Yubo International Biotech Ltd 10-Q for FY2023 Q3
Yubo International Biotech Ltd (YBGJ)
About this 10-Q
Yubo International Biotech Ltd filed this 10-Q on November 20, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).
Headline figures
Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $428.51K
- up 2839.0% from $14.58K a year earlier
- Net income
- $6293
- compared with a net loss of $238.1K 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)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None.
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 every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☐ | Smaller reporting company | ||
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
State the number of shares outstanding of each of the issuer’s classes of common equity as of the latest practicable date – November 19, 2023
Class A Common Stock, $0.001 par value |
| |
Class B Common Stock, $0.001 par value |
| 4,447 |
Class |
| Shares |
YUBO INTERNATIONAL BIOTECH LIMITED
TABLE OF CONTENTS
In this Quarterly Report on Form 10-Q (this “Quarterly Report”), unless otherwise specified, the terms “we,” “our,” “us,” our “Company,” the “Company,” or the “Registrant” refer to Yubo International Biotech Limited, a U.S. holding company and 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 (Chengdu) Limited, a company organized under the laws of the People’s Republic of China (“Yubo Chengdu” or the “WFOE”), and Yubo Global Biotechnology (Chengdu) Co., Ltd., a company organized under the laws of the People’s Republic of China (“Yubo Global”). The term “Yubo Beijing” refers to Yubo International Biotech (Beijing) Limited, a variable interest entity organized under the laws of the People’s Republic of China, including its wholly-owned subsidiary, Yubo Jingzhi Biotechnology (Chengdu) Co., Ltd. (“Yubo Jingzhi”).
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| Table of Contents |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements in this Quarterly Report that are not descriptions of historical facts are forward-looking statements that are based on management’s current expectations and assumptions and are subject to risks and uncertainties. If such risks or uncertainties materialize or such assumptions prove incorrect, our business, operating results, financial condition and stock price could be materially negatively affected. In some cases, you can identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” “will,” “would” or the negative of these terms or other comparable terminology. Factors that could cause actual results to differ materially from those currently anticipated include those set forth in “Part II Other Information—Item 1A. Risk Factors” of this Quarterly Report and “Part I—Item 1A. Risk Factors” in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 14, 2023, including, without limitation, risks relating to:
| · | the results of Yubo Beijing’s research and development activities relating, in particular, to stem cell related technologies; |
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| · | the early stage of Yubo Beijing’s product candidates presently under development; |
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| · | the need for substantial additional funds in order to continue our operations, and the uncertainty of whether we will be able to obtain the funding we need; |
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| · | Yubo Beijing’s ability to obtain and, if obtained, maintain regulatory approval of its current product candidates, and any of its other future product candidates, and any related restrictions, limitations, and/or warnings in the label of any approved product candidate; |
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| · | Yubo Beijing’s ability to retain or hire key scientific or management personnel; |
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| · | Yubo Beijing’s ability to protect its intellectual property rights that are valuable to its business, including patent and other intellectual property rights; |
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| · | Yubo Beijing’s dependence on third-party manufacturers, suppliers, research organizations, testing laboratories and other potential collaborators; |
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| · | Yubo Beijing’s ability to develop successful sales and marketing capabilities in the future as needed; |
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| · | the size and growth of the potential markets for any of Yubo Beijing’s approved product candidates, and the rate and degree of market acceptance of any of its approved product candidates; |
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| · | competition in the industry; and |
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| · | regulatory developments in China. |
We operate in a rapidly changing environment and new risks emerge from time to time. As a result, it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The forward-looking statements included in this Quarterly Report speak only as of the date hereof, and except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report to conform these statements to actual results or to changes in our expectations.
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| Table of Contents |
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
YUBO INTERNATIONAL BIOTECH LIMITED
INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the three months and nine months ended September 30, 2023 and 2022
Table of Contents
| F-2 |
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Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) |
| F-3 |
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Consolidated Statements of Changes in Shareholders’ Deficit (Unaudited) |
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| F-6 |
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| F-1 |
| Table of contents |
YUBO INTERNATIONAL BIOTECH LIMITED
CONSOLIDATED BALANCE SHEETS
(Expressed in US Dollars)
(Unaudited)
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| September 30, |
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| December 31, |
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ASSETS |
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Current assets |
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Cash |
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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 assets |
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Lease security deposits |
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Total Assets |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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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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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 of VIE without recourse to the Company of $ |
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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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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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The accompanying notes are an integral part of these consolidated financial statements.
| F-2 |
| Table of contents |
YUBO INTERNATIONAL BIOTECH LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Expressed in US Dollars)
(Unaudited)
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| For the three months ended September 30, |
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| For the nine months ended September 30, |
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Revenue |
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Sales of products and services |
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Cost of goods and services 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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Provision for doubtful accounts |
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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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Interest expenses |
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Total Other Income (Expenses) |
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Income (Loss) before Provision for Income Tax |
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Provision for Income Tax |
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Net income (loss) |
| $ |
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| $ | ( | ) |
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Net income (loss) per share basic and diluted |
| $ |
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| $ | ( | ) |
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Weighted average common shares outstanding basic and diluted |
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Comprehensive income (loss) |
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Net income (loss) |
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Foreign currency translation adjustment |
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Total comprehensive income (loss) |
| $ |
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| $ | ( | ) |
| $ | ( | ) | |
The accompanying notes are an integral part of these consolidated financial statement.
