| ||
Interest paid |
|
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|
| ||
Non-cash Investing Activities: |
|
|
|
|
|
|
|
|
Operating lease right of use asset acquired |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
| Table of Contents |
YUBO INTERNATIONAL BIOTECH LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months periods ended September 30, 2021 and 2020
(Unaudited)
NOTE 1 – ORGANIZATION
Yubo International Biotech Limited (formerly Magna-Lab Inc.) (the “Company”), a New York corporation, acquired Platinum International Biotech Co. Ltd. (“Platinum”) in a “reverse merger” transaction on January 14, 2021.
On January 14, 2021 (the “Closing Date”), the Company closed a voluntary share exchange transaction with Platinum International Biotech Co., Ltd., a company organized under the laws of the Cayman Islands (“Platinum”), pursuant to that certain Agreement and Plan of Share Exchange, dated January 14, 2021 (the “Exchange Agreement”), by and among the Company, Platinum, Yubo International Biotech (Beijing) Limited, a company organized under the laws of the People’s Republic of China (“PRC”) (“Yubo”), and certain selling stockholders named therein.
In accordance with the terms of the Exchange Agreement, on the Closing Date, the Company issued a total of
Platinum was incorporated on April 7, 2020 under the laws of the Cayman Islands as a holding company. On May 4, 2020, Platinum incorporated a wholly owned subsidiary Platinum International Biotech (Hong Kong) Limited (“Platinum HK”) in Hong Kong. On September 4, 2020, Platinum HK incorporated a wholly foreign owned enterprise (“WFOE”) Yubo International Biotech (Chengdu) Limited (“Yubo Chengdu”) in Chengdu, China.
On September 11, 2020, Yubo Chengdu entered into a series of Variable Interest Entity (“VIE”) agreements with the owners of Yubo International Biotech (Beijing) Limited (“Yubo Beijing”). Pursuant to the VIE agreements, Yubo Beijing became Yubo Chengdu’s contractually controlled affiliate. The purpose and effect of the VIE Agreements is to provide Yubo Chengdu with all management control and net profits earned by Yubo Beijing.
Yubo Beijing was incorporated on June 14, 2016. For the year ended December 31, 2020 (commencing April 2020), Yubo Beijing sold approximately 850 nebulizers to customers in the People’s Republic of China (“PRC”).
Upon executing the series of VIE agreements in September 2020, Yubo Beijing has been considered a Variable Interest Entity (“VIE”) of Yubo Chengdu, its primary beneficiary. Accordingly, Yubo Beijing has been consolidated under the guidance of FASB Accounting Standards Codification (“ASC”) 810, Consolidation.
The officers, directors, and controlling beneficial owners of Yubo Beijing from its inception on June 14, 2016 are also officers, directors, and controlling beneficial owners of Platinum. Accordingly, the accompanying consolidated financial statements include Yubo Beijing’s operations from its inception on June 14, 2016.
| F-5 |
| Table of Contents |
Commencing in the quarterly period ended March 31, 2021 Yubo Beijing started also selling certain oral liquid health products. For the nine months ended September 30, 2021, sales consisted of:
Oral liquid health products |
| $ |
| |
Nebulizers |
|
| 128,002 |
|
Others |
|
|
| |
Total |
| $ |
|
On January 21, 2021 and December 31, 2020, respectively, the Company formed two new wholly owned subsidiaries: Yubo Jingzhi Biotechnology (Chengdu) Co. Ltd. (“Yubo Jingzhi”) as a subsidiary of Yubo Beijing and Yubo Global Biotechnology (Chengdu) Co. Ltd (“Yubo Global”) as a subsidiary of Platinum HK.
Yubo International Biotech Limited and its consolidated subsidiaries and VIE are collectively referred to herein as the “Company” unless specific reference is made to an entity.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Interim Financial Information
The unaudited financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) applicable to interim financial information and the requirements of Form 10-Q and Rule 8-03 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosure required by accounting principles generally accepted in the United States of America for complete financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included. These financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2020, as not all disclosures required by generally accepted accounting principles for annual financial statements are presented. The interim financial statements follow the same accounting policies and methods of computations as the audited financial statements as of and for the year ended December 31, 2020.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and its consolidated VIE for which the Company is the primary beneficiary.
All transactions and balances among the Company, its subsidiaries and consolidated VIE have been eliminated upon consolidation.
| F-6 |
| Table of Contents |
The accompanying consolidated financial statements reflect the activities of the following entities:
Name |
| Background |
| Ownership |
Yubo International Biotech Limited (“Yubo New York”) |
| · · Incorporated in New York |
|
|
Platinum International Biotech Co. LTD (“Platinum”) |
| · · Incorporated on · A holding company |
| |
Platinum International Biotech (Hong Kong) Limited. (“Platinum HK”) |
| · · Incorporated on · A holding company |
| |
Yubo International Biotech (Chengdu) Limited (“Yubo Chengdu”) |
| · · Incorporated on · Subscribed capital of $ · A holding company |
| |
Yubo International Biotech (Beijing) Limited (“Yubo Beijing”) |
| · · Incorporated on · Subscribed capital of $ · Stem cell storage and bank |
| VIE of Yubo Chengdu WFOE |
Yubo Jingzhi Biotechnology (ChengDu) Co. Ltd. (“Yubo Jingzhi”) |
| · |
| |
Yubo Global Biotechnology (Chengdu) Co. Ltd (“Yubo Global) |
| · |
|
On September 11, 2020, our wholly-owned subsidiary, Yubo Chengdu, entered into the following contractual arrangements with Yubo Beijing and the shareholders of Yubo Beijing (the “Yubo Shareholders”), as applicable, each of which is enforceable and valid in accordance with the laws of the PRC:
Exclusive Consulting Services Agreement
Pursuant to the Exclusive Consulting Services Agreement among Yubo, Yubo WFOE, and the Yubo Shareholders, Yubo WFOE agrees to provide, and Yubo agrees to accept, exclusive management services provided by Yubo WFOE. Such management services include but are not limited to financial management, business management, marketing management, human resource management and internal control of Yubo. The Exclusive Consulting Services Agreement will remain in effect until the acquisition of all assets or equity of Yubo by Yubo WFOE is complete (as more fully described in the Exclusive Purchase Option Agreement below).
