YBGJ 8-K
Yubo International Biotech Ltd (YBGJ)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 14, 2021
| YUBO INTERNATIONAL BIOTECH LIMITED |
| (Exact name of Registrant as Specified in its Charter) |
| New York | 0-21320 | 11-3074326 | ||
| (State or Other Jurisdiction of Incorporation) | (Commission file Number) | (IRS Employer Identification No.) |
| Room 105, Building 5, 31 Xishiku Avenue, Xicheng District, Beijing, PRC |
| N/A | ||
| (Address of Principal Executive Offices) |
| (Zip Code) | ||
Registrant’s telephone number, including area code: (646) 768-8417
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
Cautionary Notice Regarding Forward-Looking Statements
This Current Report on Form 8-K (this “Report”) and other reports filed by the Registrant (collectively the “Filings”) from time to time with the U.S. Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Registrant’s management as well as estimates and assumptions made by the Registrant’s management. When used in the filings the words “anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan” or the negative of these terms and similar expressions as they relate to the Registrant or the Registrant’s management identify forward-looking statements. Such statements reflect the current view of the Registrant with respect to future events and are subject to risks, uncertainties, assumptions and other factors (including the risks contained in the section of this report entitled “Risk Factors”) relating to the Registrant’s industry, the Registrant’s operations and results of operations and any businesses that may be acquired by the Registrant. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.
Although the Registrant believes that the expectations reflected in the forward-looking statements are reasonable, the Registrant cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, the Registrant does not intend to update any of the forward-looking statements to conform these statements to actual results. The following discussion should be read in conjunction with the Registrant’s financial statements and pro forma financial statements and the related notes filed with this Report.
Unless otherwise indicated, in this Report, references to “we,” “our,” “us,” the “Company,” “PubCo” or the “Registrant” refer to Yubo International Biotech Limited, a New York corporation and its wholly owned subsidiaries, Platinum International Biotech Co., Ltd. (“Platinum”), a company organized under the laws of the Cayman Islands, Platinum International Biotech (Hong Kong) Limited, a company organized under the laws of Hong Kong (“Platinum HK”), and Yubo Biotech (Chengdu) Limited, a company organized under the laws of the People’s Republic of China (“Yubo WFOE”); and references to “Yubo” refer to Yubo International Biotech (Beijing) Limited, a company organized under the laws of the People’s Republic of China.
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Item 1.01. Entry into a Material Definitive Agreement.
The disclosure under Item 2.01 “Completion of Acquisition or Disposition of Assets” below is incorporated by reference in this Item 1.01.
Item 2.01. Completion of Acquisition or Disposition of Assets.
On January 14, 2021 (the “Closing Date”), Yubo International Biotech Limited, a New York corporation (the “Company”, “Registrant” or “PubCo”), closed a voluntary share exchange transaction with Platinum International Biotech Co., Ltd., a company organized under the laws of the Cayman Islands (“Platinum”), pursuant to that certain Agreement and Plan of Share Exchange, dated January 14, 2021 (the “Exchange Agreement”), by and among the Company, Platinum, Yubo International Biotech (Beijing) Limited, a company organized under the laws of the People’s Republic of China (“PRC”) (“Yubo”), and certain selling stockholders named therein.
In accordance with the terms of the Exchange Agreement, on the Closing Date, the Company issued a total of 117,000,000 shares of its Class A common stock to the Selling Stockholders, who were then stockholders of Platinum (the “Selling Stockholders”), in exchange for 100% of the issued and outstanding capital stock of Platinum (the “Exchange Transaction”). As a result of the Exchange Transaction, the Selling Stockholders acquired more than 99% of the Company’s issued and outstanding capital stock, Platinum became the Company’s wholly-owned subsidiary, and the Company acquired the business and operations of Platinum and Yubo. Immediately prior to the Exchange Transaction, the Company had 117,875,323 shares of Class A common stock and 4,447 shares of Class B common stock issued and outstanding. Immediately after the Exchange Transaction and the surrender and cancellation of 116,697,438 shares held by Lina Liu, the controlling shareholder, Chief Financial Officer, Treasurer and Secretary of the Company, the Company has 118,177,885 shares of Class A common stock and 4,447 shares of Class B common stock issued and outstanding.
Yubo is a leading supplier of innovative products that process, store and administer therapeutic doses of endometrial stem cells for treatment of disease and injuries in the PRC.
The Exchange Agreement contains customary representations, warranties, and conditions to closing. The following description of the terms and conditions of the Exchange Agreement and the transactions contemplated thereunder that are material to the Company does not purport to be complete and is qualified in its entirety by reference to the full text of the Exchange Agreement, a copy of which is filed as Exhibit 2.1 to this Report, and is incorporated by reference into this Item 2.01.
Mr. Jun Wang, our President, Chief Executive Officer and a director, Mr. Yang Wang, a director, Mr. Zhihui Bai, a director, and Ms. Lina Liu, our Chief Financial Officer, Treasurer and Secretary, were beneficial shareholders of the Selling Shareholders prior to the Closing of the Exchange Transaction. See “Certain Relationships and Related Transactions and Director Independence—Related Party Transactions.”
Prior to the Exchange Transaction, we were a public reporting “shell company,” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, pursuant to the requirements of Item 2.01(a)(f) of Form 8-K, set forth below is the information that would be required if the Registrant were filing a general form for registration of securities on Form 10 under the Exchange Act for the Registrant’s common stock, which is the only class of its securities subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act upon consummation of the Exchange Transaction.
From and after the Closing Date, our primary operations will consist of the business and operations of Platinum and Yubo. Therefore, we disclose information about the business, financial condition, and management of Platinum and Yubo in this Report.
In the Exchange Transaction, or reverse acquisition, the Registrant is the accounting acquiree and Platinum is the accounting acquirer. Accordingly, we are presenting the audited consolidated financial statements of Platinum and its subsidiaries and variable interest entity Yubo for the years ended December 31, 2019 and 2018 and the unaudited consolidated financial statements of Platinum and its subsidiaries and variable interest entity, Yubo, for the nine months ended September 30, 2020 and 2019 as set forth in Exhibit 99.1; and certain proforma financial information as set forth in Exhibit 99.2 of this Report. Further, as noted above, we disclose information about the business, financial condition, and management of Platinum and Yubo in this Report.
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DESCRIPTION OF BUSINESS
Except as otherwise indicated by the context, references to “we”, “us” or “our” hereinafter in this Report are to the consolidated business of Platinum and Yubo, except that references to “our common stock”, “our shares of common stock” or “our capital stock” or similar terms shall refer to the common stock of the Registrant.
Overview
Yubo was founded on June 14, 2016 under the laws of the PRC, and has its headquarters at Room 105, Building 5, 31 Xishiku Avenue, Xicheng District, Beijing, PRC. Yubo plans to become a leading supplier of innovative products that process, store and administer therapeutic doses of endometrial stem cells for treatment of disease and injury in China. Our planned products will harvest stem cells, wound healing proteins or growth factors from the blood, or tissue, of a single donor and will be administered to that donor or a matched patient. We also plan to market our products, Life Shinkansen Liquid Dressing and Life Shinkansen Spray Dressing, which will be used for treatment of small wounds, bruises, cutting wounds and other superficial wounds.
Platinum was established on April 22, 2020 under the laws of Cayman Islands as a limited liability company. Platinum acquired all of the outstanding stock of Platinum HK on May 4, 2020. Subsequently, the sole stockholder of Platinum sold 100% of the outstanding shares capital of Platinum to the Selling Stockholders.
Platinum HK was established on May 4, 2020 under the laws of Hong Kong as a limited liability company. Platinum HK acquired all of the outstanding stock of Yubo WFOE on September 11, 2020.
Yubo WFOE was established on September 4, 2020, under the laws of the PRC. Yubo WFOE is a wholly-owned subsidiary of Platinum HK, and therefore, Yubo WFOE is a wholly foreign owned enterprise. The advantages of this structure include:
| · | Independence and freedom to implement the worldwide strategies of its parent company without having to consider the involvement of Chinese law; | |
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| · | Ability to formally carry out business and the ability to issuing invoices to customers in RMB and receive revenues in RMB; |
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| · | Capable of converting RMB profits to US dollars or other foreign currency for remittance to their parent company outside China; and |
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| · | Greater protection of intellectual property rights, know-how and technology since no partner required and therefore more control of intellectual property. |
As discussed below, Yubo and/or its shareholders have entered into various agreements with Yubo WFOE to allow Yubo WFOE’s effective control over Yubo. The Company acquired 100% of the issued and outstanding capital stock of Platinum, which, in turn, holds a 100% equity interest in Yubo WFOE, in exchange for the issuance of 117,000,000 shares of the Company’s common stock to the Selling Shareholders, which constitutes more than 99% of our issued and outstanding common stock. Through its ownership of Platinum, the Company effectively acquired the business and operations of Yubo, Yubo WFOE and Platinum HK.
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Corporate Structure
As a result of the Exchange Transaction, the organizational structure of the Registrant is as follows:
Control Agreements
On September 11, 2020, our wholly-owned subsidiary, Yubo WFOE, entered into the following contractual arrangements with Yubo and the shareholders of Yubo (the “Yubo Shareholders”), as applicable, each of which is enforceable and valid in accordance with the laws of the PRC:
Exclusive Consulting Services Agreement. Pursuant to the Exclusive Consulting Services Agreement among Yubo, Yubo WFOE, and the Yubo Shareholders, Yubo WFOE agrees to provide, and Yubo agrees to accept, exclusive management services provided by Yubo WFOE. Such management services include but are not limited to financial management, business management, marketing management, human resource management and internal control of Yubo. The Exclusive Consulting Services Agreement will remain in effect until the acquisition of all assets or equity of Yubo by Yubo WFOE is complete (as more fully described in the Exclusive Option Agreement below).
Exclusive Option Agreement. Under the Exclusive Option Agreement among Yubo, Yubo WFOE, and the Yubo Shareholders, the Yubo Shareholders granted Yubo WFOE an irrevocable and exclusive purchase option to acquire Yubo’s equity and/or assets at a nominal consideration. Yubo WFOE may exercise the purchase option at any time.
Equity Pledge Agreement. Under the Equity Pledge Agreement among Yubo WFOE and the Yubo Shareholders, the Yubo Shareholders pledged all of their equity interests in Yubo, including the proceeds thereof, to guarantee all of Yubo WFOE’s rights and benefits under the Exclusive Consulting Services Agreement and the Exclusive Option Agreement. Prior to termination of this Equity Pledge Agreement, the pledged equity interests cannot be transferred without Yubo WFOE’s prior consent. The Yubo Shareholders covenants to Yubo WFOE that among other things, it will only appoint/elect the candidates for the directors of Yubo nominated by Yubo WFOE.
Stem Cells
Stem cells have the remarkable potential to develop into many different cell types in the body. They serve as a repair system for the body and they can theoretically divide without limit to replenish other cells as long as the person is alive. When a stem cell divides, each new cell has the potential to either remain a stem cell or become another type of cell with a more specialized function, such as a muscle cell, a red blood cell, or a brain cell.
There are two main types of stem cells: embryonic and adult stem cells. Embryonic stem cells are primitive cells derived from a 5-day pre implantation embryo that have the potential to become a wide variety of specialized cell types. Adult stem cells are cells found in human tissue that can renew themselves, and can differentiate to yield the major specialized cell types of that tissue. Adult stem cells are thought to reside in a specific area of each tissue where they may remain quiescent (non-dividing) for many years until they are activated by disease or tissue injury. The tissues reported to contain stem cells include umbilical cord blood, bone marrow, brain, peripheral blood, adipose, blood vessels, skeletal muscle, skin, and liver.
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Stem Cell Therapy
Stem cell therapies are treatments in which stem cells are inducted to differentiate into the specific cell type required to repair damaged or destroyed cells or tissues.
Since the first successful cord blood transplant performed in 1988, awareness of the potential therapeutic value of cord blood stem cells has increased and collection and storage has grown rapidly. These cord blood stem cells are harvested at no risk or pain to the donor and can be preserved in a cord blood bank for clinical use with a matched patient on short notice. Their use also results in a lower incidence of post-transplant immune complications than transplants with adult bone marrow stem cells.
Stem cell therapy is used to:
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| · | Replace bone marrow damaged by high-dose chemotherapy or radiation therapy used to treat patients with a variety of cancers such as leukemia and lymphoma; |
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| · | Provide genetically healthy and functioning bone marrow to treat patients with more than 60 life threatening genetic diseases such as sickle cell anemia and immunodeficiency; and |
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| · | Regenerate and repair tissue including the treatment of myocardial infarction, peripheral limb ischemia and non-union bone fractures. |
We believe the number of stem cell units stored will continue to grow, due in part to the following factors:
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| · | Increased awareness about the availability and benefits of preserving endometrial stem cells; |
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| · | Improved technology to harvest the stem cells in a sterile environment and maintain their viability for many years; |
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| · | Clinical evidence that cell dose and cell viability are critical to a successful transplant; and |
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| · | Increased government support. |
Our Strategy
We intend to build a first-class stem cell storage facility, which we believe, will be the first global bank of endometrial stem cells. We also intend to develop and expand our current product line, to include a series of endometrial stem cells light application technology and medical-grade cell therapeutic products for health management, innovative medicine, anti-aging treatments, clinical transformation and other application fields. We believe our existing technology and leadership position in stem cell processing will drive significant future growth for the Company.
Stem Cell Storage Facility.
Our endometrial stem cell bank is divided into a public resources library and private repositories. The public resources library will meet strict testing standards. We will enter into standard donation agreements with the donor customers who meet the public resources library standards, and store the collection of stem cell samples in the public resources library. Such public resources library biological samples can be widely used in research and development and subsequent commercial development.
We have reached a letter of intent to cooperate with Chengdu Medical City, China, and is expected to enter into a formal agreement with Chengdu Medical City in the near future. We intend to lease approximately 4,500 square meters of space in Chengdu Medical City, for the use of our endometrial stem cell storage laboratory and subsequent research and development laboratory. The tenant improvement and equipment procurement are expected to be completed by June 2021. When the cell bank is built, it is expected to store biological samples of more than 5,000 people in the early stages.
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Our Business Model
Yubo’s business model leverages our ability to integrate the upstream, middle stream and downstream of our stem cell based product cycle. In terms of industrial chain, we are building a public resource library of endometrial stem cells in the upstream to meet the demand for high-quality cells from stem cell application and treatment centers in China, including the rapid development of stem cell drug research and development, production, hospitals and scientific research institutions. The sales mode of light application products of downstream companies is to invite investment in China to join in our biological experience center store marked by VIVCELL, as a national-wide franchise expansion of biological experience center stores. At present, it includes the improvement and application products for human respiratory system, face, skin, eyes, privacy, hair and other parts. We believe this provides Yubo with a competitive advantage, as shown in the diagram below:
Our Service and Products
Endometrial Stem Cell Bank
We currently intend to build our own stem cell bank by June 2021. We have entered into an Entrustment Technical Service Agreement with Beijing Zhenhuikang Biotechnology Co., Ltd., a company organized under the laws of the PRC, entrusting it to store and prepare endometrial biological samples in exchange for services fees paid by us. Beijing Zhenhuikang Biotechnology Co., Ltd. is an affiliate of a shareholder of Yubo. See “Certain Relationships and Related Transactions and Director Independence.”
Light Application Products
Life Shinkansen Liquid Dressing
Our Life Shinkansen Liquid Dressing is used for treatment of small wounds, bruises, cutting wounds and other superficial wounds and for daily skin, mucous membranes and respiratory care and maintenance. When correctly applied, it forms a protective layer on the surface of the skin/mucous membrane surface to strengthen the function of the skin/mucous membrane barrier. The main active ingredients include seaweed sugar and oligopeptide-1. This product is a colorless transparent liquid and has a cool aroma.
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Life Shinkansen Spray Dressing
Our Life Shinkansen Spray Dressing is used for treatment of small wounds, bruises, cutting wounds and other superficial wounds and for daily skin, mucous membranes and respiratory care and maintenance. When correctly applied, it forms a protective layer on the surface of the skin/mucous membrane surface to strengthen the function of the skin/mucous membrane barrier. The main active ingredients include seaweed sugar, oligopeptide-1 and purified water. This product is a colorless transparent liquid and has a cool aroma.
Research and Development
We are principally focused on the development of new products that support the stem cell therapy market. Our future research and development activities will be devoted to the development and launch of additional new products, line extensions, or significant upgrades to existing products and our current stem cell storage facility. Research and Development expense reflects the cost of these activities, as well as the costs to obtain regulatory approvals of new products and processes and to maintain the highest quality standards with respect to existing products.
We have also entered into a Joint Research and Development Agreement with Beijing Zhenxigu Medical Research Center (L.P.), which is an affiliate of a shareholder of Yubo. See “Certain Relationships and Related Transactions and Director Independence.”
Intellectual Property
Intellectual property is of vital importance in our field and in biotechnology generally. We seek to protect and enhance proprietary technology, inventions, and improvements that are commercially important to the development of our business by seeking, maintaining, and defending patent rights, whether developed internally, acquired or licensed from third parties. We will also seek to rely on regulatory protection afforded through orphan drug designations, inclusion in expedited development and review, data exclusivity, market exclusivity and patent term extensions where available.
We currently own two invention patents in the PRC. Our owned patents in China are for endometrial collection and a protective solution for endometrium stem cells.
Manufacturing
We rely on third parties to manufacture our products and certain of the medical devices used in our collection and testing of stem cells. We have entered into a Cooperation Agreement with Beijing Zhenxigu Medical Research Center (L.P.), and Huailai Huayue Hengsheng Medical Device Co., Ltd., pursuant to which Huailai Huayue Hengsheng Medical Device Co., Ltd. has agreed to conduct sample trial production of our liquid dressing products. The Cooperation Agreement is attached hereto as Exhibit 10.9 and is incorporated herein by reference.
Industry
The PRC pharmaceutical industry has evolved in the past 30 years from a complex, multi-tiered system that was subject to strict control at every governmental level to a competitive and increasingly market-oriented industry. From 1950 to 1979, all Chinese pharmaceutical companies were state-owned and categorized into national, provincial and municipal-level distributors. The price markup at each level, from pharmaceutical manufacturer to end-consumer, was subject to a total markup cap of 28%. During the 1980s, the rigid three-level distribution system gave way to a more open and decentralized network. Driven by increasing demand for pharmaceutical products in the past three decades, the PRC pharmaceutical industry has experienced rapid growth. The numbers of pharmaceutical manufacturers and distributors have also increased significantly until recent years, when competition and government regulations and policies started to drive consolidation in the industry. As a result of these developments, the market volume of the PRC pharmaceutical distribution market has steadily increased.
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Market Drivers
The significant growth of China’s population aged 60 or above is expected to drive demand for healthcare and pharmaceutical products in China. According to the PRC National Bureau of Statistics, the proportion of the population aged 60 or above in China has increased from 11.9% in 2003, or approximately 150.0 million people, to 13.6%, or approximately 162.2 million people in 2007. Rising life expectancy is also expected to contribute to the growth of China’s aging population, both as an absolute number and as a percentage of the total population. We believe that the aging population in China, which historically spends the most on healthcare, will drive the growth of the PRC healthcare and pharmaceutical industries. The prevalence of chronic health problems, such as arthritis, cardiovascular diseases and cancer, is expected to increase with the growth of China’s population aged 60 or above. In addition, as living standards continue to improve and health consciousness grows in China, many lifestyle-related diseases are also increasing and becoming more widespread. For example, Business Monitor International estimates that sales of prescription cardiovascular medicines increased by 87% from ¥19.0 billion, or approximately US$2.8 billion, in 2003 to ¥35.3 billion, or approximately US$5.2 billion, in 2007, primarily as a result of the rising prevalence of heart disease in an aging population and increasingly unhealthy lifestyles in the population at large.
According to the China Statistical Yearbook 2008 (the “Yearbook”), from 2003 to 2007, the average per capita annual disposable income of China’s urban residents increased from approximately ¥8,472, or approximately US$1,250, to ¥13,785, or approximately US$2,025, representing a compound annual growth rate (“CAGR”) of approximately 12.9%. According to the Yearbook, China’s GDP grew at a CAGR of 16.4% from 2003 to 2007, and its per capita GDP grew from ¥10,542, or approximately US$1,550, in 2003 to approximately ¥18,934, or approximately US$2,780, in 2007, representing a CAGR of 15.8%. During this period, national income and disposable income levels increased significantly.
With rising living standards and increasing disposable income, people in China have become more health conscious. These developments have resulted in both Chinese urban and rural residents spending more on healthcare. According to the PRC National Bureau of Statistics, consumer expenditures on healthcare in China’s urban and rural areas increased from approximately ¥476.0, or approximately US$70, and ¥117.8, or approximately US$17, per person in 2003, respectively, to approximately ¥699.0, or approximately US$100, and ¥210.2, or approximately US$30, per person in 2007, respectively.
National Medical Insurance Program
The National Medical Insurance Program (“National Program”), which was introduced in 1999, is the largest medical insurance program in China. The National Program is funded with varying levels of contributions from the PRC Government, individual program participants and their employers.
In 1999, the National Program was originally launched as the Urban Worker Basic Medical Insurance Program (“Urban Worker Program”), a mandatory scheme covering urban workers and their minor children. In 2007, a voluntary component called the Urban Resident Basic Medical Insurance Program (“Urban Resident Program”) was further implemented as part of the National Program, to cover the rest of the urban residents that are not covered by the Urban Workers Program. The National Program provides guidance on which prescription and over-the-counter medicines are included in the National Program and to what extent the purchases of these medicines are reimbursable. See the section headed “Government Regulation - Reimbursement Under the National Medical Insurance Program” below for further information.
We believe that only a small percentage of the Chinese population can afford commercial insurance plans. Therefore, the National Program coverage is expected to expand in the future. According to the PRC National Bureau of Statistics, the percentage of PRC urban residents grew from approximately 37.7% of the total population to 44.9% from 2001 to 2007. The number of people covered by the National Program increased from approximately 37.9 million in 2000 to 180.2 million in 2007, representing a CAGR of 25%. This trend is anticipated to continue as the Eleventh Five-Year Plan government development initiative projects that the PRC urban population will increase from 45% to 47% of China’s total population between 2007 to 2010. Furthermore, the provincial and municipal authorities who are responsible for administering social medical insurance funds to cover such reimbursements have been gradually increasing funding in recent years. According to the PRC Ministry of Labor and Social Security, total funding under the national insurance program reached ¥225.7 billion, or approximately US$28.9 billion, in 2008, representing an increase of 29.2% from 2007. The availability of funding is expected to increase significantly in the near future, primarily as a result of increased financial and policy support from various levels of the PRC government.
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PRC Healthcare Reform
In September 2008, the State Council published a draft plan to ease the difficulties and minimize the costs for PRC citizens to obtain proper healthcare treatment. On March 17, 2009, the PRC Government issued the Opinion on Deepening the Healthcare System Reform (the “Opinion”). The State Council subsequently released the Notice on Important Implementing Plans for the Healthcare System Reform 2009-2011 (the “Implementing Plan”). The goal of the healthcare reform plan is to establish a basic, universal healthcare framework to provide Chinese citizens with safe, efficient, convenient and affordable healthcare. The Opinion calls for healthcare reform to be carried out in two steps:
| · | Step One, which will be completed by 2011, aims to increase the accessibility while reducing the cost of healthcare. During this phase, the PRC Government will build up a network of basic healthcare facilities, expand coverage of the public medical insurance system to cover 90% or more of the population, and reform the drug supply and public hospital system.
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| · | Step Two, which will take place between 2011 and 2020, envisions the establishment of a universal healthcare system. The entire population should be covered by public medical insurance; drugs and medical services should be accessible and affordable to citizens in all public healthcare facilities. |
While the PRC Government has neither provided a concrete timetable nor steps to implement certain tasks, such as the public hospital reform, it has released execution guidance for other tasks. Most notably, the PRC Government has announced it will spend an additional approximately RMB 850 billion, or US$125 billion from 2009 to 2011 on the healthcare industry. A significant portion will be expended to establish a basic healthcare medical insurance regime, which aims to cover over 90% of the national population by 2011, mainly through the Urban Worker Program, Urban Resident Program and the New Rural Insurance Scheme. The PRC Government further announced that the annual subsidy for each participant will be increased from approximately RMB 40, or US$5.90 to approximately RMB120, or US$17.60 for Urban Resident Program participants, and from approximately RMB 80, or US$11.76 to approximately RMB120 RMB, or US$17.60 for New Rural Insurance Scheme participants, starting from 2010. The reform plan will also raise the cap on claim payments from four times the local average annual income to six times such income. Another significant part of the spending plan focuses on healthcare facilities. The PRC Government plans to build 29,000 rural clinics in 2009. In the next three years, the PRC government plans to build an additional 5,000 rural clinics, 2,000 county-level hospitals and 2,400 urban community clinics in under-developed areas. This substantial increase in healthcare spending is expected to expedite the growth of the healthcare industry in China.
Under the healthcare reform plan, the additional funding for the healthcare industry will primarily target four fundamental healthcare systems in China:
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| · | The public health services system. This system focuses on preventing disease and promoting health as a complementary alternative to medical treatment. The public health services system will provide services such as immunizations, regular physical check-ups (for senior citizens over 65 years of age and children under three years of age), pre-natal and post-natal check-ups for women, prevention of infectious or chronic diseases and other preventative and fitness activities. |
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| · | The public medical insurance system. This system covers drugs and medical treatments for the majority of the population. The healthcare reform plan will retain the framework of the current public medical insurance schemes under the National Program, but will expand them to cover more of the population and increase the scope of treatments, raise the cap on claim payments and cover more claims at higher percentages. |
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| · | The public healthcare delivery system. One of the primary goals of the Implementing Plan is to build more healthcare facilities and to improve the training of healthcare professionals. Beyond additional public wellness centers, the reform plan aims to place a medical clinic in every village and a hospital in every county by 2011. In addition, the PRC Government will encourage private investors to establish public non-profit hospitals. |
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| · | The drug supply system. This system regulates pricing and how drugs will be procured prescribed and dispensed in healthcare facilities. The healthcare reform plan will focus on pricing, procurement, prescription and dispensing of essential drugs. |
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The Opinion and the Implementing Plan direct relevant governmental authorities, including the Ministry of Health, SFDA and the National Development Reform Commission, or NDRC, to adopt implementing regulations for the reforms outlined in the healthcare reform plan.
Industry Opportunities
The preservation of cell resources is the basis for the development of the growing cell therapy industry. At present, in the existing cell resource preservation business, the cord blood preservation is the most mature one, and mesenchymal stem cells, as a new type of cell resource, its preservation business has shown a good momentum of development. The momentum of development is expected to grow stronger in the future development and make positive contributions to human health. Up to now, the global cord blood bank has grown to more than 400, and there are more than 50 umbilical cord mesenchymal stem cell banks. Take the United States as an example, an additional stem cell bank capable of storing umbilical cord mesenchyme will be added every three months. In addition, with the promotion and application of immune cells, during the treatment of tumor patients with immune cells, it is found that some patients have very low immune system ability. It is difficult for the immune cells in the body to activate and expand outside the body. If the immune cells can be stored when the person is healthy, they can be backed up as a seed of life and health, and can be used to prevent or treat cancer. So many immune cell companies are targeting the immune cell storage market.
The report “Global Cell Therapy Market 2017-2021” released by the internationally renowned consulting company Technavio pointed out that from 2017 to 2021, the global cell therapy market is expected to grow at a compound annual growth rate of 23.27%.
The global cell therapy is developing rapidly. At the beginning of 2019, the US FDA announced its development plan for future cell therapy. The FDA predicts that by 2025, 10-20 new drugs in this field will be approved each year. In recent years, the increase in the number of clinical trials, strengthened government and capital support, and increased corporate cooperation are driving the development of CDMO business in the global cell therapy industry.
Additionally, the major developed countries in the world all regard cell therapy as a key support and development direction in the field of medicine. Our country has also formulated a series of guidelines and policies to accelerate the development of the biomedical industry to meet the urgent needs of patients for new technologies and new therapies.
With the continuous strengthening of our scientific research investment and technical strength, the number of cell therapy clinical research carried out in China has been increasing year by year, and the calls for the industrialization and clinical application of related products are also increasing. In our country, cell therapy and clinical transformation have become a major issue in the development of health protection.
With the gradual improvement of supervision, approval and payment methods, as well as the popularization of new generation cell manufacturing processes, the release of cell therapy products will be faster and the market penetration rate will also be greater. This means that more patients will be able to use cell therapy products.
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Competition
Our products will compete with novel therapies developed by biopharmaceutical companies, academic research institutions, governmental agencies and public and private research institutions, in addition to standard of care treatments.
At present, there are more than 2,000 companies engaged in stem cell research and development and application in China, but most of them focus on the storage and anti-aging application of umbilical cord blood stem cells and basic cosmetics companies. Due to our unique core leading technology, we believe there is no company in China whose main business is endometrial stem cell storage. At present, we believe no companies mainly engage in cell light application products and have product lines similar to ours.
Some of our key competitors are:
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| · | China Cord Blood (NYSE: CO) currently focuses on private storage of neonatal cord blood and is the largest company engaged in such business in China, with annual revenue of more than RMB1 billion. |
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| · | VCANBIO CELL&GENE: (SHA: 600645) its main products include cell preparation and storage, genetic testing, etc. Its revenue in 2019 was RMB1.386 billion. |
Government Regulation
In the People’s Republic of China, or PRC, we operate in an increasingly complex legal and regulatory environment. We are subject to a variety of PRC laws, rules and regulations affecting many aspects of our business. This section summarizes the principal PRC laws, rules and regulations that we believe are relevant to our business and operations.
PRC Drug Regulation
Introduction
China heavily regulates the development, approval, manufacturing and distribution of drugs, including biologics. The specific regulatory requirements applicable depend on whether the drug is made and finished in China, which is referred to as a domestically manufactured drug, or made abroad and imported into China in finished form, which is referred to as an imported drug, as well as the approval or “registration” category of the drug. For both imported and domestically manufactured drugs, China typically requires regulatory approval for a CTA to conduct clinical trials in China and submit China clinical trial data, prior to submitting an application for marketing approval. For a domestically manufactured drug, there is also a requirement to have a drug manufacturing license for a facility in China.
In 2017, the drug regulatory system entered a new and significant period of reform. The General Office of the State Council and the General Office of the Central Committee of the China Communist Party jointly issued the Opinion on Deepening the Reform of the Evaluation and Approval System to Encourage Innovation in Drugs and Medical Devices, or the Innovation Opinion in October 2017. The expedited programs and other advantages under this and other recent reforms encourage drug manufacturers to seek marketing approval in China first, manufacture domestically, and develop drugs in high priority disease areas, such as oncology.
To implement the regulatory reform introduced by the Innovation Opinion, the NPC and the NMPA has been revising the fundamental laws, regulations and rules regulating pharmaceutical products and the industry, which include the framework law known as the PRC Drug Administration Law, or DAL. The DAL was promulgated by the Standing Committee of the NPC on September 20, 1984 and last amended on August 26, 2019 and took effect as of December 1, 2019. The DAL is implemented by a high-level regulation issued by the State Council referred to as the DAL Implementing Regulation. The NMPA has its own set of regulations further implementing the DAL; the primary one governing CTAs, marketing approval, and post-approval amendment and renewal is known as the Drug Registration Regulation, or DRR. The DRR was promulgated by the NMPA on February 28, 2005 and the last amended DRR will take effect from July 1, 2020. Although the NMPA has issued several notices and proposed regulations in 2018 and 2019 to implement the reforms, the implementing regulations for many of the reforms in the Innovation Opinion have not yet been finalized and issued, and therefore, the details regarding the implementation of the regulatory changes remained uncertain in some respects.
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Regulatory Authorities and Recent Government Reorganization
In the PRC, the NMPA is the primary regulatory agency for pharmaceutical products and businesses. The agency was formed from the prior China Food and Drug Administration, or CFDA, in 2018 as part of a government reorganization. Pursuant to the Decision of the First Session of the Thirteenth National People’s Congress on the State Council Institutional Reform Proposal made by the NPC on March 17, 2018, NMPA is one of the two half-ministry level agencies under the State Administration for Market Regulation, or SAMR, which are responsible for consumer protection, advertising, anticorruption, pricing and fair competition matters. The National Intellectual Property Administration is the other half-ministry level agency under the SAMR.
Like the CFDA, the NMPA is still the primary drug regulatory agency and implements the same laws, regulations, rules, and guidelines as the CFDA, and it regulates almost all of the key stages of the life-cycle of pharmaceutical products, including nonclinical studies, clinical trials, marketing approvals, manufacturing, advertising and promotion, distribution, and pharmacovigilance (i.e., post-marketing safety reporting obligations). The Center for Drug Evaluation, or CDE, which remains under the NMPA, conducts the technical evaluation of each drug and
biologic application to assess safety and efficacy.
The NHC (formerly known by the names: the Ministry of Health (MOH) and National Health and Family Planning Commission (NHFPC)), is China’s primary healthcare regulatory agency. It is responsible for overseeing the operation of medical institutions, some of which also serve as clinical trial sites, and regulating the licensure of hospitals and other medical personnel. NHC plays a significant role in drug reimbursement. Furthermore, the NHC and its local counterparts at or below the provincial-level of local government also oversee and organize public medical institutions’ centralized bidding and procurement process for pharmaceutical products, through which public hospitals and their pharmacies acquire drugs.
Also, as part of the 2018 reorganization, the PRC government formed the National Healthcare Security Administration which focuses on regulating reimbursement under the state-sponsored insurance plans.
Non-Clinical Research
The NMPA requires preclinical data to support registration applications for imported and domestic drugs. According to the DRR, nonclinical safety studies must comply with the Administrative Measures for Good Laboratories Practice of Non-clinical Laboratory. On August 6, 2003, the NMPA promulgated the Administrative Measures for Good Laboratories Practice of Non-clinical Laboratory, which was revised on July 27, 2017, to improve the quality of non-clinical research, and began to conduct the Good Laboratories Practice. Pursuant to the Circular on Administrative Measures for Certification of Good Laboratory Practice for Non-clinical Laboratory issued by the NMPA on April 16, 2007, the NMPA is responsible for the certification of non-clinical research institutions nationwide and local provincial medical products administrative authorities is in charge of the daily supervision of non-clinical research institution. The NMPA decides whether an institution is qualified for undertaking pharmaceutical non-clinical research by evaluating such institution’s organizational administration, its research personnel, its equipment and facilities, and its operation and management of non-clinical pharmaceutical projects. A Good Laboratory Practice Certification will be issued by the NMPA if all the relevant requirements are satisfied, which will also be published on the NMPA’s website.
Pursuant to the Regulations for the Administration of Affairs Concerning Experimental Animals promulgated by the State Science and Technology Commission on November 14, 1988 and amended on January 8, 2011, July 18, 2013 and March 1, 2017, respectively, by the State Council, the Administrative Measures on Good Practice of Experimental Animals jointly promulgated by the State Science and Technology Commission and the State Bureau of Quality and Technical Supervision on December 11, 1997, and the Administrative Measures on the Certificate for Experimental Animals (Trial) promulgated by the Ministry of Science and Technology and other regulatory authorities on December 5, 2001, using and breeding experimental animals shall be subject to some rules and performing experimentation on animals requires a Certificate for Use of Laboratory Animals.
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Registration Categories
Prior to engaging with the NMPA on research and development and approval, an applicant will need to determine the registration category for its drug candidate (which will ultimately need to be confirmed with the NMPA), which will determine the application requirements for its clinical trial and marketing application. There are five categories for small molecule drugs: Category 1, or innovative drugs, refers to drugs that have a new chemical entity that has not been marketed anywhere in the world, Category 2, or improved new drugs, refers to drugs with a new indication, dosage form, route of administration, combination, or certain formulation changes not approved in the world, Category 3 is for domestic generics that reference an innovator drug marketed abroad but not in China, Category 4 is for domestic generics that reference an innovator drug marked in China, and Category 5 refers to an application to import into China innovative or generic drugs that have already been marketed abroad.
Therapeutic biologics follow a somewhat similar categorization, with three out of the 15 categories depending on marketing approval status: Category 1 is for innovative biologics that have not been approved inside or outside of China, Category 7 for biologics that have been marked abroad but not in China, and Category 15 for biologics that have been marketed in China, and the rest of the 15 categories depending on products characteristics. All biologics follow the new drug application pathway, but a tentative guideline on the development and evaluation of biosimilar drugs was issued by the NMPA in 2015.
Expedited Programs
Priority Evaluation and Approval Programs to Encourage Innovation
The NMPA has adopted several expedited review and approval mechanisms since 2009 and created additional expedited programs in recent years that are intended to encourage innovation. Applications for these expedited programs can be submitted together with the registration package or after the registration submission is admitted for review by the CDE. The Opinions on Encouraging the Prioritized Evaluation and Approval for Drug Innovation promulgated by the NMPA on December 21, 2017 clarified that fast track CTAs or drug registration pathways will be available to the innovative drugs.
If admitted to one of these expedited programs, an applicant will be entitled to more frequent and timely communication with reviewers at the CDE, expedited review and approval, and more agency resources throughout the review approval process.
NMPA also permits conditional approval of certain medicines based on early phase China clinical trial data or only on foreign approval clinical data. Post-approval the applicant may need to conduct one or more post-market studies. The agency has done this for drugs that meet unmet clinical needs for life-threatening illnesses and also for drugs that treat orphan indications. In 2018, NMPA established a conditional approval program for drugs designated by the CDE that have been approved in the US, EU and Japan within the last 10 years and that meet one of three criteria (1) orphan indications, (2) drugs that treat life threatening illnesses for which there are not effective treatment or preventive methods, and (3) drugs that treat life threatening illnesses and that have a clear clinical advantage over other approved therapies.
Clinical Trials and Marketing Approval
Upon completion of preclinical studies, a sponsor typically needs to conduct clinical trials in China for registering a new drug. The materials required for this application and the data requirements are determined by the registration category. The NMPA has taken a number of steps to increase efficiency for approving CTAs, and it has also significantly increased monitoring and enforcement of the Administrative Regulations of Quality of Drug Clinical Practice, or the PRC’s GCP to ensure data integrity.
Trial Approval
All clinical trials conducted in China for new drug registration purposes must be approved and conducted at pharmaceutical clinical trial institutions which shall be under the filing administration. For imported drugs, proof of foreign approval is required prior to the trial, unless the drug has never been approved anywhere in the world.
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In addition to a standalone China trial to support development, imported drug applicants may establish a site in China that is part of an international multicenter trial, or IMCT, at the outset of the global trial. Domestically manufactured drugs are not subject to foreign approval requirements, and in contrast to prior practice, the NMPA has recently decided to permit those drugs to conduct development via an IMCT as well.
In 2015, the NMPA began to issue an umbrella approval for all phases (typically three) of a new drug clinical trial, instead of issuing approval phase by phase. For certain types of new drug candidates, CTAs may be prioritized over other applications and put in a separate expedited queue for approval.
The NMPA has now adopted a system for clinical trials of new drugs where trials can proceed if after 60 business days, the applicant has not received any objections from the CDE. China is also expanding the number of trial sites by changing from a clinical trial site certification procedure into a notification procedure.
Drug Clinical Trial Registration
Pursuant to the DRR, upon obtaining the clinical trial approval and before commencing a clinical trial, the applicant shall file a registration with the NMPA containing various details of the clinical trial, including the clinical study protocol, the name of the principal researcher of the leading institution, names of participating institutions and researchers, an approval letter from the ethics committee, and a sample of the Informed Consent Form, with a copy sent to the competent provincial administration departments where the trial institutions will be located. On September 6, 2013, the NMPA released the Announcement on Drug Clinical Trial Information Platform, providing that for all clinical trials approved by the NMPA and conducted in China, instead of the aforementioned registration filed with the NMPA, clinical trial registration shall be completed and trial information shall be published through the Drug Clinical Trial Information Platform. The applicant shall complete trial pre-registration within one month after obtaining the clinical trial approval to obtain the trial’s unique registration number and shall complete registration of certain follow-up information before the first subject’s enrollment in the trial. If approval of the foregoing pre-registration and registration is not obtained within one year after obtaining the clinical trial approval, the applicant shall submit an explanation, and if the procedure is not completed within three years, the clinical trial approval shall automatically be annulled.
Human Genetic Resources Approval
According to the Interim Measures for the Administration of Human Genetic Resources, promulgated by the Ministry of Science and Technology and the MOH jointly on June 10, 1998, an additional approval is required for any foreign companies or foreign affiliates that conduct trials in China. Prior to beginning a trial, the foreign sponsor and the Chinese clinical trial site are required to obtain approval from the Human Genetic Resources Administration of China, or HGRAC, which is an agency under the Ministry of Science and Technology, to collect any biological samples that contain the genetic material of Chinese human subjects, and to transfer any cross-border transfer of the samples or associated data. Furthermore, one of the key review points for the HGRAC review and approval process is the IP sharing arrangement between Chinese and foreign parties. The parties are required to share patent rights to inventions arising from the samples. Conducting a clinical trial in China without obtaining the relevant HGRAC preapproval will subject the sponsor and trial site to administrative liability, including confiscation of HGRAC samples and associated data, and administrative fines.