| F-3 |
| Table of contents |
YUBO INTERNATIONAL BIOTECH LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(Expressed in US Dollars)
(Unaudited)
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Common stock |
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| Additional |
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| Accumulated Other Comprehensive |
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| Total |
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| Class A |
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| paid in |
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| Accumulated |
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| Income |
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| Stockholders' |
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| Shares |
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| Amount |
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| Amount |
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| capital |
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| Deficit |
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| Deficit |
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BALANCE, December 31, 2022 |
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| $ |
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Net loss for the three months ended March 31, 2023 |
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Foreign currency adjustment |
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BALANCE, March 31, 2023 |
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Net loss for the three months ended June 30, 2023 |
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Foreign currency adjustment |
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BALANCE, June 30, 2023 |
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Net income for the three months ended September 30, 2023 |
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Foreign currency adjustment |
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BALANCE, September 30, 2023 |
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Common Stock |
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| Additional |
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| Accumulated Other Comprehensive |
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| Total |
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| paid in |
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| Accumulated |
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| Income |
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| Stockholders’ |
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| Amount |
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| capital |
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| Deficit |
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| Deficit |
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BALANCE, December 31, 2021 |
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Net loss for the three months ended March 31, 2022 |
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Foreign currency adjustment |
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BALANCE, March 31, 2022 |
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Net loss for the three months ended June 30, 2022 |
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Foreign currency adjustment |
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BALANCE, June 30, 2022 |
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Conversion of World Precision Debt |
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Net loss for the three months ended September 30, 2022 |
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Foreign currency adjustment |
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BALANCE, September 30, 2022 |
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The accompanying notes are an integral part of these consolidated financial statement.
| F-4 |
| Table of contents |
YUBO INTERNATIONAL BIOTECH LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in US Dollars)
|
| For the nine months ended September 30, |
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Cash flows from operating activities: |
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Net loss |
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Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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Provision for doubtful accounts |
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Changes in operating assets and liabilities: |
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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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Lease security deposits |
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Accounts payable and accrued expenses |
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Advances from prospective customers/distributors |
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Due to related parties |
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Net cash provided by (used in) operating activities |
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|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
|
|
|
| ||
Purchase of intangibles |
|
|
|
|
| ( | ) | |
Net cash used in investing activities |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
| ( | ) |
|
|
| |
Cash at beginning of period |
|
|
|
|
|
| ||
Cash at end of period |
| $ |
|
| $ |
| ||
Supplemental Cash Flow Information: |
|
|
|
|
|
|
|
|
Income taxes paid |
|
|
|
|
|
| ||
Interest paid |
|
|
|
|
|
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
| Table of contents |
YUBO INTERNATIONAL BIOTECH LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended September 30, 2023 and 2022
(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 Beijing”), 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”). In 2021, 2022 and 2023, Yubo Beijing sales also included sales of skincare products, hair care products, healthy beverages, and male and female personal care products. Commencing in the quarterly period ended September 30, 2023, Yubo Beijing started selling health management and health maintenance service agreements to customers.
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 were 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.
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.
| F-6 |
| Table of contents |
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, 2022, 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, 2022.
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.
The accompanying consolidated financial statements reflect the activities of the following entities:
Name |
| Background |
| Ownership |
Yubo International Biotech Limited (“Yubo New York”) |
| · · Incorporated on · A holding company |
|
|
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”) |
| ·
|
|
| F-7 |
| Table of contents |
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 Beijing, Yubo WFOE, and the Yubo Shareholders, Yubo WFOE agrees to provide, and Yubo Beijing 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 Beijing. The Exclusive Consulting Services Agreement will remain in effect until the acquisition of all assets or equity of Yubo Beijing 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 Beijing, Yubo WFOE, and the Yubo Shareholders, the Yubo Shareholders granted Yubo WFOE an irrevocable and exclusive purchase option to acquire Yubo Beijing’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 Beijing, 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 Beijing nominated by Yubo WFOE.
Financial Statements of Yubo Beijing (VIE)
The assets and liabilities of Yubo Beijing (VIE) at September 30, 2023 and December 31, 2022 consist of:
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||
Cash |
| $ |
|
| $ |
| ||
Receivables (net) |
|
| — |
|
|
|
| |
Prepaid Expenses |
|
|
|
|
|
| ||
Inventory |
|
|
|
|
|
| ||
Due from related parties |
|
|
|
|
|
| ||
Property and equipment (net) |
|
|
|
|
|
| ||
Intangible assets (net) |
|
|
|
|
|
| ||
Operating lease right of use asset |
|
|
|
|
|
| ||
Lease security deposit |
|
|
|
|
|
| ||
Investment in Yubo Jingzhi (A) |
|
|
|
|
|
| ||
Receivables from other consolidated entities (A) |
|
|
|
|
|
| ||
Total assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
|
|
|
|
| ||
Advances from prospective customers/distributors |
|
|
|
|
|
| ||
Due to related parties |
|
|
|
|
|
| ||
Operating lease liabilities |
|
|
|
|
|
| ||
Payables to other consolidated entities (A) |
|
|
|
|
|
| ||
Total liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Shareholders’ equity |
| $ | ( | ) |
| $ | ( | ) |
| F-8 |
| Table of contents |
(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.
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.
| F-9 |
| Table of contents |
Inventories
Inventories, mainly consisting of nebulizers and components and other 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, construction in progress, 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.
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.
| F-10 |
| Table of contents |
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 (1) the sale of health management and health maintenance service agreements (commencing in the quarterly period ended September 30, 2023 and (2) the sale of nebulizers containing frozen tubes with medical fluid and from the sale of other health and personal care 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 five-step model to recognize revenue from contracts with 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 contract with 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.
Allowance for Doubtful Accounts
Trade accounts receivable arise from the sale of products and services on trade credit terms. On a quarterly basis, we review all significant accounts as to their past due balances, as well as collectability of the outstanding trade account receivables for possible write off. It is our policy to write off the account receivable against the allowance account when we deem the receivable to be uncollectible. Additionally, we review orders from dealers that are significantly past due, and we ship product only when our ability to collect payment from our customer for the new order is probable.
Our allowance for doubtful accounts reflects our best estimate for losses inherent in the trade accounts receivable balance. We determine the allowance based on known troubled accounts, weighting probabilities of future conditions and expected outcomes, and other currently available evidence.
Advertising Costs
Advertising costs are expensed as incurred.
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.
| F-11 |
| Table of contents |
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 Income (Loss) per Share
Basic net income (loss) per share is computed by dividing net loss by the weighted average number of Class A and Class B common shares outstanding during the period.