Exclusive Purchase Option Agreement
Under the Exclusive Option Agreement among Yubo, Yubo WFOE, and the Yubo Shareholders, the Yubo Shareholders granted Yubo WFOE an irrevocable and exclusive purchase option to acquire Yubo’s equity and/or assets at a nominal consideration. Yubo WFOE may exercise the purchase option at any time.
Equity Pledge Agreement
Under the Equity Pledge Agreement among Yubo WFOE and the Yubo Shareholders, the Yubo Shareholders pledged all of their equity interests in Yubo, including the proceeds thereof, to guarantee all of Yubo WFOE’s rights and benefits under the Exclusive Consulting Services Agreement and the Exclusive Option Agreement. Prior to termination of this Equity Pledge Agreement, the pledged equity interests cannot be transferred without Yubo WFOE’s prior consent. The Yubo Shareholders covenants to Yubo WFOE that among other things, it will only appoint/elect the candidates for the directors of Yubo nominated by Yubo WFOE.
| F-7 |
| Table of Contents |
Financial Statements of Yubo Beijing (VIE)
The assets and liabilities of Yubo Beijing (VIE) at September 30, 2021 and December 31, 2020 consist of:
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Cash |
| $ |
|
| $ |
| ||
Receivables |
|
|
|
|
|
| ||
Prepaid Expenses |
|
|
|
|
|
| ||
Inventory |
|
|
|
|
|
| ||
Due from related parties |
|
|
|
|
|
| ||
Property and equipment (net) |
|
|
|
|
|
| ||
Intangible assets (net) |
|
|
|
|
|
| ||
Operating lease right of use assets |
|
|
|
|
|
| ||
Lease security deposits |
|
|
|
|
|
| ||
Investment in Yubo Jingzhi (A) |
|
|
|
|
|
| ||
Receivables from other consolidating entities (A) |
|
|
|
|
|
| ||
Total assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expense |
|
|
|
|
|
| ||
Customer deposits |
|
|
|
|
|
| ||
Advances from prospective customers/distributors |
|
|
|
|
|
| ||
Due to related parties |
|
|
|
|
|
| ||
Operating lease liabilities |
|
|
|
|
|
| ||
Payables to other consolidating entities (A) |
|
|
|
|
|
| ||
Total liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Shareholders’ equity |
| $ |
|
| $ |
| ||
(A) Eliminated in consolidation.
Except for $
Foreign Currency Translation
The accompanying consolidated financial statements are presented in United States dollars (“$”), which is the reporting currency of the Company. The functional currency of Platinum and Platinum HK is the United States dollar. The functional currency of the Company’s subsidiaries and VIE located in the PRC is the Renminbi (“RMB”). For the entities whose functional currencies are the RMB, results of operations and cash flows are translated at average exchange rates during the period ($
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and judgments on historical experience and on various other assumptions and information that are believed to be reasonable under the circumstances. Estimates and assumptions of future events and their effects cannot be perceived with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes. Significant estimates and assumptions by management include, among others, useful lives and impairment of long-lived assets, and income taxes including the valuation allowance for deferred tax assets. While the Company believes that the estimates and assumptions used in the preparation of the financial statements are appropriate, actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the financial statements in the period they are determined to be necessary.
| F-8 |
| Table of Contents |
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in bank accounts, cash in time deposits, certificates of deposit and all highly liquid instruments with original maturities of three months or less.
Inventories
Inventories, mainly consisting of nebulizers and components and oral liquid health products, are stated at the lower of cost utilizing the weighted average method or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated selling costs.
The valuation of inventory requires the Company to estimate excess and slow-moving inventories. The Company evaluates the recoverability of the inventory based on expected demand and market conditions. No inventory write downs were recorded in the periods presented.
Property and Equipment
Property and equipment consist of leasehold improvements, air conditioning equipment, and office equipment. All property and equipment are stated at historical cost net of accumulated depreciation. Repairs and maintenance are expensed as incurred. Property and equipment are depreciated on a straight-line basis over the following periods:
Leasehold improvements |
| Remaining term of lease |
|
Air conditioning equipment |
|
| |
Office equipment |
|
|
Intangible Assets
Intangible assets consist of distribution software and patents and are stated at historical cost less accumulated amortization. Amortization of intangible assets is calculated on a straight-line basis over the shorter of the contractual terms or the expected useful lives of the respective assets. The amortization period by major asset classes is as follows:
Distribution software |
|
| |
Patents |
|
|
Impairment of Long-Lived Assets
The Company’s long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of the asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Impairment evaluations involve management’s estimates on asset useful lives and future cash flows. Actual useful lives and cash flows could be different from those estimated by management which could have a material effect on our reporting results and financial position. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.
| F-9 |
| Table of Contents |
Fair Value of Financial Instruments
The Company adopted ASC 820 “Fair Value Measurements,” which defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures.
The three levels are defined as follows:
Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the financial instruments.
Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value.
Financial instruments include cash, receivables, due from related parties, accounts payable and accrued expenses, advances from prospective customers/distributors and due to related parties. The carrying values of these financial instruments approximate their fair values due to the short-term maturities of these instruments.
For the periods presented, there were no financial assets or liabilities measured at fair value.
Leases
We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities - current, and operating lease liabilities - noncurrent on the balance sheets. The initial lease liability is equal to the future fixed minimum lease payments discounted using the Company’s incremental borrowing rate, on a secured basis. The initial measurement of the right-of-use asset is equal to the initial lease liability plus any initial direct costs.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.
Revenue Recognition
The Company derives its revenue from the sale of nebulizers containing frozen tubes with medical fluid and from the sale of oral liquids health products. The nebulizers are sold directly to consumers on the Company’s online e-commerce platform. The Company adopted ASC 606 requires the use of a new five-step model to recognize revenue from customers. The five-step model requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company has concluded that the new guidance did not require any significant change to its revenue recognition processes.