On July 2, 2015, the Ministry of Science and Technology issued the Service Guide for Administrative Licensing Items concerning Examination and Approval of Sampling, Collecting, Trading, Exporting Human Genetic Resources, or Taking Such Resources out of the PRC, which provides that foreign-invested sponsors that sample and collect human genetic resources in clinical trials shall be required to file with the China Human Genetic Resources Management Office through its online system. On October 26, 2017, the Ministry of Science and Technology issued the Circular on Optimizing the Administrative Examination and Approval of Human Genetic Resources, which simplified the approval for sampling and collecting human genetic resources for the purpose of commercializing a drug in the PRC. On May 28, 2019, the State Council of PRC issued the Administration Regulations on Human Genetic Resources, which became effective on July 1, 2019. The Administration Regulations on Human Genetic Resources formalized the approval requirements pertinent to research collaborations between Chinese and foreign-owned entities. Pursuant to the new rule, a new notification system (as opposed to the advance approval approach originally in place) is put in place for clinical trials using China’s human genetic resources at clinical institutions without involving the export of human genetic resources outside of China.
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Trial Exemptions and Acceptance of Foreign Data
The NMPA may reduce requirements for clinical trials and data, depending on the drug and the existing data. The NMPA has granted waivers for all or part of trials and has stated that it will accept data generated abroad (even if not part of a global study), including early phase data, that meets its requirements. On July 6, 2018, the NMPA issued the Technical Guidance Principles on Accepting Foreign Drug Clinical Trial Data, or the Guidance Principles, as one of the implementing rules for the Innovation Opinion. According to the Guidance Principles, the data of foreign clinical trials must meet the authenticity, completeness, accuracy and traceability requirements and such data must be obtained consistent with the relevant requirements under the GCP of the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use, or ICH. Sponsors must be attentive to potentially meaningful ethnic differences in the subject population.
The NMPA now officially permits, and its predecessor agencies have permitted on a case-by-case basis in the past, drugs approved outside of China to be approved in China on a conditional basis without the need for pre-approval clinical trials inside China. Specifically, on October 23, 2018, the NMPA issued the Procedures for Reviewing and Approval of Clinical Urgently Needed Overseas New Drugs, which established a program permitting drugs that have been approved within the last ten years in the United States, EU or Japan and that i) treat orphan diseases, ii) prevent or treat serious life-threatening illnesses for which there is either no effective therapy or prevention in China, or iii) prevent or treat serious life-threatening illnesses and the foreign-approved drug would have clear clinical advantages. Applicants will be required to establish a risk mitigation plan and may be required to complete trials in China after the drug is marketed. By May 29, 2019, the CDE has developed two lists of qualifying drugs that meet these criteria.
Clinical Trial Process and Good Clinical Practices
Typically drug clinical trials in China have four phases. Phase 1 refers to the initial clinical pharmacology and human safety evaluation studies. Phase 2 refers to the preliminary evaluation of a drug candidate’s therapeutic efficacy and safety for target indication(s) in patients. Phase 3 (often the pivotal study) refers to clinical trials to further verify the drug candidate’s therapeutic efficacy and safety in patients with target indication(s) and ultimately provide sufficient evidence for the review of a drug registration application. Phase 4 refers to a new drug’s post-marketing study to assess therapeutic effectiveness and adverse reactions when the drug is widely used to evaluate overall benefit-risk relationships of the drug when used among the general population or specific groups and to adjust the administration dose, etc. The NMPA requires that the different phases of clinical trials in China receive ethics committee approval and comply with the PRC’s GCP. The NMPA conducts inspections to assess the PRC’s GCP compliance and will cancel the CTA if it finds substantial issues.
On August 6, 2003, the NMPA promulgated the PRC’s GCP to improve the quality of clinical trials. According to the PRC’s GCP, the sponsor shall provide insurance to the subjects participating in the clinical trial and bear the cost of the treatment and the corresponding financial compensation for the subjects who suffer harm or death related to the trial. The sponsor shall provide legal and economic guarantee to the investigator, but harm or death caused by the medical accident shall be excluded. Pursuant to the Innovation Opinion, the accreditation of the institutions for drug clinical trials shall be subject to record-filing administration. The conduct of clinical trials must adhere to the PRC’s GCP, and the protocols must be approved by the ethics committees of each study site. Pursuant to the newly amended DAL, and the Regulations on the Administration of Drug Clinical Trial
Institution jointly promulgated by NMPA and NHC on November 29, 2019 and effective from December 1, 2019, drug clinical trial institutions shall be under filing administration. Entities that only conduct analysis of biological samples related to clinical trials of drugs do not need to be filed.
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New Drug Application (NDA) and Approval
Upon completion of clinical trials, a sponsor may submit clinical trial data to support marketing approval for the drug. For imported drugs, this means issuance of an import license. Again, the applicant must submit evidence of foreign approval, unless it is an innovative drug that has never been approved anywhere in the world.
NDA sponsors must submit data derived from domestically manufactured drugs in support of a drug approval. Under the current regime, upon approval of the registration application, the NMPA will first issue a new drug certificate to the applicant. Only when the applicant is equipped with relevant manufacturing capability will the NMPA issue a Drug Approval Serial Number, which is effectively the marketing approval allowing the holder to market/commercialize the drug in China.
Pursuant to the Opinions on the Reform of Evaluation and Approval System for Drugs and Medical Devices and Equipment promulgated on August 9, 2015, the State Council published the policy for carrying out a pilot plan for the drug marketing authorization holder mechanism.
Pursuant to the newly amended DAL, under the drug marketing authorization holder mechanism, an enterprise obtained drug registration certificate and a research and development institution are eligible to be a pharmaceutical marketing authorization holder, and this pharmaceutical marketing authorization holder shall be responsible for nonclinical laboratory studies, clinical trials, production and distribution, post-market studies, and the monitoring, reporting, and handling of adverse reactions in connection with pharmaceuticals in accordance with the provisions of the DAL. The pharmaceutical marketing authorization holder may engage contract manufacturers for manufacturing, provided that the contract manufacturers are licensed and may engage pharmaceutical distribution enterprises with drug distribution license for the distribution activities. Upon the approval of the medical products administrative department under the State Council, a drug marketing authorization holder may transfer the drug marketing license and the transferee shall have the capability of quality management, risk prevention and control, and liability compensation to ensure the safety, effectiveness and quality controllability of drugs, and fulfill the obligations of the drug marketing license holder.
Manufacturing and Distribution
According to the newly amended DAL and the implementing Measures of the DAL, all facilities that manufacture drugs in China must receive a Drug Manufacturing License with an appropriate “scope of manufacturing” from the local drug regulatory authority. This license must be renewed every five years.
Similarly, to conduct sales, importation, shipping and storage, or distribution activities, a company must obtain a Drug Distribution License with an appropriate “scope of distribution” from the local drug regulatory authority, subject to renewal every five years.
China has formed a “Two Invoice System” to control distribution of drugs. The “Two-Invoice System” generally requires that no more than two invoices may be issued throughout the distribution chain, with one from the manufacturer to a distributor and another from the distributor to the end-user hospital. This excludes the sale of products invoiced from the manufacturer to its wholly owned or controlled distributors, or for imported drugs, to their exclusive distributor, or from a distributor to its wholly owned or controlled subsidiary (or between the wholly owned or controlled subsidiaries). However, the system still significantly limits the options for companies to use multiple distributors to reach a larger geographic area in China. Compliance with the Two-Invoice System will become a prerequisite for pharmaceutical companies to participate in procurement processes with public hospitals, which currently provide most of China’s healthcare. Manufacturers and distributors that fail to implement the Two-Invoice System may lose their qualifications to participate in the bidding process. Non-compliant manufacturers may also be blacklisted from engaging in drug sales to public hospitals in a locality.
The Two-Invoice System was first implemented in 11 provinces that are involved in pilot comprehensive medical reforms, but the program has expanded to nearly all provinces, which have their own individual rules for the program.
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Human Cell Therapy
On March 20, 2003, the NMPA published the Technical Guidelines for Research on Human Cell Therapy and Quality Control of Preparations, which set some principles for the research of human cell therapy.
Pursuant to the DRR promulgated by the NMPA on July 10, 2007 and effective from October 1, 2007, human cell therapy and its products belong to biological products and the application for biological products shall be submitted as the process of new drug application.
On March 2, 2009, the MOH published the Management Measures for Clinical Application of Medical Technology, which came into effect on May 1, 2009 and prescribed that cell immunotherapy belongs to the Category 3 medical technology of which the clinical application shall be subject to the additional provisions of the MOH. In May, 2009, the MOH published the First List of Category 3 Medical Technologies Allowed for Clinical Application, or the Category 3 Medical Technologies which prescribed cell immunotherapy technology as Category 3 medical technologies were allowed for clinical application, and was abolished by the Notice on the Relevant Work Concerning Cancellation of the Category Three of Medical Technology Entry Approval of Clinical Application on June 29, 2015. The Notice on the Relevant Work Concerning Cancellation of the Category Three of Medical Technology Entry Approval of Clinical Application also cancelled the approval of Category 3 medical technology clinical application.
On November 30, 2017, the CFDA promulgated the Notice of Guidelines for Acceptance and Examination of Drug Registration (Trial), the application of clinical trials of therapeutic biological products and the production and listing application of therapeutic biological products shall be subject to the provisions thereof. On December 18, 2017, the CFDA promulgated the Technical Guiding Principles for Research and Evaluation of Cell Therapy Products (Trial) to regulate and guide the research and evaluation of cell therapy products that are researched on, developed and registered as drugs.
Post-Marketing Surveillance
Pursuant to the newly amended DAL, the drug marketing authorization holder shall be responsible for the monitoring, reporting and handling of adverse reactions in connection with pharmaceuticals in accordance with the provisions of the DAL. Marketing authorization holders, pharmaceutical manufacturer, pharmaceutical distributors and medical institutions shall regularly inspect the quality, efficacy and adverse reactions of drugs manufactured, distributed and used by them. Cases of suspected adverse reactions shall be promptly reported to the drug administrative authorities and the competent health administrative authority. The drug marketing authorization holder shall forthwith stop selling, notify the relevant pharmaceutical distributors and medical institutions to stop sales and use, recall sold drugs, promptly announce recall information if the drugs have quality issues or other safety hazards.
Advertising and Promotion of Pharmaceutical Products
China has a strict regime for the advertising of approved drugs. No unapproved drugs may be advertised. The definition of an advertisement is very broad and it can be any media that directly or indirectly introduces the product to end users. There is no clear line between advertising and any other type of promotion.
Each advertisement for drugs requires an approval from a local drug regulatory authority, and the content of an approved advertisement may not be altered without filing a new application for approval. An enterprise seeking to advertise a prescription drug may do so only in medical journals jointly approved by NMPA and the NHC, and the advertisement for a prescription drug shall tag “this advertisement is for medical and pharmaceutical professionals reading only.”
Drug advertisements are subject to strict content restrictions, which prohibit recommendations by doctors and hospitals and guarantees of effectiveness. Advertising that includes content that is outside of the drug’s approval documentation, off-label content, is prohibited. False advertising can result in civil suits from end users and administrative liability, including fines. In addition to advertisements, non-promotional websites that convey information about a drug must go through a separate approval process by a local drug regulatory authority.
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Product Liability
The Product Quality Law of the PRC, or the Product Quality Law promulgated by the Standing Committee of the NPC on February 22, 1993 and amended on July 8, 2000, August 27, 2009 and December 29, 2018, respectively, is the principal governing law relating to the supervision and administration of product quality. According to the Product Quality Law, manufacturers shall be liable for the quality of products produced by them, and sellers shall take measures to ensure the quality of the products sold by them. A manufacturer shall be liable for compensating for any bodily injuries or property damages, other than the defective product itself, resulting from the defects in the product, unless the manufacturer is able to prove that (1) the product has never been distributed; (2) the defects causing injuries or damages did not exist at the time when the product was distributed; or (3) the science and technology at the time when the product was distributed was at a level incapable of detecting the defects. A seller shall be liable for compensating for any bodily injuries or property damages of others caused by the defects in the product if such defects are attributable to the seller. A seller shall pay compensation if it fails to indicate either the manufacturer or the supplier of the defective product. A person who is injured or whose property is damaged by the defects in the product may claim for compensation from the manufacturer or the seller.
Pursuant to the General Principles of the Civil Law of the PRC promulgated by the NPC on April 12, 1986 and amended on August 27, 2009, both manufacturers and sellers shall be held liable where the defective products result in property damages or bodily injuries to others. Pursuant to the Tort Liability Law of the PRC promulgated by the Standing Committee of the NPC on December 26, 2009 and effective from July 1, 2010, manufacturers shall assume tort liabilities where the defects in products cause damages to others. Sellers shall assume tort liabilities where the defects in products that have caused damages to others are attributable to the sellers. The aggrieved party may claim for compensation from the manufacturer or the seller of the defected product that has caused damage.
Commercial Bribery
Pharmaceutical companies involved in a criminal investigation or administrative proceedings related to bribery are listed in the Adverse Records of Commercial Briberies by their respective provincial health and family planning administrative department. Pursuant to the Provisions on the Establishment of Adverse Records of Commercial Briberies in the Medicine Purchase and Sales Industry which were promulgated by the NHFPC on December 25, 2013 and became effective on March 1, 2014, provincial health and family planning administrative departments formulate the implementing measures for establishment of Adverse Records of Commercial Briberies. Where a pharmaceutical company or its agent is listed in the Adverse Records of Commercial Briberies on one occasion, it will be prohibited from participating in the procurement bidding process or selling its products to public medical institutions located in the local provincial-level region for two years from the publication of the adverse records. Where a pharmaceutical company or its agent is listed in the Adverse Records of Commercial Briberies on two or more occasions within five years, it will be prohibited from participating in the procurement bidding process or selling its products to all public medical institutions in the PRC for two years from the publication of these adverse records.
Foreign Exchange Regulation
Pursuant to the Foreign Currency Administration Rules promulgated in 1996 and amended in 1997 and various regulations issued by the State Administration of Foreign Exchange (“SAFE”), and other relevant PRC government authorities, the Renminbi is freely convertible only to the extent of current account items, such as trade-related receipts and payments, interest and dividends. Capital account items, such as direct equity investments, loans and repatriation of investments, require the prior approval from the SAFE or its local counterpart for conversion of Renminbi into a foreign currency, such as U.S. dollars, and remittance of the foreign currency outside the PRC.
Payments for transactions that take place within the PRC must be made in Renminbi. Unless otherwise approved, PRC companies must repatriate foreign currency payments received from abroad. Foreign-invested enterprises may retain foreign exchange in accounts with designated foreign exchange banks subject to a cap set by the SAFE or its local counterpart. Unless otherwise approved, domestic enterprises must convert all of their foreign currency receipts into Renminbi.
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Pursuant to the SAFE’s Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents to Engage in Financing and Inbound Investment via Overseas Special Purpose Vehicles, or the SAFE Circular No. 75, issued on October 21, 2005:
| (i) | a PRC citizen residing in the PRC, or PRC resident, shall register with the local branch of the SAFE before it establishes or controls an overseas special purpose vehicle (“overseas SPV”), for the purpose of overseas equity financing (including convertible debts financing);
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| (ii) | when a PRC resident contributes the assets of or its equity interests in a domestic enterprise into an overseas SPV, or engages in overseas financing after contributing assets or equity interests into an overseas SPV, such PRC resident shall register his or her interest in the overseas SPV and the change thereof with the local branch of the SAFE; and
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| (iii) | when the overseas SPV undergoes a material event outside of China, such as change in share capital or merger and acquisition, the PRC resident shall, within 30 days from the occurrence of such event, register such change with the local branch of the SAFE. |
On May 29, 2007, the SAFE issued relevant guidance to its local branches for the implementation of the SAFE Circular No. 75. This guidance standardizes more specific and stringent supervision on the registration requirement relating to the SAFE Circular No. 75 and further requires PRC residents holding any equity interests or options in SPVs, directly or indirectly, controlling or nominal, to register with the SAFE.
Our beneficial owners are PRC residents who have registered with the local branch of the SAFE as required under SAFE Circular No. 75.
Under the Implementing Rules of Measures for the Administration of Individual Foreign Exchange, or the Implementation Rules, issued by the SAFE on January 5, 2007, PRC citizens who are granted shares or share options by an overseas listed company according to its share incentive plan are required, through a qualified PRC agent or the PRC subsidiary of such overseas listed company, to register with the SAFE and complete certain other procedures related to the share incentive plan. Foreign exchange income received from the sale of shares or dividends distributed by the overseas listed company must be remitted into a foreign currency account of such PRC citizen or be exchanged into Renminbi.
Taxation
Under the Enterprise Income Tax Law (“EIT”), effective January 1, 2008, China will adopt a uniform tax rate of 25.0% for all enterprises (including foreign-invested enterprises) and revoke the current tax exemption, reduction and preferential treatments applicable to foreign-invested enterprises. However, there will be a transition period for enterprises, whether foreign-invested or domestic, that are currently receiving preferential tax treatment granted by relevant tax authorities. Enterprises that are subject to an enterprise income tax rate lower than 25.0% may continue to enjoy the lower rate and gradually transition to the new tax rate within five years after the effective date of the EIT Law. Enterprises that are currently entitled to exemptions or reductions from the standard income tax rate for a fixed term may continue to enjoy such treatment until the fixed term expires. However, the two-year exemption from enterprise income tax for foreign-invested enterprise will begin from January 1, 2008 instead of from when such enterprise first becomes profitable. Preferential tax treatments will continue to be granted to industries and projects that are strongly supported and encouraged by the state, and enterprises otherwise classified as “new and high technology enterprises strongly supported by the state” will be entitled to a 15.0% enterprise income tax rate even though the EIT Law does not currently define this term.
Provisions Regarding Mergers and Acquisitions of Domestic Enterprises by Foreign Investors
On August 8, 2006, six PRC regulatory agencies, including the Chinese Securities Regulatory Commission (“CSRC”), promulgated a rule entitled Provisions Regarding Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (“the new M&A rule”) to regulate foreign investment in PRC domestic enterprises. The new M&A rule provides that the Ministry of Commerce must be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise and any of the following situations exists:
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| (i) | the transaction involves an important industry in China; |
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| (ii) | the transaction may affect national “economic security;” or |
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| (iii) | the PRC domestic enterprise has a well-known trademark or historical Chinese trade name in China. |
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The new M&A rule also contains a provision requiring overseas SPVs, formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC individuals, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange.
On September 21, 2006, the CSRC issued a clarification that sets forth the criteria and process for obtaining any required approval from the CSRC. To date, the application of this new M&A rule is unclear.
Anti-Corruption.
The substantial majority of hospitals in China are owned and operated by the government, and revenue from hospital pharmacies constitutes a significant portion of hospitals’ revenue. Hospitals procure their supplies of pharmaceutical products in bulk from manufacturers or distributors of pharmaceutical products, and generally decide whether to include a particular medicine on their formulary based upon a number of factors, including doctors’ preference in prescribing the medicine, the cost of the medicine, the perceived efficacy of the medicine and the hospital’s budget. Decisions by hospitals regarding whether to include a particular medicine in their pharmacies could be affected by corrupt practices, including illegal kickbacks and other benefits offered by manufacturers or distributors of pharmaceutical products. These corrupt practices may also affect doctors’ decisions regarding which types of medicine to prescribe.
The PRC government has strengthened its anti-corruption measures and has organized a series of government-sponsored anti-corruption campaigns in recent years. In particular, China amended its criminal code in 2006, increasing the penalties for corrupt business practices. The amendment of the criminal code is expected to make pharmaceutical product suppliers compete for the hospitals’ business on fair and equal terms, and thus is expected to result in more growth opportunities for drugstores that are not affiliated with hospitals.
Pharmaceutical Product Labeling and Prescription Management
The PRC SFDA promulgated pharmaceutical product labeling regulations in March 2006, which require that pharmaceutical product labels state the generic ingredients of the pharmaceutical products and which bar the registration of any brand name for any pharmaceutical product which does not contain active ingredients. In addition, effective May 1, 2007, doctors are not permitted to include brand names in their prescriptions and required to specify the chemical ingredients of the medicines they prescribe in their prescription. These requirements are expected to have the following positive impacts on the business of non-hospital drugstores:
| · | help curb corrupt practices by pharmaceutical product manufacturers and doctors; | |
| · | ensure that patients are given better information on the medicines they purchase; and | |
| · | weaken the hospitals’ monopoly on prescriptions and prescription pharmaceutical products. |
Real Property
Yubo’s headquarters are located at Room 105, Building 5, 31 Xishiku Avenue, Xicheng District, Beijing, PRC. The lease for our headquarters has a term of five years, with a total rental and property management fee of RMB1.9 million in year one with no less than 4% increase each year thereafter. The lease will expire on July 31, 2024. See Exhibit 10.11 of this Report for the lease relating to this property.
Employees
Yubo currently employs 20 employees at its headquarters, located at Room 105, Building 5, 31 Xishiku Avenue, Xicheng District, Beijing, PRC. Our employees include three executive officers, two financial department personnel, two administrative management personnel, six R&D and product personnel, six planning and marketing personnel, and one person in IT management.
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RISK FACTORS
You should carefully consider the risks described below together with all of the other information included in this Report before making an investment decision with regard to our securities. The statements contained in or incorporated into this Report that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following events described in these risk factors actually occurs, our business, financial condition or results of operations could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
Risks Related to Our Business and Industry
The commercial success of our products depends upon the degree of their market acceptance among the medical community. If our products do not attain market acceptance among the medical community, our operations and profitability would be adversely affected.
The commercial success of our products depends, in large part, upon the degree of market acceptance they achieve among the medical community, particularly among physicians, pharmacists, administrators of hospitals, clinics and other health care institutions. Physicians may not prescribe or recommend our products to patients and pharmacies, procurement departments of hospitals, clinics and other health care institutions may not purchase our products if physicians or pharmacists do not find our products attractive. The acceptance and use of our products among the medical community will depend upon a number of factors including:
| · | perceptions by physicians, pharmacists, patients and others in the medical community about the safety and effectiveness of our products; | |
| · | the prevalence and severity of any side effects; | |
| · | pharmacological benefit of our products relative to competing products and products under development; | |
| · | the efficacy and potential advantages relative to competing products and products under development; | |
| · | relative convenience and ease of administration; | |
| · | effectiveness of our education, marketing and distribution efforts; | |
| · | publicity concerning our products or competing products and treatments; and | |
| · | the price for our products and competing products. |
If our products fail to attain market acceptance among the medical community, or if our currently marketed products cannot maintain market acceptance, our results of operations and profitability would be adversely affected.
Our proprietary, next-generation stem cell derived technologies, our approach for stem cell storage facilities and our manufacturing platform for our stem cell based product candidates, represent emerging approaches to medical treatments that face significant challenges and hurdles.
We have concentrated our primary research and development efforts on our stem cell therapies using our expertise in tumor biology and cell programming, and our future success is highly dependent on the successful development and manufacture of our CAR-T product candidates. We do not currently have any approved or commercialized products. As with other targeted therapies, off-tumor or off-target activity could delay development or require us to reengineer or abandon a particular product candidate. Because CAR-T cell therapies represent a relatively new field of cellular immunotherapy and cancer treatment generally, developing and commercializing our product candidates subjects us to a number of risks and challenges, including:
| · | obtaining regulatory approval for our product candidates, as the regulatory authorities may have limited experience with stem cell based therapies; | |
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| · | developing and deploying consistent and reliable processes for engineering a patient’s stem cells ex vivo and infusing the engineered stem cells back into the patient; |
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| · | conditioning patients with other medical treatments in conjunction with delivering each of our products, which may increase the risk of adverse side effects of our product candidates; |
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| · | sourcing clinical and, if approved, commercial supplies of the materials used to manufacture our product candidates; |
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| · | developing programming modules with the desired properties, while avoiding adverse reactions; |
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| · | creating viral vectors capable of delivering multiple programming modules; |
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| · | developing a reliable and consistent vector and cell manufacturing process; |
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| · | establishing manufacturing capacity suitable for the manufacture of our product candidates in line with expanding enrollment in our clinical studies and our projected commercial requirements; |
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| · | achieving cost efficiencies in the scale-up of our manufacturing capacity; |
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| · | developing protocols for the safe administration of our product candidates; |
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| · | educating medical personnel regarding our stem cell technologies and the potential side effect profile of our product candidates; |
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| · | establishing sales and marketing capabilities to successfully launch and commercialize our product candidates if and when we obtain any required regulatory approvals, and risks associated with gaining market acceptance of a novel therapy if we receive approval; and |
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| · | the availability of coverage and adequate reimbursement from third-party payors for our novel and personalized therapies in connection with commercialization of any approved product candidates. |
We may not be able to successfully develop our stem cell derived products, our technology or our other products in a manner that will yield products that are safe, effective, scalable or profitable.
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We may not be able to successfully create our own manufacturing infrastructure and stem cell storage facilities for supply and maintenance of our requirements of programmed stem cell products for use in clinical trials and for commercial sale.
We currently have manufacturing and storage facilities in China supplying clinical materials for our trials and commercial production through agreements with third parties. We intend to expand the capacities at these sites as we begin to expand the production of our products. We are also in the process of establishing manufacturing capability in Beijing, which will provide a regional product supply as well as add to our global manufacturing ability.
Our manufacturing and commercialization strategy is based on establishing a fully integrated vein-to-vein product delivery cycle. Over time, we expect to establish regional or zonal manufacturing hubs to service major markets to meet projected needs for commercial sale quantities. However, we are still in the process of constructing manufacturing and storage facilities that will allow us to meet commercial sale quantities.
The implementation of this plan is subject to many risks. For example, the establishment of a stem cell-therapy manufacturing facility is a complex endeavor requiring knowledgeable individuals. Expanding our internal manufacturing infrastructure will rely upon finding personnel with an appropriate background and training to staff and operate the facility. Should we be unable to find these individuals, we may need to rely on external contractors or train additional personnel to fill the needed roles. There are a small number of individuals with experience in stem cell therapy and the competition for these individuals is high.
We expect that operating our own commercial stem cell manufacturing and storage facilities will provide us with enhanced control of material supply for both clinical trials and the commercial market, enable the more rapid implementation of process changes, and allow for better long-term cost margins. However, we have limited experience as a company in designing and operating a commercial manufacturing and storage facility and may never be successful in developing our own manufacturing capability. We may establish additional manufacturing and storage sites as we expand our commercial footprint to multiple geographies, which may lead to regulatory delays or prove costly. Even if we are successful, our operations could be affected by cost-overruns, unexpected delays, equipment failures, labor shortages, natural disasters, power failures and numerous other factors, or we may not be successful in establishing sufficient capacity to produce our product candidates in sufficient quantities to meet the requirements for the potential launch or to meet potential future demand, all of which could prevent us from realizing the intended benefits of our manufacturing strategy and have a material adverse effect on our business.
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Our success is dependent upon our ability to maintain our relationships with hospitals, clinics, pharmacies, drugstores and other health care institutions, to expand such relationships and develop new relationships.
Our business depends significantly on our relationships with hospitals, clinics, pharmacies, drugstores and other health care institutions. No assurance can be given that any such distribution channels will continue their relationships with us, and the loss of one or more of these distribution channel partners could have a material adverse effect on our business, results of operations and financial condition. Our ability to grow our business will therefore depend to a significant degree upon our ability to develop new relationships with such distribution channel partners and to expand existing relationships. No assurance can be given that new partners will be found, that any such new relationships will be successful when they are in place, or that business with current distribution channel partners will increase. Failure to develop and expand such relationships could have a material adverse effect on our business, results of operations and financial condition.
We may not be able to timely identify or otherwise effectively respond to changing customer preferences, and we may fail to optimize our product offering and inventory position.
The pharmaceutical industry in China is rapidly evolving and is subject to rapidly changing customer preferences that are difficult to predict. We believe that our success depends on our ability to anticipate and identify customer preferences and adapt our product selection to these preferences. In particular, we believe that we must optimize our product selection and inventory positions based on sales trends. No assurances can be given that our product selection, especially our selections of nutritional supplements and food products, will accurately reflect customer preferences at any given time. If we fail to anticipate accurately either the market for our products or customers’ purchasing habits or fail to respond to customers’ changing preferences promptly and effectively, we may not be able to adapt our product selection to customer preferences or make appropriate adjustments to our inventory positions, which could significantly reduce our revenue and have a material adverse effect on our business, financial condition and results of operations.
We face significant competition, and if we do not compete successfully against existing and new competitors,
our revenue and profitability would be materially and adversely affected.
The pharmaceutical industry in China is highly competitive, and we expect competition to intensify. In addition there is a trend towards consolidation of the pharmaceutical industry in the future. Our primary competitors are other provincial pharmaceutical distributors. We compete for customers and revenue primarily on the basis of product selection, price, and timely delivery of products. Moreover, we may be subject to additional competition from new entrants to the drugstore industry in China. If the PRC government removes the barriers for foreign companies to operate majority-owned pharmaceutical distributors in China, we could face increased competition from foreign companies. Some of our larger competitors may enjoy competitive advantages, such as:
| · | greater financial and other resources; | |
| · | larger variety of products; | |
| · | more extensive and advanced supply chain management systems; | |
| · | greater pricing flexibility; | |
| · | larger economies of scale and purchasing power; | |
| · | more extensive advertising and marketing efforts; | |
| · | greater knowledge of local market conditions; and | |
| · | larger sales and distribution networks. |
As a result, we may be unable to offer products similar to, or more desirable than, those offered by our competitors, market our products as effectively as our competitors or otherwise respond successfully to competitive pressures. In addition, our competitors may be able to offer larger discounts on the same or competing products, and we may not be able to profitably match those discounts. Furthermore, our competitors may offer products that are more attractive to our customers or that render our products uncompetitive. Our failure to compete successfully could materially and adversely affect our business, financial condition, results of operation and prospects.
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We rely on third-party manufacturers to supply our products.
We rely on third-party manufactures to supply our products. Reliance on such third-party manufacturers involves a number of risks, including a lack of control over the manufacturing process and the potential absence or unavailability of adequate capacity. If any of our third-party manufacturers cannot or will not manufacture our products in required volumes in compliance with applicable regulations, on a cost-effective basis, in a timely manner, or at all, we will have to secure alternative manufacturers. Maintaining relationships with existing manufacturers and replacing such manufacturers may be difficult and time consuming. Any disruption of our network of manufacturers, including failure to renew existing distribution agreements with desired manufacturers, could negatively affect our product selection and our ability to effectively sell our products and could materially and adversely affect our business, financial condition and results of operations
Our certificates, permits, and licenses related to our business are subject to governmental control and renewal and failure to obtain renewal will cause all or part of our operations to be terminated.
We are subject to various PRC laws and regulations pertaining to the pharmaceutical industry. We have attained certificates, permits, and licenses required for the operation of our business. In the event that we are not able to meet any new requirements imposed on our business by the appropriate regulatory authorities or are unable to renew our certificates, permits and licenses, all or part of our operations may be terminated. Furthermore, if escalating compliance costs associated with governmental standards and regulations restrict or prohibit any part of our operations, it may adversely affect our operation and profitability.
If we are unable to protect our intellectual property from infringement, our business and prospects may be harmed.
As sales of our private label products increasingly account for a substantial portion of our revenue, we consider our brand name, trade names and trademarks to be valuable assets. Under PRC law, we have the exclusive right to use a trademark for products for which such trademark has been registered with the PRC Trademark Office of State Administration for Industry and Commerce (“SAIC”). In addition, no assurances can be given that we will be able to obtain any trademarks for which we may apply in the future.
Moreover, we may be unable to prevent third parties from using our brand name or trademarks without authorization and we may not have adequate remedies for such violations. Unauthorized use of our brand name or trademarks by third parties may adversely affect our business and reputation, including the perceived quality and reliability of our products.
We also rely on trade secrets to protect our know-how and other proprietary information, including pricing, purchasing, promotional strategies, customer lists and/or suppliers lists. However, trade secrets are difficult to protect. While we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors or advisors may unintentionally or willfully disclose our information to competitors. In addition, confidentiality agreements, if any, executed by the foregoing persons may not be enforceable or provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure. If we were to enforce a claim that a third party had illegally obtained and was using our trade secrets, our enforcement efforts could be expensive and time-consuming, and the outcome is unpredictable. In addition, if our competitors independently develop information that is equivalent to our trade secrets or other proprietary information, it will be even more difficult for us to enforce our rights and our business and prospects could be harmed.
Litigation may be necessary in the future to enforce our intellectual property rights or to determine the validity and scope of the intellectual property rights of others. However, because the validity, enforceability and scope of protection of intellectual property rights in the PRC are uncertain and still evolving, we may not be successful in prosecuting these cases. In addition, any litigation or proceeding or other efforts to protect our intellectual property rights could result in substantial costs and diversion of our resources and could seriously harm our business and operating results. Furthermore, the degree of future protection of our proprietary rights is uncertain and may not adequately protect our rights or permit us to gain or keep our competitive advantage. If we are unable to protect our trade names, trademarks, trade secrets and other propriety information from infringement, our business, financial condition and results of operations may be materially and adversely affected.
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We face risks associated with uncertainties relating to Regulation for the Administration of Human Genetic Resources.
The collection, preservation, usage and outbound provision of human genetic resources in the PRC are governed by Regulation for the Administration of Human Genetic Resources, or HGR Regulation, except for activities relating to human genetic resources conducted for some specific purposes including clinical diagnosis and treatment. We believe that our stem cell bank is both for the purpose of clinical diagnosis and treatment, so that such activities relating to human genetic resources in our diagnosis business or early screening business may not be governed by HGR Regulation. However, we cannot assure you that our stem cell bank will be continuously deemed as conducted for the purpose of clinical diagnosis and treatment by the relevant government authority. Meanwhile, our endometrial stem cell bank in our development services are governed by HGR Regulation.
Pursuant to HGR Regulation, there are some limitations for foreign entities, individuals and such entities established or actually controlled thereby (“Restricted Entities”, and each, a “Restricted Entity”) to engage in activities relating to human genetic resources. For example, the Restricted Entity is not allowed to collect or preserve human genetic resources of China, while it is prohibited from using human genetic resources of China unless that such Restricted Entity have obtained an approval from relevant government authority or have filed with relevant government authority for international cooperation with a domestic entity. Taking into consideration of our consultation with a competent government authority, among others, although an entity controlled, directly or indirectly, by foreign persons through shareholding ownership would be deemed as a Restricted Entity, HGR Regulation remains unclear as to whether a VIE entity controlled by a wholly foreign owned enterprise through contractual arrangements would be deemed as a Restricted Entity. We cannot assure you that our VIE entities will not be deemed as Restricted Entities in the future, given the lack of clear statutory interpretation regarding HGR Regulation. If our VIE entities engaging in development services are deemed as the Restricted Entities by relevant government authority, our cooperation with foreign entities, among others, would be adversely affected and we may have to cooperate with domestic entities and be required to obtain approvals or file with relevant government authority for such cooperation which could result in additional cost and our business, financial condition and results of operations will be adversely affected.
We are subject to critical accounting policies and actual results may vary from our estimates.
We follow generally accepted accounting principles in the United States in preparing our financial statements. As part of the preparation of such financial reports, we must make many estimates and judgments concerning future events, which affect the value of the assets and liabilities, contingent assets and liabilities, and revenue and expenses reported in our financial statements. We believe that these estimates and judgments are reasonable, and we make them in accordance with our accounting policies based on information available at the time. However, actual results could differ from our estimates, and this could require us to record adjustments to expenses or revenues that could be material to our financial position and results of operations in the future.
We may acquire other businesses, license rights to products or form alliances with third-parties, which could cause us to incur significant expenses and could negatively affect our profitability.
We may pursue acquisitions, licensing arrangements, and strategic alliances, as part of our business strategy. We may not complete these transactions in a timely manner, on a cost-effective basis, or at all, and may not realize the expected benefits. If we are successful in making an acquisition, the products that are acquired may not be successful or may require significantly greater resources and investments than originally anticipated. We may not be able to integrate acquisitions successfully into our existing business and could incur or assume significant debt and unknown or contingent liabilities. This may result in increased borrowing costs and interest expense.
We may need additional capital and may not be able to obtain it on acceptable terms or at all, which could adversely affect our liquidity and financial position; the issuance of additional equity would result in dilution to our shareholders.
We may need to raise additional capital if our expenditures exceed our current expectations due to changed business conditions or other future developments. Our future liquidity needs and other business reasons may require us to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities or securities convertible or exchangeable to our equity securities would result in additional dilution to our stockholders. The incurrence of additional indebtedness would result in increased debt service obligations and could result in operating and financing covenants that restrict our operational flexibility. Our ability to raise additional funds in the future is subject to a variety of uncertainties, including:
| · | our future financial condition, results of operations and cash flows; | |
| · | general market conditions for capital-raising activities by pharmaceutical companies; and | |
| · | economic, political and other conditions in China and elsewhere. |
No assurances can be given that we will be able to obtain additional capital in a timely manner or on commercially acceptable terms or at all.
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Risks Related to Our Corporate Structure
Transactions among our affiliates are subject to scrutiny by the PRC tax authorities and a finding that we or any of our consolidated entities owe additional taxes could have a material adverse impact on our net income and the value of an investment in our common stock.
Under PRC law, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. If any of the transactions we have entered into among our consolidated entities are challenged by the PRC tax authorities to be not on an arm’s-length basis, or to result in an unreasonable reduction in our PRC tax obligations, the PRC tax authorities have the authority to disallow our tax deduction claims, adjust the profits and losses of our respective PRC consolidated entities and assess late payment fees and other penalties. Our net income may be materially reduced if our tax liabilities increase or if we are otherwise assessed late payment fees or other penalties.
We currently conduct our business primarily through a contractually controlled PRC operating entity, and our control of the day-to-day operations of such PRC entity pursuant to contracts, to comply with Chinese law, may not be as effective as conducting business through direct equity ownership of such PRC entity due to uncertainties with respect to the PRC legal system which could materially and adversely affect our results of operations.
We currently conduct a substantial portion of our business primarily through our contractually controlled PRC operating entity. PRC laws and regulations govern our operations in the PRC. Our contractually controlled PRC operating entity is generally subject to laws and regulations applicable to foreign investments in the PRC and, in particular, laws applicable to wholly foreign-owned enterprises (“WFOEs”). Although members of our executive management team and our shareholders include the executive officers and owners of our contractually controlled PRC operating entity, because we do not directly own our contractually controlled PRC operating entity, we may encounter problems enforcing our rights to control the business affairs and day-to-day operations of such entity. If we find it necessary to take legal action in the PRC to enforce our rights under our contracts with the PRC operating entity, we will be subject to the uncertainties of the PRC legal system, where prior court decisions have limited precedential value. Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in PRC. However, the PRC has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in the PRC. In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their non-binding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation, if any, of these policies and rules until sometime after the violation. In addition, any litigation in the PRC, regardless of outcome, may be protracted and result in substantial costs and diversion of resources and management attention. Accordingly, notwithstanding our contractual control over our PRC operating entity, such control may not be as effective as if we conducted our business through direct equity owned PRC entities which could materially and adversely affect our results of operations.
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Our contractual arrangements with Yubo and its shareholders may not be as effective in providing control over these entities as direct ownership.
We have no equity ownership interest in Yubo as we rely on the contractual arrangements of the VIE agreements to control and operate Yubo. These contractual arrangements may not be as effective in providing control over Yubo as direct ownership. For example, Yubo could fail to take actions required for our business or fail to pay dividends to Yubo WFOE despite its contractual obligation to do so. If Yubo fails to perform its obligation under the VIE agreements, we may have to rely on legal remedies under PRC law, which may not be effective.
If the PRC government finds that the contractual arrangements that establish the structure for operating our business in China do not comply with PRC laws and regulations, or if these regulations or their interpretations change in the future, we could be subjected to severe consequences, including the nullification of such agreements and the relinquishment of our interest in our VIE.
Current PRC laws and regulations impose certain restrictions or prohibitions on foreign ownership of companies that engage in medical institutions which our stem cell bank relates to, and in the development and application of technologies for diagnosis and treatment of human stem cells and genes, which our stem cell bank and endometrial stem cell bank business relates to. Pursuant to the Special Administrative Measures (Negative List) issued by the NDRC and MOFCOM on June 23, 2020, which came into force on July 23, 2020, foreign investment are allowed in PRC medical institutions only through joint venture entities, and the foreign shareholding in these entities is limited to 70.0%, which percentage was stipulated in the Interim Administrative Measures on Sino-Foreign Equity Medical Institutions and Sino-Foreign Cooperative Medical Institutions, or the JV Interim Measures. Additionally, certain industries are specifically prohibited for foreign investment, including the development and application of technologies for diagnosis and treatment of human stem cells and genes.
To comply with PRC laws and regulations, we conduct our stem cell bank and endometrial stem cell bank business in China through VIE. We, through Yubo WFOE, our wholly owned subsidiary in China, entered into a series of contractual arrangements with our VIE and its ultimate shareholders, in order to (i) exercise effective control over our VIE, (ii) receive substantially all of the economic benefits of our VIE, and (iii) have an exclusive option to purchase all or part of the equity interests in our VIE when and to the extent permitted by PRC law. As a result of these contractual arrangements, we have control over and are the primary beneficiary of our VIE and hence consolidate its financial results under GAAP. Although the structure we have adopted is consistent with long-standing practice in certain industries, such as TMT industry, and is also adopted by some of our peers in China, the PRC government may not agree that these arrangements comply with PRC license, registration or other regulatory requirements, with existing policies, or with requirements or policies that may be adopted in the future. Our VIE hold the licenses, approvals and key assets that are essential for the operations of our precision oncology service businesses.