Diluted net income (loss) per share reflects the potential dilution that could occur if dilutive securities (such as stock options and convertible securities) were exercised or converted into common shares. For the periods presented, the Company had no dilutive securities outstanding.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the increase (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 income (loss) is reported in the consolidated statements of operations and comprehensive income (loss), including net income (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. We adopted ASU 2016-02 for interim and annual reporting periods beginning after December 15, 2018.
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. |
Other than increasing assets and liabilities at the inception of the respective leases (See Note 8), ASU 2016-02 has not had a significant effect on the Company’s financial position or results of operations.
| F-12 |
| Table of contents |
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, 2023 and December 31, 2022 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. At September 30, 2023, the Company had cash 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, |
| ||
|
| 2023 |
|
| 2022 |
| ||
|
| (Unaudited) |
|
|
| |||
Nebulizers and components |
| $ |
|
| $ |
| ||
Oral liquid health products |
|
|
|
|
|
| ||
Beauty care products |
|
|
|
|
|
| ||
Soft drinks |
|
| — |
|
|
|
| |
Other |
|
|
|
|
|
| ||
Total Inventory |
| $ |
|
| $ |
| ||
NOTE 5 – DUE FROM RELATED PARTIES
Due from related parties consisted of:
|
| September 30, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
|
| (Unaudited) |
|
|
| |||
Beijing Zhenhuikang Biotechnology Co., LTD (“Zhenhuikang”) (1) |
| $ |
|
| $ |
| ||
Total Due from Related Parties |
| $ |
|
| $ |
| ||
| (1) | Zhenhuikang is controlled by Beijing Zhenxigu Medical Research Center LP (“Zhenxigu”). Zhenxigu is controlled by Mr. Yulin Cao, a director and significant stockholder of Yubo Beijing. The due from related parties receivable is non-interest bearing and due on demand. |
| F-13 |
| Table of contents |
NOTE 6 – PROPERTY AND EQUIPMENT
Property and equipment, net, consisted of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
|
| (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 three months ended September 30, 2023 and 2022, depreciation and amortization of property and equipment was $
For the nine months ended September 30, 2023 and 2022, depreciation and amortization of property and equipment was $
NOTE 7 – INTANGIBLE ASSETS
Intangible assets, net, consisted of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
|
| (Unaudited) |
|
|
| |||
Distribution software |
| $ |
|
| $ |
| ||
Experience center software |
|
|
|
|
|
| ||
Patents acquired from related party |
|
|
|
|
|
| ||
Total intangible assets |
|
|
|
|
|
| ||
Less: Accumulated amortization |
|
| ( | ) |
|
| ( | ) |
Intangible assets, net |
| $ |
|
| $ |
| ||
For the three months ended September 30, 2023 and 2022, amortization of intangible assets expense was $
For the nine months ended September 30, 2023 and 2022, amortization of intangible assets expense was $
At September 30, 2023, the expected future amortization of intangible assets expense was:
Year ending December 31, 2023 |
| $ |
| |
Year ending December 31, 2024 |
|
|
| |
Year ending December 31, 2025 |
|
|
| |
Year ending December 31, 2026 |
|
|
| |
Thereafter |
|
|
| |
Total |
| $ |
|
| F-14 |
| Table of contents |
NOTE 8 – OPERATING LEASE RIGHT OF USE ASSETS AND OPERATING LEASE LIABILITIES
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
Also in the fourth quarter of 2022, effective September 1, 2021, Yubo Jingzhi executed a lease agreement with Sichuan Anyi Hengke Tech Co.
At September 30, 2023, the future undiscounted minimum lease payments under the two noncancellable leases are as follows:
|
| As of September 30, 2023 |
| |
Year ending December 31, 2023 |
| $ |
| |
Year ending December 31, 2024 |
|
|
| |
Year ending December 31, 2025 |
|
|
| |
Year ending December 31, 2026 |
|
|
| |
Total |
| $ |
| |
The operating lease liabilities totaling $
For the three months ended September 30, 2023 and September 30, 2022, occupancy expense attributable to leases was $
For the nine months ended September 30, 2023 and September 30, 2022, occupancy expense attributable to leases was $
NOTE 9 – ADVANCES FROM PROSPECTIVE CUSTOMERS/DISTRIBUTORS
Advances from prospective customers/distributors consists of:
|
| In RMB |
|
| In USD |
| ||||||||||
Source of Advance |
| September 30, 2023 |
|
| December 31, 2022 |
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||
Advancer 1 |
| ¥ | 1,544,748 |
|
| ¥ | 1,544,748 |
|
| $ |
|
| $ |
| ||
Advancer 2 |
|
| 550,000 |
|
|
| 550,000 |
|
|
|
|
|
|
| ||
Advancer 3 |
|
| 500,000 |
|
|
| 500,000 |
|
|
|
|
|
|
| ||
Advancer 4 |
|
| 348,000 |
|
|
| 348,000 |
|
|
|
|
|
|
| ||
Advancer 5 |
|
| 50,000 |
|
|
| 50,000 |
|
|
|
|
|
|
| ||
Advancer 6 |
|
| 50,000 |
|
|
| 50,000 |
|
|
|
|
|
|
| ||
Advancer 7 |
|
| 31,012 |
|
|
| 31,012 |
|
|
|
|
|
|
| ||
Advancer 8 |
|
| 31 |
|
|
| 31 |
|
|
|
|
|
|
| ||
Advancer 9 |
|
| — |
|
|
| 100,000 |
|
|
| — |
|
|
|
| |
Advancer 10 |
|
| 6,000 |
|
|
| — |
|
|
|
|
|
| — |
| |
|
| ¥ | 3,079,791 |
|
| ¥ | 3,173,791 |
|
| $ |
|
| $ |
| ||
| F-15 |
| Table of contents |
The related verbal agreements between Yubo Beijing and the nine advancers provide for the nine advancers to purchase inventory from Yubo Beijing or enter into such other arrangements with Yubo Beijing as the parties mutually agree. Pending formal approval of any such arrangements, all of the nine PRC advancers have the right to request the return of their advances.