Revenue is recorded net of value-added tax (“VAT”).
Advertising Costs
Advertising costs are expensed as incurred.
| F-10 |
| Table of Contents |
Income Taxes
The Company follows the liability method in accounting for income taxes in accordance with ASC topic 740 (“ASC 740”), Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more-likely than not that some portion, or all, of the deferred tax assets will not be realized.
The Company applies the provisions of ASC 740 to account for uncertainty in income taxes. ASC 740 clarifies the accounting for uncertainty in income taxes by prescribing the recognition threshold a tax position is required to meet before being recognized in the consolidated financial statements.
The Company will classify interest and penalties related to unrecognized tax benefits, if and when required, as part of income tax expense in the consolidated statements of operations.
Net Loss per Share
Basic loss per ordinary share is computed by dividing net loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
Diluted loss per ordinary share reflects the potential dilution that could occur if dilutive securities (such as stock options and convertible securities) were exercised or converted into ordinary shares. For the periods presented, the Company had no dilutive securities outstanding.
Comprehensive Loss
Comprehensive loss is defined as the decrease in equity of the Company during a period from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. Comprehensive loss is reported in the consolidated statements of operations and comprehensive loss, including net loss and foreign currency translation adjustments, presented net of tax.
New Accounting Pronouncements
In February, 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02) “Leases (Topic 842)”. ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted.
For finance leases, a lessee is required to do the following:
| · | Recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the balance sheet. |
|
|
|
| · | Recognize interest on the lease liability separately from amortization of the right-of-use asset in the statement of comprehensive income. |
|
|
|
| · | Classify repayments of the principal portion of the lease liability within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows. |
For operating leases, a lessee is required to do the following:
| · | Recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the balance sheet. |
|
|
|
| · | Recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis. |
|
|
|
| · | Classify all cash payments within operating activities in the statement of cash flows. |
| F-11 |
| Table of Contents |
Other than increasing assets and liabilities at the inception of Yubo Beijing’s office lease on August 1, 2019 and Yubo Global’s laboratory space lease on March 1, 2021 (See Note 8), ASU 2016-02 has not had a significant effect on the Company’s financial position or results of operations.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material impact on its consolidated financial position, statements of operations or cash flows.
NOTE 3 – GOING CONCERN
The Company’s financial statements as of September 30, 2021 and December 31, 2020 have been prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues and cash flows sufficient to cover its operating costs and allow it to continue as a going concern. For the nine months ended September 30, 2021 and September 30, 2020, the Company had losses of $
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking third party equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 4 – INVENTORY
Inventory consisted of the following:
|
| September 30, |
|
| December 31 |
| ||
|
| 2021 |
|
| 2020 |
| ||
|
| (Unaudited) |
|
|
|
| ||
Nebulizers and components |
| $ |
|
| $ |
| ||
Oral liquid and health products |
|
|
|
|
|
| ||
Other |
|
|
|
|
|
| ||
Total Inventory |
| $ |
|
| $ |
| ||
NOTE 5 – DUE FROM RELATED PARTIES
Due from related parties consisted of:
|
| September 30, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
|
| (Unaudited) |
|
|
|
| ||
Beijing Zhenhuikang Biotechnology Co., LTD (“Zhenhuikang”) (1) |
| $ |
|
| $ |
| ||
Yubo Global Biotechnology (Chengdu) Co., Ltd. (2) |
|
|
|
|
|
| ||
Total Due from Related Parties |
| $ |
|
| $ |
| ||
__________________
(1) | Zhenhuikang is controlled by Zhenxigu. |
|
|
(2) | Yubo Global Biotechnology (Chengdu) Co., Ltd. is controlled by Mr. Jun Wang. |
The due from related parties receivables are noninterest bearing and are due on demand.
| F-12 |
| Table of Contents |
NOTE 6 – PROPERTY AND EQUIPMENT
Property and equipment, net, consisted of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
|
| (Unaudited) |
|
|
|
| ||
Leasehold improvements |
| $ |
|
| $ |
| ||
Construction in progress |
|
|
|
|
|
| ||
Air conditioning equipment |
|
|
|
|
|
| ||
Office equipment |
|
|
|
|
|
| ||
Total property and equipment |
|
|
|
|
|
| ||
Less accumulated depreciation and amortization |
|
| ( | ) |
|
| ( | ) |
Property and equipment, net |
| $ |
|
| $ |
| ||
For the nine months ended September 30, 2021 and 2020, depreciation and amortization of property and equipment was $
NOTE 7 – INTANGIBLE ASSETS
Intangible assets, net, consisted of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
Distribution software |
| $ |
|
| $ |
| ||
Patents acquired from related party (Note 12) |
|
|
|
|
|
| ||
Total intangible assets |
|
|
|
|
|
| ||
Less: Accumulated amortization |
|
| ( | ) |
|
| ( | ) |
Intangible assets, net |
| $ |
|
| $ |
| ||
For the nine-months ended September 30, 2021 and 2020, amortization of intangible assets expense was $5,988 and $1,929, respectively.
At September 30, 2021, the expected future amortization of intangible assets expense was:
Year ending December 31, 2021 |
| $ |
| |
Year ending December 31, 2022 |
|
|
| |
Year ending December 31, 2023 |
|
|
| |
Year ending December 31, 2024 |
|
|
| |
Year ending December 31, 2025 |
|
|
| |
Thereafter |
|
|
| |
Total |
| $ |
|
| F-13 |
| Table of Contents |
NOTE 8 – OPERATING LEASE RIGHT OF USE ASSET AND OPERATING LEASE LIABILITY
On August 1, 2019 Yubo Beijing executed a lease agreement with Jiu Si Cheng Investment Management (the “Landlord”) to rent approximately 746 square meters of office space in Beijing China. The lease provided for an initial term of 2 years and 4 months from August 2, 2019 to November 30, 2021 with
Effective March 1, 2021, Yubo Global executed a lease agreement with Chengdu Liangkang Investment Co. to rent approximately 6,960 square meters of laboratory space in Chengdu China. The lease provides for a lease term of 5 years from March 1, 2021 to February 28, 2026. The lease also provides for payments of monthly rent to the landlord of approximately RMB 300,000 ($46,512 at the
At September 30, 2021, the future undiscounted minimum lease payments under the two noncancellable leases are as follows:
|
| As of September 30, 2021 |
| |
Year ending December 31, 2021 |
| $ |
| |
Year ending December 31, 2022 |
|
|
| |
Year ending December 31, 2023 |
|
|
| |
Year ending December 31, 2024 |
|
|
| |
Year ending December 31, 2025 |
|
|
| |
Thereafter |
|
|
| |
Total |
| $ |
| |
The operating lease liabilities totaling $2,342,738 at September 30, 2021 as presented in the Consolidated Balance Sheet represents the discounted (at a
For the nine-months ended September 30, 2021 and September 30, 2020, occupancy expense attributable to these two leases was $467,709 and $159,889 respectively.