We believe: (i) the ownership structures of our VIE in China, currently do not, and immediately after giving effect to this offering, will not result in any violation of the applicable PRC laws or regulations currently in effect, and (ii) subject to the risks as disclosed in the section headed “Risk Factors—Risks Relating to Our Corporate Structure”, the contractual arrangements between WFOE, our VIE and its respective equity holders governed by PRC laws are valid, binding and enforceable in accordance with their terms and applicable PRC laws and regulations currently in effect and do not violate any applicable PRC laws, rule or regulation currently in effect. There are, however, substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations. The relevant PRC regulatory authorities have broad discretion in determining whether a particular contractual structure violates PRC laws and regulations. Thus, we cannot assure you that the PRC government will not ultimately take a view contrary to the opinion of our PRC Legal Counsel. If we are found in violation of any PRC laws or regulations or if the contractual arrangements among WFOE, our VIE and its respective equity holders are determined as illegal or invalid by any PRC court, arbitral tribunal or regulatory authorities, the relevant governmental authorities would have broad discretion in dealing with such violation, including, without limitation:
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| · | revoking our business and operating licenses; |
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| · | levying fines on us and/or confiscating the proceeds that they deem to have been obtained through non-compliant operations; |
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| · | requiring us to restructure the operations in such a way as to compel us to establish a new enterprise, re-apply for the necessary licenses or relocate our businesses, staff and assets; |
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Furthermore, any of the assets under the name of any record holder of equity interest in VIE, including such equity interest, may be put under court custody in connection with litigation, arbitration or other judicial or dispute resolution proceedings against that record holder. We cannot be certain that the equity interest will be disposed of in accordance with the contractual arrangements. In addition, new PRC laws, rules and regulations may be introduced to impose additional requirements that may impose additional challenges to our corporate structure and contractual arrangements. The occurrence of any of these events or the imposition of any of these penalties may result in a material and adverse effect on our ability to conduct our precision oncology service business. In addition, if the imposition of any of these penalties causes us to be unable to direct the activities of such VIE and its subsidiaries or the right to receive their economic benefits, we would no longer be able to consolidate such VIE into our financial statements, thus adversely affecting our results of operation.
Risks Related to Doing Business in China
The pharmaceutical industry in China is highly regulated and such regulations are subject to change which may affect approval and commercialization of our drugs.
A material portion of our research and development operations and manufacturing facilities are in China, which we believe confers clinical, commercial and regulatory advantages. The pharmaceutical industry in China is subject to comprehensive government regulation and supervision, encompassing the approval, registration, manufacturing, packaging, licensing and marketing of new drugs. See “Business—Government Regulation—PRC Regulation” for a discussion of the regulatory requirements that are applicable to our current and planned business activities in China. For example, under PRC law, before we enter into a clinical trial agreement with a PRC partner, the parties are required to obtain an approval for projects of international collaboration in respect of human genetic resources in order to utilize genetic material contained in biological samples collected from Chinese human subjects. The relevant PRC partners in some of our collaboration projects have not obtained such approval in a timely manner. The failure to obtain such approval could cause relevant collaboration projects to be suspended by governing authorities, may result in fines and also may constitute a breach under our agreements with certain CROs. Furthermore, under relevant PRC laws, a license for use of laboratory animals is required for performing experimentation on animals. Any failure of fully comply with such requirement may result in the invalidation of our experimental data. In recent years, the regulatory framework in China regarding the pharmaceutical industry has undergone significant changes, and we expect that it will continue to undergo significant changes. Any such changes or amendments may result in increased compliance costs on our business or cause delays in or prevent the successful development or commercialization of our drug candidates in China and reduce the current benefits we believe are available to us from developing and manufacturing drugs in China. PRC authorities have become increasingly vigilant in enforcing laws in the pharmaceutical industry and any failure by us or our partners to maintain compliance with applicable laws and regulations or obtain and maintain required licenses and permits may result in the suspension or termination of our business activities in China. We believe our strategy and approach are aligned with the PRC government’s regulatory policies, but we cannot ensure that our strategy and approach will continue to be aligned.
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The Chinese economy differs from the economies of most developed countries in many respects, including a higher level of government involvement, the ongoing development of a market-oriented economy, a higher level of control over foreign exchange, and a less efficient allocation of resources.
While the PRC economy has experienced significant growth since the late 1970s, growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. These measures are intended to benefit the overall PRC economy, but may also have a negative effect on us. For example, our business, financial condition and results of operations could be adversely affected by PRC government control over capital investments or changes in regulations that are applicable to us.
The PRC economy has been transitioning from a centrally planned economy to a more market-oriented economy. Although the PRC government has implemented measures since the late 1970s that emphasize the utilization of market forces for economic reform, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.
The PRC legal system contains uncertainties, which could limit the legal protections available to you and to us.
In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past four decades has significantly enhanced the protections afforded to various forms of foreign investment in China. Our PRC subsidiary is subject to laws and regulations applicable to foreign-invested enterprises in China. In particular, they are subject to PRC laws, rules and regulations governing foreign companies’ ownership and operation of pharmaceutical businesses. Such laws and regulations are subject to change, and their interpretation and enforcement involve uncertainties, which could limit the legal protections available to us and our investors. In addition, we cannot predict the effect of future developments in the PRC legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement of such laws, or the preemption of local regulations by PRC laws, rules and regulations.
Moreover, China has a civil law system based on written statutes, which, unlike common law systems, is a system in which decided judicial cases have little precedential value. Furthermore, interpretation of statutes and regulations may be subject to government policies reflecting domestic political changes. The relative inexperience of China’s judiciary in many cases creates additional uncertainty as to the outcome of litigation. In addition, enforcement of existing laws or contracts based on existing laws may be uncertain and sporadic, and it may be difficult to obtain swift and equitable enforcement within China. All such uncertainties could materially and adversely affect our business, financial condition and results of operations.
You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management named in this Report based on foreign laws. It may also be difficult for overseas regulators or you to conduct investigations or collect evidence within China.
We are an exempted company incorporated under the laws of the Cayman Islands. We conduct a material portion of our operations in China and a material portion of our assets are located in China. In addition, many of our senior executive officers and directors reside within China for a significant portion of the time and some of them are PRC nationals. As a result, it may be difficult for you to effect service of process upon us or those persons inside China. It may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state.
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The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of written arrangement with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC laws or national sovereignty, security or the public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States.
It may also be difficult for you or overseas regulators to conduct investigations or collect evidence within China. For example, in China, there are significant legal and other obstacles to obtaining information, documents and materials needed for regulatory investigations or litigation outside China or otherwise with respect to foreign entities. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such regulatory cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. Accordingly, without the consent of the competent PRC securities regulators and relevant authorities, no entity or individual may provide the documents and materials relating to securities business activities to overseas parties. While detailed interpretation of or implementing rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests.
We may be restricted from transferring our scientific data abroad.
On March 17, 2018, the General Office of the PRC State Council promulgated the Measures for the Management of Scientific Data, or the Scientific Data Measures, which provide a broad definition of scientific data and relevant rules for the management of scientific data. According to the Scientific Data Measures, enterprises in China must seek governmental approval before any scientific data involving a state secret may be transferred abroad or to foreign parties. Further, any researcher conducting research funded, at least in part, by the PRC government is required to submit relevant scientific data for management by the entity to which such researcher is affiliated before such data may be published in any foreign academic journal. Currently, as the term “state secret” is not clearly defined, there is no assurance that we can always obtain relevant approvals for sending scientific data (such as the results of our pre-clinical studies or clinical trials conducted within China) abroad, or to our foreign partners in China.
If we are unable to obtain the necessary approvals in a timely manner, or at all, our research and development of drug candidates may be hindered, which may materially and adversely affect our business, results of operations, financial conditions and prospects. If relevant government authorities consider the transmission of our scientific data to be in violation of the requirements under the Scientific Data Measures, we may be subject to specific administrative penalties imposed by those government authorities.
Dividends we receive from our subsidiaries located in the PRC may be subject to PRC withholding tax, which could materially and adversely affect the amount of dividends, if any, we may pay our shareholders.
The PRC Enterprise Income Tax Law classifies enterprises as resident enterprises and non-resident enterprises. The PRC Enterprise Income Tax Law provides that an income tax rate of 20% may be applicable to dividends payable to non-resident investors, which (i) do not have an establishment or place of business in the PRC, or (ii) have an establishment or place of business in the PRC but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived from sources within the PRC. The State Council of the PRC reduced such rate to 10% through the implementation regulations of the PRC Enterprise Income Tax Law. Further, pursuant to the Double Tax Avoidance Arrangement between Hong Kong and Mainland China, or the Double Tax Avoidance Arrangement, and the Notice on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties issued in February 2009 by the State Administration of Taxation of the PRC, or the SAT, if a Hong Kong resident enterprise owns more than 25% of the equity interest in a company in China at all times during the 12-month period immediately prior to obtaining a dividend from such company, the 10% withholding tax on dividends is reduced to 5% provided that certain other conditions and requirements under the Double Tax Avoidance Arrangement and other applicable PRC laws are satisfied at the discretion of relevant PRC tax authority.
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If our Cayman Islands subsidiary and our Hong Kong subsidiary are considered as non-resident enterprises and our Hong Kong subsidiary is considered as a Hong Kong resident enterprise under the Double Tax Avoidance Arrangement and is determined by the competent PRC tax authority to have satisfied relevant conditions and requirements, then the dividends paid to our Hong Kong subsidiary by its PRC subsidiary may be subject to the reduced income tax rate of 5% under the Double Tax Avoidance Arrangement. However, based on the Notice on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties, if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment. In addition, based on the Announcement of the State Administration of Taxation on Issues Relating to Beneficial Owner in Tax Treaties, effective from April 1, 2018, under certain conditions a company cannot be defined as a beneficial owner under the treaty and thus are not entitled to the abovementioned reduced income tax rate of 5% under the Double Tax Avoidance Arrangement. If we are required under the PRC Enterprise Income Tax Law to pay income tax for any dividends we receive from our subsidiaries in China, or if our Hong Kong subsidiary is determined by PRC government authority as receiving benefits from reduced income tax rate due to a structure or arrangement that is primarily tax-driven, it would materially and adversely affect the amount of dividends, if any, we may pay to our shareholders.
If we are classified as a “resident enterprise” of China under the PRC Enterprise Income Tax Law, we and our non-PRC shareholders could be subject to unfavorable tax consequences, and our business, financial condition and results of operations could be materially and adversely affected.
Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside the PRC with “de facto management body” within the PRC is considered a “resident enterprise” and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise. In 2009, SAT issued a circular, known as SAT Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the SAT’s general position on how the “de facto management body” text should be applied in determining the tax resident status of all offshore enterprises. According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of board members with voting rights or senior executives habitually reside in the PRC.
We believe that we are not a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” If the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, we may be required to withhold a 10% tax from dividends we pay to our shareholders that are non-resident enterprises, including the holders of the common stock. In addition, non-resident enterprise shareholders, including our common stock holders, may be subject to PRC tax at a rate of 10% on gains realized on the sale or other disposition of common stock or ordinary shares, if such income is treated as sourced from within the PRC. Furthermore, if we are deemed a PRC resident enterprise, dividends paid to our non-PRC individual shareholders, including our common stock holders, and any gain realized on the transfer of common stock or ordinary shares by such shareholders may be subject to PRC tax at a rate of 20%, which in the case of dividends may be withheld at source. Any PRC tax liability may be reduced by an applicable tax treaty. However, it is unclear whether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in our common stock or ordinary shares.
| 32 |
In addition to the uncertainty as to the application of the “resident enterprise” classification, we cannot assure you that the PRC government will not amend or revise the taxation laws, rules and regulations to impose stricter tax requirements or higher tax rates. Any of such changes could materially and adversely affect our financial condition and results of operations.
Governmental control of currency conversion may affect the value of your investment.
Currently, the RMB cannot be freely converted into any foreign currency. The PRC government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of China. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiary to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency dominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from the PRC State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. However, for most capital account items, approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of the common stock.
Fluctuation in exchange rates could have a negative effect on our results of operations and the value of your investment.
The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions in China and by China’s foreign exchange policies. Since June 2010, the RMB has fluctuated against the U.S. dollar, at times significantly and unpredictably. On November 30, 2015, the Executive Board of the International Monetary Fund, or IMF, completed the regular five-year review of the basket of currencies that make up the Special Drawing Right, or the SDR, and decided that with effect from October 1, 2016, the RMB is determined to be a freely usable currency and will be included in the SDR basket as a fifth currency, along with the U.S. dollar, the euro, the Japanese yen and the British pound. Since the fourth quarter of 2016, the RMB has depreciated significantly in the backdrop of a surging U.S. dollar and persistent capital outflows of China. With the development of the foreign exchange market and progress toward interest rate liberalization and RMB internationalization, the PRC government may in the future announce further changes to the exchange rate system, and we cannot assure you that the RMB will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future.
Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. As of the date of this Report, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currency or to convert foreign currency into RMB.
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PRC regulations relating to offshore investment activities by PRC residents and enterprises may increase our administrative burden and restrict our overseas and cross-border investment activity. If our PRC resident and enterprise shareholders fail to make any required applications and filings under such regulations, we may be unable to distribute profits to such shareholders and may become subject to liability under PRC law.
In July 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, which replaces the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents to Engage in Financing and Round-tripping Investment via Overseas Special Purpose, or SAFE Circular 75. SAFE Circular 37 requires PRC residents, including PRC individuals and PRC corporate entities, to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities. SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we may make in the future.
Under SAFE Circular 37, PRC residents who make, or have prior to the implementation of SAFE Circular 37 made, direct or indirect investments in offshore special purpose vehicles, or SPVs, are required to register such investments with SAFE or its local branches. In addition, any PRC resident who is a direct or indirect shareholder of an SPV, is required to update its registration with the local branch of SAFE with respect to that SPV, to reflect any change of basic information or material events. If any PRC resident shareholder of such SPV fails to make the required registration or to update the registration, the subsidiary of such SPV in China may be prohibited from distributing its profits or the proceeds from any capital reduction, share transfer or liquidation to the SPV, and the SPV may also be prohibited from making additional capital contributions into its subsidiaries in China. In February 2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13. Under SAFE Notice 13, applications for foreign exchange registration of inbound foreign direct investments and outbound direct investments, including those required under SAFE Circular 37, shall be filed with qualified banks instead of SAFE. Qualified banks should examine the applications and accept registrations under the supervision of SAFE.
We may not be aware of the identities of all of our beneficial owners who are PRC residents. To our knowledge, some of our beneficial owners have not complied with SAFE registration requirements under SAFE Circular 37 and subsequent implementation rules on time or at all, sometimes due to reasons beyond their control. However, we do not have control over our beneficial owners and cannot compel them to comply with SAFE Circular 37 and subsequent implementation rules. Therefore, we cannot assure you that any required registration under SAFE Circular 37 and any amendment will be completed in a timely manner, or at all. The failure of our beneficial owners who are PRC residents to register or amend their foreign exchange registrations pursuant to SAFE Circular 37 and subsequent implementation rules, or the failure of future beneficial owners of our company who are PRC residents to comply with the registration procedures set forth in SAFE Circular 37 and subsequent implementation rules, may subject such beneficial owners or our PRC subsidiary to fines and legal sanctions. Failure to register or comply with relevant requirements may also limit our ability to contribute additional capital to our PRC subsidiary and limit our PRC subsidiary’s ability to distribute dividends to us. These risks may have a material adverse effect on our business, financial condition and results of operations.
Furthermore, as these foreign exchange and outbound investment related regulations and their interpretation and implementation have been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore or cross-border investments and transactions, will be interpreted, amended and implemented by the relevant government authorities. For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations. We cannot assure you that we have complied or will be able to comply with all applicable foreign exchange and outbound investment related regulations. In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.
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The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of PRC companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.
The M&A Rules and relevant regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. The M&A Rules require that the Ministry of Commerce, or the MOFCOM, be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that have or may have an impact on the national economic security; or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. The approval from MOFCOM shall be obtained in circumstances where overseas companies established or controlled by PRC enterprises or residents acquire affiliated domestic companies.
The Anti-Monopoly Law promulgated by the Standing Committee of the National People’s Congress, or NPC, which became effective in August 2008, requires that when a concentration of undertakings occurs and reaches statutory thresholds, the undertakings concerned shall file a prior notification with MOFCOM. Without the clearance from MOFCOM, no concentration of undertakings shall be implemented and effected. Mergers, acquisitions or contractual arrangements that allow one market player to take control of or to exert decisive impact on another market player must also be notified in advance to the MOFCOM when the threshold under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, or the Prior Notification Rules, issued by the State Council in August 2008 is triggered. If such prior notification is not obtained, MOFCOM may order the concentration to cease its operations, dispose of shares or assets, transfer the business of the concentration within a time limit, take any other necessary measures to restore the situation as it was before the concentration, and may impose administrative fines.
In addition, the Implementing Rules Concerning Security Review on the Mergers and Acquisitions by Foreign Investors of Domestic Enterprises, issued by the MOFCOM in August 2011, specify that mergers and acquisitions by foreign investors involved in “an industry related to national security” are subject to strict review by the MOFCOM, and prohibit any activities attempting to bypass such security review, including by structuring the transaction through a proxy or contractual control arrangement. In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the abovementioned regulations and other relevant rules to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions.
We cannot preclude the possibility that the MOFCOM or other government agencies may publish explanations contrary to our understanding or broaden the scope of such security reviews in the future, in which case our future acquisitions in the PRC, including those by way of entering into contractual control arrangements with target entities, may be closely scrutinized or prohibited. Our ability to expand our business or maintain or expand our market share through future acquisitions would as such be materially and adversely affected.
We and our shareholders face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises, assets attributed to a PRC establishment of a non-PRC company or immovable properties located in China owned by non-PRC companies.
In February 2015, SAT issued a Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises, or SAT Public Notice 7. SAT Public Notice 7 extends its tax jurisdiction to transactions involving transfer of other taxable assets through offshore transfer of a foreign intermediate holding company. In addition, SAT Public Notice 7 provides clear criteria for assessment of reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. SAT Public Notice 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets. In October 2017, SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017. The Bulletin 37 further clarifies the practice and procedure of the withholding of nonresident enterprise income tax. Where a non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which is an indirect transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such Indirect Transfer to the relevant tax authority. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such indirect transfer other than transfer of shares of our common stock acquired and sold on public markets may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.
We face uncertainties as to the reporting and other implications of certain past and future transactions that involve PRC taxable assets, such as offshore restructuring, sale of the shares in our offshore subsidiaries and investments. Our company may be subject to filing obligations or taxed if our company is the transferor in such transactions, and may be subject to withholding obligations if our company is the transferee in such transactions, under SAT Public Notice 7 or Bulletin 37, or both.
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Risks Relating to our Common Stock and our Status as a Public Company
The relative lack of public company experience of our management team may put us at a competitive disadvantage.
Our management team lacks public company experience and is generally unfamiliar with the requirements of the United States securities laws and U.S. Generally Accepted Accounting Principles, which could impair our ability to comply with legal and regulatory requirements such as those imposed by Sarbanes-Oxley Act of 2002. The individuals who now constitute our senior management team have never had responsibility for managing a publicly traded company. Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. Our senior management may not be able to implement programs and policies in an effective and timely manner that adequately responds to such increased legal, regulatory compliance and reporting requirements. Our failure to comply with all applicable requirements could lead to the imposition of fines and penalties and distract our management from attending to the growth of our business.
Our common stock is not listed on any stock exchange and there is a limited market for shares of our common stock. Even if a market for our common stock develops, our common stock could be subject to wide fluctuations.
Our common stock is not listed on any stock exchange. Although our common stock is listed on the OTC Marketplace, there is a limited public market for shares of our common stock, and limited trades of our common stock have taken place on the OTC Marketplace. Even if the shares of our common stock may in the future trade greater volume on the OTC Marketplace, the liquidity and price of our common stock is expected to be more limited than if such securities were quoted or listed on a national exchange. No assurances can be given that an active public trading market for our common stock will develop or be sustained. Trading volume may be limited by the fact that many major institutional investment funds, including mutual funds, as well as individual investors follow a policy of not investing in over the counter stocks and certain major brokerage firms restrict their brokers from recommending over the counter stocks because they are considered speculative, volatile and thinly traded. Lack of liquidity will limit the price at which stockholders may be able to sell our common stock.
Even if our common stock will in the future trade more actively on the OTC Marketplace, the price of such common stock could be subject to wide fluctuations, in response to quarterly variations in our operating results, announcements by us or others, developments affecting us, and other events or factors. In addition, the stock market has experienced extreme price and volume fluctuations in recent years. These fluctuations have had a substantial effect on the market prices for many companies, often unrelated to the operating performance of such companies, and may adversely affect the market prices of the securities. Such risks could have an adverse effect on the stock’s future liquidity.
We may be subject to risks related to penny stocks because of special regulations prescribed by the SEC.
Our common stock may be subject to regulations prescribed by the SEC relating to “penny stocks.” The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price (as defined in such regulations) of less than $5.00 per share, subject to certain exceptions. When and if trading of our common stock is established, such stock may meet the definition of a penny stock and be subject to these regulations, which impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and “accredited investors” (generally institutions with assets in excess of $5,000,000 and individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 (individually) or $300,000 (jointly with their spouse)).
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FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
Shares of our common stock that have not been registered under the Securities Act of 1933, as amended, regardless of whether such shares are restricted or unrestricted, are subject to resale restrictions imposed by Rule 144, including those set forth in Rule 144(i) which apply to a “shell company.” In addition, any shares of our common stock that are held by affiliates, including any received in a registered offering, will be subject to the resale restrictions of Rule 144(i).
Pursuant to Rule 144 of the Securities Act of 1933, as amended (“Rule 144”), a “shell company” is defined as a company that has no or nominal operations; and, either no or nominal assets; assets consisting solely of cash and cash equivalents; or assets consisting of any amount of cash and cash equivalents and nominal other assets. As such, we were a “shell company” pursuant to Rule 144 prior to the consummation of the Exchange Transaction, and as such, sales of our securities pursuant to Rule 144 are not able to be made until a period of at least twelve months has elapsed from the date that this Current Report on Form 8-K has been filed with the Commission reflecting the Company’s status as a non-”shell company.” Therefore, any restricted securities we sell in the future or issue to consultants or employees, in consideration for services rendered or for any other purpose will have no liquidity until and unless such securities are registered with the Commission and/or until a year after the date of the filing of this Current Report on Form 8-K and we have otherwise complied with the other requirements of Rule 144. As a result, it may be harder for us to fund our operations and pay our consultants with our securities instead of cash. Furthermore, it will be harder for us to raise funding through the sale of debt or equity securities unless we agree to register such securities with the Commission, which could cause us to expend additional resources in the future. Our previous status as a “shell company” could prevent us from raising additional funds, engaging consultants, and using our securities to pay for any acquisitions (although none are currently planned), which could cause the value of our securities, if any, to decline in value or become worthless. Lastly, any shares held by affiliates, including shares received in any registered offering, will be subject to the resale restrictions of Rule 144(i).
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SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA
The following tables summarize selected consolidated financial data regarding the business of Platinum and its subsidiaries and variable interest entity Yubo and should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated pro forma financial statements of the Company and Platinum and its subsidiaries and variable interest entity Yubo and the related notes included with those financial statements. All monetary amounts are expressed in U.S. dollars unless otherwise indicated.
Historical Financial Performance of Platinum and its subsidiaries and variable interest entity Yubo
The following represents the past financial performance for Platinum and its subsidiaries and variable interest entity Yubo as of and for the years ended December 31, 2019 and 2018 and for the nine months ended September 30, 2020 and 2019.
|
|
| For the nine months ended September 30, |
|
| For the year ended December 31, |
| ||||||||||
|
|
| 2020 |
|
| 2019 |
|
| 2019 |
|
| 2018 |
| ||||
|
|
| (Unaudited) |
|
| (Unaudited) |
|
|
|
|
| ||||||
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Sales |
| $ | 471,148 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| Cost of Goods Sold |
|
| 39,724 |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Gross Profit |
|
| 431,424 |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sales commissions |
|
| 187,963 |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Employee compensation |
|
| 113,748 |
|
|
| 4,984 |
|
|
| 4,951 |
|
|
| — |
|
| Occupancy |
|
| 159,889 |
|
|
| 46,189 |
|
|
| 101,702 |
|
|
| — |
|
| Depreciation and amortization of property and equipment |
|
| 16,250 |
|
|
| — |
|
|
| 91 |
|
|
| — |
|
| Amortization of intangible assets |
|
| 1,929 |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Other operating expenses |
|
| 381,789 |
|
|
| 2,378 |
|
|
| 124,322 |
|
|
| — |
|
| Total Operating Expenses |
|
| 861,568 |
|
|
| 53,551 |
|
|
| 231,066 |
|
|
|
|
|
| Income (loss) from operations |
|
| (430,144 | ) |
|
| (53,551 | ) |
|
| (231,066 | ) |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other Income (Expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest expenses |
|
| (157 | ) |
|
| (161 | ) |
|
| (127 | ) |
|
| — |
|
| Total Other Income (Expenses) |
|
| (157 | ) |
|
| (161 | ) |
|
| (127 | ) |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss before Provision for Income Tax |
|
| (430,301 | ) |
|
| (53,712 | ) |
|
| (231,193 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Provision for Income Tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
| $ | (430,301 | ) |
| $ | (53,712 | ) |
| $ | (231,193 | ) |
| $ | — |
|
| Net loss per share basic and diluted |
| $ | (0.04 | ) |
| $ | (0.01 | ) |
| $ | (0.02 | ) |
| $ | — |
|
| Weighted average common shares outstanding basic and diluted |
| 10,011,116 |
|
|
| 10,000,000 |
|
|
| 10,000,000 |
|
|
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
| (430,301 | ) |
|
| (53,712 | ) |
|
| (231,193 | ) |
|
| — |
|
| Foreign currency translation adjustment |
|
| 3,395 |
|
|
| — |
|
|
| (3,935 | ) |
|
| — |
|
| Total comprehensive income (loss) |
| $ | (426,906 | ) |
| $ | (53,712 | ) |
| $ | (235,128 | ) |
| $ | — |
|
| 38 |
|
|
| September 30, |
|
| December 31, |
|
| December 31, |
| |||
|
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
|
|
| (Unaudited) |
|
|
|
|
| |||||
| ASSETS |
|
|
|
|
|
|
|
|
| |||
| Current assets |
|
|
|
|
|
|
|
|
| |||
| Cash |
| $ | 749,440 |
|
| $ | 1,262 |
|
| $ | 145 |
|
| Receivables |
|
| 5,458 |
|
|
| — |
|
|
| — |
|
| Prepaid expenses |
|
| 42,295 |
|
|
| 62,089 |
|
|
| — |
|
| Inventory |
|
| 83,607 |
|
|
| — |
|
|
| — |
|
| Due from related parties |
|
| 463,831 |
|
|
| 399,251 |
|
|
| — |
|
| Total Current Assets |
|
| 1,344,631 |
|
|
| 462,602 |
|
|
| 145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Property and equipment, net |
|
| 77,255 |
|
|
| 36,597 |
|
|
|
|
|
| Intangible assets, net |
|
| 54,872 |
|
|
| — |
|
|
| — |
|
| Operating lease right of use asset |
|
| 364,426 |
|
|
| 546,350 |
|
|
| — |
|
| Lease security deposit |
|
| 80,008 |
|
|
| 83,386 |
|
|
|
|
|
| Total Assets |
| $ | 1,921,192 |
|
| $ | 1,128,935 |
|
| $ | 145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
| Accounts payable and accrued expenses (including accounts payable and accrued expenses of VIE without recourse to the Company of $120,852, $0, and $0 as of September 30, 2020, December 31, 2019, and December 31, 2018, respectively) |
| $ | 120,852 |
|
| $ | — |
|
| $ | — |
|
| Customer deposits (including customer deposits of VIE without recourse to the Company of $10,603, $0 and $0 as of September 30, 2020, December 31, 2019, and December 31, 2018, respectively) |
|
| 15,378 |
|
|
| — |
|
|
| — |
|
| Due to related parties (including due to related parties without recourse to the Company of $93,134, $93,852, and $145 as of September 30, 2020, December 31, 2019, and December 31, 2018, respectively) |
|
| 88,359 |
|
|
| 93,852 |
|
|
| 145 |
|
| Operating lease liability – current (including operating lease liability -current of VIE without recourse to the Company of $306,707, $262,928, and $0 as of September 30, 2020, December 31, 2019, and December 31, 2018, respectively) |
|
| 306,707 |
|
|
| 262,928 |
|
|
| — |
|
| Total Current Liabilities |
|
| 531,296 |
|
|
| 356,780 |
|
|
| 145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
| Operating lease liability - non-current (including operating lease liability – non- current of VIE without recourse to the Company of $57,718, $283,422, and $0 as of September 30, 2020, December 31, 2019, and December 31, 2018, respectively) |
|
| 57,718 |
|
|
| 283,422 |
|
|
| — |
|
| Total Liabilities |
|
| 589,014 |
|
|
| 640,202 |
|
|
| 145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shareholders' Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock, par value $ 0.0001 per share; authorized 500,000,000 shares, issued and outstanding 10,152,284, 0, and 0 shares, respectively. |
|
| 1,015 |
|
|
| — |
|
|
| — |
|
| Additional Paid in Capital |
|
| 1,993,197 |
|
|
| 723,861 |
|
|
| — |
|
| Accumulated deficit |
|
| (661,494 | ) |
|
| (231,193 | ) |
|
| — |
|
| Accumulated other comprehensive income (loss) |
|
| (540 | ) |
|
| (3,935 | ) |
|
| — |
|
| Total Shareholders' Equity |
|
| 1,332,178 |
|
|
| 488,733 |
|
|
| — |
|
| Total Liabilities and Shareholders' Equity |
| $ | 1,921,192 |
|
| $ | 1,128,935 |
|
| $ | 145 |
|
| 39 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of the consolidated results of operations and financial condition of Platinum and its subsidiaries and variable interest entity (“Platinum”) for the fiscal years ended December 31, 2019 and 2018 and as of and for the nine months ended September 30, 2020 and 2019 should be read in conjunction with the Summary Selected Consolidated Financial Data, the Platinum financial statements, and the notes to those financial statements that are included elsewhere in this Report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and Business sections in this Report. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
Overview
Our management’s discussion and analysis of our financial condition and results of operations are only based on Platinum current stem cell based pharmaceutical and medical treatment business operated by our variable interest entity Yubo in China. Our previous shell company’s results of operations are immaterial and will not be included in the discussion below. Key factors affecting our results of operations include revenues, cost of revenues, operating expenses and income and taxation.
As a result of the Exchange Transaction, the Registrant ceased being a shell company as such term is defined in Rule 12b-2 under the Exchange Act. See Item 5.06 of this Current Report on Form 8-K.
Results of Operations
|
|
| For the nine months ended September 30, |
|
| For the year ended December 31, |
| ||||||||||
|
|
| 2020 |
|
| 2019 |
|
| 2019 |
|
| 2018 |
| ||||
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Sales |
| $ | 471,148 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| Cost of Goods Sold |
|
| 39,724 |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Gross Profit |
|
| 431,424 |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sales commissions |
|
| 187,963 |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Employee compensation |
|
| 113,748 |
|
|
| 4,984 |
|
|
| 4,951 |
|
|
| — |
|
| Occupancy |
|
| 159,889 |
|
|
| 46,189 |
|
|
| 101,702 |
|
|
| — |
|
| Depreciation and amortization of property and equipment |
|
| 16,250 |
|
|
| — |
|
|
| 91 |
|
|
| — |
|
| Amortization of intangible assets |
|
| 1,929 |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Other operating expenses |
|
| 381,789 |
|
|
| 2,378 |
|
|
| 124,322 |
|
|
| — |
|
| Total Operating Expenses |
|
| 861,568 |
|
|
| 53,551 |
|
|
| 231,066 |
|
|
|
|
|
| Income (loss) from operations |
|
| (430,144 | ) |
|
| (53,551 | ) |
|
| (231,066 | ) |
|
| — |
|
| Other Income (Expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest expenses |
|
| (157 | ) |
|
| (161 | ) |
|
| (127 | ) |
|
| — |
|
| Total Other Income (Expenses) |
|
| (157 | ) |
|
| (161 | ) |
|
| (127 | ) |
|
| — |
|
| Loss before Provision for Income Tax |
|
| (430,301 | ) |
|
| (53,712 | ) |
|
| (231,193 | ) |
|
|
|
|
| Provision for Income Tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Net loss |
| $ | (430,301 | ) |
| $ | (53,712 | ) |
| $ | (231,193 | ) |
| $ | — |
|
| 40 |
Comparison of the Nine Months Ended September 30, 2020 and 2019
Sales
Our sales were $471,148 for the nine months ended September 30, 2020, as compared to $0 for the nine months ended September 30, 2019. The increase in sales was primarily due to the sale of nebulizers.
Cost of Goods Sold
Our cost of goods sold was $39,724 for the nine months ended September 30, 2020, as compared to $0 for the nine months ended September 30, 2019. The increase in cost of goods sold was primarily due to costs of nebulizers sold.
Gross Profit
Our gross profit was $431,424 for the nine months ended September 30, 2020, as compared to $0 for the nine months ended September 30, 2019. The increase in gross profit was primarily due to sale of nebulizers.
Operating Expenses
Our operating expenses were $861,568 for the nine months ended September 30, 2020, as compared to $53,551 for the nine months ended September 30, 2019. The increase in operating expenses was primarily due to increases in sales commissions, employee compensation, occupancy, and other operating expenses.
Loss from Operations
Our loss from operations was $(430,144) for the nine months ended September 30, 2020, as compared to $(53,551) for the nine months ended September 30, 2019. The increase in loss from operations was primarily due to the $808,017 increase in operating expenses, partially offset by the $431,424 increase in gross profit.
Other Income (Expense)
Our other income (expense) was $(157) for the nine months ended September 30, 2020, as compared to $(161) for the nine months ended September 30, 2019. The decrease in other expense was primarily due to a decrease in bank charges.
Net Loss
Our net loss was $(430,301) for the nine months ended September 30, 2020, as compared to $(53,712) for the nine months ended September 30, 2019. The increase in net loss was primarily due to the $808,017 increase in operating expenses, partially offset by the $431,424 increase in gross profit.
Comparison of the Years Ended December 31, 2019 and 2018
Sales
Our sales were $0 for the year ended December 31, 2019, as compared to $0 for the year ended December 31, 2018.
Cost of Goods Sold
Our cost of goods sold was $0 for the year ended December 31, 2019, as compared to $0 for the year ended December 31, 2018.
| 41 |
Gross Profit
Our gross profit was $0 for the year ended December 31, 2019, as compared to $0 for the year ended December 31, 2018.
Operating Expenses
Our operating expenses were $231,066 for the year ended December 31, 2019, as compared to $0 for the year ended December 31, 2018. The increase in operating expenses was primarily due to increases in occupancy (resulting from the Beijing China office space lease commencing in August 2019) and other operating expenses.
Loss from Operations
Our loss from operations was $(231,066) for the year ended December 31, 2019, as compared to $0 for the year ended December 31, 2018. The increase in loss from operations was due to the increase in operating expenses.
Other Income (Expense)
Our other income (expense) was $(127) for the year ended December 31, 2019, as compared to $0 for the year ended December 31, 2018. The increase in other expense was primarily due to an increase in bank charges.
Net Loss
Our net loss was $(231,193) for the year ended December 31, 2019, as compared to $0 for the year ended December 31, 2018. The increase in net loss was primarily due to the increase in operating expenses.
Liquidity and Capital Resources
Overview
Platinum’s cash needs are primarily for working capital to support Yubo’s operations. These cash needs have historically been financed with cash generated from shareholder capital contributions.
As of September 30, 2020, Platinum had cash and equivalents on hand of $749,440 and working capital of $813,335. Platinum believes that its cash on hand and working capital will be sufficient to meet its anticipated cash requirements through January 31, 2021. If Yubo does not meet its revenue objectives over that period, the Company may need to sell additional equity securities, which could result in dilution to current stockholders, or seek additional loans. The incurrence of indebtedness would result in increased debt service obligations and could require the Company to agree to operating and financial covenants that would restrict its operations. Financing may not be available in amounts or on terms acceptable to the Company, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.
Net cash provided by (used in) operating activities
Net cash used in operating activities was $411,858 for the nine months ended September 30, 2020, as compared to $315,598 for the nine months ended September 30, 2019. The $96,260 increase in net cash used in operating activities was primarily due to the $373,589 increase in net loss and the $83,607 increase in inventory, offset partially by the $120,852 increase in accounts payable and accrued expenses, the $143,063 decrease of the increase in due from related parties, and the $76,880 decrease of the increase in the lease security deposit.
Net cash used in operating activities was $682,121 for the year ended December 31, 2019, as compared to cash provided in operating activities of $145 for the year ended December 31, 2018. The increase in net cash used in operating activities was primarily due to the $231,193 net loss in 2019 and the $399,251 increase in due from related parties.
| 42 |
Net cash provided by (used in) investing activities
Net cash used in investing activities was $108,202 for the nine months ended September 30, 2020, as compared to $6,558 for the nine months ended September 30, 2019. The increase in net cash used in investing activities was due to purchases of property and equipment and purchases of intangible assets.
Net cash used in investing activities was $36,983 for the year ended December 31, 2019, as compared to $0 for the year ended December 31, 2018. The increase in net cash used in investing activities was due to purchases of property and equipment in 2019.
Net cash provided by financing activities
Net cash provided by financing activities was $1,270,351 for the nine months ended September 30, 2020, as compared to $349,770 for the nine months ended September 30, 2019. The increase in net cash provided by financing activities was primarily due to a $170,581 increase in capital contributions to Yubo and a $750,000 sale of Platinum ordinary shares.
Net cash provided by financing activities was $723,861 for the year ended December 31, 2019, as compared to $0 for the year ended December 31, 2018. The increase in net cash provided by financing activities was due to capital contributions to Yubo.
Contractual Obligations and Off-Balance Sheet Arrangements
Contractual Obligations
As of September 30, 2020, Platinum has no long-term debt or purchase obligations:
Off-Balance Sheet Arrangements
Platinum has not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. Platinum has not entered into any derivative contracts that are indexed to its shares and classified as shareholder’s equity or that are not reflected in its consolidated financial statements. Furthermore, Platinum does 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. Platinum does not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to it or engages in leasing, hedging or research and development services with it.
Critical 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”).
The accompanying consolidated financial statements for the nine months ended September 30, 2020 and 2019 (unaudited) and for the years ended December 31, 2019 and 2018 comprise the following periods for each entity:
| Name |
| Periods |
| Platinum |
| April 7, 2020 (Inception) – September 30, 2020 |
| Platinum HK |
| May 4, 2020 (Inception) – September 30, 2020 |
| Yubo WFOE |
| September 4, 2020 (Inception) – September 30, 2020 |
| Yubo |
| January 1, 2018 – September 30, 2020 |
| 43 |
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, its two 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.
Leases
We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities - current, and operating lease liabilities - noncurrent on the balance sheets. The initial lease liability is equal to the future fixed minimum lease payments discounted using the Company’s incremental borrowing rate, on a secured basis. The initial measurement of the right-of-use asset is equal to the initial lease liability plus any initial direct costs.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.
Revenue Recognition
The Company derives its revenue from the sale of nebulizers containing frozen tubes with medical fluid. The nebulizers are sold directly to consumers on the Company’s online e-commerce platform. The Company recognizes product revenues when the following four revenue recognition criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the selling price is fixed or determinable, and (iv) collectability is reasonably assured. The Company does not allow sales returns or exchanges. Revenue is recorded net of value-added tax (“VAT”).
| 44 |
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership Prior To Exchange Transaction
The following table sets forth certain information as of January 13, 2021 prior to the closing of the Exchange Transaction, with respect to the beneficial ownership of our common stock for (i) each director and officer, (ii) all of our directors and officers as a group, and (iii) each person known to us to own beneficially five percent (5%) or more of the outstanding shares of our common stock. As of January 13, 2021, there were 117,875,323 shares of Class A common stock and 4,447 shares of Class B common stock issued and outstanding.