NOTE 10 – DUE TO RELATED PARTIES
Due to related parties consisted of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
|
| (Unaudited) |
|
|
| |||
Mr. Yang Wang (1) |
| $ |
|
| $ |
| ||
Mr. Jun Wang (2) |
|
|
|
|
|
| ||
Ms. Huang Li (3) |
|
|
|
|
|
| ||
Mr. Jin Wei (4) |
|
|
|
|
| — |
| |
Total |
| $ |
|
| $ |
| ||
| (1) | Mr. Yang Wang controls |
|
|
|
| (2) | Mr. Jun Wang controls |
|
|
|
| (3) | Ms. Huang Li is a shareholder of Focus One Technology Group Limited (“Focus One”). Focus One owns |
|
|
|
| (4) | Mr. Jin Wei controls |
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
Common Stock Class A – par value
Common Stock Class B – par value
| F-16 |
| Table of contents |
On January 14, 2021, 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 |
|
|
|
|
| % | ||
On September 2, 2022, the Company issued
Platinum International Biotech Co., LTD (Cayman Islands) (“Platinum”)
Platinum has authorized
On April 7, 2020, Platinum issued a total of
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.
| F-17 |
| Table of contents |
Since inception to September 30, 2023, Yubo Chengdu, Yubo Jingzhi, Yubo Global, and Yubo Beijing have not generated any profit and had negative retained earnings as of September 30, 2023. 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. |
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 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-18 |
| 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 has had no taxable income or loss from September 4, 2020 (inception) to September 30, 2023.
Yubo Beijing has had net losses of $
The components of deferred tax assets were as follows:
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||
|
| (Unaudited) |
|
|
| |||
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, 2023 |
|
| For the nine months ended September 30, 2022 |
| ||
|
| (Unaudited) |
|
| (Unaudited) |
| ||
Income tax (benefit) at 25% |
| $ | ( | ) |
| $ | ( | ) |
Net loss of Platinum |
|
|
|
|
|
| ||
Increase in valuation allowance |
|
|
|
|
|
| ||
Other |
|
|
|
|
| ( | ) | |
Provision for income taxes |
| $ | — |
|
| $ | — |
|
| F-19 |
| 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, 2023 and December 31, 2022.
NOTE 14 – COMMITMENTS AND CONTINGENCIES
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.
NOTE 15 – MAJOR CUSTOMERS
Two customers accounted for
| F-20 |
| 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 unaudited consolidated financial statements for the three and nine months ended September 30, 2023 and 2022 included under “Part I Financial Information—Item 1. Financial Statements” of this Quarterly Report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited, to those set forth under “Part II Other Information—Item 1A. Risk Factors” and elsewhere in our Annual Report on Form 10-K filed with the SEC on April 14, 2023.
Corporate Overview
We are a U.S. holding company primarily operating through our wholly owned subsidiary, Platinum. Platinum is not a Chinese operating company but a Cayman Islands holding company which in turn operates in China through its subsidiaries and contractual arrangements with Yubo Beijing, the Chinese operating company. None of our Company, Platinum, or Platinum HK, each as a holding company, conducts any day-to-day business operations in China.
Yubo Beijing conducts the day-to-day business operations of our Company in China through contractual relationships with us. Yubo Beijing is a technology company focused on the research and development and application of endometrial stem cells. Yubo Beijing is committed to building the first public endometrial stem cell repository in the world. Yubo Beijing offers its products and services under the brand “VIVCELL.” Yubo Beijing’s product offerings include healthcare products for respiratory system, skincare products, hair care products, healthy beverages and male and female personal care products. Yubo Beijing also offers stem cell related services including cell testing and health management consulting services.
Key factors affecting our results of operations include revenues, cost of goods sold, operating expenses and income and taxation.
The VIE and China Operations
We are a U.S. holding company primarily operating through our wholly owned subsidiary, Platinum. Platinum is not a Chinese operating company but a Cayman Islands holding company, which in turn operates in China through (i) its Hong Kong and PRC subsidiaries, including Yubo Jingzhi, Yubo Global, and the WFOE, in which we hold equity ownership interests, and (ii) Yubo Beijing, a Chinese operating company that conducts the day-to-day business operations in China as described in this Quarterly Report. We do not own any equity interest in Yubo Beijing or Yubo Jingzhi.
We manage Yubo Beijing through the WFOE. On September 11, 2020, the WFOE entered into a series of contractual arrangements with Yubo Beijing and its shareholders, allowing us to exercise effective control over Yubo Beijing. These agreements include:
| · | Exclusive Consulting Services Agreement. Pursuant to the Exclusive Consulting Services Agreement, the WFOE agreed to provide, and Yubo Beijing agreed to accept, exclusive management services provided by the WFOE. The Exclusive Consulting Services Agreement was amended in March 2022 for the sole purpose of clarifying the fee structure under such agreement. Pursuant to the amendment, Yubo Beijing agreed to compensate the WFOE, Yubo Chengdu, for its services on an annual basis. Under the amendment, the WFOE is entitled to receive 90% of the after-tax profit from Yubo Beijing annually following the closing of Yubo Beijing’s annual accounts. In light of such arrangement, the WFOE is considered a primary beneficiary of benefits that are otherwise potentially significant to Yubo Beijing. The amendment did not change the contractual relationships that we have with Yubo Beijing. Since Yubo Beijing has not generated any after-tax profit to date, Yubo Beijing has not paid any fee to the WFOE to date. |
| · | Exclusive Option Agreement. Pursuant the Exclusive Option Agreement, the shareholders of Yubo Beijing granted the WFOE an irrevocable and exclusive purchase option to acquire Yubo Beijing’s equity and/or assets at a nominal consideration. The WFOE may exercise the purchase option at any time. |
| · | Equity Pledge Agreement. Pursuant to the Equity Pledge Agreement, the shareholders of Yubo Beijing pledged all of their equity interests in Yubo Beijing, including the proceeds thereof, to guarantee all of the WFOE’s rights and benefits under the Exclusive Consulting Services Agreement and the Exclusive Option Agreement. |
| 4 |
| Table of Contents |
We do not have any equity ownership interest in, direct foreign investment in, or control through such contractual agreements of Yubo Beijing. As a result of our contractual relationships with Yubo Beijing, we consolidate Yubo Beijing’s financial results in our consolidated financial statements and are the primary beneficiary of Yubo Beijing for accounting purposes only. Our corporate structure involving the VIE provides investors with contractual exposure to foreign investment in China-based companies where PRC laws prohibit direct foreign investment in Chinese operating companies in certain industries, such as Yubo Beijing. This structure involves unique risks to investors. For example, management through these contractual arrangements may be less effective than direct ownership, and we could face heightened risks and costs in enforcing these contractual arrangements, because there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations, and rules relating to these contractual arrangements. Our contractual arrangements with Yubo Beijing have not been tested in a court of law. If the PRC government finds such agreements non-compliant with relevant PRC laws, regulations, and rules, or if these laws, regulations, and rules or the interpretation thereof change in the future, we could be subject to severe penalties or be forced to relinquish our interests in Yubo Beijing or forfeit our rights under the contractual arrangements. See “Item 1A. Risk Factors—Risks Related to Our Corporate Structure.”