NOTE 9 – ADVANCES FROM PROSPECTIVE CUSTOMERS/DISTRIBUTORS
As of September 30, 2021, Yubo Beijing received a total of RMB ¥ 4,821,043 ($747,449) from ten PRC entities in amounts of RMB ¥
| F-14 |
| Table of Contents |
NOTE 10 – DUE TO RELATED PARTIES
Due to related parties consisted of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
|
| (Unaudited) |
|
|
|
| ||
Ms. Huang Li (3) |
| $ |
|
| $ |
| ||
Mr. Yang Wang (1) |
|
|
|
|
|
| ||
World Precision Medicine Technology Inc. (2) |
|
|
|
|
|
| ||
Total |
| $ | 987,252 |
|
| $ |
| |
_____________
(1) | Mr. Yang Wang controls |
|
|
(2) | World Precision Medicine Technology Inc. is controlled by MR. Cheung Ho Shun. Cheung Ho Shun purchased |
|
|
(3) | Ms. Huang Li is a shareholder of Focus One Technology Group Limited (“Focus One”). Focus One owns |
The due to related parties payables are noninterest bearing and are due on demand.
NOTE 11 – SHAREHOLDERS’ EQUITY
Yubo Biotech International Limited
The Company has three types of stocks:
Preferred stock – par value 0.01 per share,
Common Stock Class A – par value 0.001 per share,
Common Stock Class B – par value 0.001 per share,
On January 14, 2021, Lina Liu, Company CFO, cancelled
The Company issued
Name of Selling Shareholder |
| Number of Exchange Shares |
|
| Percentage of Exchange Shares |
| ||
FLYDRAGON INTERNATIONAL LIMITED (controlled by Mr. Jun Wang) |
|
|
|
|
| % | ||
CHINAONE TECHNOLOGY LIMITED (controlled by Mr. Yang Wang) |
|
|
|
|
| % | ||
BOAO BIOTECH LIMITED (controlled by Mr. Yulin Cao) |
|
|
|
|
| % | ||
FOCUS DRAW GROUP LIMITED (controlled by Ms. Lina Liu) |
|
|
|
|
| % | ||
FOCUSONE TECHNOLOGY GROUP LIMITED (controlled by Mr. Jin Wei) |
|
|
|
|
| % | ||
DRAGONCLOUD TECHNOLOGY LIMITED (Controlled by Mr. Yang Wang) |
|
|
|
|
| % | ||
CHEUNG HO SHUN |
|
|
|
|
| % | ||
TOTAL |
|
|
|
|
| % | ||
Platinum International Biotech Co., LTD (Cayman Islands) (“Platinum”)
| F-15 |
| Table of Contents |
Platinum has authorized
On April 7, 2020, Platinum issued a total of 10,000,000 ordinary shares to six entities as follows:
Entity |
| Shares |
| |
1. Flydragon International Limited (controlled by Mr. Jun Wang) |
|
|
| |
2. Chinaone Technology Limited (controlled by Mr. Yang Wang) |
|
|
| |
3. Boao Biotech Limited (controlled by Mr. Yulin Cao) |
|
|
| |
4. Dragoncloud Technology Limited (controlled by Mr. Yang Wang) |
|
|
| |
5. Focus Draw Group Limited (controlled by Ms. Lina Liu) |
|
|
| |
6. Focusone Technology Group Limited (controlled by Mr. Jin Wei) |
|
|
| |
Total |
|
|
| |
On September 11, 2020, Platinum sold
On January 21, 2021, Yubo New York acquired all
Yubo International Biotech (Chengdu) Limited (“Yubo Chengdu”)
Yubo Chengdu has subscribed capital of $
Yubo International Biotech (Beijing) Limited (“Yubo Beijing”)
Yubo Beijing has subscribed capital of $
Restricted net assets
The Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiaries or its VIE. Relevant PRC statutory laws and regulations permit payments of dividends by Yubo Chengdu, Yubo Jingzhi, Yubo Global, and Yubo Beijing only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations and after it has met the PRC requirements for appropriation to statutory reserves. Paid in capital of the PRC subsidiaries and VIE included in the Company’s consolidated net assets are also non-distributable for dividend purposes. The results of operations reflected in the accompanying consolidated financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of Yubo Chengdu, Yubo Jingzhi, Yubo Global, and Yubo Beijing.
Yubo Chengdu, Yubo Jingzhi, Yubo,Global and Yubo Beijing are required to set aside at least 10% of their after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, Yubo Chengdu, Yubo Jingzhi, Yubo Global and Yubo Beijing may allocate a portion of its after-tax profits based on PRC accounting standards to an enterprise expansion fund and a staff bonus and welfare fund at its discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends.
Since inception to September 30, 2021, Yubo Chengdu, Yubo Jingzhi, Yubo Global, and Yubo Beijing have not generated any profit and had negative retained earnings as of September 30, 2021. As a result, these entities have not accrued statutory reserve funds.