To our knowledge, except as indicated in the footnotes to this table or pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to the shares of common stock indicated.
| Name and Address of Beneficial Owner |
| Amount and Nature of Beneficial Ownership (1) |
|
| Percentage of Class Beneficially Owned (3) |
| ||
| Directors and Executive Officers |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
| Jun Wang Room 105, Building 5, 31 Xishiku Avenue Xicheng District, Beijing, PRC |
|
| 0 |
|
|
| 0 | % |
|
|
|
|
|
|
|
|
|
|
| Yang Wang Room 105, Building 5, 31 Xishiku Avenue Xicheng District, Beijing, PRC |
|
| 0 |
|
|
| 0 | % |
|
|
|
|
|
|
|
|
|
|
| Zhihui Bai Room 105, Building 5, 31 Xishiku Avenue Xicheng District, Beijing, PRC |
|
| 0 |
|
|
| 0 | % |
|
|
|
|
|
|
|
|
|
|
| Lina Liu Room 105, Building 5, 31 Xishiku Avenue Xicheng District, Beijing, PRC |
|
| 116,697,438 | (2) |
|
| 99.0 | % |
|
|
|
|
|
|
|
|
|
|
| All Officers and Directors as a Group |
|
| 116,697,438 | (2) |
|
| 99.0 | % |
|
|
|
|
|
|
|
|
|
|
| 5% Stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Lina Liu Room 105, Building 5, 31 Xishiku Avenue Xicheng District, Beijing, PRC |
|
| 116,697,438 | (2) |
|
| 99.0 | % |
______________
| (1) | Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. Pursuant to the rules of the SEC, shares of common stock which an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be beneficially owned and outstanding for the purpose of computing the percentage ownership of any other person shown in the table. |
| (2) | Includes 116,697,438 shares of Class A common stock. |
| (3) | Represents the percentage of ownership of our Class A common stock only. |
| 45 |
Security Ownership After Exchange Transaction
The following table sets forth certain information as of January 14, 2021, after giving effect to the Closing of the Exchange Transaction, with respect to the beneficial ownership of our common stock for (i) each director and officer, (ii) all of our directors and officers as a group, and (iii) each person known to us to own beneficially five percent (5%) or more of the outstanding shares of our common stock. As of January 14, 2021, after giving effect to the Closing of the Exchange Transaction, there were 118,177,885 shares of Class A common stock and 4,447 shares of Class B common stock outstanding.
To our knowledge, except as indicated in the footnotes to this table or pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to the shares of common stock indicated.
| Name and Address of Beneficial Owner |
| Amount and Nature of Beneficial Ownership (1)(2) |
|
| Percentage of Class Beneficially Owned (3) |
| ||
| Directors and Executive Officers |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
| Jun Wang Room 105, Building 5, 31 Xishiku Avenue Xicheng District, Beijing, PRC |
|
| 39,943,800 |
|
|
| 33.80 | % |
|
|
|
|
|
|
|
|
|
|
| Yang Wang Room 105, Building 5, 31 Xishiku Avenue Xicheng District, Beijing, PRC |
|
| 19,211,400 |
|
|
| 16.26 | % |
|
|
|
|
|
|
|
|
|
|
| Zhihui Bai Room 105, Building 5, 31 Xishiku Avenue Xicheng District, Beijing, PRC |
|
| 2,496,780 |
|
|
| 2.11 | % |
|
|
|
|
|
|
|
|
|
|
| Lina Liu Room 105, Building 5, 31 Xishiku Avenue Xicheng District, Beijing, PRC |
|
| 5,098,439 |
|
|
| 4.31 | % |
|
|
|
|
|
|
|
|
|
|
| All Officers and Directors as a Group |
|
| 66,750,419 |
|
|
| 56.48 | % |
|
|
|
|
|
|
|
|
|
|
| 5% Stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| FlyDragon International Limited Wickham’s Cay II,P.O.Box 2221 Road Town, Tortola, British Virgin Islands |
|
| 39,943,800 |
|
|
| 33.80 | % |
|
|
|
|
|
|
|
|
|
|
| ChinaOne Technology Limited Wickham’s Cay II,P.O.Box 2221 Road Town, Tortola, British Virgin Islands |
|
| 19,211,400 |
|
|
| 16.26 | % |
|
|
|
|
|
|
|
|
|
|
| Boao Biotech Limited Wickham’s Cay II,P.O.Box 2221 Road Town, Tortola, British Virgin Islands |
|
| 24,967,800 |
|
|
| 21.13 | % |
|
|
|
|
|
|
|
|
|
|
| Focus Draw Group Limited Wickham’s Cay II,P.O.Box 2221 Road Town, Tortola, British Virgin Islands |
|
| 13,829,400 |
|
|
| 11.70 | % |
|
|
|
|
|
|
|
|
|
|
| FocusOne Technology Group Limited Wickham’s Cay II,P.O.Box 2221 Road Town, Tortola, British Virgin Islands |
|
| 11,524,500 |
|
|
| 9.75 | % |
_________________
| (1) | Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. Pursuant to the rules of the SEC, shares of common stock which an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be beneficially owned and outstanding for the purpose of computing the percentage ownership of any other person shown in the table. |
| (2) | Excludes any of our Class B common stock. |
| (3) | Represents the percentage of ownership of our Class A common stock only. |
| 46 |
DIRECTORS AND EXECUTIVE OFFICERS
Our executive officers and directors are:
| Name | Age | Position | ||
| Jun Wang | 53 | Director, President and Chief Executive Officer | ||
| Yang Wang | 40 | Director | ||
| Zhihui Bai | 34 | Director | ||
| Lina Liu | 40 | Chief Financial Officer, Treasurer and Secretary |
Jun Wang. Mr. Wang was appointed as our Chief Executive Officer, President and Director in 2020. He continues to serve as President of Yubo from 2019 to present. From 2015 to 2019, Mr. Wang served as President of Borongtai Asset Management (Beijing) Co., Ltd. He graduated with a Bachelors degree from Tianjin Commercial University, Department of Business Management. In making the decision to appoint Mr. Wang to serve as a director, the Board considered, in addition to the criteria referred to above, his extensive marketing experience in the healthcare industry, current service as our Chief Executive Officer and his comprehensive knowledge of Yubo, its business and operations.
Yang Wang. Mr. Wang was appointed as our Director in 2020. He has served as General Manager of Yubo from 2019 to present. From 2015 to 2019, Mr. Wang served as General Manager of Beijing Zunsheng Investment Consulting Co., Ltd. Additionally, he has worked for Horwath Financing Asia Limited, Mingli CHINA Growth Fund, Peking University Shangshuai Alumni Industry Investment Fund and Zhonsheng Capital Partners. He graduated with an MBA from New York Institute of Technology. Mr. Wang’s experience in the capital markets and mergers and acquisitions were the primary qualifications that the Board considered in appointing him as a director of the Company.
Zhihui Bai. Mr. Bai was appointed as our Director in 2020. He has served as General Manager of Beijing Zhenhuikang Biotech Co.LTD from 2015 to present. He graduated with a Master’s degree from Sofia University. Mr. Bai’s experience in the stem cell industry, including in product design, selection and production were the primary qualifications that the Board considered in appointing him as a director of the Company.
Lina Liu. Ms. Liu was appointed as our Chief Financial Officer, Treasurer and Secretary in 2020. She has served as Chief Financial Officer of Yubo from 2019 to present. From 2015 to 2019, she served as Chief Financial Officer of Borongtai Asset Management (Beijing) Co., Ltd. Additionally, she has over ten years of experience working for Ernst & Young. Ms. Liu graduated with a Master of Accounting from the Central University of Finance and Economics.
Terms of Office
The Company’s directors are appointed for a one-year term to hold office until the next annual general meeting of the Company’s stockholders or until removed from office in accordance with the Company’s bylaws and the provisions of the New York Business Corporation Law (the “NYBCL”). The Company’s directors hold office after the expiration of his or her term until his or her successor is elected and qualified, or until he or she resigns or is removed in accordance with the Company’s bylaws and the provisions of the NYBCL.
The Company’s officers are appointed by the Company’s Board of Directors and hold office until removed by the Board.
Involvement in Certain Legal Proceedings
No director, executive officer, significant employee or control person of the Company has been involved in any legal proceeding listed in Item 401(f) of Regulation S-K in the past 10 years.
| 47 |
Committees of the Board
Our Board of Directors held no formal meetings during the 12-month period ended September 30, 2020. All proceedings of the Board of Directors were conducted by resolutions consented to in writing by the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the NYBCL and the bylaws of our company, as valid and effective as if they had been passed at a meeting of the directors duly called and held. We do not presently have a policy regarding director attendance at meetings.
We do not currently have standing audit, nominating or compensation committees, or committees performing similar functions. Due to the size of our board, our Board of Directors believes that it is not necessary to have standing audit, nominating or compensation committees at this time because the functions of such committees are adequately performed by our Board of Directors. We do not have an audit, nominating or compensation committee charter as we do not currently have such committees. We do not have a policy for electing members to the board. Neither our current nor proposed directors are independent directors as defined in the NASDAQ listing standards.
We intend to form separate compensation, nominating and audit committees, with the audit committee including an audit committee financial expert, after the completion of the Exchange Transaction.
Audit Committee
Our Board of Directors has not established a separate audit committee within the meaning of Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Instead, the entire Board of Directors acts as the audit committee within the meaning of Section 3(a)(58)(B) of the Exchange Act and will continue to do so upon the appointment of the proposed directors until such time as a separate audit committee has been established.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3, 4 and 5 delivered to us as filed with the Securities Exchange Commission, our executive officers and directors, and persons who own more than 10% of our Common Stock timely filed all required reports pursuant to Section 16(a) of the Securities Exchange Act, with the exception of a Form 3 for Ms. Lina Liu, our Chief Financial Officer, Treasurer and Secretary, which was filed 3 days later than the required reporting deadline.
Nominations to the Board of Directors
Our directors take a critical role in guiding our strategic direction and oversee the management of the Company. Board candidates are considered based upon various criteria, such as their broad-based business and professional skills and experiences, a global business and social perspective, concern for the long-term interests of the stockholders, diversity, and personal integrity and judgment.
In addition, directors must have time available to devote to Board activities and to enhance their knowledge in the growing business. Accordingly, we seek to attract and retain highly qualified directors who have sufficient time to attend to their substantial duties and responsibilities to the Company.
In carrying out its responsibilities, the Board will consider candidates suggested by stockholders. If a stockholder wishes to formally place a candidate’s name in nomination, however, he or she must do so in accordance with the provisions of the Company’s Bylaws. Suggestions for candidates to be evaluated by the proposed directors must be sent to the Board of Directors, c/o Yubo International Biotech Limited, Room 105, Building 5, 31 Xishiku Avenue, Xicheng District, Beijing, PRC.
| 48 |
Board Leadership Structure and Role on Risk Oversight
Mr. Jun Wang currently serves as the Company’s principal executive officer and a director. The Company determined this leadership structure was appropriate for the Company due to our small size and limited operations and resources. The Board of Directors will continue to evaluate the Company’s leadership structure and modify as appropriate based on the size, resources and operations of the Company.
Subsequent to the closing of the Exchange Transaction, it is anticipated that the Board of Directors will establish procedures to determine an appropriate role for the Board of Directors in the Company’s risk oversight function.
Compensation Committee Interlocks and Insider Participation
No interlocking relationship exists between our board of directors and the board of directors or compensation committee of any other company, nor has any interlocking relationship existed in the past.
Family Relationships
There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.
| 49 |
EXECUTIVE COMPENSATION
Board Compensation
We have no standard arrangement to compensate directors for their services in their capacity as directors. Directors are not paid for meetings attended. However, we intend to review and consider future proposals regarding board compensation. All travel and lodging expenses associated with corporate matters are reimbursed by us, if and when incurred.
Executive Compensation - Former Executive Officers
No director, officer or employee received compensation during the last fiscal year.
Executive Compensation - New Executive Officers
None of the current directors and executive officers received compensation from Yubo during the fiscal years ended December 31, 2019 and 2018.
None of our executive officers or directors received, nor do we have any arrangements to pay out, any bonus, stock awards, option awards, non-equity incentive plan compensation, or non-qualified deferred compensation.
Potential Payments Upon Termination or Change-in-Control
SEC regulations state that we must disclose information regarding agreements, plans or arrangements that provide for payments or benefits to our executive officers in connection with any termination of employment or change in control of the company. We currently have no employment agreements with any of our executive officers, nor any compensatory plans or arrangements resulting from the resignation, retirement or any other termination of any of our executive officers, from a change-in-control, or from a change in any executive officer’s responsibilities following a change-in-control. As a result, we have omitted this table.
Employment Agreements
The Company is party to employment agreements with Jun Wang, Yang Wang and Lina Liu, providing for monthly salaries of RMB8,800, RMB8,800 and RMB8,000, respectively. Each employment agreement commenced on October 10, 2020 and will terminate on October 9, 2021. The employment agreements each provide for the Company to arrange social insurance, housing insurance and medical insurances for the executive officers and the termination by the Company or executive officer upon 30-day notice upon the occurrence of a limited number of circumstances. The employment agreements for Jun Wang, Yang Wang and Lina Liu are attached hereto as Exhibits 10.1, 10.2 and 10.3, respectively, and are incorporated herein by reference.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AND DIRECTOR INDEPENDENCE
Certain Relationships and Transactions
Other than Ms. Lina Liu, who is our controlling shareholder, Chief Financial Officer, Treasurer and Secretary prior to the closing of the Exchange Transaction, and the appointment of our directors and executive officers, none of our officers and directors have been involved in any material proceeding adverse to the Company or any transactions with the Company or any of its directors, executive officers, affiliates or associates that are required to be disclosed pursuant to the rules and regulations of the SEC.
Although we have not adopted a Code of Ethics, we rely on our board to review related party transactions on an ongoing basis to prevent conflicts of interest. Our board reviews a transaction in light of the affiliations of the director, officer or employee and the affiliations of such person’s immediate family. Transactions are presented to our board for approval before they are entered into or, if this is not possible, for ratification after the transaction has occurred. If our board finds that a conflict of interest exists, then it will determine the appropriate remedial action, if any. Our board approves or ratifies a transaction if it determines that the transaction is consistent with the best interests of the Company. These policies and procedures are not evidenced in writing. We intend to adopt a Code of Ethic after the Closing.
Related Party Transactions
On January 14, 2021, we entered into the Exchange Agreement. As a result of the Exchange Transaction, the Selling Shareholders received 117,000,000 shares of our Class A common stock, representing approximately 99.00% of our Class A common stock, in exchange for 100% of the issued and outstanding common stock of Platinum. Mr. Jun Wang, our President, Chief Executive Officer and a director, Mr. Yang Wang, a director, Mr. Zhihui Bai, a director, and Ms. Lina Liu, our CFO, Treasurer and Secretary, were beneficial shareholders of Platinum prior to the Closing of the Exchange Transaction, through their ownership of Flydragon International Limited, Chinaone Technology Limited, Boao Biotech Limited and Focus Draw Group Limited as well as Focusone Technology Group Limited, each a company organized under the laws of British Virgin Islands, respectively. Accordingly, Mr. Jun Wang, Mr. Yang Wang, Mr. Zhihui Bai and Ms. Lina Liu were beneficial recipients of certain shares of our common stock issued in connection with the Exchange Transaction.
In addition, our wholly owned subsidiary, Yubo WFOE has entered into variable interest entity control agreements over Yubo. Mr. Jun Wang is the President of Yubo.
Further, as detailed above under “Executive Compensation-Employment Agreements,” each of Jun Wang, Yang Wang and Lina Liu have each entered into Employment Agreements with the Company, pursuant to which they will be compensated for their services provided to the Company as executives.
Further, we have also entered into an Entrustment Technical Service Agreement with Beijing Zhenhuikang Biotechnology Co., Ltd., entrusting it to store and prepare endometrial biological samples in exchange for services fees paid by us. We have also entered into a Joint Research and Development Agreement with Beijing Zhenxigu Medical Research Center (L.P.) and agreed to provide Beijing Zhenxigu Medical Research Center (L.P.) with aggregate R&D expenses of RMB241,880. Both of Beijing Zhenhuikang Biotechnology Co., Ltd. and Beijing Zhenxigu Medical Research Center (L.P.) are affiliates of a shareholder of Yubo. The above-mentioned agreements are attached hereto as Exhibits 10.7 and 10.8, respectively, and are incorporated herein by reference.
Other than as set forth above, none of our current officers or directors have been involved in any material proceeding adverse to the Company or any transactions with the Company or any of its directors, executive officers, affiliates or associates that are required to be disclosed pursuant to the rules and regulations of the SEC.
Director Independence
During the twelve-month ended September 30, 2020, we did not have any independent directors on our board. We evaluate independence by the standards for director independence established by applicable laws, rules, and listing standards including, without limitation, the standards for independent directors established by The New York Stock Exchange, Inc., the NASDAQ Stock Market, and the SEC.
Subject to some exceptions, these standards generally provide that a director will not be independent if (a) the director is, or in the past three years has been, an employee of ours; (b) a member of the director’s immediate family is, or in the past three years has been, an executive officer of ours; (c) the director or a member of the director’s immediate family has received more than $120,000 per year in direct compensation from us other than for service as a director (or for a family member, as a non-executive employee); (d) the director or a member of the director’s immediate family is, or in the past three years has been, employed in a professional capacity by our independent public accountants, or has worked for such firm in any capacity on our audit; (e) the director or a member of the director’s immediate family is, or in the past three years has been, employed as an executive officer of a company where one of our executive officers serves on the compensation committee; or (f) the director or a member of the director’s immediate family is an executive officer of a company that makes payments to, or receives payments from, us in an amount which, in any twelve-month period during the past three years, exceeds the greater of $1,000,000 or two percent of that other company’s consolidated gross revenues.
| 51 |
LEGAL PROCEEDINGS
None.
MARKET PRICE OF AND DIVIDENDS ON COMMON EQUITY
AND RELATED SHAREHOLDER MATTERS
Market Information
Our common stock is not listed on any stock exchange. Our common stock is currently quoted on the OTC Marketplace under the symbol “YBGJ”.
Holders
Prior to the Exchange Transaction, there were 480 shareholders of record of our common stock based upon the shareholders’ listing provided by our transfer agent. Our transfer agent is VStock Transfer, LLC. The transfer agent’s address is 18 Lafayette Place, Woodmere, New York 11598, and its phone number is (212) 828-8436.
After the Closing of the Exchange Transaction, there were 486 shareholders of record of our common stock.
Dividends
We have never paid cash dividends on our common stock. We intend to keep future earnings, if any, to finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future. Our future payment of dividends will depend on our earnings, capital requirements, expansion plans, financial condition and other relevant factors that our board of directors may deem relevant. Our retained earnings deficit currently limits our ability to pay dividends.
Securities Authorized for Issuance Under Equity Compensation Plans
None.
RECENT SALES OF UNREGISTERED SECURITIES
Reference is made to Item 3.02 of this Report for a description of recent sales of unregistered securities, which is hereby incorporated by reference.
DESCRIPTION OF SECURITIES
The following information describes our capital stock and provisions of our articles of incorporation and our bylaws, all as in effect upon the Closing of the Exchange Transaction. This description is only a summary. You should also refer to our articles of incorporation and bylaws which have been incorporated by reference or filed with the Securities and Exchange Commission as exhibits to this Report.
General
Our authorized capital stock consists of (i) 120,000,000 shares of Class A common stock, at a par value of $0.001 per share, of which 118,177,885 shares of Class A common stock are issued and outstanding subsequent to the Closing of the Exchange Transaction, (ii) 3,750,000 shares of Class B common stock, at a par value of $0.001 per share, of which 4,447 shares of Class B common stock are issued and outstanding subsequent to the Closing of the Exchange Transaction, and (iii) 5,000,000 shares of Preferred Stock at a par value of $.001 per share, none of which shares are issued or outstanding are issued and outstanding subsequent to the Closing of the Exchange Transaction.
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Class A Common Stock
Holders of Class A common stock are entitled to one vote for each share on all matters submitted to a shareholder vote. Holders of Class A common stock do not have cumulative voting rights. Subject to preferences that may be applicable to any then-outstanding preferred stock, holders of Class A common stock are entitled to share in all dividends that the board of directors, in its discretion, declares from legally available funds. In the event of our liquidation, dissolution or winding up, subject to preferences that may be applicable to any then-outstanding preferred stock, each outstanding share entitles its holder to participate in all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over Class A common stock.
Holders of Class A common stock have no conversion, preemptive or other subscription rights, and there are no redemption or sinking fund provisions applicable to Class A common stock. The rights of the holders of Class A common stock are subject to any rights that may be fixed for holders of preferred stock, when and if any preferred stock is authorized and issued. All outstanding shares of Class A common stock are duly authorized, validly issued, fully paid and non-assessable.
Class B Common Stock
Holders of Class B common stock are entitled to five votes for each share on all matters submitted to a shareholder vote. Each share of Class B is convertible into one share of Class A common stock upon notice of the holder.
Preferred Stock
We have authorized 5,000,000 shares of Preferred Stock at a par value of $.001 per share. None of our authorized Preferred Stock are issued or outstanding.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
As previously disclosed on our Current Report on Form 8-K filed with the SEC on October 16, 2020, RBSM LLP was dismissed as our independent accountant, effective October 13, 2020. On October 13, 2020, we engaged Michael T Studer CPA P.C. as our new independent registered public accounting firm. There were no disagreements (as that term is used in Item 304(a)(1)(iv) of Regulation S-K) or reportable events (as described in Item 304(a)(1)(v) of Regulation S-K) in connection with such changes in accountants.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The NYBCL permits a corporation to indemnify its current and former directors and officers against expenses, judgments, fines and amounts paid in connection with a legal proceeding. To be indemnified, the person must have acted in good faith and in a manner the person reasonably believed to be in, and not opposed to, the best interests of the corporation. With respect to any criminal action or proceeding, the person must not have had reasonable cause to believe the conduct was unlawful.
The NYBCL permits a present or former director or officer of a corporation to be indemnified against certain expenses if the person has been successful, on the merit or otherwise, in defense of any proceeding brought against such person by virtue of the fact that the person is or was an officer or director of the corporation. In addition, the NYBCL permits the advancement of expenses relating to the defense of any proceeding to directors and officers contingent upon the person's commitment to repay advances for expenses in the case he or she is ultimately found not to be entitled to be indemnified.
The NYBCL provides that the indemnification provisions contained in the NYBCL are not exclusive of any other right that a person seeking indemnification may have or later acquire under any provision of a corporation's certification of incorporation or by-laws, or, when authorized by the corporation's certificate of incorporation or by-laws, by any agreement, by any vote of shareholders or disinterested directors or otherwise. The NYBCL also provides that a corporation may maintain insurance, at its expense, to protect its directors and officers in instances in which they may not otherwise be indemnified by the corporation under the provisions of the NYBCL provided the contract of insurance covering the directors and officers provides, in a manner acceptable to the New York superintendent of insurance, for a retention amount and for co-insurance.
| 53 |
Our charter and bylaws do not provide for indemnification for our officers and directors.
In connection with the Exchange Transaction, we have entered into an indemnification agreement with each of our officers and director, which provides for indemnification for our current \ directors and officers against expenses, judgments, fines and amounts paid in connection with a legal proceeding to the fullest extent permitted by the NYBCL. These indemnification agreements are attached hereto as Exhibits 10.12, 10.13, 10.14 and 10.15, and are incorporated herein by reference.
Item 3.02. Unregistered Sale of Equity Securities
As more fully described in Item 2.01 above, in connection with the Exchange Agreement, on the Closing Date, we issued a total of 117,000,000 shares of our Class A common stock to the Selling Stockholders in exchange for 100% of the capital stock of Platinum. Reference is made to the disclosures set forth under Items 1.01 and 2.01 of this Report, which disclosures are incorporated herein by reference. The issuance of the Class A common stock to the Selling Stockholders pursuant to the Exchange Agreement was exempt from registration under the Securities Act pursuant to Section 4(2) and Regulation D and Regulation S thereof. We made this determination based on the representations of the Selling Stockholders which included, in pertinent part, that each shareholder was an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, and that each shareholder was acquiring our Class A common stock, for investment purposes for its own account and not as nominee or agent, and not with a view to the resale or distribution thereof, and that each shareholder understood that the shares of our Class A common stock may not be sold or otherwise disposed of without registration under the Securities Act or an applicable exemption therefrom.
Item 5.06. Change in Shell Company Status.
Reference is made to the voluntary share exchange transaction under the Exchange Agreement, as described in Item 1.01, which is incorporated herein by reference. From and after the Closing Date of the transactions under these agreements, our primary operations consist of the business and operations of Platinum and Yubo. Accordingly, we are disclosing information about Platinum and Yubo’s business, financial condition, and management in this Report.
Item 9.01. Financial Statements and Exhibits.
Reference is made to the voluntary share exchange transaction under the Exchange Agreement, as described in Item 2.01, which is incorporated herein by reference. As a result of the closing of the voluntary share exchange transaction, our primary operations consist of the business and operations of Platinum and Yubo. Accordingly, we are presenting the financial statements of Platinum and its subsidiaries and variable interest entity Yubo as of and for the years ended December 31, 2019 and 2018 and the unaudited consolidated financial statements of Platinum and its subsidiaries and variable interest entity Yubo as of and for the nine months ended September 30, 2020 and 2019, after giving effect to the acquisition of Yubo by Platinum.
| (a) | Financial Statements of the Business Acquired |
The audited consolidated financial statements of Platinum and its subsidiaries and variable interest entity Yubo as of and for the years ended December 31, 2019 and 2018 and the unaudited consolidated financial statements of Platinum and its subsidiaries and variable interest entity Yubo as of and for the nine months ended September 30, 2020, including the notes to such financial statements, are incorporated herein by reference to Exhibits 99.1.
| (b) | Pro Forma Financial Information |
The pro forma financial statements of the Registrant and its subsidiaries and variable interest entity Yubo as of and for the nine months ended September 30, 2020 and the year ended December 31, 2019, including the notes to such financial statements, are incorporated by reference to Exhibits 99.2 of this Report.
| (c) | Shell Company Transactions |
Reference is made to Items 9.01(a) and 9.01(b) above and the exhibits referred to therein, which are incorporated herein by reference.
| 54 |
| (d) | Exhibits |
Exhibit
_________
* Filed Herewith
+ Portions of this exhibit containing personally identifiable information have been redacted.
| 55 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Yubo International Biotech Limited |
| ||
|
| |||
| Dated: January 14, 2021 | By: | /s/ Jun Wang |
|
| Name: Jun Wang |
| ||
| Title: President and Chief Executive Officer |
| ||
| 56 |
EXHIBIT 2.1
AGREEMENT AND PLAN OF SHARE EXCHANGE
THIS AGREEMENT AND PLAN OF SHARE EXCHANGE (this “Agreement”) is made this 14th day of January, 2021 (the “Effective Date”), by and among YUBO INTERNATIONAL BIOTECH LIMITED (f/k/a Magna-Lab, Inc.), a New York corporation (“Pubco”), on the one hand, and YUBO INTERNATIONAL BIOTECH (BEIJING) LIMITED, a company organized under the laws of the People’s Republic of China (“Platinum Beijing”), PLATINUM INTERNATIONAL BIOTECH CO., LTD., a company organized under the laws of the Cayman Islands (the “Company”), and the shareholders of the Company as set forth on Exhibit A attached hereto (the “Selling Shareholders”), on the other hand.
BACKGROUND:
A. The respective board of directors of Pubco and the Company have determined that an acquisition of the Company’s outstanding shares by Pubco through a voluntary share exchange with the Selling Shareholders (the “Exchange”), upon the terms and subject to the conditions set forth in this Agreement, would be fair and in the best interests of their respective shareholders, and such boards of directors have approved such Exchange, pursuant to which shares of capital stock of the Company issued and outstanding immediately prior to the Effective Time (as defined in Section 1.04) and all securities convertible or exchangeable into capital stock of the Company (the “Shares”) will be exchanged (including by reservation for future issuances) for the right to receive shares of common stock of Pubco (the “Exchange Shares”) representing at Closing (as hereinafter defined) no less than 99.0% of the issued and outstanding shares of Pubco.
B. Pubco, Platinum Beijing, the Company and the Selling Shareholders, desire to make certain representations, warranties, covenants and agreements in connection with the Exchange and also to prescribe various conditions to the Exchange.
C. For federal income tax purposes, the parties intend that the Exchange shall qualify as a reorganization under the provisions of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the “Code”).
NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the parties agree as follows:
ARTICLE I
THE EXCHANGE
1.01 Share Exchange. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the Consolidated Laws of New York, Business Corporation (“New York Statutes”), at the Closing, the parties shall do the following:
(a) The Selling Shareholders will sell, convey, assign, and transfer the Shares to Pubco by delivering to Pubco a stock certificate issued in the name of Pubco evidencing the Shares (the “Shares Certificate”). The Shares transferred to Pubco at the Closing shall constitute 100% of the issued and outstanding equity interests of the Company; and
(b) As consideration for its acquisition of the Shares, Pubco shall issue the Exchange Shares to the Selling Shareholders by delivering share certificates registered in the name of the Selling Shareholders, or their nominees, evidencing the Exchange Shares (the “Exchange Shares Certificates”) in such percentages attributable to each Selling Shareholder as set forth on Exhibit A hereto. The Exchange Shares issued shall equal no less than 99.0% of the outstanding shares of Pubco’s common stock at the time of Closing.
| 1 |
(c) For federal income tax purposes, the Exchange is intended to constitute a “reorganization” within the meaning of Section 368 of the Code, and the parties shall report the transactions contemplated by this Agreement consistent with such intent and shall take no position in any Tax filing or legal proceeding inconsistent therewith. The parties to this Agreement hereby adopt this Agreement as a “plan of reorganization” within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations. None of Pubco, the Company, Platinum Beijing or the Selling Shareholders have taken or failed to take, and after the Effective Time, Pubco shall not take or fail to take, any action which reasonably could be expected to cause the Exchange to fail to qualify as a “reorganization” within the meaning of Section 368(a) of the Code.
1.02 Effect of the Exchange. The Exchange shall have the effects set forth in the applicable provisions of the New York Statutes.
1.03 Closing. Subject to the satisfaction or waiver of the conditions set forth in Article V, the closing of the Exchange (the “Closing”) will take place at 10:00 a.m. U.S. Pacific Standard Time on the Effective Date (or as soon as practicable thereafter following satisfaction or waiver of the conditions set forth in Article V) (the “Closing Date”), at the offices of Greenberg Traurig, LLP, 1201 K Street, Suite 1100, Sacramento, California, unless another date, time or place is agreed to in writing by the parties hereto.
1.04 Effective Time of Exchange. As soon as practicable following the satisfaction or waiver of the conditions set forth in Article V, the parties shall make all filings or recordings required under New York Statutes and Hong Kong law. The Exchange shall become effective at such time as is permissible in accordance with New York Statutes and Hong Kong law (the time the Exchange becomes effective being the “Effective Time”). Pubco and the Company shall use reasonable efforts to have the Closing Date and the Effective Time to be the same day.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.01 Representations and Warranties of the Company. Except as set forth in the disclosure schedule delivered by the Company to Pubco at the time of execution of this Agreement (the “Company Disclosure Schedule”), the Company, Platinum Beijing and their respective subsidiaries, and Selling Shareholders, jointly and severally, represent and warrant to Pubco as follows:
(a) Organization, Standing and Corporate Power. The Company, and its respective subsidiaries, including Yubo International Biotech (Chengdu) Limited, a wholly foreign owned enterprise organized under the laws of the People’s Republic of China (“PRC Sub”), Platinum International Biotech (Hong Kong) Limited, a company organized under the laws of Hong Kong (“Platinum Hong Kong”) and Platinum Beijing (collectively referred to herein as the “Existing Company Entities”) are each duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable) and has the requisite corporate power and authority and all government licenses, authorizations, permits, consents and approvals required to own, lease and operate its properties and carry on its business as now being conducted. Each Existing Company Entity is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of their respective businesses or the ownership or leasing of their respective properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed (individually or in the aggregate) would not have a material adverse effect (as defined in Section 8.02).
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(b) Subsidiaries. Except for Platinum Beijing, Platinum Hong Kong and PRC Sub, the Company does not own directly or indirectly, any equity or other ownership interest in any company, corporation, partnership, joint venture or otherwise.
(c) Capital Structure. The number of shares and type of all authorized, issued and outstanding capital stock of the Company, Platinum Beijing, Platinum Hong Kong and PRC Sub, and all shares of capital stock reserved for issuance under the Company’s various option and incentive plans is specified on Schedule 2.01(c). Except as set forth in Schedule 2.01(c), no shares of capital stock or other equity securities of the Existing Company Entities are issued, reserved for issuance or outstanding. All outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. There are no outstanding bonds, debentures, notes or other indebtedness or other securities of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters. Except as set forth in Schedule 2.01(c), there are no outstanding securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which the Existing Company Entities are a party or by which they are bound obligating any Existing Company Entity to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity or voting securities of the Company or obligating the Company to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. There are no outstanding contractual obligations, commitments, understandings or arrangements of the Company to repurchase, redeem or otherwise acquire or make any payment in respect of any shares of capital stock of the Company. There are no agreements or arrangements pursuant to which the Company is or could be required to register shares of Company common stock or other securities under the Securities Act of 1933, as amended and the rules and regulations promulgated thereunder (the “Securities Act”) or other agreements or arrangements with or among any security holders of the Company with respect to securities of the Company.
(d) Corporate Authority; Noncontravention. The Selling Shareholders and each Existing Company Entity have all requisite corporate and other power and authority to enter into this Agreement and to consummate the Exchange. On or prior to Closing, the execution and delivery of this Agreement by each Existing Company Entity and the consummation by each of them of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of each Existing Company Entity. This Agreement has been duly executed and when delivered by the Selling Shareholders and each Existing Company Entity, shall constitute a valid and binding obligation of the Selling Shareholders and each such Existing Company Entity, enforceable against the Selling Shareholders and each such Existing Company Entity and its shareholders, as applicable, in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors’ rights generally or by general principles of equity. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions hereof will not, conflict with, or result in any breach or violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of or “put” right with respect to any obligation or to a loss of a material benefit under, or result in the creation of any lien upon any of the properties or assets of the Existing Company Entities under, (i) the certificate or articles of incorporation, bylaws or other organizational or charter documents of any of the Existing Company Entities, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to any of the Existing Company Entities, their properties or assets, or (iii) subject to the governmental filings and other matters referred to in the following sentence, any judgment, order, decree, statute, law, ordinance, rule, regulation or arbitration award applicable to the Existing Company Entities, their properties or assets, other than, in the case of clauses (ii) and (iii), any such conflicts, breaches, violations, defaults, rights, losses or liens that individually or in the aggregate could not have a material adverse effect with respect to the Existing Company Entities or could not prevent, hinder or materially delay the ability of the Existing Company Entities to consummate the transactions contemplated by this Agreement.
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(e) Governmental Authorization. No consent, approval, order or authorization of, or registration, declaration or filing with, or notice to, any United States, People’s Republic of China (“PRC”) or Hong Kong court, administrative agency or commission, or other federal, state or local government or other governmental authority, agency, domestic or foreign (each, a “Governmental Entity”), is required by or with respect to the Selling Shareholders or the Existing Company Entities in connection with the execution and delivery of this Agreement by the Selling Shareholders or the Existing Company Entities or the consummation by the Selling Shareholders or the Existing Company Entities of the transactions contemplated hereby, except, with respect to this Agreement, any filings under the Securities Act or Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange Act”) and any registrations, notices or filings required to be made in order to comply with the currency and exchange control requirements imposed by the Chinese and Hong Kong governments and/or PRC or Hong Kong law, if any.
(f) Financial Statements.
(i) Pubco has received a copy of the unaudited consolidated financial statements of the Existing Company Entities for the fiscal years ended December 31, 2018 and 2019 and unaudited financial statements for the nine months ended September 30, 2020 (collectively, the “Financial Statements”). The Financial Statements fairly present the financial condition of the Existing Company Entities at the dates indicated and the results of their operations and cash flows for the periods then ended and, except as indicated therein, reflect all claims against, debts and liabilities of the Existing Company Entities, fixed or contingent, and of whatever nature.
(ii) Since September 30, 2020 (the “Balance Sheet Date”), there has been no material adverse change in the assets or liabilities, or in the business or condition, financial or otherwise, or in the results of operations or prospects, of the Existing Company Entities, whether as a result of any legislative or regulatory change, revocation of any license or rights to do business, fire, explosion, accident, casualty, labor trouble, flood, drought, riot, storm, condemnation, act of God, public force or otherwise and no material adverse change in the assets or liabilities, or in the business or condition, financial or otherwise, or in the results of operation or prospects, of the Existing Company Entities except in the ordinary course of business.
(iii) Since the Balance Sheet Date, the Existing Company Entities have not suffered any damage, destruction or loss of physical property (whether or not covered by insurance) affecting its condition (financial or otherwise) or operations (present or prospective), nor have the Existing Company Entities except as disclosed in writing to Pubco, issued, sold or otherwise disposed of, or agreed to issue, sell or otherwise dispose of, any capital stock or any other security of the Existing Company Entities and have not granted or agreed to grant any option, warrant or other right to subscribe for or to purchase any capital stock or any other security of the Existing Company Entities or have incurred or agreed to incur any indebtedness for borrowed money.
(g) Absence of Certain Changes or Events. Except as set forth on Schedule 2.01(g), since the Balance Sheet Date, the Existing Company Entities have conducted their business only in the ordinary course consistent with past practice, and there is not and has not been any:
(i) material adverse change with respect to the Existing Company Entities;
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(ii) condition, event or occurrence which could reasonably be expected to prevent, hinder or materially delay the ability of the Existing Company Entities to consummate the transactions contemplated by this Agreement;
(iii) incurrence, assumption or guarantee by the Existing Company Entities of any indebtedness for borrowed money other than in the ordinary course and in amounts and on terms consistent with past practices or as disclosed to Pubco in writing;
(iv) creation or other incurrence by the Company of any lien on any asset other than in the ordinary course consistent with past practices;
(v) transaction or commitment made, or any contract or agreement entered into, by the Existing Company Entities relating to their assets or business (including the acquisition or disposition of any assets) or any relinquishment by the Existing Company Entities of any contract or other right, in either case, material to the Existing Company Entities, other than transactions and commitments in the ordinary course consistent with past practices and those contemplated by this Agreement;
(vi) labor dispute, other than routine, individual grievances, or, to the knowledge of the Existing Company Entities, any activity or proceeding by a labor union or representative thereof to organize any employees of any Existing Company Entity or any lockouts, strikes, slowdowns, work stoppages or threats by or with respect to such employees;
(vii) payment, prepayment or discharge of liability other than in the ordinary course of business or any failure to pay any liability when due;
(viii) write-offs or write-downs of any assets of the Existing Company Entities;
(ix) creation, termination or amendment of, or waiver of any right under, any material contract of the Existing Company Entities;
(x) damage, destruction or loss having, or reasonably expected to have, a material adverse effect on the Existing Company Entities;
(xi) other condition, event or occurrence which individually or in the aggregate could reasonably be expected to have a material adverse effect or give rise to a material adverse change with respect to the Existing Company Entities; or
(xii) agreement or commitment to do any of the foregoing.
(h) Certain Fees. No brokerage or finder’s fees or commissions are or will be payable by the Existing Company Entities to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other person with respect to the transactions contemplated by this Agreement.
(i) Litigation; Labor Matters; Compliance with Laws.
(i) There is no suit, action or proceeding or investigation pending or, to the knowledge of each of the Existing Company Entities, threatened against or affecting any of the Existing Company Entities or any basis for any such suit, action, proceeding or investigation that, individually or in the aggregate, could reasonably be expected to have a material adverse effect with respect to the Existing Company Entities or prevent, hinder or materially delay the ability of the Existing Company Entities to consummate the transactions contemplated by this Agreement, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against the Existing Company Entities having, or which, insofar as reasonably could be foreseen by the Existing Company Entities, in the future could have, any such effect.
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(ii) Each of the Existing Company Entities is not a party to, or bound by, any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor is it the subject of any proceeding asserting that it has committed an unfair labor practice or seeking to compel it to bargain with any labor organization as to wages or conditions of employment nor is there any strike, work stoppage or other labor dispute involving it pending or, to its knowledge, threatened, any of which could have a material adverse effect with respect to such Existing Company Entity.
(iii) The conduct of the business of the Existing Company Entities complies with all statutes, laws, regulations, ordinances, rules, judgments, orders, decrees or arbitration awards applicable thereto.
(j) Benefit Plans. Except as disclosed to Pubco in writing, each of the Existing Company Entities is not a party to any Benefit Plan under which such Existing Company Entity currently has an obligation to provide benefits to any current or former employee, officer or director of the Existing Company Entity. As used herein, “Benefit Plan” shall mean any employee benefit plan, program, or arrangement of any kind, including any defined benefit or defined contribution plan, stock ownership plan, executive compensation program or arrangement, bonus plan, incentive compensation plan or arrangement, profit sharing plan or arrangement, deferred compensation plan, agreement or arrangement, supplemental retirement plan or arrangement, vacation pay, sickness, disability, or death benefit plan (whether provided through insurance, on a funded or unfunded basis, or otherwise), medical or life insurance plan providing benefits to employees, retirees, or former employees or any of their dependents, survivors, or beneficiaries, employee stock option or stock purchase plan, severance pay, termination, salary continuation, or employee assistance plan.
(k) Certain Employee Payments. No Existing Company Entity is a party to any employment agreement which could result in the payment to any current, former or future director or employee of the Existing Company Entities of any money or other property or rights or accelerate or provide any other rights or benefits to any such employee or director as a result of the transactions contemplated by this Agreement, whether or not (i) such payment, acceleration or provision would constitute a “parachute payment” (within the meaning of Section 280G of the Code), or (ii) some other subsequent action or event would be required to cause such payment, acceleration or provision to be triggered.
(l) Tax Returns and Tax Payments.