The OTCQB® Venture Market
On April 24, 2023, shares of our Class A common stock began being quoted on the OTCQB® Venture Market under the symbol “YBGJ”.
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 and China’s responses to the pandemic have significantly affected the economy. There are no comparable events that provide guidance as to the ultimate 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.
Regulatory Developments
Implication of the Holding Foreign Companies Accountable Act
The Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on December 18, 2020. The HFCA Act states that if the SEC determines that an issuer’s audit reports issued by a registered public accounting firm have not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit such issuer’s securities from being traded on a national securities exchange or in the over-the-counter trading market in the United States.
On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (“AHFCAA”), which was signed into law on December 29, 2022. the AHFCAA amended the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three years.
| 5 |
| Table of Contents |
On December 2, 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act. We will be required to comply with these rules if the SEC identifies us as a Commission-Identified Issuer (as defined in the final rules) under a process to be subsequently established by the SEC, and the SEC could prohibit the trading of our securities on national securities exchanges if we are identified as a Commission-Identified Issuer. Under the HFCA Act, our securities may be prohibited from trading on the Nasdaq or other U.S. stock exchanges if our auditor is not inspected by the PCAOB for three consecutive years, and this ultimately could result in our shares being delisted.
On December 16, 2021, PCAOB announced the PCAOB Holding Foreign Companies Accountable Act determinations (the “2021 PCAOB Determinations”) relating to the PCAOB’s inability to inspect or investigate completely registered public accounting firms headquartered in mainland China of the PRC or Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in the PRC or Hong Kong.
On August 26, 2022, the PCAOB announced and signed a Statement of Protocol (the “Protocol”) with the CSRC and the Ministry of Finance of the PRC (the “MOF”). The Protocol provides the PCAOB with: (1) sole discretion to select the firms, audit engagements and potential violations it inspects and investigates, without any involvement of Chinese authorities; (2) procedures for PCAOB inspectors and investigators to view complete audit work papers with all information included and for the PCAOB to retain information as needed; (3) direct access to interview and take testimony from all personnel associated with the audits the PCAOB inspects or investigates.
The PCAOB reassessed the 2021 PCAOB Determinations that the positions taken by PRC authorities prevented the PCAOB from inspecting and investigating in mainland China and Hong Kong completely. The PCAOB sent its inspectors to conduct on-site inspections and investigations of firms headquartered in mainland China and Hong Kong from September to November 2022.
On December 15, 2022, the PCAOB announced in the 2022 Determination its determination that the PCAOB was able to secure complete access to inspect and investigate accounting firms headquartered in mainland China and Hong Kong, and the PCAOB Board voted to vacate previous determinations to the contrary. Should the PCAOB again encounter impediments to inspections and investigations in mainland China or Hong Kong as a result of positions taken by any authority in either jurisdiction, including by the CSRC or the MOF, the PCAOB will make determinations under the HFCAA as and when appropriate.
As of the date of this Quarterly Report, our auditor, Michael T. Studer CPA P.C., an independent registered public accounting firm headquartered in the United States, is currently subject to PCAOB inspections and has been inspected by the PCAOB on a regular basis. However, in the event it is later determined that the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by an authority in a foreign jurisdiction, then such lack of inspection could cause trading in our securities to be delisted from the stock exchange in the United States pursuant to the HFCA Act.
Cybersecurity Review Measures
On December 28, 2021, the Cyberspace Administration of China (“CAC”) published the revised Measures for Cybersecurity Review (“CRM”), which further restates and expands the applicable scope of the cybersecurity review. The revised CRM took effect on February 15, 2022. Pursuant to the revised CRM, if a network platform operator holding personal information of over one million users seeks for “foreign” listing, it must apply for the cybersecurity review, and operators of critical information infrastructure purchasing network products and services are also obligated to apply for the cybersecurity review for such purchasing activities. Although the CRM provides no further explanation on the extent of “network platform operator” and “foreign” listing, we do not believe we are obligated to apply for a cybersecurity review pursuant to the revised CRM, considering that (i) we are not in possession of or otherwise holding personal information of over one million users and it is also very unlikely that we will reach such threshold in the near future; and (ii) as of the date of this Quarterly Report, we have not received any notice or determination from applicable PRC governmental authorities identifying it as a CIIO or requiring us to go through cybersecurity review or similar government reviews. That being said, considering that the revised CRM empowers the cybersecurity review office to initiate cybersecurity review when they believe any particular data processing activities “affect or may affect national security”, and that the revised CRM is new, it is uncertain whether the competent government authorities will deem that Yubo Beijing’s data processing activities may affect national security and thus initiating the cybersecurity review against Yubo Beijing’s businesses, and whether the competent government authorities, including the CAC, will adopt new laws, regulations or rules related to the revised CRM subjecting Yubo Beijing or its business to the cybersecurity review. We cannot guarantee, however, that we will not be subject to the cybersecurity review in the future. If a cybersecurity review is determined to apply to us in the future, we may be required to suspend our operations or experience other disruptions to our operations. Cybersecurity review could also result in negative publicity with respect to our Company and diversion of our managerial and financial resources, which could materially and adversely affect our business, financial condition, and results of operations. Failure of cybersecurity, data privacy and data security compliance which may be identified during any of such cybersecurity review could subject Yubo Beijing to penalties, damage its reputation and brand, and harm its business and results of operations.