The ability of the Company’s PRC subsidiaries and its VIE to make dividends and other payments to the Company may also be restricted by changes in applicable foreign exchange and other laws and regulations. Foreign currency exchange regulation in China is primarily governed by the following rules:
| · | Foreign Exchange Administration Rules (1996), as amended in August 2008, or the Exchange Rules; |
| · | Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules. |
| F-16 |
| Table of Contents |
Currently, under the Administration Rules, Renminbi is freely convertible for current account items, including the distribution of dividends, interest payments, trade and service related foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of China, unless the prior approval of the State Administration of Foreign Exchange (the “SAFE”) is obtained and prior registration with the SAFE is made. Foreign-invested enterprises that need foreign exchange for the distribution of profits to its shareholders may affect payment from their foreign exchange accounts or purchase and pay foreign exchange rates at the designated foreign exchange banks to their foreign shareholders by producing board resolutions for such profit distribution. Based on their needs, foreign-invested enterprises are permitted to open foreign exchange settlement accounts for current account receipts and payments of foreign exchange along with specialized accounts for capital account receipts and payments of foreign exchange at certain designated foreign exchange banks.
Although the current Exchange Rules allow the convertibility of Chinese Renminbi into foreign currency for current account items, conversion of Chinese Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of SAFE, which is under the authority of the People’s Bank of China. These approvals, however, do not guarantee the availability of foreign currency conversion. The Company cannot be sure that it will be able to obtain all required conversion approvals for its operations or that the Chinese regulatory authorities will not impose greater restrictions on the convertibility of Chinese Renminbi in the future. Currently, all of the Company’s revenues are generated in Renminbi. Any future restrictions on currency exchanges may limit the Company’s ability to use its retained earnings generated in Renminbi to make dividends or other payments in U.S. dollars or fund possible business activities outside China.
NOTE 12 – RELATED PARTY TRANSACTIONS
On February 17, 2020, Yubo Beijing executed an Agreement of Joint Research and Development with Beijing Zhenxigu Medical Research Center LP (“Zhenxigu”), an entity that owns
On February 27, 2020, Yubo Beijing executed a Patent Transfer Agreement with Beijing Zhenhuikang Biotechnology Co. LTD (“Zhenhuikang”), an entity controlled by Mr. Yulin Cao (who is a director of Platinum and Yubo Beijing). The Agreement provided for the assignment of two patents owned by Zhenhuikang to Yubo Beijing for consideration of RMB 140,000 ($
On February 27, 2020, Yubo Beijing executed an Entrustment Technical Service Agreement with Beijing Zhenhuikang Biotechnology Co. LTD (“Zhenhuikang”), an entity controlled by Mr. Yulin Cao (who is a director of Platinum and Yubo Beijing). The Agreement provides for Zhenhuikang to, among other things, assist Yubo Beijing in the preparation of 300 sets of endometrial stem cell harvesting packages. As amended July 2, 2020, the Agreement provides for Yubo Beijing to pay Zhenhuikang at the rate of RMB 666 per set or RMB 199,800 total ($
On May 11, 2021, World Precision Medicine Technology Inc., a company owned and controlled by Cheung Ho Shun, a shareholder of Yubo International Biotech Limited, provided the Company $
| F-17 |
| Table of Contents |
NOTE 13 – INCOME TAX
Cayman Islands
Under the current laws of the Cayman Islands, Platinum is not subject to tax on income or capital gains. In addition, payments of dividends by Platinum to its shareholders are not subject to withholding tax in the Cayman Islands.
Hong Kong
Platinum HK was incorporated under the Hong Kong tax law where the statutory income tax rate is
People’s Republic of China
Yubo International Biotech (Chengdu) Limited (“Yubo Chengdu”), Yubo Jingzhi Biotechnology (Chengdu) Co. LTD. (“Yubo Jingzhi”), Yubo Global Biotechnology (Chengdu) Co. Ltd (“Yubo Global”) and Yubo International Biotech (Beijing) Limited were incorporated in the PRC and are subject to PRC Enterprise Income Tax (“EIT”) on their taxable income in accordance with the relevant PRC income tax laws. On March 16, 2007, the National People’s Congress enacted a new enterprise income tax law, which took effect on January 1, 2008. The law applies a uniform
Yubo Chengdu and Yubo Jingzhi have had no taxable income or loss from September 4, 2020 (inception) to September 30, 2021.
Yubo Beijing has had net losses of $
The components of deferred tax assets were as follows:
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||
|
|
|
|
|
|
| ||
Net operating losses carry forward |
| $ |
|
| $ |
| ||
Valuation allowance |
|
| ( | ) |
|
| ( | ) |
Deferred tax assets, net |
| $ |
|
| $ |
| ||
The reconciliation of the provisions for (benefits from) income tax by applying the PRC tax rate to income (loss) before provisions for income tax and the actual provisions for income tax is as follows:
|
| For the nine months ended September 30, 2021 |
|
| For the nine months ended September 30, 2020 |
| ||
|
|
|
|
|
|
| ||
Income tax (benefits) at 25% |
| $ | ( | ) |
| $ | ( | ) |
Net loss of Platinum |
|
|
|
|
|
| ||
Increase in valuation allowance |
|
|
|
|
|
| ||
Other |
|
|
|
|
|
| ||
Provision for income taxes |
| $ |
|
| $ |
| ||
| F-18 |
| Table of Contents |
Accounting for Uncertainty in Income Taxes
The tax authority of the PRC government conducts periodic and ad hoc tax filing reviews on business enterprises operating in the PRC after those enterprises complete their relevant tax filings. Therefore, the Company’s PRC entities’ tax filings results are subject to change and may lead to tax liabilities.
ASC 740 requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. The management evaluated the Company’s tax positions and concluded that no liability for uncertainty in income taxes was necessary as of September 30, 2021 and December 31, 2020.
NOTE 13 – COMMITMENTS AND CONTINGENCIES
Freelancer Service Contract
On March 30, 2020, Yubo Beijing executed an agreement with Hainan Huiyonggong Service Ltd. (“HHS”). The agreement provided for HHS to engage sales representatives (often Yubo Beijing customers) to refer new customers to Yubo Beijing and for Yubo Beijing to pay fees to HHS based on the amount of sales generated from HHS’s sales representatives. The term of the agreement was for one year expiring March 29, 2021.