(i) The Existing Company Entities have timely filed with the appropriate taxing authorities all Tax Returns required to be filed by them (taking into account all applicable extensions). All such Tax Returns are true, correct and complete in all respects. All Taxes due and owing by the Existing Company Entities have been paid (whether or not shown on any Tax Return and whether or not any Tax Return was required). The Existing Company Entities are not currently beneficiaries of any extension of time within which to file any Tax Return or pay any Tax. No claim has ever been made in writing or otherwise addressed to the Existing Company Entities by a taxing authority in a jurisdiction where the Existing Company Entities do not file Tax Returns that they are or may be subject to taxation by that jurisdiction. The unpaid Taxes of the Existing Company Entities did not, as of the Balance Sheet Date, exceed the reserve for Tax liability (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Financial Statements (rather than in any notes thereto). Since the Balance Sheet Date, the Existing Company Entities have not incurred any liability for Taxes outside the ordinary course of business consistent with past custom and practice. As of the Closing Date, the unpaid Taxes of the Existing Company Entities will not exceed the reserve for Tax liability (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the books and records of the Existing Company Entities.
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(ii) No material claim for unpaid Taxes has been made or become a lien against the property of any of the Existing Company Entities or is being asserted against any of the Existing Company Entities, no audit of any Tax Return of any of the Existing Company Entities is being conducted by a tax authority, and no extension of the statute of limitations on the assessment of any Taxes has been granted by any of the Existing Company Entities and is currently in effect. The Existing Company Entities have withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party.
(iii) As used herein, “Taxes” shall mean all taxes of any kind, including, without limitation, those on or measured by or referred to as income, gross receipts, sales, use, ad valorem, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium value added, property or windfall profits taxes, customs, duties or similar fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any governmental authority, domestic or foreign. As used herein, “Tax Return” shall mean any return, report or statement required to be filed with any governmental authority with respect to Taxes.
(m) Environmental Matters. The Existing Company Entities are in compliance with all Environmental Laws in all material respects. The Existing Company Entities have not received any written notice regarding any violation of any Environmental Laws, including any investigatory, remedial or corrective obligations. Each of the Existing Company Entities holds all permits and authorizations required under applicable Environmental Laws, unless the failure to hold such permits and authorizations would not have a material adverse effect on such Existing Company Entity, and are is compliance with all terms, conditions and provisions of all such permits and authorizations in all material respects. No releases of Hazardous Materials have occurred at, from, in, to, on or under any real property currently or formerly owned, operated or leased by any of the Existing Company Entities or any predecessor thereof and no Hazardous Materials are present in, on, about or migrating to or from any such property which could result in any liability to the Existing Company Entities. The Existing Company Entities have not transported or arranged for the treatment, storage, handling, disposal, or transportation of any Hazardous Material to any off-site location which could result in any liability to any Existing Company Entities. The Existing Company Entities have no liability, absolute or contingent, under any Environmental Law that if enforced or collected would have a material adverse effect on the Existing Company Entities. There are no past, pending or threatened claims under Environmental Laws against any of the Existing Company Entities and none of the Existing Company Entities is aware of any facts or circumstances that could reasonably be expected to result in a liability or claim against the Existing Company Entities pursuant to Environmental Laws. “Environmental Laws” means all applicable foreign, federal, state and local statutes, rules, regulations, ordinances, orders, decrees and common law relating in any manner to contamination, pollution or protection of human health or the environment, and similar state laws. “Hazardous Material” means any toxic, radioactive, corrosive or otherwise hazardous substance, including petroleum, its derivatives, by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics, which in any event is regulated under any Environmental Law.
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(n) Material Agreements.
(i) Schedule 2.01(n) lists the following contracts and other agreements (“Material Agreements”) to which the Existing Company Entities are a party: (a) any agreement (or group of related agreements) for the lease of real or personal property, including capital leases, to or from any person providing for annual lease payments in excess of $25,000; (b) any licensing agreement, or any agreement forming a partnership, strategic alliances, profit sharing or joint venture; (c) any agreement (or group of related agreements) under which it has created, incurred, assumed, or guaranteed any indebtedness for borrowed money in excess of $25,000, or under which a security interest has been imposed on any of its assets, tangible or intangible; (d) any profit sharing, stock option, stock purchase, stock appreciation, deferred compensation, severance, or other material plan or arrangement for the benefit of its current or former officers and managers or any of the Existing Company Entities’ employees; (e) any employment or independent contractor agreement providing annual compensation in excess of $25,000 or providing post-termination or severance payments or benefits or that cannot be cancelled without more than 30 days’ notice; (f) any agreement with any current or former officer, director, shareholder or affiliate of the Existing Company Entities; (g) any agreements relating to the acquisition (by merger, purchase of stock or assets or otherwise) by the Existing Company Entities of any operating business or material assets or the capital stock of any other person; (h) any agreements for the sale of any of the assets of the Existing Company Entities, other than in the ordinary course of business; (i) any outstanding agreements of guaranty, surety or indemnification, direct or indirect, by the Existing Company Entities; (j) any royalty agreements, licenses or other agreements relating to Intellectual Property (excluding licenses pertaining to “off-the-shelf” commercially available software used pursuant to shrink-wrap or click-through license agreements on reasonable terms for a license fee of no more than $10,000); and (k) any other agreement under which the consequences of a default or termination could reasonably be expected to have a material adverse effect on the Existing Company Entities.
(ii) The Existing Company Entities have made available to Pubco either an original or a correct and complete copy of each written Material Agreement. Except as set forth on Schedule 2.01(n), with respect to each Material Agreement to which the Existing Company are a party thereto: (a) the agreement is the legal, valid, binding, enforceable obligation of the Existing Company Entities and is in full force and effect in all material respects, subject to bankruptcy and equitable remedies exceptions; (b)(X) the Existing Company Entities are not in material breach or default thereof, and (Y) no event has occurred which, with notice or lapse of time, would constitute a material breach or default of, or permit termination, modification, or acceleration under, the Material Agreement; and (c) the Existing Company Entities have not repudiated any material provision of the agreement.
(o) Accounts Receivable. All of the accounts receivable of each of the Existing Company Entities that are reflected on the Financial Statements or the accounting records of such Existing Company Entity as of the Closing Date (collectively, the “Accounts Receivable”) represent or will represent valid obligations arising from sales actually made or services actually performed in the ordinary course of business and are not subject to any defenses, counterclaims, or rights of set off other than those arising in the ordinary course of business and for which adequate reserves have been established. The Accounts Receivable are fully collectible to the extent not reserved for on the balance sheet on which they are shown.
(p) Properties and Tangible Assets.
(i) Each Existing Company Entity has valid land use rights for all real property that is material to its business and good, clear and marketable title to all the tangible properties and tangible assets reflected in the latest balance sheet as being owned by such Existing Company Entity or acquired after the date thereof which are, individually or in the aggregate, material to such Existing Company Entity’s business (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business), free and clear of all material liens, encumbrances, claims, security interest, options and restrictions of any nature whatsoever. Any real property and facilities held under lease by any Existing Company Entity are held by them under valid, subsisting and enforceable leases of which such Existing Company Entity is in compliance, except as could not, individually or in the aggregate, have or reasonably be expected to result in a material adverse effect.
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(ii) Each Existing Company Entity has good and marketable title to, or in the case of leased property, a valid leasehold interest in, the office space, computers, equipment and other material tangible assets which are material to its business. Except as set forth on Schedule 2.01(p), each such tangible asset is in all material respects in good operating condition and repair (subject to normal wear and tear), is suitable for the purposes for which it presently is used, and, except as to leased assets, free and clear of any and all security interests. None of the Existing Company Entities have any knowledge of any dispute or claim made by any other person concerning such right, title and interest in such tangible assets.
(q) Intellectual Property.
(i) As used in this Agreement, “Intellectual Property” means all right, title and interest in or relating to all intellectual property, whether protected, created or arising under the laws of the United States or any other jurisdiction or under any international convention, including, but not limited to the following: (a) service marks, trademarks, trade names, trade dress, logos and corporate names (and any derivations, modifications or adaptations thereof), Internet domain names and Internet websites (and content thereof), together with the goodwill associated with any of the foregoing, and all applications, registrations, renewals and extensions thereof (collectively, “Marks”); (b) patents and patent applications, including all continuations, divisionals, continuations-in-part and provisionals and patents issuing thereon, and all reissues, reexaminations, substitutions, renewals and extensions thereof (collectively, “Patents”); (c) copyrights, works of authorship and moral rights, and all registrations, applications, renewals, extensions and reversions thereof (collectively, “Copyrights”); (d) confidential and proprietary information, trade secrets and non-public discoveries, concepts, ideas, research and development, technology, know-how, formulae, inventions (whether or not patentable and whether or not reduced to practice), compositions, processes, techniques, technical data and information, procedures, designs, drawings, specifications, databases, customer lists, supplier lists, pricing and cost information, and business and marketing plans and proposals, in each case excluding any rights in respect of any of the foregoing that comprise or are protected by Patents (collectively, “Trade Secrets”); and (e) Technology. For purposes of this Agreement, “Technology” means all Software, information, designs, formulae, algorithms, procedures, methods, techniques, ideas, know-how, research and development, technical data, programs, subroutines, tools, materials, specifications, processes, inventions (whether or not patentable and whether or not reduced to practice), apparatus, creations, improvements and other similar materials, and all recordings, graphs, drawings, reports, analyses, and other writings, and other embodiments of any of the foregoing, in any form or media whether or not specifically listed herein. Further, for purposes of this Agreement, “Software” means any and all computer programs, whether in source code or object code; databases and compilations, whether machine readable or otherwise; descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing; and all documentation, including user manuals and other training documentation, related to any of the foregoing.
(ii) Schedule 2.01(q) sets forth a list and description of the Intellectual Property required for the Existing Company Entities to operate, or used or held for use by the Existing Company Entities, in the operation of its business, including, but not limited to (a) all issued Patents and pending Patent applications, registered Marks, pending applications for registration of Marks, unregistered Marks, registered Copyrights of the Existing Company Entities and the record owner, registration or application date, serial or registration number, and jurisdiction of such registration or application of each such item of Intellectual Property, (b) all Software developed by or for the Existing Company Entities and (c) any Software not exclusively owned by the Existing Company Entities and incorporated, embedded or bundled with any Software listed in clause (b) above (except for commercially available software and so-called “shrink wrap” software licensed to the Existing Company Entities on reasonable terms through commercial distributors or in consumer retail stores for a license fee of no more than $10,000).
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(iii) The Existing Company Entities are the exclusive owner of or has a valid and enforceable right to use all Intellectual Property listed for the Existing Company Entities in Schedule 2.01(q) (and any other Intellectual Property required to be listed in Schedule 2.01(q)) as the same are used, sold, licensed and otherwise commercially exploited by the Existing Company Entities, free and clear of all liens, security interests, encumbrances or any other obligations to others, and no such Intellectual Property has been abandoned. The Intellectual Property owned by the Existing Company Entities and the Intellectual Property licensed to them pursuant to valid and enforceable written license agreements include all of the Intellectual Property necessary and sufficient to enable the Existing Company Entities to conduct its business in the manner in which such business is currently being conducted. The Intellectual Property owned by the Existing Company Entities and its rights in and to such Intellectual Property are valid and enforceable.
(iv) The Existing Company Entities have not received, and are not aware of, any written or oral notice of any reasonable basis for an allegation against the Existing Company Entities of any infringement, misappropriation, or violation by the Existing Company Entities of any rights of any third party with respect to any Intellectual Property, and the Existing Company Entities are not aware of any reasonable basis for any claim challenging the ownership, use, validity or enforceability of any Intellectual Property owned, used or held for use by the Existing Company Entities. The Existing Company Entities do not have any knowledge (a) of any third-party use of any Intellectual Property owned by or exclusively licensed to the Existing Company Entities, (b) that any third-party has a right to use any such Intellectual Property, or (c) that any third party is infringing, misappropriating, or otherwise violating (or has infringed, misappropriated or violated) any such Intellectual Property.
(v) The Existing Company Entities have not infringed, misappropriated or otherwise violated any Intellectual Property rights of any third parties, and the Existing Company Entities are not aware of any infringement, misappropriation or violation of any third party rights which will occur as a result of the continued operation of the Existing Company Entities as presently operated and/or the consummation of the transaction contemplated by this Agreement.
(vi) Each Existing Company Entity has taken adequate security measures to protect the confidentiality and value of its Trade Secrets (and any confidential information owned by a third party to whom the Company has a confidentiality obligation).
(vii) The consummation of the transactions contemplated by this Agreement will not adversely affect the right of the Existing Company Entities to own or use any Intellectual Property owned, used or held for use by them.
(viii) All necessary registration, maintenance, renewal and other relevant filing fees in connection with any of the Intellectual Property owned by the Existing Company Entities and listed (or required to be listed) on Schedule 2.01(q) have been timely paid and all necessary registrations, documents, certificates and other relevant filings in connection with such Intellectual Property have been timely filed with the relevant governmental authorities in the United States or foreign jurisdictions, as the case may be, for the purpose of maintaining such Intellectual Property and all issuances, registrations and applications therefor. There are no annuities, payments, fees, responses to office actions or other filings necessary to be made and having a due date with respect to any such Intellectual Property within ninety (90) days after the date of this Agreement.
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(r) Board Recommendation. The board of directors of the Company has unanimously determined that the terms of the Exchange are fair to and in the best interests of the sole stockholder of the Company and recommended that the Selling Shareholders approve the Exchange.
(s) Compliance with Anti-Corruption Laws. None of the Existing Company Entities nor to the knowledge of the Existing Company Entities, any director, officer, agent, employee or other person acting on behalf of the Existing Company Entities has, in the course of its actions for, or on behalf of, the Existing Company Entities (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any applicable Hong Kong or PRC laws; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.
(t) OFAC. None of the Existing Company Entities, nor to the knowledge of the Existing Company Entities, any director, officer, agent, employee, affiliate or person acting on behalf of the Existing Company Entities, is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department.
(u) Undisclosed Liabilities. Each of the Existing Company Entities has no liabilities or obligations of any nature (whether fixed or unfixed, secured or unsecured, known or unknown and whether absolute, accrued, contingent, or otherwise) except for liabilities or obligations reflected or reserved against in the Financial Statements incurred in the ordinary course of business or such liabilities or obligations disclosed in Schedule 2.01(g).
(v) Money Laundering Laws. The operations of the Existing Company Entities are and have been conducted at all times in compliance with the money laundering statutes of applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any applicable governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Existing Company Entities with respect to the Money Laundering Laws is pending or, to the best knowledge of the Existing Company Entities, threatened.
(w) Other Representations and Warranties Relating to Platinum Beijing.
(i) All material consents, approvals, authorizations or licenses required under PRC law for the due and proper establishment and operation of Platinum Beijing have been duly obtained from the relevant PRC governmental authorities and are in full force and effect.
(ii) All filings and registrations with the PRC governmental authorities required in respect of Platinum Beijing and its capital structure and operations including, without limitation, the registration with the Ministry of Commerce, the State Administration of Industry and or their respective local divisions of Commerce, the State Administration of Foreign Exchange, tax bureau and customs authorities have been duly completed in accordance with the relevant PRC rules and regulations, except where, the failure to complete such filings and registrations does not, and would not, individually or in the aggregate, have a material adverse effect.
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(iii) Platinum Beijing has complied with all relevant PRC laws and regulations regarding the contribution and payment of its registered share capital, the payment schedule of which has been approved by the relevant PRC governmental authorities. There are no outstanding commitments made by the Company or any subsidiary to sell any equity interest in Platinum Beijing.
(iv) Platinum Beijing has not received any letter or notice from any relevant PRC governmental authority notifying it of revocation of any licenses or qualifications issued to it or any subsidy granted to it by any PRC governmental authority for non-compliance with the terms thereof or with applicable PRC laws, or the lack of compliance or remedial actions in respect of the activities carried out by Platinum Beijing, except such revocation as does not, and would not, individually or in the aggregate, have a material adverse effect.
(v) Platinum Beijing has conducted its business activities within the permitted scope of business or has otherwise operated its business in compliance with all relevant legal requirements and with all requisite licenses and approvals granted by competent PRC governmental authorities other than such non-compliance that do not, and would not, individually or in the aggregate, have a material adverse effect. As to licenses, approvals and government grants and concessions requisite or material for the conduct of any material part of Platinum Beijing’s business which is subject to periodic renewal, the Company has no knowledge of any reasons related to the Platinum Beijing for which such requisite renewals will not be granted by the relevant PRC governmental authorities.
(vi) With regard to employment and staff or labor, Platinum Beijing has complied with all applicable PRC laws and regulations in all material respects, including without limitation, laws and regulations pertaining to welfare funds, social benefits, medical benefits, insurance, retirement benefits, pensions or the like, other than such non-compliance that do not, and would not, individually or in the aggregate, have a material adverse effect.
(x) Ownership of Stock. The Selling Shareholders own all of the issued and outstanding shares of capital stock of the Company, free and clear of all liens, claims, rights, charges, encumbrances, and security interests of whatsoever nature or type.
(y) Full Disclosure. All of the representations and warranties made by the Existing Company Entities and Selling Shareholders in this Agreement, and all statements set forth in the certificates delivered by the Existing Company Entities at the Closing Date pursuant to this Agreement, are true, correct and complete in all material respects and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make such representations, warranties or statements, in light of the circumstances under which they were made, misleading. The copies of all documents furnished by the Existing Company Entities and Selling Shareholders pursuant to the terms of this Agreement are complete and accurate copies of the original documents. The schedules, certificates, and any and all other statements and information, whether furnished in written or electronic form, to Pubco or its representatives by or on behalf of any of the Existing Company Entities or their affiliates in connection with the negotiation of this Agreement and the transactions contemplated hereby do not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein not misleading.
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2.02 Representations and Warranties of Pubco. Except as set forth in the disclosure schedule delivered by Pubco to the Company at the time of execution of this Agreement (the “Pubco Disclosure Schedule”), Pubco represents and warrants to the Company, Platinum Beijing and the Selling Shareholders as follows:
(a) Organization, Standing and Corporate Power. Pubco is duly organized, validly existing and in good standing under the laws of the State of New York, and has the requisite corporate power and authority and all government licenses, authorizations, permits, consents and approvals required to own, lease and operate its properties and carry on its business as now being conducted. Pubco is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed (individually or in the aggregate) would not have a material adverse effect with respect to Pubco. Shares of common stock of Pubco, par value $0.001 (“Pubco Common Stock”), trade on the OTC Marketplace under the symbol “YBGJ.”
(b) Subsidiaries. Pubco does not own directly or indirectly, any equity or other ownership interest in any company, corporation, partnership, joint venture or otherwise.
(c) Capital Structure of Pubco. As of the date of this Agreement, the authorized capital stock of Pubco consists of (of (i) 120,000,000 shares of Class A common stock, at a par value of $0.001 per share, of which 117,875,323 shares of Class A common stock are issued and outstanding, (ii) 3,750,000 shares of Class B common stock, at a par value of $0.001 per share, of which 4,447 shares of Class B common stock are issued and outstanding, and (iii) 5,000,000 shares of Preferred Stock at a par value of $0.01 per share, none of which shares are issued or outstanding are issued and outstanding subsequent to the Closing of the Exchange Transaction. Except as set forth above, no shares of capital stock or other equity securities of Pubco are issued, reserved for issuance or outstanding. All outstanding shares of capital stock of Pubco are, and all shares which may be issued pursuant to this Agreement will be, when issued, duly authorized, validly issued, fully paid and nonassessable, not subject to preemptive rights, and issued in compliance with all applicable state and federal laws concerning the issuance of securities. Except as set forth above, there are no outstanding bonds, debentures, notes or other indebtedness or other securities of Pubco having the right to vote (or convertible into, or exchangeable for, securities having the right to vote). Except as set forth above, there are no outstanding securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which Pubco is a party or by which any of them is bound obligating Pubco to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity securities of Pubco or obligating Pubco to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity securities of Pubco or obligating Pubco to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. There are no outstanding contractual obligations, commitments, understandings or arrangements of Pubco or any of its subsidiaries to repurchase, redeem or otherwise acquire or make any payment in respect of any shares of capital stock of Pubco or any of its subsidiaries. There are no agreements or arrangements pursuant to which Pubco is or could be required to register shares of Pubco Common Stock or other securities under the Securities Act or other agreements or arrangements with or among any security holders of Pubco with respect to securities of Pubco.
(d) Corporate Authority; Noncontravention. Pubco has all requisite corporate and other power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by Pubco and the consummation by Pubco of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of Pubco. This Agreement has been duly executed and when delivered by Pubco, shall constitute a valid and binding obligation of Pubco, enforceable against Pubco in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors’ rights generally or by general principles of equity. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions of this Agreement will not, conflict with, or result in any breach or violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of or “put” right with respect to any obligation or to loss of a material benefit under, or result in the creation of any lien upon any of the properties or assets of Pubco under, (i) its articles of incorporation, bylaws or other charter documents of Pubco, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to Pubco, its properties or assets, or (iii) subject to the governmental filings and other matters referred to in the following sentence, any judgment, order, decree, statute, law, ordinance, rule, regulation or arbitration award applicable to Pubco, its properties or assets, other than, in the case of clauses (ii) and (iii), any such conflicts, breaches, violations, defaults, rights, losses or liens that individually or in the aggregate could not have a material adverse effect with respect to Pubco or could not prevent, hinder or materially delay the ability of Pubco to consummate the transactions contemplated by this Agreement.
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(e) Government Authorization. No consent, approval, order or authorization of, or registration, declaration or filing with, or notice to, any Governmental Entity, is required by or with respect to Pubco in connection with the execution and delivery of this Agreement by Pubco, or the consummation by Pubco of the transactions contemplated hereby, except, with respect to this Agreement, any filings under the New York Statutes, the Securities Act or the Exchange Act.
(f) SEC Documents; Undisclosed Liabilities. Pubco has timely filed all reports, schedules, forms, statements and other documents as required by the Securities and Exchange Commission (the “SEC”) and Pubco has delivered or made available to the Company all reports, schedules, forms, statements and other documents filed with the SEC (collectively, and in each case including all exhibits and schedules thereto and documents incorporated by reference therein, the “Pubco SEC Documents”). As of their respective dates, the Pubco SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such Pubco SEC Documents, and none of the Pubco SEC Documents (including any and all consolidated financial statements included therein) as of such date contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent revised or superseded by a subsequent filing with the SEC (a copy of which has been provided to the Company prior to the Effective Date), none of the Pubco SEC Documents, to the knowledge of Pubco’s management, contains any untrue statement of a material fact or omits to state any material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The consolidated financial statements of Pubco included in such Pubco SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with U.S. generally accepted accounting principles (except, in the case of unaudited consolidated quarterly statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of Pubco and its consolidated subsidiaries as of the dates thereof and the consolidated results of operations and changes in cash flows for the periods then ended (subject, in the case of unaudited quarterly statements, to normal year-end audit adjustments as determined by Pubco’s independent accountants). Except as set forth in the Pubco SEC Documents, at the date of the most recent audited financial statements of Pubco included in the Pubco SEC Documents, Pubco has not incurred any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) which, individually or in the aggregate, could reasonably be expected to have a material adverse effect with respect to Pubco.
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(g) Absence of Certain Changes or Events. Except as disclosed in the Pubco SEC Documents or as set forth on Schedule 2.02(g), since the date of the most recent financial statements included in the Pubco SEC Documents, Pubco has conducted its business only in the ordinary course consistent with past practice in light of its current business circumstances, and there is not and has not been any:
(i) material adverse change with respect to Pubco;
(ii) condition, event or occurrence which could reasonably be expected to prevent, hinder or materially delay the ability of Pubco to consummate the transactions contemplated by this Agreement;
(iii) incurrence, assumption or guarantee by Pubco of any indebtedness for borrowed money other than in the ordinary course and in amounts and on terms consistent with past practices or as disclosed to the Company in writing;
(iv) creation or other incurrence by Pubco of any lien on any asset other than in the ordinary course consistent with past practices;
(v) transaction or commitment made, or any contract or agreement entered into, by Pubco relating to its assets or business (including the acquisition or disposition of any assets) or any relinquishment by Pubco of any contract or other right, in either case, material to Pubco, other than transactions and commitments in the ordinary course consistent with past practices and those contemplated by this Agreement;
(vi) labor dispute, other than routine, individual grievances, or, to the knowledge of Pubco, any activity or proceeding by a labor union or representative thereof to organize any employees of Pubco or any lockouts, strikes, slowdowns, work stoppages or threats by or with respect to such employees;
(vii) payment, prepayment or discharge of liability other than in the ordinary course of business or any failure to pay any liability when due;
(viii) write-offs or write-downs of any assets of Pubco;
(ix) creation, termination or amendment of, or waiver of any right under, any material contract of Pubco;
(x) damage, destruction or loss having, or reasonably expected to have, a material adverse effect on Pubco;
(xi) other condition, event or occurrence which individually or in the aggregate could reasonably be expected to have a material adverse effect or give rise to a material adverse change with respect to Pubco; or
(xii) agreement or commitment to do any of the foregoing.
(h) Certain Fees. No brokerage or finder’s fees or commissions are or will be payable by Pubco to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other person with respect to the transactions contemplated by this Agreement.
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(i) Litigation; Labor Matters; Compliance with Laws.
(i) There is no suit, action or proceeding or investigation pending or, to the knowledge of Pubco, threatened against or affecting Pubco or any basis for any such suit, action, proceeding or investigation that, individually or in the aggregate, could reasonably be expected to have a material adverse effect with respect to Pubco or prevent, hinder or materially delay the ability of Pubco to consummate the transactions contemplated by this Agreement, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Pubco having, or which, insofar as reasonably could be foreseen by Pubco, in the future could have, any such effect.
(ii) Pubco is not a party to, or bound by, any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor is it the subject of any proceeding asserting that it has committed an unfair labor practice or seeking to compel it to bargain with any labor organization as to wages or conditions of employment nor is there any strike, work stoppage or other labor dispute involving it pending or, to its knowledge, threatened, any of which could have a material adverse effect with respect to Pubco.
(iii) The conduct of the business of Pubco complies with all statutes, laws, regulations, ordinances, rules, judgments, orders, decrees or arbitration awards applicable thereto.
(j) Benefit Plans. Pubco is not a party to any Benefit Plan under which Pubco currently has an obligation to provide benefits to any current or former employee, officer or director of Pubco.
(k) Certain Employee Payments. Pubco is not a party to any employment agreement which could result in the payment to any current, former or future director or employee of Pubco of any money or other property or rights or accelerate or provide any other rights or benefits to any such employee or director as a result of the transactions contemplated by this Agreement, whether or not (i) such payment, acceleration or provision would constitute a “parachute payment” (within the meaning of Section 280G of the Code), or (ii) some other subsequent action or event would be required to cause such payment, acceleration or provision to be triggered.
(l) Tax Returns and Tax Payments.
(i) Pubco has timely filed with the appropriate taxing authorities all Tax Returns required to be filed by it (taking into account all applicable extensions). All such Tax Returns are true, correct and complete in all respects. All Taxes due and owing by Pubco has been paid (whether or not shown on any Tax Return and whether or not any Tax Return was required). Pubco is not currently the beneficiary of any extension of time within which to file any Tax Return or pay any Tax. No claim has ever been made in writing or otherwise addressed to Pubco by a taxing authority in a jurisdiction where Pubco does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. The unpaid Taxes of Pubco did not, as of the date of the most recent financial statements included in the Pubco SEC Documents, exceed the reserve for Tax liability (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the financial statements (rather than in any notes thereto). Since the date of the most recent financial statements included in the Pubco SEC Documents, Pubco has not incurred any liability for Taxes outside the ordinary course of business consistent with past custom and practice. As of the Closing Date, the unpaid Taxes of Pubco will not exceed the reserve for Tax liability (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the books and records of Pubco.
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(ii) No material claim for unpaid Taxes has been made or become a lien against the property of Pubco or is being asserted against Pubco, no audit of any Tax Return of Pubco is being conducted by a tax authority, and no extension of the statute of limitations on the assessment of any Taxes has been granted by Pubco and is currently in effect. Pubco has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party.
(m) Environmental Matters. Pubco is in compliance with all Environmental Laws in all material respects. Pubco holds all permits and authorizations required under applicable Environmental Laws, unless the failure to hold such permits and authorizations would not have a material adverse effect on Pubco, and is compliance with all terms, conditions and provisions of all such permits and authorizations in all material respects. No releases of Hazardous Materials have occurred at, from, in, to, on or under any real property currently or formerly owned, operated or leased by Pubco or any predecessor thereof and no Hazardous Materials are present in, on, about or migrating to or from any such property which could result in any liability to Pubco. Pubco has not transported or arranged for the treatment, storage, handling, disposal, or transportation of any Hazardous Material to any off-site location which could result in any liability to Pubco. Pubco has no liability, absolute or contingent, under any Environmental Law that if enforced or collected would have a material adverse effect on Pubco. There are no past, pending or threatened claims under Environmental Laws against Pubco and Pubco is not aware of any facts or circumstances that could reasonably be expected to result in a liability or claim against Pubco pursuant to Environmental Laws.
(n) Material Contract Defaults. Pubco is not, or has not, received any notice or has any knowledge that any other party is, in default in any respect under any Pubco Material Contract; and there has not occurred any event that with the lapse of time or the giving of notice or both would constitute such a material default. For purposes of this Agreement, a “Pubco Material Contract” means any contract, agreement or commitment that is effective as of the Closing Date to which Pubco is a party (i) with expected receipts or expenditures in excess of $25,000, (ii) requiring Pubco to indemnify any person, (iii) granting exclusive rights to any party, (iv) evidencing indebtedness for borrowed or loaned money in excess of $25,000 or more, including guarantees of such indebtedness, or (v) which, if breached by Pubco in such a manner would (A) permit any other party to cancel or terminate the same (with or without notice of passage of time) or (B) provide a basis for any other party to claim money damages (either individually or in the aggregate with all other such claims under that contract) from Pubco or (C) give rise to a right of acceleration of any material obligation or loss of any material benefit under any such contract, agreement or commitment.
(o) Accounts Receivable. All of the accounts receivable of Pubco that are reflected in the Pubco SEC Documents or the accounting records of Pubco as of the Closing Date (collectively, the “Pubco Accounts Receivable”) represent or will represent valid obligations arising from sales actually made or services actually performed in the ordinary course of business and are not subject to any defenses, counterclaims, or rights of set off other than those arising in the ordinary course of business and for which adequate reserves have been established. The Pubco Accounts Receivable are fully collectible to the extent not reserved for on the balance sheet on which they are shown.
(p) Properties. Pubco has valid land use rights for all real property that is material to its business and good, clear and marketable title to all the tangible properties and tangible assets reflected in the latest balance sheet as being owned by Pubco or acquired after the date thereof which are, individually or in the aggregate, material to Pubco’s business (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business), free and clear of all material liens, encumbrances, claims, security interest, options and restrictions of any nature whatsoever. Any real property and facilities held under lease by Pubco are held by them under valid, subsisting and enforceable leases of which Pubco is in compliance, except as could not, individually or in the aggregate, have or reasonably be expected to result in a material adverse effect.
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(q) Intellectual Property. Pubco owns or has valid rights to use the Trademarks, trade names, domain names, copyrights, patents, logos, licenses and computer software programs (including, without limitation, the source codes thereto) that are necessary for the conduct of its business as now being conducted. All of Pubco’s licenses to use Software programs are current and have been paid for the appropriate number of users. To the knowledge of Pubco, none of Pubco’s Intellectual Property or Pubco License Agreements infringe upon the rights of any third party that may give rise to a cause of action or claim against Pubco or its successors.
(r) Board Determination. The board of directors of Pubco has unanimously determined that the terms of the Exchange are fair to and in the best interests of Pubco and its shareholders.
(s) Compliance with Anti-Corruption Laws. Neither Pubco nor to the knowledge of Pubco, any director, officer, agent, employee or other person acting on behalf of Pubco has, in the course of its actions for, or on behalf of, Pubco (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any applicable U.S. laws; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.
(t) OFAC. Neither Pubco, nor to the knowledge of Pubco, any director, officer, agent, employee, affiliate or person acting on behalf of Pubco, is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department.
(u) Undisclosed Liabilities. Pubco has no liabilities or obligations of any nature (whether fixed or unfixed, secured or unsecured, known or unknown and whether absolute, accrued, contingent, or otherwise) except for liabilities or obligations reflected or reserved against in the financial statements included in the Pubco SEC Documents incurred in the ordinary course of business.
(v) Money Laundering Laws. The operations of Pubco are and have been conducted at all times in compliance with the Money Laundering Laws, and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving Pubco with respect to the Money Laundering Laws is pending or, to the best knowledge of Pubco, threatened.
(w) Full Disclosure. All of the representations and warranties made by Pubco in this Agreement, and all statements set forth in the certificates delivered by Pubco at the Closing pursuant to this Agreement, are true, correct and complete in all material respects and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make such representations, warranties or statements, in light of the circumstances under which they were made, misleading. The copies of all documents furnished by Pubco pursuant to the terms of this Agreement are complete and accurate copies of the original documents. The schedules, certificates, and any and all other statements and information, whether furnished in written or electronic form, to the Company or its representatives by or on behalf of Pubco in connection with the negotiation of this Agreement and the transactions contemplated hereby do not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein not misleading.
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ARTICLE III
[INTENTIONALLY OMITTED]
ARTICLE IV
ADDITIONAL AGREEMENTS
4.01 Confidentiality.
(a) Except as required by law, each of the Existing Company Entities and Pubco will hold, and will cause its respective directors, officers, employees, accountants, counsel, financial advisors and other representatives and affiliates to hold, any nonpublic information in confidence.
4.02 Best Efforts. Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to use its best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Exchange and the other transactions contemplated by this Agreement. Pubco and the Company shall mutually cooperate in order to facilitate the achievement of the benefits reasonably anticipated from the Exchange.
4.03 Public Announcements. Pubco, on the one hand, and the Company, on the other hand, will consult with each other before issuing, and provide each other the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable law or court process. The parties agree that the initial press release or releases to be issued with respect to the transactions contemplated by this Agreement shall be mutually agreed upon prior to the issuance thereof.
4.04 Expenses. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses.
ARTICLE V
CONDITIONS PRECEDENT
5.01 Conditions to Each Party’s Obligation to Effect the Exchange. The obligation of each party to effect the Exchange and otherwise consummate the transactions contemplated by this Agreement is subject to the satisfaction, at or prior to the Closing, of each of the following conditions:
(a) No Restraints. No temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the Exchange shall have been issued by any court of competent jurisdiction or any other Governmental Entity having jurisdiction and shall remain in effect, and there shall not be any applicable legal requirement enacted, adopted or deemed applicable to the Exchange that makes consummation of the Exchange illegal.
(b) Governmental Approvals. All authorizations, consents, orders, declarations or approvals of, or filings with, or terminations or expirations of waiting periods imposed by, any Governmental Entity having jurisdiction which the failure to obtain, make or occur would have a material adverse effect on Pubco or the Company shall have been obtained, made or occurred.
(c) Company Shareholder Approval. The Selling Shareholders shall have adopted and approved this Agreement and the Exchange in accordance with applicable law.
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(d) No Litigation. There shall not be pending or threatened any suit, action or proceeding before any court, Governmental Entity or authority (i) pertaining to the transactions contemplated by this Agreement or (ii) seeking to prohibit or limit the ownership or operation by the Company, Pubco or any of its subsidiaries, or to dispose of or hold separate any material portion of the business or assets of the Company or Pubco.
(e) Audited Financial Statements. The Existing Company Entities shall have completed, and Pubco shall have received from the Company, audited Financial Statements and proforma Financial Statements as required to be filed by Pubco pursuant to the Exchange Act.
5.02 Conditions Precedent to Obligations of Pubco. The obligation of Pubco to effect the Exchange and otherwise consummate the transactions contemplated by this Agreement are subject to the satisfaction, at or prior to the Closing, of each of the following conditions:
(a) Representations, Warranties and Covenants. (i) The representations and warranties of the Company, the Selling Shareholders and Platinum Beijing in this Agreement shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality or material adverse effect, which representations and warranties as so qualified shall be true and correct in all respects) both when made and on and as of the Closing Date, and (ii) the Company, the Selling Shareholders and Platinum Beijing shall each have performed and complied in all material respects with all covenants, obligations and conditions of this Agreement required to be performed and complied with by them prior to the Effective Time.
(b) Consents. Pubco shall have received evidence, in form and substance reasonably satisfactory to it, that such licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and other third parties as necessary in connection with the transactions contemplated hereby have been obtained.
(c) No Material Adverse Change. There shall not have occurred any change in the business, condition (financial or otherwise), results of operations or assets (including intangible assets) and properties of the Company or Platinum Beijing that, individually or in the aggregate, could reasonably be expected to have a material adverse effect on the Company or Platinum Beijing.
(d) Selling Shareholder Representation Letter. Selling Shareholders shall each have executed and delivered to Pubco a shareholder representation letter in substantially the form attached hereto as Exhibit B, and Pubco shall be reasonably satisfied that the issuance of Pubco Common Stock pursuant to the Exchange is exempt from the registration requirements of the Securities Act.
5.03 Conditions Precedent to Obligation of the Company. The obligation of the Company to effect the Exchange and otherwise consummate the transactions contemplated by this Agreement is subject to the satisfaction, at or prior to the Closing, of each of the following conditions:
(a) Representations, Warranties and Covenants. (i) The representations and warranties of Pubco in this Agreement shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality or material adverse effect, which representations and warranties as so qualified shall be true and correct in all respects) both when made and on and as of the Closing Date, and (ii) Pubco shall have performed and complied in all material respects with all covenants, obligations and conditions of this Agreement required to be performed and complied with by it prior to the Effective Time.
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(b) Consents. The Company shall have received evidence, in form and substance reasonably satisfactory to it, that such licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and other third parties as necessary in connection with the transactions contemplated hereby have been obtained.
(c) No Material Adverse Change. There shall not have occurred any change in the business, condition (financial or otherwise), results of operations or assets (including intangible assets) and properties of Pubco that, individually or in the aggregate, could reasonably be expected to have a material adverse effect on Pubco.
(d) Good Standing Certificate. The Company shall have received a certificate of good standing for Pubco from the New York Department of State, dated not earlier than three (3) calendar days prior to the Closing Date.
(e) Delivery of the Exchange Shares Certificates. The Selling Shareholders shall have received the Exchange Shares Certificates on the Closing Date.
(f) Current Report. Pubco shall file a Current Report on Form 8-K with the SEC within four (4) business days of the Closing Date containing information about the Exchange and pro forma financial statements of Pubco and the Company and audited financial statements of the Company as required by Regulation S-K under the Securities Act. Such Form 8-K shall be in form and substance acceptable to the Company and its counsel prior to Closing.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
6.01 Termination. This Agreement may be terminated and the transactions contemplated hereunder abandoned at any time prior to the Effective Time of the Exchange:
(a) by mutual written consent of Pubco and the Company;
(b) by either Pubco or the Company if any Governmental Entity shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the Exchange and such order, decree, ruling or other action shall have become final and nonappealable;
(c) by either Pubco or the Company if the Exchange shall not have been consummated on or before March 31, 2021 (other than as a result of the failure of the party seeking to terminate this Agreement to perform its obligations under this Agreement required to be performed at or prior to the Effective Time);
(d) by Pubco, if a material adverse change shall have occurred relative to the Company (and not curable within thirty (30) days);
(e) by the Company if a material adverse change shall have occurred relative to Pubco (and not curable within thirty (30) days);
(f) by Pubco, if the Company willfully fails to perform in any material respect any of its material obligations under this Agreement; or
(g) by the Company, if Pubco willfully fails to perform in any material respect any of its obligations under this Agreement.
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6.02 Effect of Termination. In the event of termination of this Agreement by either the Company or Pubco as provided in Section 6.01, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of Pubco or the Company, other than the provisions of Section 4.01(a) and this Section 6.02. Nothing contained in this Section shall relieve any party for any breach of the representations, warranties, covenants or agreements set forth in this Agreement.
6.03 Amendment. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties upon approval by the party, if such party is an individual, and upon approval of the boards of directors of each of the parties that are corporate entities.
6.04 Extension; Waiver. Subject to Section 6.01(c), at any time prior to the Effective Time, the parties may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties contained in this Agreement or in any document delivered pursuant to this Agreement, or (c) waive compliance with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights.
6.05 Return of Documents. In the event of termination of this Agreement for any reason, Pubco and the Company will return to the other party all of the other party’s documents, work papers, and other materials (including copies) relating to the transactions contemplated in this Agreement, whether obtained before or after execution of this Agreement. Pubco and the Company will not use any information so obtained from the other party for any purpose and will take all reasonable steps to have such other party’s information kept confidential.
ARTICLE VII
INDEMNIFICATION AND RELATED MATTERS
7.01 Survival of Representations and Warranties. The representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive until twelve (12) months after the Effective Time (except for with respect to Taxes which shall survive for the applicable statute of limitations plus 90 days, and covenants that by their terms survive for a longer period).
7.02 Indemnification.
(a) Irrespective of any due diligence investigation conducted by the Company with regard to the transactions contemplated hereby, Pubco shall indemnify and hold the Selling Shareholders, the Existing Company Entities, and the Existing Company Entities’ officers and directors (the “Company Representatives”) harmless from and against any and all liabilities, obligations, damages, losses, deficiencies, costs, penalties, interest and expenses (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever) (collectively, “Losses”) to which Pubco, the Selling Shareholders, the Existing Company Entities, or any of the Company Representatives may become subject resulting from or arising out: (1) of any breach of a representation, warranty or covenant made by Pubco as set forth herein; or (2) any and all liabilities arising out of or in connection with: (A) any of the assets of Pubco prior to the Closing; or (B) the operations of Pubco prior to the Closing.