| 6 |
| Table of Contents |
Furthermore, on August 20, 2021, the Standing Committee of the National People’s Congress promulgated the PRC Personal Information Protection Law (the “PIPL”), which took effect in November 2021. The PIPL provides that any entity involving processing of personal information (“PI Handler”) shall take various measures to prevent the disclosure, modification or losing of the personal information processed by such entity, including, but not limited to, formulating a related internal management system and standard of operation, conducting classified management of personal information, taking safety technology measures to encrypt and de-identify the processed personal information, providing regular safety training and education for staff and formulating a personal information safety emergency accident plan. The PIPL further provides that a PI Handler shall conduct a prior evaluation of the impact of personal information protection before the occurrence of various situations, including, but not limited to, processing of sensitive personal information (personal information that, once leaked or illegally used, may lead to discrimination against an individual or serious harm to an individual’s personal or property safety, including information on an individual’s ethnicity, religious beliefs, personal biological characteristics, medical health, financial accounts, personal whereabouts), using personal information to make automated decisions and providing personal information to any overseas entity. Notably, in case of cross-border transfer of personal information, the PIPL requires the PI Handler to either (i) complete a mandatory security assessment by CAC, (ii) complete the personal information protection certification (the “PIPC”) by a certification institution designated by the CAC, or (iii) conclude a standard contract provided by CAC with the foreign recipients.
On July 7, 2022, the CAC promogulated the Outbound Data Transfer Security Assessment Measures (the “Measures”), which became effective on September 1, 2022. According to the Measures, a PI Handler should declare a mandatory security assessment for its outbound data transfer to the CAC through the local provincial cyberspace administration under the following circumstances (i) where such PI Handler provides critical data outside the territory of the PRC, (ii) where the PI Handler being a CIIO or processing the personal information of more than one million individuals provides personal information outside the territory of the PRC, (iii) where a PI Handler has provided personal information of 100,000 individuals or sensitive personal information of 10,000 individuals in total outside the territory of the PRC since January 1 of the previous year; or (iv) other circumstances prescribed by the CAC for which declaration for security assessment for cross-border data transfers is required. Considering that (i) Yubo Beijing is not in possession of or otherwise holding personal information of over one million users and it is also very unlikely that we will reach such threshold in the near future; (ii) as of the date of this Quarterly Report, Yubo Beijing has not received any notice or determination from applicable PRC governmental authorities identifying Yubo Beijing as a CIIO, or as a processor of critical data, and (iii) since January 1, 2022, Yubo Beijing has not provided personal information of 100,000 individuals or sensitive personal information of 10,000 individuals outbound accumulatively, we do not believe we are currently obliged to declare a mandatory security assessment under the Measures. However, according to the draft version of the PRC national standard “Information security technology—Guideline for identification of critical data” dated January 2022, information related to human genetic resources might fall into the scope of critical data. Although this national standard has not released its final version and become effective yet, if we are deemed to be a PI Handler providing critical data outbound in the future, we might be subject to the mandatory security assessment as mentioned above.
On November 4, 2022, the CAC and the State Administration for Market Regulation (the “SAMR”) jointly issued the Notification on the Implementation of Personal Information Protection Certification, formally initiating the mechanism of PIPC. In parallel, on December 16, 2022, the National Information Security Standardization Technical Committee released an updated version of the Guidance on Network Security Standardized Practice – Specification for Certification of Personal Information Cross-Border Processing Activities, which provides the general principles and detailed requirements for cross-border PIPC.
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| Table of Contents |
On February 24, 2023, the CAC released the Measures for the Standard Contract for Cross-Border Transfer of Personal Information, along with the final version of the standard contract for the cross-border transfer of personal information outside of mainland China (the “PRC Standard Contract”), which came into effect on June 1, 2023. A PI Handler may choose either (i) to complete a PIPC, or (ii) to conclude a PRC Standard Contract with the foreign recipient and submit it along with other required materials to the provincial-level CAC where the PI Handler is located for filing to ensure the legality of a cross-border transfer of personal information, as long as not falling into the circumstances required for a mandatory security assessment as mentioned above.
Yubo Beijing’s business involves the processing of personal information of customers using Yubo Beijing’s healthcare products and receiving Yubo Beijing’s services, which may be deemed as sensitive personal information. Considering that (i) Yubo Beijing has not provided the personal information collected and gathered in its business outside the territory of China, (ii) our Company do not have the access to the personal information gathered by Yubo Beijing, based on our understanding of current PRC laws and regulations, we are not subject to the regulations over the cross-border transfer of personal information so far. However, given that the national security legal framework imposes stricter data localization and protection requirements on personal information and human health-related data in recent years, we might need to maintain the data and personal information collected and generated in our business in mainland China, enter into standard contracts with the overseas recipients of any personal information processed by us (if any), conduct self-assessments, undergo security assessments, or even obtain the requisite approvals from the Chinese government if the transmission of such information and data outside of mainland China is needed, which could significantly increase our operating costs or cause delays or disruptions in our business operations. Furthermore, if Yubo Beijing does not take measures to review and improve its mechanisms in protecting personal information, failure of personal information protection compliance could subject Yubo Beijing to penalties, damage its reputation and brand and harm its business and results of operations.