Website Platform Maintenance Agreement
On April 29, 2020, Yubo Beijing executed an agreement with Hainan Haifu Technology Ltd. (“HHT”). The agreement provided for HHT to provide certain website maintenance services for Yubo Beijing and provided for Yubo Beijing to pay a monthly fee of RMB 150,000 ($
Credit risk
Cash deposits with banks are held in financial institutions in the PRC, which are insured with deposit protection up to RMB 500,000 (approximately $
Risks of Variable Interest Entity Structure
Although the structure the Company has adopted is consistent with longstanding industry practice, and is commonly adopted by comparable companies in China, the PRC government may not agree that these arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. There are uncertainties regarding the interpretation and application of PRC laws and regulations including those that govern the Company’s contractual arrangements, which could limit the Company’s ability to enforce these contractual arrangements. If the Company or its variable interest entity is found to be in violation of any existing or future PRC laws, rules or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including levying fines, revoking business and other licenses of the Company’s variable interest entity, requiring the Company to discontinue or restrict its operations, restricting its right to collect revenue, requiring the Company to restructure its operations or taking other regulatory or enforcement actions against the Company. In addition, it is unclear what impact the PRC government actions would have on the Company and on its ability to consolidate the financial results of its variable interest entity in the consolidated financial statements, if the PRC government authorities were to find the Company’s legal structure and contractual arrangements to be in violation of PRC laws, rules and regulations. If the imposition of any of these government actions causes the Company to lose its right to direct the activities of Yubo Beijing or the right to receive their economic benefits, the Company would no longer be able to consolidate Yubo Beijing.
| F-19 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements (unaudited) and the related notes and other financial information included elsewhere in this quarterly report on Form 10-Q and our consolidated financial statements (unaudited) included in our current report on Form 8-K field on January 14, 2021. In addition to historical consolidated financial information, 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. You should review the subsection titled “Cautionary Note Regarding Forward-Looking Statements” below for a discussion of forward-looking statements and the section titled “Risk Factors” included in our current report on Form 8-K field on January 14, 2021 for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this quarterly report on Form 10-Q.
Cautionary Note Regarding Forward-Looking Statements
Some of the statements contained in this quarterly report on Form 10-Q discuss our plans and strategies for our business or state other forward-looking statements, as this term is defined in the Private Securities Litigation Reform Act of 1995. Statements that are not statements of historical facts may be deemed to be forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “plan,” “intend,” “should,” “seek,” “will,” and similar expressions are intended to identify these forward-looking statements but are not the exclusive means of identifying them. These forward-looking statements reflect the current views of our management. However, various risks, uncertainties and contingencies could cause our actual results, performance or achievements to differ materially from those expressed in, or implied by, these statements. See our current report on Form 8-K filed on January 14, 2021 for a discussion of certain known risks.
Business Overview
We are a technology company focused on the research and development and application of endometrial stem cells. We are committed to building the first public endometrial stem cell repository in the world. We offer our products and services under the brand “VIVCELL”. Our product offerings include healthcare products for respiratory system, skincare products, hair care products, healthy beverages and male and female personal care products. We also offer stem cell related services including cell testing and health management consulting services.
We are a U.S. holding company primarily operating in China through our wholly owned subsidiary, Platinum International Biotech Co., Ltd., a company organized under the laws of the Cayman Islands (“Platinum”), which in turn operates in China through its wholly-owned subsidiaries and contractual arrangements with a variable interest entity (the “VIE”), Yubo International Biotech (Beijing) Limited, a company organized under the laws of the People’s Republic of China (“Yubo”) that conducts our daily operations.
Key factors affecting our results of operations include revenues, cost of revenues, operating expenses and income and taxation.
History
We were incorporated as a New York corporation on February 22, 1991 and commenced operations on February 10, 1992. Prior to March 2003, our business had been focused on pre-revenue development and commercialization of disposable medical devices designed to enhance the effectiveness of magnetic resonance imaging in detection and diagnosis of heart disease. Due to the unavailability of funding, beginning in the Fall of 2002 we essentially ceased all of our operations including product development and commercialization activities. Our efforts to realize value for our prior business and MRI technology have been unsuccessful. As a result, we view our most viable option to be merging with an unrelated operating company that could benefit from our status as a reporting company in a so-called “reverse merger” transaction. In November 2006, our then shareholders approved a 1 for 100 reverse stock split of our common stock. On March 1, 2007, such reverse stock split became effective. Fractional shares were rounded up to the next full share.
| 4 |
| Table of Contents |
Change of Control
On September 23, 2020, Activist Investing LLC (the “Seller”), the owner of 116,697,438 common shares (the “Shares”) upon conversion of $1,472,000 of promissory notes and accrued interest acquired by the Seller after the Seller purchased control of our Company in July 2020, agreed to sell the Shares to Lina Liu (the “Purchaser), a resident of China, for $255,000, pursuant to an Amended and Restated Stock Purchase Agreement (the “Stock Purchase Agreement”). The first agreement between the Seller and the Purchase was superseded because it had the incorrect name of the Seller. The Seller is owned 100% by David Lazar. The Shares represent approximately 99.0% of the 117,875,323 Class A common shares outstanding at November 30, 2020.
The sale of the Shares to Ms. Liu was completed on October 2, 2020. Ms. Liu, as our 99.0% majority shareholder, then appointed Jun Wang, Yang Wang and Zhihui Bai as members of our board of director (the “Board”) and Ms. Liu as a director and CFO, Treasurer and Secretary (together, the “Designees”). As a result, there was a change of control of our Company; and the change of management was completed on or about October 12, 2020 (the “New Management Date”), ten (10) days after our Information Statement pursuant to SEC Rule 14f-1 was filed with the SEC and mailed to our stockholders. There is no family relationship or other relationship between the Seller and the Purchaser.
In connection with the sale under the Stock Purchase Agreement, Mr. Lazar resigned as an officer and director, and John B. Lowy and Dovid Kotkes have resigned as directors, and have appointed the Designees as our directors, on the New Management Date. As a result thereof, the Designees became our directors, on or about October 12, 2020.