(b) The Existing Company Entities shall jointly and severally indemnify and hold Pubco harmless from and against any and all Losses to which Pubco may become subject to resulting from or arising out of any breach of a representation, warranty or covenant made by any of the Existing Company Entities as set forth herein.
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7.03 Notice of Indemnification. Promptly after the receipt by any indemnified party (the “Indemnitee”) of notice of the commencement of any action or proceeding against such Indemnitee, such Indemnitee shall, if a claim with respect thereto is or may be made against any indemnifying party (the “Indemnifying Party”) pursuant to this Article VII, give such Indemnifying Party written notice of the commencement of such action or proceeding and give such Indemnifying Party a copy of such claim and/or process and all legal pleadings in connection therewith. The failure to give such notice shall not relieve any Indemnifying Party of any of its indemnification obligations contained in this Article VII, except where, and solely to the extent that, such failure actually and materially prejudices the rights of such Indemnifying Party. Such Indemnifying Party shall have, upon request within thirty (30) days after receipt of such notice, but not in any event after the settlement or compromise of such claim, the right to defend, at its own expense and by its own counsel reasonably acceptable to the Indemnitee, any such matter involving the asserted liability of the Indemnitee; provided, however, that if the Indemnitee determines that there is a reasonable probability that a claim may materially and adversely affect it, other than solely as a result of money payments required to be reimbursed in full by such Indemnifying Party under this Article VII or if a conflict of interest exists between Indemnitee and the Indemnifying Party, the Indemnitee shall have the right to defend, compromise or settle such claim or suit; and, provided, further, that such settlement or compromise shall not, unless consented to in writing by such Indemnifying Party, which shall not be unreasonably withheld, be conclusive as to the liability of such Indemnifying Party to the Indemnitee. In any event, the Indemnitee, such Indemnifying Party and its counsel shall cooperate in the defense against, or compromise of, any such asserted liability, and in cases where the Indemnifying Party shall have assumed the defense, the Indemnitee shall have the right to participate in the defense of such asserted liability at the Indemnitee’s own expense. In the event that such Indemnifying Party shall decline to participate in or assume the defense of such action, prior to paying or settling any claim against which such Indemnifying Party is, or may be, obligated under this Article VII to indemnify an Indemnitee, the Indemnitee shall first supply such Indemnifying Party with a copy of a final court judgment or decree holding the Indemnitee liable on such claim or, failing such judgment or decree, the terms and conditions of the settlement or compromise of such claim. An Indemnitee’s failure to supply such final court judgment or decree or the terms and conditions of a settlement or compromise to such Indemnifying Party shall not relieve such Indemnifying Party of any of its indemnification obligations contained in this Article VII, except where, and solely to the extent that, such failure actually and materially prejudices the rights of such Indemnifying Party. If the Indemnifying Party is defending the claim as set forth above, the Indemnifying Party shall have the right to settle the claim only with the consent of the Indemnitee.
ARTICLE VIII
GENERAL PROVISIONS
8.01 Notices. Any and all notices and other communications hereunder shall be in writing and shall be deemed duly given to the party to whom the same is so delivered, sent or mailed at addresses and contact information set forth below (or at such other address for a party as shall be specified by like notice.) Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be deemed given and effective on the earliest of: (a) on the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (Pacific Standard Time) on a business day, (b) on the next business day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a business day or later than 5:30 p.m. (Pacific Standard Time) on any business day, (c) on the second business day following the date of mailing, if sent by a nationally recognized overnight courier service, or (d) if by personal delivery, upon actual receipt by the party to whom such notice is required to be given.
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If to Pubco:
Room 105, Building 5, 31 Xishiku Avenue
Xicheng District, Beijing, China
Telephone No.: +86 (010) 6615-5141
Atten: Lina Liu
with a copy to (which copy shall not constitute notice):
Mark C. Lee, Esq.
Greenberg Traurig, LLP
1201 K Street, Suite 1100
Sacramento, CA 95814
Telephone No.: (916) 442-1111
Facsimile No.: (916) 448-1709
Email: [email protected]
If to the Company, Platinum Beijing and the Selling Shareholders:
Room 105, Building 5, 31 Xishiku Avenue
Xicheng District, Beijing, China
Telephone No.: +86 (010) 6615-5141
Atten: Yang Wang
8.02 Definitions. For purposes of this Agreement:
(a) an “affiliate” of any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person;
(b) “material adverse change” or “material adverse effect” means, when used in connection with the Company or Pubco, any change or effect that either individually or in the aggregate with all other such changes or effects is materially adverse to the business, assets, properties, condition (financial or otherwise) or results of operations of such party and its subsidiaries taken as a whole (after giving effect in the case of Pubco to the consummation of the Exchange);
(c) “ordinary course of business” means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency);
(d) “person” means an individual, corporation, partnership, joint venture, association, trust, unincorporated organization or other entity;
(e) a “subsidiary” of any person means another person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its board of Directors or other governing body (or, if there are no such voting interests, fifty percent (50%) or more of the equity interests of which) is owned directly or indirectly by such first person.
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(f) “security interest” means any mortgage, pledge, lien, encumbrance, deed of trust, lease, charge, right of first refusal, easement, servitude, proxy, voting trust or agreement, transfer restriction under any shareholder or similar agreement or any other security interest, other than (a) mechanic’s, materialmen’s, and similar liens, (b) statutory liens for taxes not yet due and payable, (c) purchase money liens and liens securing rental payments under capital lease arrangements, (d) pledges or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance or other similar social security legislation; and (e) encumbrances, security deposits or reserves required by law or by any Governmental Entity.
8.03 Interpretation. When a reference is made in this Agreement to a Section, Exhibit or Schedule, such reference shall be to a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.
8.04 Entire Agreement; No Third-Party Beneficiaries. This Agreement and the other agreements referred to herein constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement. This Agreement is not intended to confer upon any person other than the parties any rights or remedies.
8.05 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.
8.06 Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.
8.07 Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of New York, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (a) agrees that it will not attempt to deny or defeat such personal jurisdiction or venue by motion or other request for leave from any such court, and (b) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any state court other than such court.
8.08 Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.
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8.09 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement. This Agreement, to the extent delivered by means of a facsimile machine or electronic mail (any such delivery, an “Electronic Delivery”), shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto, each other party hereto shall re-execute original forms hereof and deliver them in person to all other parties. No party hereto shall raise the use of Electronic Delivery to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of Electronic Delivery as a defense to the formation of a contract, and each such party forever waives any such defense, except to the extent such defense related to lack of authenticity.
8.10 Attorneys Fees. In the event any suit or other legal proceeding is brought for the enforcement of any of the provisions of this Agreement, the parties hereto agree that the prevailing party or parties shall be entitled to recover from the other party or parties upon final judgment on the merits reasonable attorneys’ fees, including attorneys’ fees for any appeal, and costs incurred in bringing such suit or proceeding.
8.11 Currency. All references to currency in this Agreement shall refer to the lawful currency of the United States of America.
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned have caused their duly authorized officers to execute this Agreement as of the date first above written.
| YUBO INTERNATIONAL BIOTECH LIMITED | |||
| By: | /s/ Jun Wang | ||
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| Name: | Jun Wang | |
| Title: | President and Chief Executive Officer | ||
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| YUBO INTERNATIONAL BIOTECH (BEIJING) LIMITED |
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| By: | /s/ Jun Wang |
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| Name: | Jun Wang |
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| Title: | President |
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| PLATINUM INTERNATIONAL BIOTECH CO., LTD. |
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| By: | /s/ Jun Wang |
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| Name: | Jun Wang |
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| Title: | Director |
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[Signature Page to Share Exchange Agreement]
| SELLING SHAREHOLDERS:
FLYDRAGON INTERNATIONAL LIMITED | |||
| By: | /s/ Jun Wang | ||
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| Name: | Jun Wang | |
| Title: | Director | ||
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| CHINAONE TECHNOLOGY LIMITED |
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| By: | /s/ YangWang |
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| Name: | Yang Wang |
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| Title: | Director |
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| BOAO BIOTECH LIMITED |
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| By: | /s/ Yulin Cao |
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| Name: | Yulin Cao |
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| Title: | Director |
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| FOCUS DRAW GROUP LIMITED |
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| By: | /s/ Lina Liu |
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| Name: | Lina Liu |
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| Title: | Director |
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| FOCUSONE TECHNOLOGY GROUP LIMITED |
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| By: | /s/ Wei Jin |
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| Name: | Wei Jin |
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| Title: | Director |
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| DRAGONCLOUD TECHNOLOGY LIMITED |
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| By: | /s/ Yang Wang |
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| Name: | Yang Wang |
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| Title: | Director |
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| /s/ Cheung Ho Shun |
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| CHEUNG HO SHUN |
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[Signature Page to Share Exchange Agreement]
EXHIBIT A
SELLING SHAREHOLDERS
| Name of Selling Shareholder |
| Number of Exchange Shares to Receive |
|
| Percentage of Exchange Shares to Receive |
| ||
| FLYDRAGON INTERNATIONAL LIMITED |
|
| 39,943,800 |
|
|
| 34.14 | % |
| CHINAONE TECHNOLOGY LIMITED |
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| 19,211,400 |
|
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| 16.42 | % |
| BOAO BIOTECH LIMITED |
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| 24,967,800 |
|
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| 21.34 | % |
| FOCUS DRAW GROUP LIMITED |
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| 13,829,400 |
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| 11.82 | % |
| FOCUSONE TECHNOLOGY GROUP LIMITED |
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| 11,524,500 |
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| 9.85 | % |
| DRAGONCLOUD TECHNOLOGY LIMITED |
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| 5,768,100 |
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| 4.93 | % |
| CHEUNG HO SHUN |
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| 1,755,000 |
|
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| 1.50 | % |
| TOTAL: |
| 117,000,000 shares of Class A common stock |
|
| 99.26% of issued and outstanding Class A common stock of Pubco |
| ||
EXHIBIT A
EXHIBIT B
Form of Shareholder Representation Letter
(see attached)
EXHIBIT B
SCHEDULE 2.01(c)
CAPITAL STRUCTURE OF THE COMPANY, PLATINUM HONG KONG, PLATINUM BEIJING AND PRC SUB
| · | Platinum International Biotech Co., Ltd. |
Total authorized share capital is $50,000 divided into 500,000,000 shares, par value $0.0001 per share;
Total of 10,152,284 shares issued and outstanding
| · | Platinum International Biotech (Hong Kong) Limited: |
Total amount of share capital is one (1) ordinary share in the amount of HK$1.00
| · | Yubo International Biotech (Chengdu) Limited: |
Registered capital of $15,000,000
| · | Yubo International Biotech (Beijing) Limited: |
Registered capital of RMB10,000,000
SCHEDULE 2.01(c)
SCHEDULE 2.01(g)
CERTAIN CHANGES OR EVENTS
| · | None. |
SCHEDULE 2.01(g)
SCHEDULE 2.01(n)
MATERIAL AGREEMENTS
| · | Equity Pledge Agreement, dated September 11, 2020, by and among Yubo International Biotech (Chengdu) Limited and each of the stockholders of Yubo International Biotech (Beijing) Limited |
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| · | Exclusive Option Agreement, dated September 11, 2020, by and among Yubo International Biotech (Chengdu) Limited and each of the stockholders of Yubo International Biotech (Beijing) Limited |
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| · | Exclusive Consulting Service Agreement, dated September 11, 2020, by and between by and among Yubo International Biotech (Chengdu) Limited and Yubo International Biotech (Beijing) Limited |
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| · | Entrustment Technical Service Agreement, dated February 27, 2020, by and between Yubo International Biotech (Beijing) Limited and Beijing Zhenhuikang Biotechnology Co., Ltd. (English Translation) |
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| · | Agreement of Joint Research and Development, dated February 17, 2020, by and between Beijing Zhenxigu Medical Research Center (L.P.) and Yubo International Biotech (Beijing) Limited |
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| · | Cooperation Agreement, dated March 1, 2020, by and among Beijing Zhenxigu Medical Research Center (L.P.), Yubo International Biotech (Beijing) Limited and Huailai Huayue Hengsheng Medical Device Co., Ltd. |
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| · | Loan Agreement, by and between Yubo International Biotech (Beijing) Limited and Beijing Zhenhuikang Biotechnology Co., Ltd. |
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| · | Labor Contract, dated December 1, 2019, by and between Yubo International Biotech (Beijing) Limited and Jun Wang |
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| · | Labor Contract, dated December 1, 2019, by and between Yubo International Biotech (Beijing) Limited and Yang Wang |
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| · | Labor Contract, dated December 1, 2019, by and between Yubo International Biotech (Beijing) Limited and Lina Liu |
SCHEDULE 2.01(n)
SCHEDULE 2.01(p)
TANGIBLE ASSETS
| · | None. |
SCHEDULE 2.01(p)
SCHEDULE 2.01(q)
INTELLECTUAL PROPERTY
| · | Invention patent (201610621905X): kit for endometrial collection |
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| · | Invention patent (2016106227662): a protective solution for endometrium stem cells |
SCHEDULE 2.01(q)
SCHEDULE 2.02(g)
CERTAIN CHANGES OR EVENTS
| · | None. |
SCHEDULE 2.02(g)
|
|
EXHIBIT 3.1
EXHIBIT 3.2
BYLAWS
OF
YUBO INTERNATIONAL BIOTECH LIMITED
(A NEW YORK CORPORATION)
Dated: October 14, 2020
YUBO INTERNATIONAL BIOTECH LIMITED
BYLAWS
ARTICLE ONE
OFFICES
Section 1. Registered Office. The registered office of YUBO International Biotech Limited, a New York corporation (the “Corporation”), shall be within the State of New York in the County of New York, unless otherwise designated by the Board of Directors.
Section 2. Other Offices. The Corporation may also have offices at such other places, either within or without the State of New York, as the Board of Directors of the Corporation (the “Board of Directors”) may determine from time to time or as the business of the Corporation may require.
ARTICLE TWO
MEETINGS OF SHAREHOLDERS
Section 1. Place. All annual meetings of shareholders shall be held at such place, within or without the State of New York, as may be designated by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Special meetings of shareholders may be held at such place, within or without the State of New York, and at such time as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Time of Annual Meeting. Annual meetings of shareholders shall be held on such date and at such time fixed, from time to time, by the Board of Directors, provided that there shall be an annual meeting held every year at which the shareholders shall elect a Board of Directors and transact such other business as may properly be brought before the meeting.
Section 3. Call of Special Meetings. Special meetings of the shareholders shall be held if called by the Board of Directors or the Chairman of the Board and deliver to the Secretary one or more written demands for the meeting describing the purpose or purposes for which it is to be held.
Section 4. Conduct of Meetings. The Chairman of the Board (or in his or her absence, such other designee of the Chairman of the Board of Directors) shall preside at the annual and special meetings of shareholders and shall be given full discretion in establishing the rules and procedures to be followed in conducting the meetings, except as otherwise provided by law or in these Bylaws.
Section 5. Notice and Waiver of Notice. Except as otherwise provided by law, written or printed notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the day of the meeting, either personally or by first-class mail, by or at the direction of the Chairman of the Board of Directors, the Secretary, or the officer or person calling the meeting, to each shareholder of record entitled to vote at such meeting. If the notice is mailed at least thirty (30) days before the date of the meeting, it may be done by a class of United States mail other than first-class. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his, her or its address as it appears on the stock transfer books of the Corporation, with postage thereon prepaid. If a meeting is adjourned to another time and/or place, and if an announcement of the adjourned time and/or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the Board of Directors, after adjournment, fixes a new record date for the adjourned meeting. Whenever any notice is required to be given to any shareholder, a waiver thereof in writing signed by the person or persons entitled to such notice, whether signed before, during or after the time of the meeting stated therein and delivered to the Corporation for inclusion in the minutes or filing with the corporate records, shall be equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the shareholders need be specified in any written waiver of notice. Attendance of a person at a meeting shall constitute a waiver of (a) lack of or defective notice of such meeting, unless the person objects at the beginning to the holding of the meeting or the transacting of any business at the meeting, or (b) lack of defective notice of a particular matter at a meeting that is not within the purpose or purposes described in the meeting notice, unless the person objects to considering such matter when it is presented.
Section 6. Quorum. At all meetings of the shareholders the holders of a majority of the shares of the Corporation issued and outstanding and entitled to vote thereat shall be present in person or by proxy to constitute a quorum for the transaction of business, except as otherwise provided by statute. In the absence of a quorum, the holders of a majority of the shares present in person or by proxy and entitled to vote may adjourn the meeting from time to time. At any such adjourned meeting at which a quorum may be present any business may be transacted which might have been transacted at the meeting as originally called.
Section 7. Voting. Except as otherwise provided in the Certificate of Incorporation or by law, each shareholder is entitled to one (1) vote for each outstanding share held by him, her or it on each matter voted at a shareholders' meeting. A shareholder may vote at any meeting of shareholders of the Corporation, either in person or by proxy.
Section 8. Shareholder List. A list of shareholders as of the record date, shall be produced at any meeting of the shareholders upon the request of any shareholder made at or prior to such meeting.
Section 9. Action Without Meeting. Any action required by law to be taken at a meeting of shareholders, or any action that may be taken at a meeting of shareholders, may be taken without a meeting or notice if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted with respect to the subject matter thereof, and such consent shall have the same force and effect as a vote of shareholders taken at such a meeting.
Section 10. Voting for Directors. Unless otherwise provided in the Certificate of Incorporation, directors shall be elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present.
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ARTICLE THREE
DIRECTORS
Section 1. Number, Election and Term. The number of directors of the Corporation shall be fixed from time to time, within the limits specified by the Certificate of Incorporation, by resolution of the Board of Directors; provided, however, no director’s term shall be shortened by reason of a resolution reducing the number of directors. The directors shall be elected at the annual meeting of the shareholders, except as provided in Section 2 of this Article Three, and each director elected shall hold office for the term for which he or she is elected and until his or her successor is elected and qualified or until his or her earlier resignation, removal from office or death. Directors must be natural persons who are 18 years of age or older but need not be residents of the State of New York, shareholders of the Corporation or citizens of the United States. Any director may be removed at any time, with or without cause, at a special meeting of the shareholders called for that purpose.
Section 2. Vacancies. A director may resign at any time by giving written notice to the Corporation, the Board of Directors or the Chairman of the Board of Directors. Such resignation shall take effect when the notice is delivered unless the notice specifies a later effective date, in which event the Board of Directors may fill the pending vacancy before the effective date if they provide that the successor does not take office until the effective date. Any vacancy occurring in the Board of Directors and any directorship to be filled by reason of an increase in the size of the Board of Directors shall be filled by the affirmative vote of a majority of the current directors though less than a quorum of the Board of Directors, or may be filled by an election at an annual or special meeting of the shareholders called for that purpose, unless otherwise provided by law. A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office, or until the next election of one or more directors by shareholders if the vacancy is caused by an increase in the number of directors.
Section 3. Powers. Except as provided in the Certificate of Incorporation and by law, all corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, its Board of Directors.
Section 4. Place of Meetings. Meetings of the Board of Directors, regular or special, may be held either within or without the State of New York.
Section 5. Annual Meeting. The first meeting of each newly elected Board of Directors shall be held, without call or notice, immediately following each annual meeting of shareholders.
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Section 6. Regular Meetings. Regular meetings of the Board of Directors may also be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors.
Section 7. Special Meetings and Notice. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors. Written notice of special meetings of the Board of Directors shall be given to each director at least forty-eight (48) hours before the meeting. Except as required by statute, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Notices to directors shall be in writing and delivered personally or mailed to the directors at their addresses appearing on the books of the Corporation. Notice by mail shall be deemed to be given at the time when the same shall be received. Notice to directors may also be given by telegram, teletype or other form of electronic communication. Notice of a meeting of the Board of Directors need not be given to any director who signs a written waiver of notice before, during or after the meeting. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and a waiver of any and all objections to the place of the meeting, the time of the meeting and the manner in which it has been called or convened, except when a director states, at the beginning of the meeting or promptly upon arrival at the meeting, any objection to the transaction of business because the meeting is not lawfully called or convened.
Section 8. Quorum; Required Vote; Presumption of Assent. A majority of the number of directors fixed by, or in the manner provided in, these Bylaws shall constitute a quorum for the transaction of business; provided, however, that whenever, for any reason, a vacancy occurs in the Board of Directors, a quorum shall consist of a majority of the remaining directors until the vacancy has been filled. The act of a majority of the directors present at a meeting at which a quorum is present when the vote is taken shall be the act of the Board of Directors. A director of the Corporation who is present at a meeting of the Board of Directors or a committee of the Board of Directors when corporate action is taken shall be presumed to have assented to the action taken, unless he or she objects at the beginning of the meeting, or promptly upon his or her arrival, to holding the meeting or transacting specific business at the meeting, or he or she votes against or abstains from the action taken.
Section 9. Action Without Meeting. Any action required or permitted to be taken at a meeting of the Board of Directors or a committee thereof may be taken without a meeting if a consent in writing, setting forth the action taken, is signed by all of the members of the Board of Directors or the committee, as the case may be, and such consent shall have the same force and effect as a unanimous vote at a meeting. Action taken under this section is effective when the last director signs the consent, unless the consent specifies a different effective date. A consent signed under this Section 9 shall have the effect of a meeting vote and may be described as such in any document.
Section 10. Conference Telephone or Similar Communications Equipment Meetings. Members of the Board of Directors may participate in a meeting of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation in such a meeting shall constitute presence in person at the meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground the meeting is not lawfully called or convened.
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Section 11. Committees. The Board of Directors, by resolution adopted by a majority of the full Board of Directors, may designate from among its members an executive committee and one or more other committees, each of which, to the extent provided in such resolution, shall have and may exercise all of the authority of the Board of Directors in the business and affairs of the Corporation except where the action of the full Board of Directors is required by statute. Each committee must have two or more members who serve at the pleasure of the Board of Directors. The Board of Directors, by resolution adopted in accordance with this Article Three, may designate one or more directors as alternate members of any committee, who may act in the place and stead of any absent member or members at any meeting of such committee. Vacancies in the membership of a committee shall be filled by the Board of Directors at a regular or special meeting of the Board of Directors. The executive committee shall keep regular minutes of its proceedings and report the same to the Board of Directors when required. The designation of any such committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it, him or her by law.
Section 12. Compensation of Directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
Section 13. Chairman of the Board. The Board of Directors may, in its discretion, choose a chairman of the board who shall preside at meetings of the shareholders and of the directors and shall be an ex officio member of all standing committees. The Chairman of the Board of Directors shall have such other powers and shall perform such other duties as shall be designated by the Board of Directors. The Chairman of the Board of Directors shall be a member of the Board of Directors, but no other officers of the Corporation need be a director. The Chairman of the Board of Directors shall serve until his or her successor is chosen and qualified, but he or she may be removed at any time by the affirmative vote of a majority of the Board of Directors.
ARTICLE FOUR
OFFICERS
Section 1. Positions. The officers of the Corporation shall consist of, if elected by the Board of Directors by resolution, a President, a Secretary, a Treasurer and one or more Vice Presidents. Any two or more offices may be held by the same person.
Section 2. Election of Specified Officers by Board. The Board of Directors at its first meeting and, from time to time, may elect or ratify a President, a Secretary, a Treasurer and one or more Vice Presidents.
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Section 3. Election or Appointment of Other Officers. Such other officers and assistant officers and agents as may be deemed necessary may be elected or appointed by the Board of Directors, or, unless otherwise specified herein, appointed by the President of the Corporation. The Board of Directors shall be advised of appointments by the President at or before the next scheduled Board of Directors meeting.
Section 4. Salaries. The salaries of all officers of the Corporation to be elected by the Board of Directors pursuant to Article Four, Section 2 hereof shall be fixed from time to time by the Board of Directors or pursuant to its discretion. The salaries of all other elected or appointed officers of the Corporation shall be fixed from time to time by the President of the Corporation, or in its absence the Board of Directors, pursuant to his/her/its direction.
Section 5. Term; Resignation. The officers of the Corporation shall hold office until their successors are chosen and qualified. Any officer or agent elected or appointed by the Board of Directors may be removed, with or without cause, by the Board of Directors. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise, may be but shall not be, filled by the Board of Directors. Any officer of the Corporation may resign from his or her respective office or position by delivering notice to the Corporation. Such resignation is effective when delivered unless the notice specifies a later effective date. If a resignation is made effective at a later date and the Corporation accepts the future effective date, the Board of Directors may fill the pending vacancy before the effective date if the Board of Directors provides that the successor does not take office until the effective date.
Section 6. President. The President shall be the Chief Executive Officer of the Corporation, shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. In the absence of the Chairman of the Board of Directors, the President shall preside at meetings of the shareholders and the Board of Directors.
Section 7. Vice Presidents. The Vice Presidents in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President. They shall perform such other duties and have such other powers as the Board of Directors shall prescribe or as the President may delegate from time to time.
Section 8. Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders and record all the proceedings of the meetings of the shareholders and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He or she shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he or she shall be. He or she shall keep in safe custody the seal of the Corporation and, when authorized by the Board of Directors, affix the same to any instrument requiring it.
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Section 9. Treasurer. The Treasurer shall have the custody of corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He or she shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors at its regular meetings or when the Board of Directors so requires an account of all his or her transactions as treasurer and of the financial condition of the Corporation unless otherwise specified by the Board of Directors, the Treasurer shall be the Corporation's Chief Financial Officer.
Section 10. Other Officers, Employees and Agents. Each and every other officer, employee and agent of the Corporation shall possess, and may exercise, such power and authority, and shall perform such duties, as may from time to time be assigned to him, her or it by the Board of Directors, the officer so appointing him, her or it and such officer or officers who may from time to time be designated by the Board of Directors to exercise such supervisory authority.
ARTICLE FIVE
CERTIFICATES FOR SHARES
Section 1. Certificated and Uncertificated Shares Certificates. Shares of the Corporation may be either certificated or uncertificated. Each owner of certificated shares of the Corporation shall be entitled to have a certificate, in such form as shall be approved by the Board of Directors, certifying the number of shares of the Corporation owned by him. The certificates representing shares shall be signed in the name of the Corporation by the Chairman of the Board of Directors or the President or the Chief Executive Officer or a Vice President and by the Secretary or the Treasurer and while a corporate seal is not required by law, it may be sealed with corporate seal of the Corporation. In case any officer who shall have signed any such certificate shall have ceased to be such officer before such certificate shall be issued, it may nevertheless be issued by the Corporation with the same effect as if such officer were still in office at the date of their issue.
Section 2. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his, her or its legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed.
Section 3. Transfer of Shares. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.
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Section 4. Registered Shareholders. The Corporation shall be entitled to recognize the exclusive rights of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of New York.
ARTICLE SIX
GENERAL PROVISIONS
Section 1. Dividends. From time to time, the Board of Directors may announce, and the Corporation may pay dividends on its outstanding shares in cash, property, or its own shares pursuant to law and subject to the provisions of the Certificate of Incorporation.
Section 2. Checks. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may designate from time to time.
Section 3. Fiscal Year. The fiscal year of the Corporation shall end on December 31st of each year, unless otherwise fixed by resolution of the Board of Directors.
Section 4. Seal. While the corporate seal is not required by law, when it is used, it shall have inscribed thereon the name, the date, and the state of incorporation of the Corporation. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.
Section 5. Gender. All pronouns used in these Bylaws in any gender shall extend to and shall include all other genders as the context may require.
ARTICLE SEVEN
INDEMNIFICATION
On the terms, to the extent, and subject to the conditions prescribed by statute and by such rules and regulations, not inconsistent with statute, as the Board of Directors may in its discretion impose in general or particular cases or classes of cases, (a) the Corporation shall indemnify any person made, or threatened to be made, a party to an action or proceeding, civil or criminal, including an action by or in the right of any other Corporation of any type or kind, domestic, or foreign, or any partnership, joint venture, trust, employee benefit plan, or other enterprise which any director or officer of the Corporation served in any capacity at the request of the Corporation, by reason of the fact that he, his testator or intestate, was a director or officer of the Corporation, or served such other Corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise in any capacity, against judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees, actually and necessarily incurred as a result of such action or proceeding, or any appeal therein, and (b) the Corporation may pay, in advance of final disposition of any such action or proceeding, expenses incurred by such person in defending such action or proceeding.
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On the terms, to the extent, and subject to the conditions prescribed by statute and by such rules and regulations, not inconsistent with statute, as the Board of Directors may in its discretion impose in general or particular cases or classes of cases, (a) the Corporation shall indemnify any person made a party to an action by or in the right of the Corporation to procure a judgment in its favor, by reason of the fact that he, his testator or intestate, is or was a director or officer of the Corporation, against the reasonable expenses, including attorneys' fees, actually and necessarily incurred by him in connection with the defense of such action, or in connection with an appeal therein, and (b) the Corporation may pay, in advance of final disposition of any such action, expenses incurred by such person in defending such action or proceeding.
ARTICLE EIGHT
AMENDMENTS OF BYLAWS
Unless otherwise provided by law, these Bylaws may be altered, amended, or repealed or new Bylaws may be adopted by action of the Board of Directors.
CERTIFICATE OF SECRETARY
I, hereby certify, that I am the duly elected, qualified, and acting Secretary of YUBO International Biotech Limited, and that the above and foregoing Bylaws were adopted as the Bylaws of said Corporation on October 14, 2020, by written consent of the Incorporator of this Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand on October 14, 2020.
| /s/ Liu Lina | |||
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| Liu Lina, Secretary |
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EXHIBIT 10.1
CERTAIN PERSONALLY IDENTIFIABLE INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY [***], HAS BEEN OMITTED.
Labor Contract
Party A: Yubo International Biotech (Beijing) Limited
Legal Representative: Jun Wang
Business Address: Room 108, Building 6, No. 31, Xishiku Street, Xicheng District, Beijing
Party B: Jun Wang
Chinese Identification No.: [***********] Tel: [***********]
Residence Address: [***********]
Party A and Party B shall comply with the Labor Contract Law of the People's Republic of China and other relevant laws and regulations. Party A and Party B enter into this Contract on the basis of equality, voluntariness, fairness and justice, consensus and honesty and trustworthiness.
1. Term of Labor Contract
| Article 1: | The fixed term of the contract is from December 1, 2019 to November 30, 2020. |
2. Job Contents
| Article 2: | Party B agrees to serve as the post (type of work) of chairman of the board based on the work needs of Party A. Based on its work needs and production and operation status, Party A can change Party B's job position and type of work through consultation with Party B. Party B's job duties include: be fully responsible for formulating and deciding major operation guidelines and strategic objectives of the Company, fully supervising the operation of the Company's management system, and convening directors and shareholders to convene directors and shareholders' meetings. The specific standards of assessment for Party B's position shall be implemented according to overall plan of the Company. |
| Article 3: | Party B shall complete the required quantity of work and reach the required quality standard as per the lawful requirements of Party A. |
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3. Labor Protection and Working Conditions
| Article 4: | Party A arranges Party B to implement the fixed working hour system. Party A arranges Party B to work 8 hours a day, and 40 hours a week on average. Party A shall ensure Party B has at least one off day each week. If Party A needs to extend Party B's working hours, the extension of working hours should not exceed 3 hours a day, and should not exceed 36 hours a month under the condition that Party B is healthy. Specific working hours shall be arranged by Party A according to its operation need, and Party B shall obey. |
| Article 5: | If Party A arranges Party B to work overtime, Party B agrees that Party A can arrange Party B to have compensated off day off in the same period, otherwise, Party B will pay overtime pay according to law. If Party B needs to work overtime, Party B shall apply to Party A for approval before Party B work, otherwise it will not be deemed as overtime work. |
4. Labor Reward
| Article 6: | Party A shall, in accordance with the provisions of laws and regulations, determine the wage standard of Party B based on the principle of distribution according to work, and based on its actual conditions of Party A and the position of Party B. |
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| 1. | The wage standard shall be determined according to the salary administration regulations formulated by Party A in accordance with law, but the wage paid by Party A to Party B shall not be lower than the minimum wage standard announced by the local government for the year. |
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| 2. | Party A has the right to adjust the wage standard of Party B according to the change of Party B's job position and company's salary administration rules formulated in accordance with law. |
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| 3. | The composition of wages shall be composed of basic wages and performance-based wages. |
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| 4. | Party A will pay the full wage to Party B in the form of currency on around 10th of every month according to the monthly wage standard regulated by company. If it falls on holiday, the wage will be advanced one day or postponed to the end of the holiday. |
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| 5. | Basic Monthly Salary: RMB eight thousand ¥8000.00. |
5. Insurance and Welfare Benefits
| Article 7: | The Parties shall pay social insurance premium and accumulated housing fund according to relevant national and Beijing regulations. Party A shall complete the relevant procedures for social insurance premium and accumulated housing fund for Party B and assume the corresponding social insurance and other obligations. |
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| Article 8: | If Party B suffers from the disease or work-related injury, Party B's wages and medical insurance treatment shall be determined according to the national and local regulations. |
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| Article 9: | Party A shall provide Party B with the following insurance and other welfare: |
Medical insurance, pension insurance, maternity insurance, work-related injury insurance, unemployment insurance and housing fund
6. Labor discipline
| Article 10: | Party B shall abide by the administrative rules and regulations formulated by Party A, protect Party A's property, observe professional ethics, actively participate in the trainings organized by Party A to improve his/her ideological consciousness and professional skills, and fulfill his/her own job on schedule and quantity. Party B shall keep all trade secrets, intellectual property rights, company secrets and any other matters of Party A which should not be made public, otherwise, Party B shall bear the responsibility of compensation if it causes losses to Party A. |
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| Article 11: | Party B promises that he/she does not keep employment relation with any other employer at the time of signing this Contract, otherwise, Party B shall be solely responsible for any loss caused to other employer and has nothing to do with Party A. Provided that Party B violates labor discipline, Party A has the right to give him/her disciplinary punishment or administrative fine, up to terminate this contract. |
7. Amendment, Rescission, Termination and Renewal of Labor Contract
| Article 12: | When the laws, administrative regulations and rules, on which this contract is made change, the related contents of this contract should be changed. |
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| Article 13: | In event that the objective circumstances, based on which this contract is concluded, change significantly, which causes that this contract can not be performed, the contents of this contract can be amended with the agreement of both parties. |
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| Article 14: | This contract can be terminated based on the mutual agreement of the two parties. |
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| Article 15: | If Party B has one of the following behaviors, Party A has the right to immediately terminate this contract: |
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| 1. | Party B seriously breaches labor discipline or the rules and regulations of Party A; |
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| 2. | Party B causes material damages to the interests of Party A due to serious dereliction of duties or engagement in malpractices for selfish ends; |
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| 3. | Party B is prosecuted for criminal liability; |
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| 4. | If it is verified that the personal information provided by Party B to Party A is false, such provision of false information is deemed as a serious violation of company rules and regulations, including but not limited to: certificate of employment separation, certificate of identity, certificate of permanent residence registration, certificate of academic qualification, certificate of physical examination, past working experience, family members and major social relations. |
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| Article 16: | Party A shall have the right to terminate this contract in any of the following circumstances by giving a 30-day prior written notice to Party B: |
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| 1. | Party B suffers from a disease or non-work-related injury and is unable to take his/her original work or other work arranged by Party A after the expiration of his/her medical treatment period; |
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| 2. | Party B is not qualified for the work, despite further training or adjustment of position; |
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| 3. | The two parties fail to reach an agreement on alteration of the contract in accordance with Article 12 and 13 hereof. |
| Article 17: | When Party A is carrying out legal reorganization on the edge of bankruptcy or encountering serious operational difficulties, after explaining the situation to all staff and listening to the opinions of staff, Party A may terminate this contract in light of economic layoffs. |
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| Article 18: | If Party B has any of the following behaviors, Party A shall not terminate this contract in accordance with Article 16 and 17 hereof: |
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| 1. | Party B has any disease or work-related injury, and is in the specified medical period; |
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| 2. | Female staff involved in pregnancy, confinement or lactation. |
| Article 19: | Party B shall give Party A a written notice thirty days in advance to terminate this contract. |
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| Article 20: | Party B may at any time inform Party A to terminate this contract in any of the following cases: |
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| 1. | Party B forces Party B to work with such means as violation or threat or unlawful restriction of personal freedom; |
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| 2. | Party A is unable to pay remuneration or provide working conditions in accordance with its contract; |
| Article 21: | Party A shall do the transfer of social insurance file within fifteen days after the termination of the contract. |
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| Article 22: | Party B shall do the work handover in accordance with the regulations. |
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| Article 23: | Upon the expiration of the term of this contract, both parties may renew it if mutually agreed. |
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8. Economic Compensation and Indemnification
| Article 24: | In case of any of the following circumstances, Party A shall pay Party B an economic compensation in accordance with Party B's average monthly salary of the 12 months prior to the termination of the contract for each one year service, but the total compensation shall not exceed 12 months, based on the length of service of Party B in Party A: |
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| 1. | Party A terminates the contract through unanimous negotiations between the two parties; |
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| 2. | Party A shall terminate the contract for Party B who is not competent for the job, despite further training or adjustment of positions; |
| Article 25: | In case of any of the following circumstances, Party A shall pay Party B economic compensation in accordance with Party B's average monthly salary of the 12 months prior to the termination of the contract for each one year service according to the term of service: |
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| 1. | Party B suffers from a disease or non-work-related injury, and is confirmed by the Labor Appraisal Committee as unable to take up the original work or other work arranged by Party A, and terminates the contract; |
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| 2. | Party A terminates the contract because major changes have occurred in objective circumstances for concluding the contract, which caused that the contract can not be fulfilled, and the parties cannot reach an agreement for alteration through negotiation; |
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| 3. | Party A is carrying out legal reorganization on the verge of bankruptcy or encountering serious difficulties and having to cut down personnel; |
| Article 26: | If Party B rescinds the labor contract by violating the conditions stated in this contract or breaches the stipulation of the contract to keep the business secrets confidential, and causes economic loss to Party A, Party B shall pay compensation based on the extent of loss. |
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| Article 27: | If the contract is terminated by Party B, all the personnel provided by Party A for training shall be paid to Party A the pro rata amount of training expenses and cost of tooling specially made by Party A for Party B. |
9. Settlement of labor disputes
| Article 28: | if a labor dispute arises in the performance of this contract, the parties involved can apply to Party A for mediation. If the mediation fails and Party B requests for arbitration, he/she should appeal to the Labor Dispute Arbitration Committee for arbitration within sixty days of the dispute. Party B may also directly appeal to the Labor Dispute Arbitration Committee for arbitration. If either party disagrees with the arbitration award, it may file a suit at the People's Court. |
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| Article 29: | Matters not covered in this contract or in the future contrary to the relevant national and local regulations shall be subject to the relevant provisions. |
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| Article 30: | This contract is made in duplicate. Party A and Party B shall keep one copy each. |
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| Party A (seal) |
| Party B (sign): Wang Jun |
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| Date: December 1, 2019 |
| Date: December 1, 2019 |
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EXHIBIT 10.2
CERTAIN PERSONALLY IDENTIFIABLE INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY [***], HAS BEEN OMITTED.
Labor Contract
Party A: Yubo International Biotech (Beijing) Limited.
Legal Representative: Jun Wang
Business Address: Room 108, Building 6, No. 31, Xishiku Street, Xicheng District, Beijing
Party B: Yang Wang
Chinese Identification No.: [***********] Tel: [***********]
Residence Address: [***********]
Party A and Party B shall comply with the Labor Contract Law of the People's Republic of China and other relevant laws and regulations. Party A and Party B enter into this Contract on the basis of equality, voluntariness, fairness and justice, consensus and honesty and trustworthiness.