Cybersecurity Risk Management, Strategy, Governance and Incident Reporting
On July 26, 2023, the SEC adopted amendments to its rules to require disclosure regarding cybersecurity risk management, strategy, governance and incident reporting by public companies. The SEC’s adopted amendments require public companies to (i) disclose, on a current basis, any cybersecurity incident it deems to be material within four business days on a Form 8-K; (ii) describe, on a periodic basis, the company’s processes, if any, for the assessment, identification and management of material risks from cybersecurity threats, as well as whether any risks from cybersecurity threats have materially affected or are reasonably likely to materially affect their business strategy, results of operations or financial condition; and (iii) describe, on a periodic basis, the board’s oversight of risks from cybersecurity threats and management’s role in assessing and managing those risks. The amendments will require ongoing evaluation and analysis of possible changes in our applicable processes and procedures, including regarding cyber incident response plans and procedures, disclosure analysis framework, risk management processes, and board oversight structure.
Disclosure
requirements for risk management, strategy and governance will become effective for all registrants for fiscal years ending on or after December 15, 2023. As such, we will be required to provide our risk management strategy and governance disclosures in our annual report on Form 10-K for the year ending December 31, 2023. The material incident disclosure requirements will become effective on or after December 18, 2023. We, as a “smaller reporting company”, have a 180-day deferral period to postpone the disclosure of any material cybersecurity incident in current report on Form 8-K. As such, we will be required to report material cybersecurity incidents beginning June 2024.
Other
To operate its business activities in China, Yubo Beijing is required to obtain the following licenses and approvals. Yubo Beijing has obtained such licenses and approvals, and, to date, no application for any such licenses and approvals has been denied.
Licenses and Approvals |
| PRC Regulatory Authority |
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Food Operation License Permit |
| Xicheng District Market Supervision and Administration Office of Beijing Municipality |
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Medical License Distribution Enterprise Filing Certificate |
| Xicheng District Market Supervision and Administration Office of Beijing Municipality |
Major Customers
Yubo Beijing has historically generated most of its revenue from a limited number of customers. Two customers accounted for approximately 14.8% and 14.8% of Yubo Beijing’s total sales for the nine months ended September 30, 2023.
Corporate Information
Our principal executive offices are located at room 105, building 5, 31 Xishiku Avenue, Xicheng District, Beijing, PRC 100034. Our telephone number is +86 (040) 0677-6010. Our website address is http://www.yubogroup.com/. The information contained in, or that can be accessed through, our website is not incorporated by reference into, and is not a part of, this Quarterly Report. You should not consider any information on our website to be part of this Quarterly Report or in decides whether to purchase our securities. We have included our website address in this Quarterly Report solely for informational purposes.
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Critical Accounting Principles and Estimates
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 to our unaudited consolidated financial statements for the three and nine months ended September 30, 2023 and 2022 included elsewhere in this Quarterly Report.
As of September 30, 2023, 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 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 more information, see Note 2: Summary of Significant Accounting Policies to our unaudited consolidated financial statements for the three and nine months ended September 30, 2023 and 2022 included elsewhere in this Quarterly Report.
We do 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.
Results of Operations for the Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022 and for the Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022
Sales, Cost of Goods Sold and Gross Profit
Our sales increased to $428,510 for the three months ended September 30, 2023 from $14,580 for the three months ended September 30, 2022, primarily as a result of the launch of our new health management and health maintenance services as a new revenue stream during the quarter. Our cost of goods sold increased to $84,428 for the three months ended September 30, 2023 from $4,980 for the three months ended September 30, 2022, primarily as a result of the increase in sales. Accordingly, our gross profit increased to $344,082 for the three months ended September 30, 2023 from $9,600 for the three months ended September 30, 2022.
Our sales increased to $582,390 for the nine months ended September 30, 2023 from $37,763 for the nine months ended September 30, 2022, primarily as a result of the launch of our new health management and health maintenance services as a new revenue stream during the third quarter. Our cost of goods sold increased to $181,267 for the nine months ended September 30, 2023 from $14,046 for the nine months ended September 30, 2022, primarily as a result of the increase in sales. Accordingly, our gross profit increased to $401,123 for the nine months ended September 30, 2023 from $23,717 for the nine months ended September 30, 2022.
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Operating Expenses
Our operating expenses increased to $337,659 for the three months ended September 30, 2022 from $247,870 for the three months ended September 30, 2022, primarily as a result of a decrease in employee compensation expense.
Our operating expenses decreased to $1,078,508 for the nine months ended September 30, 2023 from $1,332,422 for the nine months ended September 30, 2022, primarily as a result of a decrease in occupancy expense.
Income (Loss) from Operations
Our income from operations was $6,423 for the three months ended September 30, 2023, as compared to loss from operations of $(238,096) for the three months ended September 30, 2022. The increase in our income from operations was primarily due to the new revenue stream provided by our new health management and health maintenance services that we launched in the third quarter.
Our loss from operations was $(1,078,508) for the nine months ended September 30, 2023, as compared to $(1,308,705) for the nine months ended September 30, 2022. The decrease in our loss from operations was primarily due to the new revenue stream provided by our new health management and health maintenance services that we launched in the third quarter.
Other Income (Expense)
Our other expense was $(130) for the three months ended September 30, 2023, as compared to other income of $174 for the three months ended September 30, 2022. The decrease was primarily due to interest expense.
Our other expense was $(316) for the nine months ended September 30, 2023, as compared to other income of $102 for the nine months ended September 30, 2022. The decrease was primarily due to interest expense.
Net Income (Loss)
Our net income was $6,293 for the three months ended September 30, 2023, as compared to a net loss of $(238,096) for the three months ended September 30, 2022. The increase in our net income was primarily due to higher gross profit and higher revenue from the new revenue stream.
Our net loss was $(677,701) for the nine months ended September 30, 2023, as compared to $(1,308,603) for the nine months ended September 30, 2022. The decrease was primarily due to higher gross profit and higher revenue from the new revenue stream.