Name Change
After obtaining the approval of the Board and the majority stockholder, we amended our Article of Incorporations by filing of a Certificate of Amendment changing the name of the Company to “Yubo International Biotech Limited” under stock symbol “YBGJ”. The name change became effective December 4, 2020, pursuant to the Certificate of Amendment, upon completion of processing by the Financial Industry Regulatory Authority and in accordance with the SEC rules and regulations.
Reverse Merger with Platinum International Biotech Co., Ltd.
On January 14, 2021 (the “Closing Date”), we entered into a voluntary share exchange transaction with Platinum International Biotech Co., Ltd., a company organized under the laws of the Cayman Islands (“Platinum”), pursuant to that certain Agreement and Plan of Share Exchange, dated January 14, 2021 (the “Exchange Agreement”), by and among us, Platinum, Yubo International Biotech (Beijing) Limited, a company organized under the laws of the People’s Republic of China (“Yubo”), and certain selling stockholders named therein.
In accordance with the terms of the Exchange Agreement, on the Closing Date, we issued a total of 117,000,000 shares of our Class A common stock to the then stockholders of Platinum (the “Selling Stockholders”), in exchange for 100% of the issued and outstanding capital stock of Platinum (the “Exchange Transaction”). As a result of the Exchange Transaction, the Selling Stockholders acquired more than 99% of our issued and outstanding capital stock, Platinum became our wholly-owned subsidiary, and we acquired the business and operations of Platinum and Yubo.
Platinum was incorporated on April 7, 2020 under the laws of the Cayman Islands as a holding company. Commencing April 2020, its consolidated variable interest entity Yubo is a leading supplier of innovative products that process, store and administer therapeutic doses of endometrial stem cells for treatment of disease and injuries in the PRC.
Immediately prior to the Exchange Transaction, we had 117,875,323 shares of Class A common stock and 4,447 shares of Class B common stock issued and outstanding. Immediately after the Exchange Transaction and the surrender and cancellation of 116,697,438 shares of Class A common stock previously held by Lina Liu, and as of the date hereof, our authorized capital stock consists of 120,000,000 shares of common stock, par value $.001 per share, of which 118,177,885 Class A common plus 4,447 Class B common) are issued and outstanding, and 5,000,000 shares of Preferred Stock, $.001 par value, none of which shares are issued or outstanding. Each share of Class A common stock is entitled to one vote with respect to all matters to be acted on by the stockholders; and each share of Class B common stock is entitled to five votes per share, and is convertible into one share of Class A common stock.
| 5 |
| Table of Contents |
COVID-19
On March 11, 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most U.S. states and many countries have issued policies intended to stop or slow the further spread of the disease.
COVID-19 and the U.S’s response to the pandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the COVID-19 pandemic may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business, or our operations.
Critical Accounting Principles
This section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. We consider certain accounting policies related to fair value measurements and earnings per share to be critical accounting policies that require the use of significant judgments and estimates relating to matters that are inherently uncertain and may result in materially different results under different assumptions and conditions. See Note 2 – Summary of Significant Accounting Policies.
As of September 30, 2021, the impact of COVID-19 on our business continued to unfold. As a result, many of our estimates and assumptions carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, our estimates may change in future periods.
Recently Issued and Adopted Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update (“ASU”) 201409, Revenue from Contracts with Customers (Topic 606), which supersedes all existing revenue recognition requirements, including most industry specific guidance. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. This guidance was originally effective for interim and annual periods beginning after December 15, 2016 and allowed for adoption using a full retrospective method, or a modified retrospective method. The Company has adopted ASC 606.
In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02) “Leases (Topic 842)”. ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted.
Results of Operations for the Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020 and for the Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020
| 6 |
| Table of Contents |
Sales, Cost of Goods Sold and Gross Profit
We generated sales of $98,303 for the three months ended September 30, 2021, as compared to $194,459 for the three months ended September 30, 2020. Such decrease was primarily due to decrease in sale of oral liquid health products. Our cost of goods sold was $25,106 for the three months ended September 30, 2021, as compared to $62,990 for the three months ended September 30, 2020. Such decrease was primarily due to sale of oral liquid health products. As a result, our gross profit decreased from $131,469 for the three months ended September 30, 2020 to $73,197 for the three months ended September 30, 2021.
We generated sales of $913,103 for the nine months ended September 30, 2021, as compared to $471,148 for the nine months ended September 30, 2020. Such increase was primarily due to sale of oral liquid health products. Our cost of goods sold was $310,312 for the nine months ended September 30, 2021, as compared to $39,724 for the nine months ended September 30, 2020. Such increase was primarily due to sale of oral liquid health products. As a result, our gross profit increased from $431,424 for the nine months ended September 30, 2020 to $601,791 for the nine months ended September 30, 2021.
Operating Expenses
Our operating expenses were $419,211 for the three months ended September 30, 2021, as compared to $435,934 for the three months ended September 30, 2020. The decrease in operating expenses was primarily due to decreases in operating expenses partially offset by increases in employee compensation and occupancy.
Our operating expenses were $1,756,460 for the nine months ended September 30, 2021, as compared to $861,568 for the nine months ended September 30, 2020. The increase in operating expenses was primarily due to increases in employee compensation, occupancy, and other operating expenses.
Loss from Operations
Our loss from operations was $346,014 for the three months ended September 30, 2021, as compared to $304,465 for the three months ended September 30, 2020. The increase in loss from operations was due to decrease in gross profit $58,272.
Our loss from operations was $1,154,669 for the nine months ended September 30, 2021, as compared to $430,144 for the nine months ended September 30, 2020. The increase in loss from operations was due to increase in gross profit $170,367 offset by increase in operating expense of $894,892.
Other Income (Expense)
Our other expense (income) was $9,430 for the three months ended September 30, 2021, as compared to $(247) for the three months ended September 30, 2020. The increase in other expense was primarily due to write off of an intangible asset.
Our other expense (income) was $9,402 for the nine months ended September 30, 2021, as compared to $(157) for the nine months ended September 30, 2020. The increase in other income was primarily due to write off of an intangible asset.