1. Term of Labor Contract
| Article 1: | The fixed term of this Contract is from October 10, 2020 to October 9, 2021. |
2. Job Contents
| Article 2: | Party B agrees to serve as the president (type of work) based on the work needs of Party A. Based on its work needs and production and operation status, Party A can change Party B's job position and type of work based on its work needs and production and operation status. |
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| Party B shall be responsible for the daily operation management of the Company, organize the implementation of business plans and investment plans for the Company, coordinate, inspect and supervise the management work of various departments, fully implement the related resolutions and decisions of the board of directors, and fulfill the various indicators set by the board of directors. |
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| The specific standards of assessment for Party B's position shall be implemented according to overall plan of the Company. |
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| Article 3: | Party B shall complete the required quantity of work and reach the required quality standard as per the lawful requirements of Party A. |
3. Labor Protection and Working Conditions
| Article 4: | Party A arranges Party B to implement the fixed working hour system. |
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| Party A arranges Party B to work 8 hours a day, and 40 hours a week on average. Party A shall ensure Party B has at least one off day each week. If Party A needs to extend Party B's working hours, the extension of working hours should not exceed 3 hours a day, and should not exceed 36 hours a month under the condition that Party B is healthy. Specific working hours shall be arranged by Party A according to its operation need, and Party B shall obey. |
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| Article 5: | If Party A arranges Party B to work overtime, Party B agrees that Party A can arrange Party B to have compensated off day off in the same period, otherwise, Party B will pay overtime pay according to law. If Party B needs to work overtime, Party B shall apply to Party A for approval before Party B work, otherwise it will not be deemed as overtime work. |
4. Labor Reward
| Article 6: | Party A shall, in accordance with the provisions of laws and regulations, determine the wage standard of Party B based on the principle of distribution according to work, and based on its actual conditions of Party A and the position of Party B. |
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| 1. | The wage standard shall be determined according to the salary administration regulations formulated by Party A in accordance with law but the wage paid by Party A to Party B shall not be lower than the minimum wage standard announced by the local government for the year. |
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| 2. | Party A has the right to adjust the wage standard of Party B according to the change of Party B's job position and company's salary administration rules formulated in accordance with law. |
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| 3. | The composition of wages shall be composed of basic wages and performance-based wages. |
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| 4. | Party A will pay the full wage to Party B in the form of currency on around 10th of every month according to the monthly wage standard regulated by company. If it falls on holiday, the wage will be advanced one day or postponed to the end of the holiday. |
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| 5. | Monthly Basic Salary_RMB8800 (Eight Thousand Eight Hundred Yuan)_ |
5. Insurance and Welfare Benefits
| Article 7: | The Parties shall pay social insurance premium and accumulated housing fund according to relevant national and Beijing regulations. Party A shall complete the relevant procedures for social insurance premium and accumulated housing fund for Party B and assume the corresponding social insurance and other obligations. |
| Article 8: | If Party B suffers from the disease or work-related injury, Party B's wages and medical insurance treatment shall be determined according to the national and local regulations. |
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| Article 9: | Party A shall provide Party B with the following insurance and other welfare: |
Medical insurance, pension insurance, maternity insurance, work-related injury insurance, unemployment insurance and housing fund
6. Labor discipline
| Article 10: | Party B shall abide by the administrative rules and regulations formulated by Party A, protect Party A's property, observe professional ethics, actively participate in the trainings organized by Party A to improve his/her ideological consciousness and professional skills, and fulfill his/her own job on schedule and quantity. Party B shall keep all trade secrets, intellectual property rights, company secrets and any other matters of Party A which should not be made public, otherwise, Party B shall bear the responsibility of compensation if it causes losses to Party A. |
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| Article 11: | Party B promises that he/she does not keep employment relation with any other employer at the time of signing this Contract, otherwise, Party B shall be solely responsible for any loss caused to other employer and has nothing to do with Party A. Provided that Party B violates labor discipline, Party A has the right to give him/her disciplinary punishment or administrative fine, up to terminate this contract. |
7. Amendment, Rescission, Termination and Renewal of Labor Contract
| Article 12: | When the laws, administrative regulations and rules, on which this contract is made change, the related contents of this contract should be changed. |
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| Article 13: | In event that the objective circumstances, based on which this contract is concluded, change significantly, which causes that this contract can not be performed, the contents of this contract can be amended with the agreement of both parties. |
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| Article 14: | This contract can be terminated based on the mutual agreement of the two parties. |
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| Article 15: | If Party B has one of the following behaviors, Party A has the right to immediately terminate this contract: |
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| 1. | Party B seriously breaches labor discipline or the rules and regulations of Party A; |
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| 2. | Party B causes material damages to the interests of Party A due to serious dereliction of duties or engagement in malpractices for selfish ends; |
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| 3. | Party B is prosecuted for criminal liability; |
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| 4. | If it is verified that the personal information provided by Party B to Party A is false, such provision of false information is deemed as a serious violation of company rules and regulations, including but not limited to: certificate of employment separation, certificate of identity, certificate of permanent residence registration, certificate of academic qualification, certificate of physical examination, past working experience, family members and major social relations. |
| Article 16: | Party A shall have the right to terminate this contract in any of the following circumstances by giving a 30-day prior written notice to Party B: |
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| 1. | Party B suffers from a disease or non-work-related injury and is unable to take his/her original work or other work arranged by Party A after the expiration of his/her medical treatment period; |
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| 2. | Party B is not qualified for the work, despite further training or adjustment of position; |
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| 3. | The two parties fail to reach an agreement on alteration of the contract in accordance with Article 12 and 13 hereof. |
| Article 17: | When Party A is carrying out legal reorganization on the edge of bankruptcy or encountering serious operational difficulties, after explaining the situation to all staff and listening to the opinions of staff, Party A may terminate this contract in light of economic layoffs. |
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| Article 18: | If Party B has any of the following behaviors, Party A shall not terminate or terminate this contract in accordance with Article 16 and 17 hereof: |
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| 1. | Party B has any disease or work-related injury, and is in the specified medical period; |
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| 2. | Female staff involved in pregnancy, confinement or lactation. |
| Article 19: | Party B shall give Party A a written notice thirty days in advance to terminate this contract. |
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| Article 20: | Party B may at any time inform Party A to terminate this contract in any of the following cases: |
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| 1. | Party B forces Party B to work with such means as violation or threat or unlawful restriction of personal freedom; |
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| 2. | Party A is unable to pay remuneration or provide working conditions in accordance with its contract; |
| Article 21: | Party A shall do the transfer of social insurance file within fifteen days after the termination of the contract. |
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| Article 22: | Party B shall do the work handover in accordance with the regulations. |
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| Article 23: | Upon the expiration of the term of this contract, both parties may renew it if mutually agreed. |
8. Economic Compensation and Indemnification
| Article 24: | In case of any of the following circumstances, Party A shall pay Party B an economic compensation in accordance with Party B's average monthly salary of the 12 months prior to the termination of the contract for each one year service, but the total compensation shall not exceed 12 months, based on the length of service of Party B in Party A: |
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| 1. | Party A terminates the contract through unanimous negotiations between the two parties; |
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| 2. | Party A shall terminate the contract for Party B who is not competent for the job, despite further training or adjustment of positions; |
| Article 25: | In case of any of the following circumstances, Party A shall pay Party B economic compensation in accordance with Party B's average monthly salary of the 12 months prior to the termination of the contract for each one year service according to the term of service: |
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| 1. | Party B suffers from a disease or non-work-related injury, and is confirmed by the Labor Appraisal Committee as unable to take up the original work or other work arranged by Party A, and terminates the contract; |
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| 2. | Party A terminates the contract because major changes have occurred in objective circumstances for concluding the contract, which caused that the contract can not be fulfilled, and the parties cannot reach an agreement for alteration through negotiation; |
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| 3. | Party A is carrying out legal reorganization on the verge of bankruptcy or encountering serious difficulties and having to cut down personnel; |
| Article 26: | If Party B rescinds the labor contract by violating the conditions stated in this contract or breaches the stipulation of the contract to keep the business secrets confidential, and causes economic loss to Party A, Party B shall pay compensation based on the extent of loss. |
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| Article 27: | If the contract is terminated by Party B, all the personnel provided by Party A for training shall be paid to Party A the pro rata amount of training expenses and cost of tooling specially made by Party A for Party B. |
9. Settlement of labor disputes
| Article 28: | if a labor dispute arises in the performance of this contract, the parties involved can apply to Party A for mediation. If the mediation fails and Party B requests for arbitration, he/she should appeal to the Labor Dispute Arbitration Committee for arbitration within sixty days of the dispute. Party B may also directly appeal to the Labor Dispute Arbitration Committee for arbitration. If either party disagrees with the arbitration award, it may file a suit at the People's Court. |
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| Article 29: | Matters not covered in this contract or in the future contrary to the relevant national and local regulations shall be subject to the relevant provisions |
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| Article 30: | This contract is made in duplicate. Party A and Party B shall keep one copy each. |
| Party A (seal) | Party B (sign): Wang Yang |
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| Date: 2020.10.10 | Date: 2020.10.10 |
EXHIBIT 10.3
CERTAIN PERSONALLY IDENTIFIABLE INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED.
Labor Contract
Party A: Yubo International Biotech (Beijing) Limited.
Legal Representative: Jun Wang
Business Address: Room 108, Building 6, No. 31, Xishiku Street, Xicheng District, Beijing
Party B: Lina Liu
Chinese Identification No.: [***********] Tel: [***********]
Residence Address: [***********]
Party A and Party B shall comply with the Labor Contract Law of the People’s Republic of China and other relevant laws and regulations. Party A and Party B enter into this Contract on the basis of equality, voluntariness, fairness and justice, consensus and honesty and trustworthiness.
1. Term of Labor Contract
| Article 1: |
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| The fixed term of this Contract is from October 10, 2020 to October 9, 2021. |
2. Job Contents
| Article 2: | Party B agrees to serve as the post (type of work) of CFO based on the work needs of Party A. Based on its work needs and production and operation status, Party A can change Party B’s job position and type of work through consultation with Party B. |
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| Party B’s job duties are: fully responsible for managing the financial and accounting of the Company, examining, approving and supervising the financial plans and capital conditions of the Company, and handling the financing and related capital flows of the Company. Review and guide the accounts of the Company. Review the Company’s significant operational, investment and financing plans and contracts as well as the asset and debt restructuring plans of the Company. Provide financial analysis and participate in final decision-making and implementation of the Company’s significant business plans and investment projects. Inspect the legality, authenticity and validity of the financial and accounting activities and relevant business activities of the Company in accordance with laws. |
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| The specific standards of assessment for Party B’s position shall be implemented according to overall plan of the Company. |
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| Article 3: | Party B shall complete the required quantity of work and reach the required quality standard as per the lawful requirements of Party A. |
3. Labor Protection and Working Conditions
| Article 4: | Party A arranges Party B to implement the fixed working hour system. |
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| Party A arranges Party B to work 8 hours a day, and 40 hours a week on average. Party A shall ensure Party B has at least one off day each week. If Party A needs to extend Party B’s working hours, the extension of working hours should not exceed 3 hours a day, and should not exceed 36 hours a month under the condition that Party B is healthy. Specific working hours shall be arranged by Party A according to its operation need, and Party B shall obey. |
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| Article 5: | If Party A arranges Party B to work overtime, Party B agrees that Party A can arrange Party B to have compensated off day off in the same period, otherwise, Party B will pay overtime pay according to law. If Party B needs to work overtime, Party B shall apply to Party A for approval before Party B work, otherwise it will not be deemed as overtime work. |
4. Labor Reward
| Article 6: | Party A shall, in accordance with the provisions of laws and regulations, determine the wage standard of Party B based on the principle of distribution according to work, and based on its actual conditions of Party A and the position of Party B. |
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| 1. | The wage standard shall be determined according to the salary administration regulations formulated by Party A in accordance with law but the wage paid by Party A to Party B shall not be lower than the minimum wage standard announced by the local government for the year. |
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| 2. | Party A has the right to adjust the wage standard of Party B according to the change of Party B’s job position and company’s salary administration rules formulated in accordance with law. |
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| 3. | The composition of wages shall be composed of basic wages and performance-based wages. |
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| 4. | Party A will pay the full wage to Party B in the form of currency on around 10th of every month according to the monthly wage standard regulated by company. If it falls on holiday, the wage will be advanced one day or postponed to the end of the holiday. |
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| 5. | Monthly Basic Salary_RMB8000 (Eight Thousand Yuan)__ |
5. Insurance and Welfare Benefits
| Article 7: | The Parties shall pay social insurance premium and accumulated housing fund according to relevant national and Beijing regulations. Party A shall complete the relevant procedures for social insurance premium and accumulated housing fund for Party B and assume the corresponding social insurance and other obligations. |
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| Article 8: | If Party B suffers from the disease or work-related injury, Party B’s wages and medical insurance treatment shall be determined according to the national and local regulations. |
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| Article 9: | Party A shall provide Party B with the following insurance and other welfare: |
Medical insurance, pension insurance, maternity insurance, work-related injury insurance, unemployment insurance and housing fund
6. Labor discipline
| Article 10: | Party B shall abide by the administrative rules and regulations formulated by Party A, protect Party A’s property, observe professional ethics, actively participate in the trainings organized by Party A to improve his/her ideological consciousness and professional skills, and fulfill his/her own job on schedule and quantity. Party B shall keep all trade secrets, intellectual property rights, company secrets and any other matters of Party A which should not be made public, otherwise, Party B shall bear the responsibility of compensation if it causes losses to Party A. |
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| Article 11: | Party B promises that he/she does not keep employment relation with any other employer at the time of signing this Contract, otherwise, Party B shall be solely responsible for any loss caused to other employer and has nothing to do with Party A. Provided that Party B violates labor discipline, Party A has the right to give him/her disciplinary punishment or administrative fine, up to terminate this contract. |
7. Amendment, Rescission, Termination and Renewal of Labor Contract
| Article 12: | When the laws, administrative regulations and rules, on which this contract is made change, the related contents of this contract should be changed. |
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| Article 13: | In event that the objective circumstances, based on which this contract is concluded, change significantly, which causes that this contract can not be performed, the contents of this contract can be amended with the agreement of both parties. |
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| Article 14: | This contract can be terminated based on the mutual agreement of the two parties. |
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| Article 15: | If Party B has one of the following behaviors, Party A has the right to immediately terminate this contract: |
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| 1. | Party B seriously breaches labor discipline or the rules and regulations of Party A; |
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| 2. | Party B causes material damages to the interests of Party A due to serious dereliction of duties or engagement in malpractices for selfish ends; |
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| 3. | Party B is prosecuted for criminal liability; |
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| 4. | If it is verified that the personal information provided by Party B to Party A is false, such provision of false information is deemed as a serious violation of company rules and regulations, including but not limited to: certificate of employment separation, certificate of identity, certificate of permanent residence registration, certificate of academic qualification, certificate of physical examination, past working experience, family members and major social relations. |
| Article 16: | Party A shall have the right to terminate this contract in any of the following circumstances by giving a 30-day prior written notice to Party B: |
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| 1. | Party B suffers from a disease or non-work-related injury and is unable to take his/her original work or other work arranged by Party A after the expiration of his/her medical treatment period; |
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| 2. | Party B is not qualified for the work, despite further training or adjustment of position; |
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| 3. | The two parties fail to reach an agreement on alteration of the contract in accordance with Article 12 and 13 hereof. |
| Article 17: | When Party A is carrying out legal reorganization on the edge of bankruptcy or encountering serious operational difficulties, after explaining the situation to all staff and listening to the opinions of staff, Party A may terminate this contract in light of economic layoffs. |
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| Article 18: | If Party B has any of the following behaviors, Party A shall not terminate this contract in accordance with Article 16 and 17 hereof: |
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| 1. | Party B has any disease or work-related injury, and is in the specified medical period; |
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| 2. | Female staff involved in pregnancy, confinement or lactation. |
| Article 19: | Party B shall give Party A a written notice thirty days in advance to terminate this contract. |
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| Article 20: | Party B may at any time inform Party A to terminate this contract in any of the following cases: |
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| 1. | Party B forces Party B to work with such means as violation or threat or unlawful restriction of personal freedom; |
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| 2. | Party A is unable to pay remuneration or provide working conditions in accordance with its contract; |
| Article 21: | Party A shall do the transfer of social insurance file within fifteen days after the termination of the contract. |
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| Article 22: | Party B shall do the work handover in accordance with the regulations. |
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| Article 23: | Upon the expiration of the term of this contract, both parties may renew it if mutually agreed. |
8. Economic Compensation and Indemnification
| Article 24: | In case of any of the following circumstances, Party A shall pay Party B an economic compensation in accordance with Party B’s average monthly salary of the 12 months prior to the termination of the contract for each one year service, but the total compensation shall not exceed 12 months, based on the length of service of Party B in Party A: |
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| 1. | Party A terminates the contract through unanimous negotiations between the two parties; |
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| 2. | Party A shall terminate the contract for Party B who is not competent for the job, despite further training or adjustment of positions; |
| Article 25: | In case of any of the following circumstances, Party A shall pay Party B economic compensation in accordance with Party B’s average monthly salary of the 12 months prior to the termination of the contract for each one year service according to the term of service: |
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| 1. | Party B suffers from a disease or non-work-related injury, and is confirmed by the Labor Appraisal Committee as unable to take up the original work or other work arranged by Party A, and terminates the contract; |
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| 2. | Party A terminates the contract because major changes have occurred in objective circumstances for concluding the contract, which caused that the contract can not be fulfilled, and the parties cannot reach an agreement for alteration through negotiation; |
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| 3. | Party A is carrying out legal reorganization on the verge of bankruptcy or encountering serious difficulties and having to cut down personnel; |
| Article 26: | If Party B rescinds the labor contract by violating the conditions stated in this contract or breaches the stipulation of the contract to keep the business secrets confidential, and causes economic loss to Party A, Party B shall pay compensation based on the extent of loss. |
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| Article 27: | If the contract is terminated by Party B, all the personnel provided by Party A for training shall be paid to Party A the pro rata amount of training expenses and cost of tooling specially made by Party A for Party B. |
9. Settlement of labor disputes
| Article 28: | if a labor dispute arises in the performance of this contract, the parties involved can apply to Party A for mediation. If the mediation fails and Party B requests for arbitration, he/she should appeal to the Labor Dispute Arbitration Committee for arbitration within sixty days of the dispute. Party B may also directly appeal to the Labor Dispute Arbitration Committee for arbitration. If either party disagrees with the arbitration award, it may file a suit at the People’s Court. |
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| Article 29: | Matters not covered in this contract or in the future contrary to the relevant national and local regulations shall be subject to the relevant provisions. |
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| Article 30: | This contract is made in duplicate. Party A and Party B shall keep one copy each. |
| Party A (seal) | Party B (sign): Liu Lina |
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| Date:2020.10.10 | Date: 2020.10.10 |
EXHIBIT 10.4
CERTAIN PERSONALLY IDENTIFIABLE INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED.
Equity Pledge Agreement
This Equity Pledge Agreement (this “Agreement”) has been executed by and among the following parties on September 11, 2020 in Beijing:
Party A: Yubo International Biotech (Chengdu) Limited. (the “Pledgee”)
Registered Address: 1201, 12 / F, unit 1, building 2, 368 Tianfu Second Street, Chengdu hi tech Zone
Party B 1: Wang Jun
Chinese Identification Card No.: [************]
Party B 2: Wang Yang
Chinese Identification Card No.: [************]
Party B 3: Beijing Zhenxigu Medical Research Center (L.P.)
Registered Address: Room 301, Building 23, No. 31, Xishiku Avenue, Xicheng District, Beijing
Party B 4: Beijing Borong Hongtai Asset Management Center (L.P.)
Registered Address: Room 601-273, No. 99, Yanmi Road, Xitian Gezhuang Town, Miyun District, Beijing
Party B 5: Platinum Health Management (Tianjin) Center (L.P.)
Registered Address: 217-43, Xinzhuang Economic Service Center, No. 818, Jingu Road, Xinzhuang Creative Industry Park, Xinzhuang Town, Jinnan District, Tianjin
(Party B 1, Party B 2, Party B 3, Party B 4 and Party B 5 are collectively referred to as “Party B” or the “Pledgors”.)
Party C: Platinum International Biotechnology (Beijing) Co., Ltd.
Registered Address: Room 108, Building 6, No. 31, Xishiku Avenue, Xicheng District, Beijing
In this Agreement, each of Pledgee, Pledgors and Party C shall be referred to as a “Party” respectively, and they shall be collectively referred to as the “Parties”.
WHEREAS:
| 1. | Pledgors collectively own 100% of the equity interest in Party C; |
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| 2. | ont Party C acknowledges the respective rights and obligations of the Pledgors and the Pledgee under this Agreement and agrees to provide any necessary assistance in registering the Pledge Right as defined below; |
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| 3. | To ensure that Party C and the Pledgors fully perform their obligations under the Transaction Documents (as defined below), the Pledgors hereby pledge to the Pledgee all of the equity interest they hold in Party C as pledge guarantee for Party C’s and the Pledgors’ performance of the Transaction Documents. |
| 1. | Definitions |
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| Unless otherwise provided herein, the following terms shall have the following meanings: |
| 1.1 | “Pledge Right” means the guarantee interest granted by the Pledgors to the Pledgee in accordance with Article 2 of this Agreement, i.e., the right of the Pledgee to be compensated in a preferential way with the proceeds from the conversion, auction or sale of the Equity Interest. |
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| 1.2 | “Equity Interest” means all of the equity interest in Party C lawfully held now and acquired hereafter by the Pledgors. |
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| 1.3 | “Term of Pledge” means the term set forth in Article 3 hereof. |
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| 1.4 | “Transaction Documents” shall mean the Exclusive Consulting Service Agreement executed by and between Party C and the Pledgee on September 11, 2020 (the “Consulting Service Agreement”), the Exclusive Option Agreement executed by and among Party C, the Pledgee and the Pledgors on September 11, 2020 (the “Exclusive Option Agreement”), and Entrustment Agreement executed on September 11, 2020 with the Pledgors (the “Entrustment Agreement”) and any modification, amendment and restatement to the aforementioned documents. |
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| 1.5 | “Secured Indebtedness” means all direct, indirect and derivative losses and losses of foreseeable profits suffered by the Pledgee as a result of any Event of Default of the Pledgors and/or Party C or invalidity, cancellation or rescission of any Transaction Document. The basis for the amounts of such losses shall include, but not be limited to, the reasonable business plans and profit forecasts of the Pledgee, the service fees payable by Party C under the Consulting Service Agreement, all expenses incurred by the Pledgee in connection with its enforcement of the Pledgors’ and/or Party C’s obligations hereunder. |
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| 1.6 | “Event of Default” means any of the circumstances set forth in Article 7 hereof. |
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| 1.7 | “Notice of Default” means the notice given by the Pledgee in accordance with this Agreement declaring an Event of Default. |
| 2. | Pledge |
| 2.1 | The Pledgors hereby pledge their 100% Equity Interest in Party C by them to the Pledgee by means of first priority pledge as guarantee for the repayment of the Secured Indebtedness. For the avoidance of doubt, the pledged property shall be all of the equity interest in Party C held by the Pledgors, representing RMB 10,000,000.00 of registered capital. |
EQUITY PLEDGE AGREEMENT
| - 2 - |
| 2.2 | If any of the following events (each an “Event of Settlement”) occurs, the value of the Secured Indebtedness shall be determined based on the total amount of the Secured Indebtedness that are due, outstanding and payable to the Pledgee immediately prior to or on the date of occurrence of the Event of Settlement (the “Determined Indebtedness”): |
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| (a) | The Consulting Service Agreement expires or is terminated in accordance with the relevant provisions thereunder; |
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| (b) | The occurrence and failure to resolve an Event of Default set forth in Article 7 hereof, as a result of which the Pledgee gives a Notice of Default to the relevant Pledgor(s) in accordance with Article 7.3; |
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| (c) | Upon due inquiry, the Pledgee reasonably determines that the Pledgors and/or Party C is insolvent or could potentially be made insolvent; or |
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| (d) | Any other event that requires the determination of the Secured Indebtedness in accordance with the relevant laws of the PRC. |
| 2.3 | For the avoidance of doubt, the date on which an Event of Settlement occurs shall be the settlement date (the “Settlement Date”). The Pledgee shall have the right, at its option, to realize the Pledge Right in accordance with Article 8 on or after the Settlement Date. |
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| 2.4 | During the Term of Pledge (as defined below), the Pledgee is entitled to receive any dividends or other distributable benefits with respect to the Equity Interest. Without the Pledgee’s prior written consent, the Pledgors shall not receive dividends distributed on the Equity Interest. |
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| 2.5 | The Pledgors may subscribe for capital increase in Party C with the prior written consent of the Pledgee. Any equity interest obtained by the Pledgors as a result of any capital increase in Party C by them shall also be deemed as Equity Interest. |
| 3. | Term of Pledge |
| 3.1 | The Pledge shall become effective as of the date on which it is registered with the market supervision and administration authority (the “Registration Authority”) in the locality of Party C, and the term of the Pledge (the “Term of Pledge”) shall terminate until the obligation secured by the Pledge has been fully repaid or performed. The Parties agree that after the execution of this Agreement, they shall use their best efforts to submit an application for the creation and registration of pledge to the Registration Authority in accordance with the Measures for the Registration of Equity Pledge with the Administrative Authorities for Industry and Commerce, at the earliest date of the procedures prescribed by the Registration Authority. |
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| 3.2 | During the Term of Pledge, in the event Party C fails to perform its obligations in accordance with the Transaction Documents, the Pledgee shall have the right, but not the obligation, to dispose of the Pledge in accordance with the provisions of this Agreement. |
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| 3.3 | The Pledgors and Party C shall promptly record the pledge of the Equity Interest contemplated herein in the shareholders’ register of Party C upon the execution of this Agreement. |
EQUITY PLEDGE AGREEMENT
| - 3 - |
| 4. | Custody of Equity Interest Records subject to the Pledge |
| 4.1 | During the Term of Pledge set forth in this Agreement, the Pledgors shall deliver to the Pledgee’s custody the original of investment certificate and the original of shareholders’ register recording the Pledge (and other documents reasonably requested by the Pledgee, including, without limitation, the Pledge Registration Notice issued by the market supervision and administration authority) as soon as possible from the date on which the Pledge is registered and created. The Pledgee shall have custody of such documents during the entire Term of Pledge set forth in this Agreement. |
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| 4.2 | During the Term of Pledge, the Pledgee shall be entitled to collect dividends generated by the Equity Interest. |
| 5. | Representations and Warranties of Each Pledgor and Party C |
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| The Pledgors hereby represent and warrant to the Pledgee as follows: |
| 5.1 | The Pledgors are the sole legal and beneficial owners of the Equity Interest and shall have lawful, good and full ownership of the Equity Interest, unless subject to the agreements otherwise executed by and between the Pledgors and the Pledgee. |
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| 5.2 | The Pledgors shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions of this Agreement. |
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| 5.3 | Except for the Pledge Right, the Pledgors have created no security interest or other encumbrance on the Equity Interest, and the ownership of the Equity Interest is not disputed, or subject to attachment or other legal proceedings, or similar threatened action, in which the Equity Interest may be used for pledge and transfer in accordance with applicable laws. |
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| 5.4 | The Pledgors’ execution of this Agreement and exercise of their rights hereunder or performance of their obligations hereunder will not violate any laws or regulations, any agreements or contracts to which the Pledgors are a party, or any covenants made by the Pledgors to any third party. |
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| 5.5 | All documents, information, statements and certificates provided by the Pledgors to the Pledgee are accurate, true, complete and valid. |
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| 5.6 | The Pledgors hereby warrant to the Pledgee that the above mentioned representations and warranties shall remain true and correct and be fully complied with under any circumstances at any time prior to the full performance of the obligations hereunder or the full repayment of the Secured Indebtedness. |
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| Party C represents and warrants to the Pledgee as follows: |
| 5.7 | Party C is a limited liability company registered, incorporated and lawfully existing under the laws of the PRC with independent legal person status; it has full and independent civil and legal capacity to execute, deliver and perform this Agreement. |
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| 5.8 | Upon due execution of this Agreement by Party C, the legal and valid obligations binding on Party A is hereby constituted. |
EQUITY PLEDGE AGREEMENT
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| 5.9 | Party C has full internal right and authority to execute and deliver this Agreement and all other documents relating to the transactions contemplated hereby, and has full right and authority to consummate the transactions contemplated hereby. |
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| 5.10 | There is no material security interest or other encumbrance on the assets owned by Party C, which may affect the rights and interests of the Pledgee in the Equity Interest. |
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| 5.11 | There are no pending or, to the knowledge of Party C, threatened litigation, arbitration or other legal proceedings before any court or arbitral tribunal with respect to the Equity Interest, Party C or its assets, nor are there pending or, to the knowledge of Party C, threatened administrative procedures or penalty before any governmental or administrative authority with respect to the Equity Interest, Party C or its assets, which will have material or adverse effect on the economic condition of Party C or the Pledgors’ ability to perform their obligations and guarantee liability hereunder. |
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| 5.12 | Party C hereby agrees to bear joint and several liability to the Pledgee for all or any of the Pledgors made hereunder. |
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| 5.13 | Party C hereby warrants to the Pledgee that the foregoing representations and warranties will remain true and correct and be fully complied with under any circumstances at any time prior to full performance of the obligations hereof or full satisfaction of the Secured Indebtedness. |
| 6. | Covenants and Further Agreements of the Pledgors and Party C |
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| The Pledgors covenant and further agree as follows: |
| 6.1 | During the validity term of this Agreement, the Pledgors hereby covenant to the Pledgee that: |
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| 6.1.1 | Except for the performance of the Exclusive Option Agreement executed by the Pledgors, the Pledgee and Party C on September 11, 2020, without the prior written consent of the Pledgee, the Pledgors shall not transfer, or agree to others’ transfer of, all or any part of the Equity Interest, create or permit to be created any security interest or other encumbrance which may affect the rights and interests of the Pledgee in the Equity Interest; |
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| 6.1.2 | The Pledgors shall comply with all laws and regulations applicable to the pledge of rights, show any notice, order or recommendation issued or prepared by relevant competent authorities (or any other relevant authority) in connection with the Pledge Right to the Pledgee within five (5) days after the receipt of the same, and comply with such notice, order or recommendation, or make objections and representations with respect to such matters as reasonably requested by the Pledgee or upon approval of the Pledgee; |
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| 6.1.3 | The Pledgors shall promptly notify the Pledgee of any event or notice received by the Pledgors which may have effect on the Pledgee’s rights in the Equity Interest or any portion thereof, together with any event or notice received by the Pledgors which may have effect on any warranty and other obligations of the Pledgors arising out of this Agreement. |
EQUITY PLEDGE AGREEMENT
| - 5 - |
| 6.2 | The Pledgors agree that the Pledge Right acquired by the Pledgee in accordance with this Agreement shall not be suspended or prejudiced by the Pledgors or any of their successors or representatives or any other person through legal proceedings. |
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| 6.3 | To protect or perfect the security interest granted hereby, including the payment of the consulting and services fees under the Consulting Service Agreement and the performance of the Transaction Documents, the Pledgors hereby covenant to execute in good faith and cause other parties who have interest in the Pledge Right to execute all certificates, agreements, deeds and/or covenants requested by the Pledgee. The Pledgors further covenant to take and cause other parties who have interest in the Pledge Right to take actions requested by the Pledgee, facilitate the exercise by the Pledgee of the rights and authority granted by this Agreement, and enter into all relevant documents regarding the ownership of the Equity Interest with the Pledgee or its designees (natural persons/legal persons). The Pledgors covenant to provide the Pledgee with all notices, orders and decisions requested by the Pledgee in connection with the Pledge Right within a reasonable period. |
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| 6.4 | The Pledgors hereby covenant to the Pledgee that they will comply with and perform all warranties, covenants, agreements, representations and conditions hereunder. In the event of failure or failure of full performance of their warranties, covenants, agreements, representations and conditions, the Pledgors shall indemnify the Pledgee for all losses caused thereby. |
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| 6.5 | If any compulsory measures are imposed on the Equity Interest pledged hereunder by court or other governmental authorities due to any reason, the Pledgors shall use all endeavors, including, without limitation, provision of other warranties to the court or adoption of other measures, to release such compulsory measures taken by court or other authorities with respect to the Equity Interest. |
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| 6.6 | Without the prior written consent of the Pledgee, the Pledgors and/or Party C shall not (or assist others to) increase, decrease or transfer the registered capital of Party C (or amount of capital contribution to Party C) or create any encumbrance thereon (including the Equity Interest). |
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| 6.7 | Unless the Pledgee gives prior written instructions to the contrary, the Pledgors and/or Party C agree that if all or any part of the equities are transferred between the Pledgors and any third party (the “Equity Transferee”) in violation of this Agreement, the Pledgors and/or Party C shall ensure that the Equity Transferee shall unconditionally acknowledge the Pledge Right and complete necessary pledge change registration formalities (including, without limitation, execution of relevant documents) to procure the existence of the Pledge Right. |
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| Party C covenants and further agrees as follows: |
| 6.8 | If the execution and performance hereof and the Equity Pledge hereunder require consent, permit, waiver or authorization of any third party or approval, permit or exemption of any governmental authority or completion of registration or filing formalities with any governmental authority (if required by law), Party C will endeavor to assist in obtaining and keeping them fully valid during the validity term hereof. |
EQUITY PLEDGE AGREEMENT
| - 6 - |
| 6.9 | Without the prior written consent of the Pledgee, Party C shall not assist or permit the Pledgors to create any new pledge or grant any other security interest on the Equity Interest, nor shall it assist or permit the Pledgors to transfer the Equity Interest. |
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| 6.10 | Without the prior written consent of the Pledgee, Party C shall not transfer its assets, create or permit to be created any security interest or other encumbrance on its assets which may affect the rights and interests of the Pledgee in the Equity Interest. |
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| 6.11 | If there is any lawsuit, arbitration or other claims likely to have adverse effect on Party C, the Equity Interest or the interests of the Pledgee under the Transaction Documents and this Agreement, Party C warrants that it will notify the Pledgee in writing as soon as possible without delay and take all necessary measures as reasonably requested by the Pledgee to ensure the Pledgee’s pledge interests in the Equity Interest. |
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| 6.12 | Party C will not do or permit any act or action likely to have adverse effect on the interests of the Pledgee under the Transaction Documents and this Agreement. |
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| 6.13 | Party C warrants that it will take all necessary measures and execute all necessary documents as reasonably requested by the Pledgee to ensure the Pledgee’s pledge interests in the Equity Interest together with the exercise and realization by the Pledgee of such interests. |
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| 6.14 | If the exercise of the Pledge Right hereunder results in the transfer of any Equity Interest, Party C warrants that it will take all measures to complete such transfer. |
| 7. | Event of Breach |
| 7.1 | Any violation by either Party hereto of any of its obligations hereunder shall be deemed as an Event of Default. |
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| 7.2 | Upon knowledge or discovery of any circumstance set forth in Article 7.1 or the occurrence of any event that may lead to such circumstance, the Pledgors shall promptly notify the Pledgee in writing accordingly. |
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| 7.3 | Unless an Event of Default set forth in this Article 7.1 has been successfully resolved to the Pledgee within thirty (30) days after the date of notice from the Pledgee, the Pledgee may give a Notice of Default to the Pledgors when an Event of Default occurs or at any time after the occurrence of an Event of Default, requesting the Pledgor to exercise of the Pledge Right in accordance with the provisions of Article 8 of this Agreement. |
| 8. | Exercise of Pledge Right |
| 8.1 | The Pledgee shall issue a Notice of Default to the Pledgors when it exercises the Pledge Right. |
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| 8.2 | Subject to the provisions of Article 7.3, the Pledgee may exercise the right to enforce the Pledge Right at any time after the issuance of the Notice of Default in accordance with Article 8.1. Once the Pledgee elects to enforce the Pledge Right, the Pledgors shall have no rights or interests in the Equity Interest. |
EQUITY PLEDGE AGREEMENT
| - 7 - |
| 8.3 | In the event of default, to the extent permitted, and in accordance with applicable laws, the Pledgee has the right to dispose of the pledged Equity Interest in accordance with law. After all the monies received by the Pledgee from the exercise of the Pledge Right are satisfied for paying off the Secured Indebtedness, the remaining amount shall be paid to the Pledgors or the persons entitled to it (without any interest accrued thereon). |
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| 8.4 | The Pledgee is entitled to designate an attorney or other representatives to exercise the Pledge on its behalf, and Pledgors or Party C shall not raise any objectionto such exercise. |
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| 8.5 | When the Pledgee disposes of the Pledge Right in accordance with this Agreement, the Pledgors and Party C shall provide necessary assistance so that the Pledgee can enforce the Pledge Right in accordance with this Agreement. |
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| 8.6 | All out-of-pocket expenses, taxes and all legal costs relating to the creation of the Pledge and the realization of the Pledgee’s rights hereunder shall be borne by the Pledgors, except for those borne by the Pledgee in accordance with laws. |
| 9. | Assignment |
| 9.1 | Without the prior written consent of the Pledgee, the Pledgors shall not assign or delegate their rights and obligations under this Agreement. |
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| 9.2 | This Agreement shall be binding on the Pledgors and his/her successors and permitted assigns, and shall be valid with respect to the Pledgee and each of his/her successors and assigns. |
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| 9.3 | At any time, the Pledgee may assign any and all of its rights and obligations under the Transaction Documents to its designee(s) (natural/legal persons), in which case the assigns shall have the rights and obligations of the Pledgee hereunder, as if they were the original Party hereto. When the Pledgee assigns the rights and obligations under the Transaction Documents, upon request by the Pledgee, the Pledgors shall execute relevant agreements or other documents in connection with such assignment. |
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| 9.4 | In the event of change of the Pledgee due to assignment, upon request by the Pledgee, the Pledgors shall enter into a new pledge agreement with the new pledgee on the same terms and conditions as those of this Agreement. |
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| 9.5 | The Pledgors shall strictly comply with the provisions of this Agreement and other contracts or agreements jointly or severally executed by the Parties hereto or any of them, including the Exclusive Option Agreement and the Entrustment Agreement to authorize the Pledgee, perform the obligations hereunder and thereunder and refrain from any act/omission that may affect the validity and enforceability hereof and thereof. The Pledgors shall not exercise any remaining rights in the Equity Interest pledged hereunder unless in accordance with the written instructions given by the Pledgee. |
EQUITY PLEDGE AGREEMENT
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| 10. | Termination |
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| Upon the full fulfillment of the rights and obligations under the Transaction Documents, this Agreement shall terminate and the Pledgee shall cancel or terminate this Agreement as soon as reasonably practicable. |
| 11. | Handling Fees and Other Expenses |
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| All fees and out of pocket expenses relating to this Agreement, including but not limited to attorneys’ fee, costs of production, stamp duty and any other taxes and fees, shall be borne by Party C. If the Pledgee is required to bear relevant taxes and fees by applicable laws, the Pledgors shall cause Party C to fully reimburse all taxes and fees already paid by the Pledgee. |
| 12. | Confidentiality |
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| The Parties acknowledge that any oral or written information exchanged in connection with this Agreement shall be considered as Confidential Information. Each Party shall keep all such information confidential and shall not disclose any relevant information to any third party without the written consent of the other Parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s disclosure to the public); (b) is required to be disclosed in accordance with applicable laws or rules or provisions of any stock exchange; or (c) is required to be disclosed by any Party to its shareholders, directors, employees, counsels or financial advisors in connection with the transactions contemplated hereby, provided, however, that such shareholders, directors, employees, counsels or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this article. If the staff or agencies engaged by any Party disclose any confidential information, such Party shall be deemed to have disclosed such confidential information and shall bear legal liability for breach of this Agreement. This article shall survive the termination of this Agreement for any reason. |
| 13. | Governing Law and Resolution of Disputes |
| 13.1 | The execution, effectiveness, interpretation and performance of this Agreement and resolution of disputes hereunder shall be governed by the formally promulgated and publicly available laws of the PRC. Any matters not covered by formally promulgated and publicly available laws of the PRC shall be governed by international legal principles and practices. |
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| 13.2 | Any dispute arising from the interpretation and performance of the provisions of this Agreement shall be resolved by the Parties through consultation in good faith. If the Parties fail to agree upon the resolution of a dispute within thirty (30) days after any Party’s request to resolve such dispute through consultation, any Party may submit the dispute to the China International Economic and Trade Arbitration Commission for arbitration in accordance with the Commission’s arbitration rules then in effect. The arbitration shall be conducted in Beijing and conducted in the Chinese language. The arbitration award shall be final and binding on both Parties. |
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| 13.3 | Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement. |
EQUITY PLEDGE AGREEMENT
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| 14. | Notices |
| 14.1 | All notices and other communications required or permitted to be given in accordance with this Agreement shall be personally delivered or sent by registered mail, postage prepaid, commercial courier service, facsimile or email to the address of such Party set forth below. The dates on which notices shall be deemed to have been effectively given shall be determined as follows: |
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| 14.1.1 | Notices given by personal delivery, courier service or registered mail, postage prepaid, shall be deemed effectively given on the date of delivery or refusal at the mailing address specified for notices. |
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| 14.1.2 | Notices given by facsimile or email shall be deemed effectively given on the date of successful transmission (as evidenced by an automatically generated confirmation of transmission). |
| 14.2 | For the purpose of notices, the addresses of the Parties are as follows: |
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| Party A: Address: [************] Attn: Wang Yanxin E-mail: [************] Phone: [************] |
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| Party B: Address: [************] Attn: Wang Yanxin E-mail: [************] Phone: [************] |
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| Party C: Address: [************] Attn: Wang Yanxin E-mail: [************] Phone: [************] |
| 14.3 | Any Party may change its mailing address for notices at any time by giving a notice to the other Parties in accordance with this article. |
| 15. | Severability |
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| If one or more of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions hereof shall not be affected or compromised in any respect. The Parties shall strive through consultation in good faith to replace such invalid, illegal or unenforceable provisions with valid provisions to the greatest extent permitted by laws and expected by the Parties, and the economic effect of such valid provisions shall be as close as possible to the economic effect of such invalid, illegal or unenforceable provisions. |
EQUITY PLEDGE AGREEMENT
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| 16. | Effectiveness |
| 16.1 | Any amendment, modification and supplement to this Agreement shall be made in writing and become effective after the Parties affix their signatures or seals and complete governmental registration procedures, if applicable. |
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| 16.2 | This Agreement is written in the Chinese language in eight (8) counterparts. Each of the Pledgors, the Pledgee and Party C shall hold one (1) copy. One (1) copy shall be submitted to the Registration Authority. Each counterpart of this Agreement shall have the same force and effect. |
[The remainder of this page is intentionally left blank]
EQUITY PLEDGE AGREEMENT
| - 11 - |
IN WITNESS WHEREOF, the Parties have executed this Equity Pledge Agreement as of the date first above written.