Liquidity and Capital Resources
As of September 30, 2023, we had cash and equivalents on hand of $5,295 and a negative working capital of $(2,152,984). Generally, the primary sources of our funds have been cash from operations, loans from our shareholders and capital contributions. We believe that our cash on hand and working capital will be sufficient to meet our and Yubo Beijing’s anticipated cash requirements through 2023. We intend to continue working toward identifying and obtaining new sources of financing and we intend to raise additional capital in the fourth quarter of 2023 through the next fiscal year. 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 Yubo Beijing’s 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 Yubo Beijing’s continued operations and the expansion efforts.
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We 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.
Cash Flows
Net cash provided by (used in) operating activities
Net cash used in operating activities was $(180,618) for the nine months ended September 30, 2023, as compared to net cash provided by operating activities of $88,578 for the nine months ended September 30, 2022. The decrease in cash from operations was primarily due to an increase in prepaid expense.
Net cash provided by (used in) investing activities
Net cash provided by investing activities was nil for the nine months ended September 30, 2023, as compared to net cash used in investing activities of $(39,772) for the nine months ended September 30, 2022. The decrease in cash from investing activities was primarily due to that no intangible assets were purchased during the nine month ended September 30, 2023.
Net cash provided by (used in) financing activities
Net cash provided by financing activities was nil for the nine months ended September 30, 2023, as compared to $nil for the nine months ended September 30, 2022.
Current Liabilities
As of September 30, 2023, Yubo Beijing received an aggregate amount of $422,005 from nine PRC entities. The related verbal agreements provide for the nine entities to purchase inventory from Yubo Beijing or enter into such other arrangements with Yubo Beijing as the parties mutually agree. Pending formal approval of any such arrangements, all of the nine PRC entities have the right to request the return of their advances.
Shareholder Loans
In May and November 2021 and April and September 2022, we entered into several verbal loan agreements with World Precision Medicine Technology Inc. (“World Precision”), a company owned and controlled by Mr. Cheung Ho Shun, our existing shareholder, which provided the Company with working capital loans of an aggregate principal amount of $819,229. Such loans have been settled by our issuance of an aggregate of 1,638,458 new shares of our Class A common stock to World Precision in September 2022. As of the date of this Quarterly Report, Mr. Cheung Ho Shun is the beneficial owner of an aggregate of 7,121,458 shares of our Class A common stock, representing approximately 5.9% of the total shares of such class issued and outstanding.
As of September 30, 2023, we also had payables due to Mr. Jun Wang, our director, President and Chief Executive Officer, in the amount of $1,046,267, to Mr. Yang Wang, our director, in the amount of $434,834, to Mr. Huang Li, our indirect shareholder, in the amount of $53,480, and to Mr. Jin Wei, our shareholder, in the amount of $10,000.
All of our shareholder loans are due on demand and non-interest bearing.
Going concern
The accompanying interim unaudited consolidated financial statements for the three and nine months ended September 30, 2023 included an explanatory note 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. To date, we have not yet established an ongoing source of revenues and cash flows sufficient to cover our operating costs and allow us to continue as a going concern. For the three and nine months ended September 30, 2023, we had net income (loss) of $6,293 and $(677,701), respectively. These factors among others raise substantial doubt about our ability to continue as a going concern for a reasonable period of time.
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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.
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 as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our chief executive officer and our chief financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)), as of the end of the period covered by this Quarterly Report (the “Evaluation Date”), to ensure that information that we are required to disclose 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
Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. 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 a company have been detected. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report, management, with the participation of our chief executive officer and our chief financial officer concluded that our disclosure controls and procedures were effective as of such date.
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, 2023 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.
Inherent Limitations on Effectiveness of Internal Controls
The Company’s management, including the chief executive officer and chief financial officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
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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 as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
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.
Rule 10b5-1 Trading Plans
During the quarter ended September 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (in each case, as defined in Item 408 of Regulation S-K).
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Item 6. – Exhibits.
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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 |
____________________
(1) | Filed as an exhibit to the Current Report on Form 8-K filed by the Company with the SEC on January 14, 2021, and is incorporated herein by reference. |
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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 |
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Date: November 20, 2023 | 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 20, 2023 | By: | /s/ Lina Liu |
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| Lina Liu |
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| Chief Financial Officer, Treasurer and Secretary |
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| (Principal Financial and Accounting Officer) |
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EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jun Wang, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Yubo International Biotech Limited; |
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| 2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a‑15(f) and 15d‑15(f)) for the registrant and have: |
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| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
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| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function): |
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| a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 20, 2023 | By: | /s/ Jun Wang | |
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| Jun Wang, Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Lina Liu, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Yubo International Biotech Limited; |
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| 2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a‑15(f) and 15d‑15(f)) for the registrant and have: |
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| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
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| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function): |
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| a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 20, 2023 | By: | /s/ Lina Liu | |
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| Lina Liu, Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying quarterly report on Form 10-Q of Yubo International Biotech Limited for the quarter ended September 30, 2023, the undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:
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| (1) | such quarterly report on Form 10-Q for the quarter ended September 30, 2023 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| (2) | the information contained in such quarterly report on Form 10-Q for the quarter ended September 30, 2023 fairly presents, in all material respects, the financial condition and results of operations of Yubo International Biotech Limited. |
| Date: November 20, 2023 | /s/ Jun Wang | ||
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| Name: Jun Wang |
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| Title: Chief Executive Officer |
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EXHIBIT 32.2
CERTIFICATIONS OF CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying quarterly report on Form 10-Q of Yubo International Biotech Limited for the quarter ended September 30, 2023, the undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:
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| (1) | such quarterly report on Form 10-Q for the quarter ended September 30, 2023 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| (2) | the information contained in such quarterly report on Form 10-Q for the quarter ended September 30, 2023 fairly presents, in all material respects, the financial condition and results of operations of Yubo International Biotech Limited. |
| Date: November 20, 2023 | /s/ Lina Liu | ||
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| Name: Lina Liu |
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| Title: Chief Financial Officer |
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