Net Loss
Our net loss was $336,584 for the three months ended September 30, 2021, as compared to $304,712 for the three months ended September 30, 2020. The increase in net loss was primarily due to decrease in gross profit $58,272.
Our net loss was $1,145,267 for the nine months ended September 30, 2021, as compared to $430,301 for the nine months ended September 30, 2020. The increase in net loss was primarily due to increase in gross profit $170,367 offset by increase in operating expense of $894,892.
| 7 |
Liquidity and Capital Resources
As of September 30, 2021, we had cash and equivalents on hand of $62,953 and a negative working capital of $1,099,690. Generally, the primary sources of our funds have been cash from operations, loans from our shareholders and capital contributions. In addition, on May 6, 2021, we filed a registration statement on Form S-1 with the SEC in connection with an offering, on a “best efforts” basis, up to an aggregate of 5,000,000 shares of our Class A common stock at a fixed price of $0.50 per share. We estimate that the net proceeds of this offering will be approximately $2.42 million. We believe that our cash on hand and working capital will be sufficient to meet its anticipated cash requirements through January 31, 2022. We intend to continue working toward identifying and obtaining new sources of financing. No assurances can be given that we will be successful in obtaining additional financing in the future. Any future financing that we may obtain may cause significant dilution to existing stockholders. Any debt financing or other financing of securities senior to common stock that we are able to obtain will likely include financial and other covenants that will restrict our flexibility. Any failure to comply with these covenants would have a negative impact on our business, prospects, financial condition, results of operations and cash flows.
If adequate funds are not available, we may be required to delay, scale back or eliminate portions of our operations, cease operations or obtain funds through arrangements with strategic partners or others that may require us to relinquish rights to certain of our assets. Accordingly, the inability to obtain such financing could result in a significant loss of ownership and/or control of our assets and could also adversely affect our ability to fund our continued operations and our expansion efforts.
During the next 12 months, we expect to incur significant research and development expenses with respect to our products. The majority of our research and development activity is focused on development of our stem cell bank.
We also expect to incur significant legal and accounting costs in connection with being a public company. We expect those fees will be significant and will continue to impact our liquidity. Those fees will be higher as our business volume and activity increases.
Shareholder Loans
On May 11, 2021, we entered into a verbal loan agreement with World Precision Medicine Technology Inc., a company owned and controlled by Cheung Ho Shun, one of our existing shareholders, which provided the Company with a working capital loan in the principal amount of $600,000. As of September 30, 2021, the entire loan amount was outstanding.
As of September 30, 2021, we also had payables due to our shareholder and director, Mr. Yang Wang, in the amount of $326,667, and to Mr. Huang Li, an indirect shareholder, in the amount of $60,585.
All of our shareholder loans are due on demand and non-interest bearing.
Going concern
The accompanying interim unaudited condensed consolidated financial statements for the quarter ended September 30, 2021 included an explanatory paragraph referring to our recurring operating losses and expressing substantial doubt in our ability to continue as a going concern. Our consolidated financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as a going concern. Our consolidated financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
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Off Balance Sheet Arrangements
We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in its consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including Mr. Jun Wang, our Chief Executive Officer (who is our Principal Executive Officer) and Ms. Lina Liu, our new Chief Financial Officer (who is our Principal Financial Officer and Principal Accounting Officer), of the effectiveness of the design of our disclosure controls and procedures (as defined by Exchange Act Rules 13a-15(e) or 15d-15(e)) as of September 30, 2021, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2021 in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms. This conclusion is based on findings that constituted material weaknesses. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s interim financial statements will not be prevented or detected on a timely basis.
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In performing the above-referenced assessment, our management identified the following material weaknesses:
| i) | We have insufficient quantity of dedicated resources and experienced personnel involved in reviewing and designing internal controls. As a result, a material misstatement of the interim and annual financial statements could occur and not be prevented or detected on a timely basis. |
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| ii) | We do not have an audit committee. While not being legally obligated to have an audit committee, it is the management’s view that to have an audit committee, comprised of independent board members, is an important entity-level control over our financial statements. |
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| iii) | We did not perform an entity level risk assessment to evaluate the implication of relevant risks on financial reporting, including the impact of potential fraud-related risks and the risks related to non-routine transactions, if any, on our internal control over financial reporting. Lack of an entity-level risk assessment constituted an internal control design deficiency which resulted in more than a remote likelihood that a material error would not have been prevented or detected, and constituted a material weakness. |
Our management believes that the weaknesses identified above have not had any material effect on our financial results. However, we are currently reviewing our disclosure controls and procedures related to these material weaknesses and expect to implement changes in the near term, including identifying specific areas within our governance, accounting and financial reporting processes to add adequate resources to potentially mitigate these material weaknesses.
Our management team will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the quarterly period ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal controls 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.
We are currently not a party to any material legal or administrative proceedings.
Item 1A. Risk Factors.
We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. – Exhibits.
| Agreement and Plan of Share Exchange, dated January 14, 2021(1) | |
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101.ins |
| XBRL Instance Document** |
101.sch |
| XBRL Taxonomy Schema Document** |
101.cal |
| XBRL Taxonomy Calculation Document** |
101.def |
| XBRL Taxonomy Linkbase Document** |
101.lab |
| XBRL Taxonomy Label Linkbase Document** |
101.pre |
| XBRL Taxonomy Presentation Linkbase Document** |
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(1) | Included as an exhibit to our Current Report on Form 8-K filed on January 14, 2021. |
(2) | Included as an exhibit to our Current Report on Form 8-K filed on April 13, 2021. |
| * Furnished herewith |
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SIGNATURES
Pursuant to the requirements 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.
| YUBO INTERNATIONAL BIOTECH LIMITED | ||
| (Registrant) |
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Date: November 15, 2021 | By: | /s/ Jun Wang | |
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| Jun Wang |
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| President, Chief Executive Officer and Director |
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| (Principal Executive Officer) |
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Date: November 15, 2021 | By: | /s/ Lina Liu |
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| Lina Liu Chief Financial Officer, Treasurer and Secretary |
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| (Principal Financial and Accounting Officer) |
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