Party A: Yubo International Biotech (Chengdu) Limited. (Seal)
By:
Name: Wang Jun
Title: Legal Representative
IN WHEREOF, the Parties have executed this Equity Pledge Agreement as of the date first above.
Party B:
Wang Jun
By:
Wang Yang
By:
Beijing Zhenxigu Medical Research Center (L.P.) (Seal)
By:
Name: Yulin Cao
Title: Authorized Representative
Beijing Borong Hongtai Asset Management Center (L.P.) (Seal)
By:
Name: Liu Lina
Title: Authorized Representative
Platinum Health Management (Tianjin) Centre (L.P.) (Seal)
By:
Name: Jin Jin
Title: Authorized Representative
IN WITNESS WHEREOF, the Parties have executed this Equity Pledge Agreement as of the date first above written.
Party C: Yubo International Biotechn (Beijing) Limited. (Seal)
By:
Name: Jun Wang
Title: Legal Representative
EXHIBIT 10.5
CERTAIN PERSONALLY IDENTIFIABLE INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED.
Exclusive Option Agreement
This Exclusive Option Agreement (this “Agreement”) is executed by and among the following Parties on September 11, 2020 in Beijing, PRC:
Party A: Yobo International Biotech (Chengdu) Limited
Registered Address: 1201, 12 / F, unit 1, building 2, 368 Tianfu Second Street, Chengdu hi tech Zone
Party B 1: Wang Jun
Chinese Identification Card No.: [************]
Party B 2: Wang Yang
Chinese Identification Card No.: [************]
Party B 3: Beijing Zhenxigu Medical Research Center (L.P.)
Registered Address: Room 301, Building 23, No. 31, Xishiku Avenue, Xicheng District, Beijing
Party B 4: Beijing Borong Hongtai Asset Management Center (L.P.)
Registered Address: Room 601-273, No. 99, Yanmi Road, Xitian Gezhuang Town, Miyun District, Beijing
Party B 5: Platinum Health Management (Tianjin) Center (L.P.)
Registered Address: 217-43, Xinzhuang Economic Service Center, No. 818, Jingu Road, Xinzhuang Town, Jinnan District, Tianjin
(Party B 1, Party B 2, Party B 3, Party B 4 and Party B 5 are collectively referred to as “Party B”.)
Party C: Yubo International Biotech (Beijing) Limited
Registered Address: Room 108, Building 6, No. 31, Xishiku Avenue, Xicheng District, Beijing
WHEREAS:
Party B collectively holds 100% of the equity interest in Party C; and Party B intends to collectively grant to Party A an irrevocable and exclusive option to purchase all the equity interests in Party C.
Nowtherefore, upon mutual discussion and negotiation, the Parties have reached the following agreement:
| 1. | Sale and Purchase of Equity Interest |
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| 1.1 | Option Granted |
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| Party B hereby irrevocably grants to Party A an irrevocable and exclusive option to purchase, or designate one or more persons (each, a “Designee”) to purchase the equity interests in Party C then held by Party B once or at multiple times at any time in part or in whole at Party A’s sole and absolute discretion to the extent permitted by PRC laws, at the price described in Section 1.3 herein (such option being the “Equity Interest Purchase Option”). Except for Party A and the Designee(s), no other third Person shall be entitled to the Equity Interest Purchase Option or other rights with respect to the equity interests of Party B. Party C hereby agrees to the grant by Party B of the Equity Interest Purchase Option to Party A. The “person” referred to in this section and this Agreement shall mean individuals, companies, joint ventures, partnerships, enterprises, trusts or unincorporated organizations. | |
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| 1.2 | Steps for Exercise |
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| Party A’s exercise of the Equity Interest Purchase Option shall be subject to the provisions of the laws and regulations of PRC. Party A may exercise the Equity Interest Purchase Option by issuing a written notice to Party B (the “Equity Interest Purchase Option Notice”), specifying: (a) Party A’s decision to exercise the Equity Interest Purchase Option; (b) the portion of equity interests to be purchased from Party B (the “Optioned Interests”); and (c) the date for purchasing the Optioned Interests and/or the date for transfer of the Optioned Interests. Party A and/or the Designee(s) shall have all the rights to the Optioned Interests as set forth in the Equity Interest Purchase Option Notice(s), including, without limitation, the voting rights, information rights, dividend rights and liquidation and distribution rights. Party B and Party C shall take all necessary actions to ensure completion of the relevant industrial and commercial change registration as soon as practicable. | |
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| 1.3 | Equity Interest Purchase Price and Payment |
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| Unless such appraisal is required by the laws of PRC at the time when Party A exercises the Equity Interest Purchase Option, the purchase price of the Optioned Interests (the “Equity Interest Purchase Price”) shall be the lowest price allowed by the applicable laws. After all necessary tax withholdings of the Equity Interest Purchase Price have been made in accordance with the laws of PRC, the Equity Interest Purchase Price shall be paid by Party A to the account designated by Party B within seven (7) days after the Optioned Interests are duly registered under the name of Party A. | |
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| 1.4 | Transfer of Optioned Interests |
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| When Party A exercises the Equity Interest Purchase Option each time, |
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| 1.4.1 | Party B shall cause Party C to promptly convene a shareholders’ meeting, at which a resolution shall be adopted approving Party B’s transfer of the Optioned Interests to Party A and/or the Designee(s); |
EXCLUSIVE OPTION AGREEMENT
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| 1.4.2 | Party B shall execute a share transfer contract with respect to each transfer with Party A and/or each Designee (whichever is applicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice regarding the Optioned Interests; |
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| 1.4.3 | The relevant Parties shall execute all other necessary contracts, agreements or documents (including, without limitation, amendment to the articles of association), obtain all necessary governmental licenses and permits (including, without limitation, business license) and take all necessary actions to transfer valid ownership of the Optioned Interests to Party A and/or the Designee(s), free and clear of any security interests and other encumbrances, and cause Party A and/or the Designee(s) to become the registered owner(s) of the Optioned Interests. For the purpose of this Section and this Agreement, “security interests” shall include security, mortgages, third party’s rights or interests, any stock options, acquisition right, right of first refusal, right to offset, ownership retention or other security arrangements; however, for the avoidance of doubt, “security interests” shall not include any security interest created by this Agreement, Party B’s Equity Pledge Agreement and Party B’s Entrustment Agreement. “Party B’s Equity Pledge Agreement” as used in this Section and this Agreement shall refer to the Equity Pledge Agreement (“Equity Pledge Agreement”, see Appendix I hereto) executed by and among Party A, Party B and Party C on the date hereof, as well as any modification, amendment and restatement thereto. “Party B’s Entrustment Agreement” as used in this Section and this Agreement shall refer to the Entrustment Agreement executed by Party B to authorize Party A on the date hereof (“Entrustment Agreement”, see Appendix II hereto) as well as any modification, amendment and restatement thereto. |
| 2. | Covenants |
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| 2.1 | Covenants Relating to Party C |
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| Party B (as the shareholders of Party C) and Party C hereby covenant as follows: |
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| 2.1.1 | Without the prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of association and bylaws of Party C, increase or decrease its registered capital or change its structure of registered capital in other manners; |
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| 2.1.2 | They shall maintain Party C’s corporate existence in accordance with good financial and business standards and practices by prudently and effectively conducting its business and transacting its affairs and Party C shall (and Party B shall cause Party C to) perform its obligations under the Exclusive Consulting Service Agreement (as defined in Appendix I hereto); |
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| 2.1.3 | Without the prior written consent of Party A, they shall not at any time following the date hereof, sell, transfer, mortgage or dispose of in any manner any assets of Party C or legal or beneficial interest in the business or revenues of Party C of more than RMB500,000, or allow the encumbrance thereon of any Security Interests; |
EXCLUSIVE OPTION AGREEMENT
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| 2.1.4 | Without the prior written consent of Party A, they shall not incur, inherit, guarantee or permit the existence of any debt, except for (i) debt incurred in the ordinary course of business; and (ii) debts disclosed to and approved by Party A’s written consent; |
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| 2.1.5 | They shall always conduct all the business of Party C in the ordinary course of business to maintain the asset value of Party C and refrain from any act/omission that may affect Party C’s operating status and asset value; |
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| 2.1.6 | Without the prior written consent of Party A, Party C shall (and Party B shall cause Party C to) not enter into any major contract, except the contracts in the ordinary course of business (for purpose of this subsection, a contract shall be deemed a major contract if its value exceeds RMB500,000); |
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| 2.1.7 | Without the prior written consent of Party A, Party C shall (and Party B shall cause Party C to) not to provide any Person with loan or credit or any form of security; |
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| 2.1.8 | They shall provide Party A with information on Party C’s business operations and financial condition at Party A’s request; |
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| 2.1.9 | If requested by Party A, they shall procure and maintain insurance on assets and business of Party C, at an amount and type of coverage typical for companies that operate similar businesses, with an insurance company acceptable to Party A; |
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| 2.1.10 | Without the prior written consent of Party A, Party C shall (and Party B shall cause Party C to) not merge or consolidate with any Person, acquire or invest in any Person, or sell its assets with value of more than RMB500,000; |
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| 2.1.11 | They shall promptly notify Party A of any litigation, arbitration or administrative proceedings initiated or threatened in relation to Party C’s assets, business or income; |
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| 2.1.12 | To retain Party C’s title to all of its assets, they shall execute all necessary or appropriate documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or make necessary and appropriate defenses against all claims; |
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| 2.1.13 | Without the prior written consent of Party A, Party C shall (and Party B shall ensure that Party C shall) not distribute dividends to its shareholders in any form; provided, however, that Party C shall promptly distribute all distributable profits to its shareholders upon written request by Party A; |
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| 2.1.14 | Unless mandatorily required by the laws of PRC, without the written consent of Party A, Party C (and Party B shall ensure that Party C) shall not be dissolved or liquidated; and |
EXCLUSIVE OPTION AGREEMENT
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| 2.1.15 | Upon request by Party A, they shall appoint any Person designated by Party A as the director of Party C and/or remove the incumbent director of Party C. |
| 2.2 | Covenants of Party B |
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| Party B hereby covenants that: |
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| 2.2.1 | Without the prior written consent of Party A, it shall not sell, transfer, mortgage or dispose of in any other manner any lawful or beneficial interest in its equity interests in Party C or permit the encumbrance thereon of any Security Interests, other than the pledge placed on these equity interests in accordance with Party B’s Equity Pledge Agreement and Party B’s Entrustment Agreement; |
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| 2.2.2 | If Party B receives any proceeds, profit distribution or dividends from Party C, to the extent permitted by the laws of the PRC, it shall promptly pay or transfer such proceeds, profit distribution or dividends to Party A or the party designated by Party A for the benefit of Party C as the service fee payable by Party C to Party A under the Exclusive Consulting Service Agreement; |
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| 2.2.3 | It shall cause the shareholders’ meeting and/or the board of directors of Party C not to approve the sale, transfer, mortgage or other disposition of any lawful or beneficial interest in its equity interests in Party C or permit the encumbrance thereon of any Security Interests, without the prior written consent of Party A, other than the pledge placed on these equity interests in accordance with Party B’s Equity Pledge Agreement and Party B’s Entrustment Agreement; |
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| 2.2.4 | It shall cause the shareholders’ meeting and/or the board of directors of Party C not to approve merger or consolidation with any Person or acquisition of or investment in any Person, without the prior written consent of Party A; |
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| 2.2.5 | It shall promptly notify Party A of any litigation, arbitration or administrative proceedings initiated or threatened in relation to its equity interest in Party C; |
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| 2.2.6 | It shall cause the shareholders’ meeting and/or the board of directors of Party C to approve the transfer of the Optioned Interests hereunder and take any and all other actions that Party A may request; |
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| 2.2.7 | To retain its ownership of its equity interest in Party C, it shall execute all necessary or appropriate documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or make necessary and appropriate defenses against all claims; |
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| 2.2.8 | Upon request by Party A, it shall appoint any Person designated by Party A as the director or the executive director of Party C; |
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| 2.2.9 | Upon request by Party A at any time, it shall promptly and unconditionally transfer its equity interest in Party C to the Designee (s) of Party A based on the Equity Call Option hereunder, and Party B hereby waives the right of first refusal, if any, with respect to the equity transfer by the other shareholders of Party C; and |
EXCLUSIVE OPTION AGREEMENT
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| 2.2.10 | It shall strictly abide by the provisions of thisAgreement and other contracts or agreements jointly or separately executed by and among Party B, Party C and Party A, perform its obligations hereunder and thereunder and refrain from any act/omission that may affect the validity and enforceability thereof. If Party B has any remaining rights with respect to the equity interest under this Agreement or the Equity Interest Pledge Agreement among the Parties hereto or under the Entrustment Agreement (as defined in Appendix 1 hereto) granted in favor of Party A, Party B shall not exercise such rights, unless according to the written instructions given by Party A. |
| 3. | Representations and Warranties |
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| Party B and Party C hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement and each date of transfer of the Optioned Interests, that: | |
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| 3.1 | They have the authority to authorize the execution and delivery of this Agreement and any equity interest transfer contracts or agreements to which they are parties relating to the Optioned Interests to be transferred thereunder (each, a “Transfer Contract”), and to perform their obligations under this Agreement and any Transfer Contracts. Party B and Party C agree to enter into Transfer Contracts consistent with the terms of this Agreement upon Party A’s exercise of the Equity Interest Purchase Option. This Agreement and the Transfer Contracts to which they are parties constitute or will constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof; |
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| 3.2 | The execution and delivery of this Agreement or any Transfer Contracts and the obligations under this Agreement or any Transfer Contracts shall not: (i) cause any violation of any laws of PRC applicable to them; (ii) be inconsistent with the articles of association, bylaws or other organizational documents of Party C; (iii) cause any breach of any contracts or instruments to which they are a party or which are binding on them, or constitute any breach under any contracts or instruments to which they are a party or which are binding on them; (iv) cause any violation of any condition for the grant and/or continued effectiveness of any licenses or permits issued to either of them; or (v) cause the suspension or revocation of or imposition of additional conditions to any licenses or permits issued to either of them; |
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| 3.3 | Party B has a good and merchantable title to the equity interests in Party C he holds. Except for Party B’s Equity Pledge Agreement and Party B’s Entrustment Agreement, Party B has not placed any security interest on such equity interests; |
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| 3.4 | Party C has a good and merchantable title to, and has not placed any security interest on, all of its assets; |
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| 3.5 | Party C does not have any outstanding debts, except for (i) debt incurred in the ordinary course of business; and (ii) debts disclosed to and approved by Party A in writing. |
EXCLUSIVE OPTION AGREEMENT
| 3.6 | If Party C is required to be liquidated or dissolved under PRC laws, it shall sell all of its assets to Party A or other qualified person designated by Party A to the extent permitted by the laws of PRC, at the lowest price permitted by the laws of PRC. Party C waives Party A or any qualified person designated by Party A from any payment obligation arising thereof, to the extent permitted by the then effective laws of PRC; or any earnings from such transaction shall be paid to Party A or a qualified person designated by Party A as part of the Services Fees under the Exclusive Consulting Service Agreement to the extent permitted by the then effective laws of PRC; |
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| 3.7 | Party C has complied with all laws and regulations of PRC applicable to asset acquisitions; and |
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| 3.8 | There are no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests of Party B in Party C, assets of Party C, or Party C. |
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| 4. | Effective Date and Term |
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| This Agreement shall become effective upon the date hereof, and remain effective until all equity interests held by Party B in Party C have been transferred or assigned to Party A and/or any other person designated by Party A in accordance with this Agreement. | |
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| 5. | Governing Law and Resolution of Disputes |
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| 5.1 | Governing Law |
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| The execution, effectiveness, construction, performance, amendment and terminationof this Agreement and the resolution of disputes hereunder shall be governed by the formally promulgated and publicly available laws of PRC. Any matters not covered by formally promulgated and publicly available laws of the PRC shall be governed by international legal principles and practices. | |
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| 5.2 | Methods of Resolution of Disputes |
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| Any dispute arising from the construction and performance of this Agreement shall be first resolved by the Parties through friendly consultation. If the Parties fail to agree upon the resolution of a dispute within 30 days after any Party requests the other Parties to resolve such dispute through consultation, any Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration, in accordance with the Commission’s arbitration rules then in effect. The arbitration shall be conducted in Beijing and conducted in the Chinese language. The arbitration award shall be final and binding on all Parties. |
EXCLUSIVE OPTION AGREEMENT
| 6. | Taxes and Expenses |
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| Each Party shall pay any and all transfer and registration taxes, costs and expenses incurred by it or levied on it in connection with the preparation and execution of this Agreement and the relevant transfer contract and consummation of the transactions contemplated under this Agreement and the relevant transfer contract in accordance with the laws of PRC. | |
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| 7. | Notices |
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| 7.1 | All notices and other communications required or permitted to be given in accordance with this Agreement shall be personally delivered or sent by registered mail, postage prepaid, commercial courier service, facsimile or email to the address of such Party set forth below. The dates on which notices shall be deemed to have been effectively given shall be determined as follows: |
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| 7.1.1 | Notices given by personal delivery, courier service or registered mail, postage prepaid, shall be deemed effectively given on the date of delivery or refusal at the mailing address specified for notices. |
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| 7.1.2 | Notices given by facsimile or email shall be deemed effectively given on the date of successful transmission (as evidenced by an automatically generated confirmation of transmission). |
| 7.2 | For the purpose of notices, the addresses of the Parties are as follows: |
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| Party A: Address: [************] Attn: Wang Yanxin E-mail: [************] Phone: [************]
Party B: Address: [************] Attn: Wang Yanxin E-mail: [************] Phone: 1[************]
Party C: Address: [************] Attn: Wang Yanxin E-mail: [************] Phone: [************] |
| 7.3 | Any Party may change its mailing address for notices at any time by giving a notice to the other Parties in accordance with this article. |
EXCLUSIVE OPTION AGREEMENT
| 8. | Confidentiality |
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| The Parties acknowledge that any oral or written information exchanged in connection with this Agreement shall be considered as confidential information. Each Party shall keep all such information confidential and shall not disclose any relevant information to any third party without the written consent of the other Parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s disclosure to the public); (b) is required to be disclosed in accordance with applicable laws or rules or provisions of any stock exchange; or (c) is required to be disclosed by any Party to its shareholders, directors, employees, counsels or financial advisors in connection with the transactions contemplated hereby, provided, however, that such shareholders, directors, employees, counsels or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this article. If the staff or agencies engaged by any Party disclose any confidential information, such Party shall be deemed to have disclosed such confidential information and shall bear legal liability for breach of this Agreement. This article shall survive the termination of this Agreement for any reason. | |
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| 9. | Further Warranties |
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| The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement. | |
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| 10. | Miscellaneous |
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| 10.1 | Amendment, change and supplement |
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| The Agreement may not be amended, changed or supplemented except by an agreement in writing signed by all the Parties. | |
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| 10.2 | Entire agreement |
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| Except for the amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall constitute the entire agreement of the Parties hereto with respect to the subject matter hereof and shall supersede all prior oral and written consultations, representations and contracts reached with respect to the subject matter of this Agreement. The attachments set forth herein shall be an integral part of this Agreement. | |
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| 10.3 | Headings |
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| The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of the provisions of this Agreement. |
EXCLUSIVE OPTION AGREEMENT
| 10.4 | Language |
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| This Agreement is written in the Chinese language in seven (7) counterparts with each of Party A, each Person of Party B and Party C holding one (1) counterpart. They shall have the same legal effect. | |
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| 10.5 | Severability |
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| If one or more of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions hereof shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal orunenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions. | |
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| 10.6 | Successors |
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| This Agreement shall be binding on the respective successors of the Parties and the permitted assigns of such Parties. | |
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| 10.7 | Survival |
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| 10.7.1 | Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall survive the expiration or early termination thereof. |
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| 10.7.2 | The provisions of Articles 5, 8 and this Section 10.7 shall survive the termination of this Agreement. |
| 10.8 | Waiver |
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| Any Party may waive the terms and conditions of this Agreement, provided, however, that such waiver must be made in writing and signed by the Parties. No waiver by any Party under particular circumstances with respect to a breach by the other Parties shall operate as a waiver by such Party with respect to similar breach under other circumstances. |
EXCLUSIVE OPTION AGREEMENT
IN WITNESS WHEREOF, the Parties have executed this Exclusive Option Agreement as of the date first above written.
Party A: Yubo International Biotech (Chengdu) Limited (Seal)
By:
Name: Wang Jun
Title: Legal Representative
Signature Page to Exclusive Option Agreement
IN WITNESS WHEREOF, the Parties have executed this Exclusive Option Agreement as of the date first abovewritten.
Party B:
Wang Jun
By:
Wang Yang
By:
Beijing Zhenxigu Medical Research Center (L.P.) (Seal)
By:
Name: Yulin Cao
Title: Authorized Representative
Beijing Borong Hongtai Asset Management Center (L.P.) (Seal)
By:
Name: Liu Lina
Title: Authorized Representative
Platinum Health Management (Tianjin) Centre (L.P.) (Seal)
By:
Name: Jin Jin
Title: Authorized Representative
Signature Page to Exclusive Option Agreement
IN WITNESS WHEREOF, the Parties have executed this Exclusive Option Agreement as of the date first above written.
Party C: Yubo International Biotech (Beijing) Limited (Seal)
By:
Name: Jun Wang
Title: Legal Representative
Signature Page to Exclusive Option Agreement
Appendix I
Equity Pledge Agreement
To EXCLUSIVE OPTION AGREEMENT
Appendix II
Entrustment Agreement
To EXCLUSIVE OPTION AGREEMENT
EXHIBIT 10.6
CERTAIN PERSONALLY IDENTIFIABLE INFORMATION CONTAINED
IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED.
EXCLUSIVE CONSULTING SERVICE AGREEMENT
This Exclusive Consulting Service Agreement (this “Agreement”) is made and entered into by and between the following parties on September 11, 2020 in Beijing, PRC.
Party A: Yubo International Biotech (Chengdu) Limited
Address: Address: 1201, 12 / F, unit 1, building 2, 368 Tianfu Second Street, Chengdu hi tech Zone
Party B: Yubo International Biotech (Beijing) Limited
Address: Room 108, Building 6, 31 Xishiku Street, Xicheng District, Beijing
Each of Party A and Party B shall be hereinafter referred to as a “Party” respectively, and as the “Parties” collectively.
WHEREAS:
| 1. | Party A is a wholly-foreign-owned enterprise registered in the People’s Republic of China (“PRC”), and has the necessary resources to provide technical and business consulting services; |
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| 2. | Party B is a company with exclusively domestic capital registered in PRC; |
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| 3. | Party A is willing to provide Party B with relevant exclusive technical services, technical consulting services and other services (as may be specifically defined below) during the term of this Agreement, utilizing its advantages in human resources, technology and information, and Party B is willing to accept such services provided by Party A or Party A’s designee (s), each on the terms set forth herein. |
Now, therefore, through mutual discussion, the Parties have reached the following agreements:
| 1. | Party A’s Services Provision |
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| 1.1 | Party B hereby appoints Party A as Party B’s exclusive services provider to provide Party B with complete business support and technical and consulting services during the term of this Agreement, in accordance with the terms and conditions of this Agreement, which may include all services within the business scope of Party B in whole or in part as may be determined from time to time by Party A, such as but not limited to personnel training, technical services, business consultations, intellectual property licensing, equipment or factory building leasing, marketing consultancy, etc. (the “Services”). |
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| 1.2 | Party B is willing to accept all the consultations and services provided by Party A. Party B further agrees that unless with Party A’s prior written consent, during the term of this Agreement, Party B shall not accept the same or any similar consultations and/or services provided by any third party regarding matters contemplated by this Agreement. Party A may appoint other parties, who may enter into certain agreements described in Section 1.3 with Party B, to provide Party B with the consultations and/or services contemplated under this Agreement. |
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| 1.3 | Service Providing Methodology |
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| 1.3.1 | Party A and Party B agree that during the term of this Agreement, they may enter into other technical service agreements or consulting service agreements through any other party designated by each of them, which shall provide the specific contents, manner, personnel, and fees for specific technical services and consulting services. |
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| 1.3.2 | To fulfill this Agreement, Party A and Party B agree that during the term of this Agreement, they may enter into an intellectual property (including, without limitation, software, trademark, patent, know-how) license agreement, which shall permit Party B to use Party A’s intellectual property at any time according to the needs of Party B’s business. |
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| 1.3.3 | To fulfill this Agreement, Party A and Party B agree that during the term of this Agreement, they may enter into an equipment or plant lease agreement directly or through any other party designated by them, which agreement shall permit Party B to use Party A’s relevant equipment or plant buildings according to the business needs of Party B. |
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| 1.3.4 | Party A may, at its sole discretion, subcontract part of the services provided to Party B under this Agreement to any third party. |
| 2. | Calculation of the Service Fees, Term of Payment, Financial Statements, Audit and Taxes |
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| 2.1 | The Parties agree that in respect to Party A’s services provided, Party B shall pay Party A the service fees (the “Service Fees”). The Service Fees under this Agreement shall be determined and paid according to the manner set forth in the separate written agreements reached between Party A and Party B. The Parties agree that in determining the specific amount of the services fees, the following factors shall be taken into consideration: (a) the technical difficulty and complexity of the consultancy and services; (b) the time spent by the employees of Party A for the consultancy and services; (c) the specific content and commercial value of such consultancy and services; (d) the market price of similar consultancy and services; and (e) the operation status of Party B. |
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| 2.2 | The taxation burden arising from the performance of this Agreement shall be borne by the Parties. |
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| 3. | Intellectual Property Rights, Confidentiality Clauses | |
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| 3.1 | Party A shall have exclusive rights and interests in all rights, ownership, interests and intellectual properties arising out of or created during the performance of this Agreement, including but not limited to copyrights, patents, patent applications, trademarks, software, technical secrets, trade secrets and others, whether developed by Party A or Party B. |
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| 3.2 | The Parties acknowledge that any oral or written information exchanged in connection with this Agreement shall be considered as confidential information. Each Party shall keep all such information confidential and shall not disclose any relevant information to any third party without obtaining the written consent of the other Party, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s disclosure to the public); (b) is required to be disclosed in accordance with applicable laws or rules or provisions of any stock exchange; or (c) is required to be disclosed by any Party to its shareholders, directors, employees, counsels or financial advisors in connection with the transactions contemplated hereby, provided, however, that such shareholders, directors, employees, counsels or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this article. If the staff or agencies engaged by any Party disclose any confidential information, such Party shall be deemed to have disclosed such confidential information and shall bear legal liability for breach of this Agreement. This article shall survive the termination of this Agreement for any reason. |
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| 3.3 | The Parties agree that this article shall survive change, revocation or termination of this Agreement. |
| 4. | Representations and Warranties |
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| 4.1 | Party A hereby represents and warrants as follows: |
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| 4.1.1 | Party A is a company legally registered and validly existing in accordance with the laws of PRC. |
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| 4.1.2 | Party A’s execution and performance of this Agreement shall be within its corporate capacity and the scope of its business operations; Party A has taken necessary corporate actions and is given proper authorization and has obtained the consent and approval from third parties and government agencies. The execution and performance of this Agreement will not violate any restrictions in law or otherwise binding or having an impact on Party A. |
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| 4.1.3 | This Agreement constitutes Party A’s legal, valid and binding obligation, enforceable in accordance with its terms. |
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| 4.2 | Party B hereby represents and warrants as follows: |
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| 4.2.1 | Party B is a company legally registered and validly existing in accordance with the laws of PRC. |
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| 4.2.2 | Party B’s execution and performance of this Agreement is within its corporate capacity and the scope of its business operations; Party B has taken necessary corporate actions and has been given proper authorization and has obtained the consent and approval from third parties and government agencies. The execution and performance of this Agreement will not violate any restriction in law or otherwise binding or affecting Party B. |
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| 4.2.3 | This Agreement constitutes legal, valid and binding obligation of Party B, and shall be enforceable against it. |
| 5. | Effectiveness and Term of the Agreement |
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| This Agreement is signed on the date first above written and shall become effective as of such date. Unless earlier terminated in accordance with the provisions of this Agreement or other agreements separately executed by the Parties, this Agreement shall remain effective. |
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| 6. | Governing Law, Dispute Resolution and Change of Law |
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| 6.1 | The execution, effectiveness, interpretation, performance, amendment and termination of this Agreement and resolution of disputes arising hereunder shall be governed by the laws of the PRC. |
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| 6.2 | Any dispute arising from the interpretation and performance of the provisions of this Agreement shall be resolved by the Parties through consultation in good faith. If the Parties fail to agree upon the resolution of a dispute within 30 days after any Party requests to resolve such dispute through consultation, any Party may submit the dispute to the China International Economic and Trade Arbitration Commission for arbitration, in accordance with the Commission’s then-effective arbitration rules. The arbitration shall be conducted in Beijing and conducted in the Chinese language. The arbitration award shall be final and binding on both Parties. |
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| 6.3 | Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement. |
| 7. | Indemnification |
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| Party B shall indemnify and hold harmless Party A from any losses, injuries, obligations or expenses caused by any lawsuit, claim or other demands against Party A arising from or caused by the consultations and services provided by Party A at the request of Party B, except where such losses, injuries, obligations or expenses arise from willful misconduct of Party A. |
| 8. | Notices |
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| 8.1 | All notices and other communications required or permitted to be given in accordance with this Agreement shall be personally delivered or sent by registered mail, postage prepaid, commercial courier service, facsimile or email to the address of such Party set forth below. The dates on which notices shall be deemed to have been effectively given shall be determined as follows: |
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| 8.1.1 | Notices given by personal delivery, courier service or registered mail, postage prepaid, shall be deemed effectively given on the date of delivery or refusal at the mailing address specified for notices. |
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| 8.1.2 | Notices given by facsimile or email shall be deemed effectively given on the date of successful transmission (as evidenced by an automatically generated confirmation of transmission). |
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| 8.2 | For the purpose of notices, the addresses of the Parties are as follows: |
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| Party A: Address: C1002, building 5, yard 31, Xishiku street, Xicheng District, Beijing Attn: Wang Yanxin E-mail: [*****************] Phone: [*****************] |
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| Party B: Address: C1002, building 5, yard 31, Xishiku street, Xicheng District, Beijing Attn: Wang Yanxin E-mail: [*****************] Phone: [*****************] |
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| 8.3 | Any Party may change its mailing address for notices at any time by giving a notice to the other Party in accordance with this article. |
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| 9. | Assignment |
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| 9.1 | Without Party A’s prior written consent, Party B shall not assign its rights and obligations under this Agreement to any third party. |
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| 9.2 | Party B agrees that Party A may assign its obligations and rights under this Agreement to any third party by giving a prior written notice to Party B but without Party B’s consent. In the meantime, Party B shall, in accordance with Party A’s requirements, execute relevant agreements with such third party that are satisfactory to Party A to specify the rights and obligations of the related parties. |
| 10. | Severability |
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| If one or more of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions hereof shall not be affected or compromised in any respect. The Parties shall strive through consultation in good faith to replace such invalid, illegal or unenforceable provisions with valid provisions to the greatest extent permitted by laws and expected by the Parties, and the economic effect of such valid provisions shall be as close as possible to the economic effect of such invalid, illegal or unenforceable provisions. |
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| 11. | Force Majeure |
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| 11.1 | In the case of any force majeure events such as earthquake, typhoon, flood, fire, epidemic, war, riot, hostile action, public disturbance, strike or any other force majeure events that cannot be predicted and are unpreventable and unavoidable by the affected Party (the “Force Majeure”) directly resulting in the failure of either Party to perform, completely perform or delay of the performance of this Agreement, the Party affected by such Force Majeure shall not be liable for the failure of either Party to perform this Agreement. However, the affected Party shall give written notice without any delay to the other Party and shall, within fifteen (15) days after sending such written notice, provide the other Party with details of the Force Majeure event and relevant documents evidencing the reasons for such failure, incompleteness or delay in performance. |
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| 11.2 | If such Party claiming Force Majeure fails to notify the other Party and furnish it with proof pursuant to the above provision, such Party shall not be excused from its liabilities for failure to perform, failure to fully perform or delay in performance of, its obligations hereunder. The Party so affected by the event of Force Majeure shall use reasonable efforts to minimize the consequences of such Force Majeure and to promptly resume performance hereunder whenever the causes of such excuse are cured. Should the Party so affected by the event of Force Majeure fail to resume performance hereunder when the causes of such excuse are cured, such Party shall be liable to the other Party. |
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| 11.3 | In the eventof Force Majeure, the Parties shall immediately consult with each other to find an equitable solution and shall use all reasonable endeavours to minimize the consequences of such Force Majeure. |
| 12. | Amendment and Supplement |
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| Any amendments of, and supplements to this Agreement shall be in writing. The amendment agreements and supplementary agreements in connection with this Agreement, which are signed by the Parties, shall be an integral part of this Agreement and shall have the same legal validity as this Agreement. |
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| 13. | Entire |
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| The Parties confirm that, upon effectiveness of this Agreement, this Agreement constitutes the entire agreement and understanding between the Parties with respect to the content hereof and completely supersedes any prior oral and/or written agreements and understanding with respect to the content hereof between the Parties. |
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| 14. | Language and Counterparts |
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| This Agreement is written in Chinese in two (2) counterparts, with each Party holding one copy. They shall have the same legal effect. |
[The remainder of this page is intentionally left blank]
| 7 |
IN WITNESS WHEREOF, the Parties have executed this Exclusive Consulting Service Agreement as of the date first above written.
Party A: Yubo International Biotech (Chengdu) Limited
By:
Name: Wang Jun
Title: Legal Representative
Party B: Yubo International Biotech (Beijing) Limited
By:
Name: Wang Jun
Title: Legal Representative
| 8 |
EXHIBIT 10.7
CERTAIN PERSONALLY IDENTIFIABLE INFORMATION CONTAINED IN
THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED.
Entrustment Technical Service Agreement
This Entrustment Technical Service Agreement (this “Agreement”) is made by and between the following two parties on February 27, 2020 in Beijing:
Party A: Yubo International Biotech (Beijing) Limited
Address: Building 5, Yard 31, Xishiku Street, Xicheng District, Beijing
Legal Representative: Jun Wang
Party B: Beijing Zhenhuikang Biotechnology Co., Ltd.
Address: Room 202, 2/F, Building 23, No. 31, Xishiku Street, Xicheng District, Beijing
Legal Representative: Yulin Cao
Party A and Party B shall be referred to individually as a “Party” and collectively as the “Parties”.
According to relevant laws and regulations of the People’s Republic of China, and adhering to the principle of equality and mutual benefits, the two parties enter into this Agreement through friendly consultation for, intending to be legally bound by.
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| 1. | Entrusted Matters |
To bring into full play the resources and technical advantages of the Parties, Party B accepts Party A’s entrustment and provides Party A with the following technical services:
| 1. | Customized service for endometrial stem cell harvesting package; |
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| 2. | Endometrial stem cell preparation and management of exclusive endometrial stem cell bank (public bank); |
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| 3. | Technical services for endometrial stem cell application preparation. |
| 2. | Entrustment Fees and Payment Method |
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| 1. | Customized service for endometrial stem cell harvesting package: RMB718 for each set. Customized period is 30 working days. First order is 300 sets and each order no less than 200 sets thereafter. Within [3] business days after Party A provides Party B with a reserved order, Party A shall prepay 70% of the total price of the sampling package. The remaining 30% of the total price of the sampling package shall be paid off before shipment. The delivery date by Party B shall be no later than [30] business days after Party A provides the reserved order. In case of any quality problem with the sampling package provided by Party B, it shall be returned and replaced unconditionally as required by Party A. In case of repeated collection is required due to Party B’s cause, Party B shall bear the expenses of repeated collection; Party A shall bear the expenses related thereto if such repeated collection is not caused by Party B. |
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| 2. | Entrusted cell preparation and public library management expenses: mainly used for endometrial stem cell preparation and public library management expenses: mainly used for endometrial stem cell preparation expenses for each person and public library management expenses (Note: standard for public library cell storage is P2 generation, qualified donor cells are 100 million cells in total and stored in 10 frozen storage tubes). The total settlement price of sample preparation fee for each person and 5-year public library management fee is RMB9,282 (of which the sample preparation cost is RMB8,282, and public library management fee is RMB200/year). All samples shall be prepaid, meaning that Party B shall receive the samples and start the preparation after receiving the full payment amount. When the market price cost fluctuates, both parties shall timely negotiate to adjust the preparation cost. After 5 years, the whole shall be handed over to Party A for management. |
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| 3. | Preparation expenses of endometrial stem cell application: if the seed cells are needed to be extracted from public library and expanded into working cell (P2-P5), the expansion expense standard is: RMB3,500/1x10 * 7 cells; the scheduled expansion period shall be no less than 15 working days and the expansion shall be started after being paid in full amount in advance. Once the expansion is started or the cells are abandoned for reasons attributable to Party A, the expenses shall not be refunded. |
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| Bank account information of Party B:
Account Name: Beijing Zhenhuikang Biotechnology Co., Ltd.
Bank: Beijing West Railway Sub-branch of China Merchants Bank Co., Ltd.
Account Number: [******************] |
If Party B changes the bank account or other receiving information, Party B shall immediately inform Party A.
| 3. | Rights and obligations between the parties |
| 1. | Party A shall be responsible for providing endometrial blood samples and shall have the right to fetch and dispose of such samples and prepare stem cells from the samples at any time. The ownership of the endometrial blood samples and stem cells prepared and stored by Party B shall not be transferred as a result of this Agreement. |
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| 2. | Party A has the right to determine whether or not to continue to perform this Agreement in light of the work status of Party B and to pay the commission fees. |
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| 3. | Party B warrants that it is a legally existing entity and has obtained the necessary qualifications and licenses to engage in all the matters entrusted hereunder. Party B warrants that all actions taken during the performance of this Agreement are in compliance with laws, regulations, rules, industry norms and ethics. |
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| 4. | Party B shall conscientiously, prudently and properly complete the preparation and storage of endometrial stem cells as well as the establishment and maintenance of exclusive endometrial stem cell banks. |
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| 5. | Party B shall assist Party A with work in relation to the entrusted matters, such as collecting and transportation of endometrial blood samples. |
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| 6. | Without Party A’s prior written permission, Party B shall not entrust the preparation, storage of stem cells and relevant matters hereunder to a third party. |
| 4. | Default liability |
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| 1. | Either party’s breach of any provisions herein or failure to perform its obligations hereunder shall constitute a default, which shall entitle the non-defaulting party to request the defaulting party to immediately terminate such default or rectify such default with a reasonable period of time and to request the defaulting party to indemnify for the actual damages and costs caused of the non-defaulting party due to the default behavior. |
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| 2. | If any party conducts any material breach of any agreement made under this Agreement, or fails to substantially perform its obligations under this Agreement, and fails to rectify or remedy such default with a reasonable period of time or within seven (7) days of non-defaulting party’s written notice requesting for such rectification or remedy, the non-defaulting party has the right to terminate this Agreement immediately with a written notice and request the defaulting party to fully compensate all damages of the non-defaulting party. |
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| 5. | Dispute Resolution |
Any disputes in connection with the performance of this Agreement shall be settled by both parties through friendly negotiation. If such consultation fails, either Party may file a lawsuit in a people’s court in the locality of Party A.
| 6. | Confidentiality |
Without Party A’s prior written consent, Party B shall not disclose, transfer or permit any third party to disclose, use or transfer the contents of this Agreement, information exchanged for the purpose of drafting this Agreement, and any data, file, information and reports learned, obtained or produced during the performance of this Agreement (collectively, the “Confidential Information”). Party B may disclose the Confidential Information only to its appropriately qualified employees, provided that such disclosure is necessary for Party B to perform its obligations hereunder and cause such employees to agree to assume the same or stricter confidentiality obligations as those contained hereunder. If any disclosure of the Confidential Information is caused by the personnel of Party B, it shall be deemed as the disclosure of Confidential Information by Party B, for which Party B shall be responsible for compensation. The confidentiality obligations set forth in this Article shall survive the termination of this Agreement.
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| 7. | Miscellaneous |
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| 1. | For matters that are not covered herein, the two parties shall negotiate separately and the supplementary agreement shall be equally valid with this Agreement. |
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| 2. | This Agreement shall become effective upon being signed and sealed by both parties. |
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| 3. | This Agreement contains two original copies; these copies are held by both parties. Both the signed copies of this Agreement are legally valid. |
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This page is the signature page to the Entrustment Technical Service Agreement.
Party A: Yubo International Biotech (Beijing) Limited (Seal)
Legal Representative: Wang Jun
Party B: Beijing Zhenhuikang Biotechnology Co., Ltd. (Seal)
Legal Representative:
| 6 |
Supplementary Agreement of Entrustment Technical Service Agreement for Endometrial Stem Cell Project
Party A: Yubo International Biotech (Beijing) Limited
Address: Building 5, Yard 31, Xishiku Street, Xicheng District, Beijing
Legal Representative: Jun Wang
Party B: Beijing Zhenhuikang Biotechnology Co., Ltd.
Address: Room 202, 2/F, Building 23, No. 31, Xishiku Street, Xicheng District, Beijing
Legal Representative: Yulin Cao
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| 1. | According to the market demand of Party A, both parties agreed to adjust the original special collection package through communication. Due to the change in the price of consumables, Party A and Party B agreed to change the service content “customized service of endometrial stem cell collection kit” in Article 2 “entrustment fee and payment method” signed on February 27, 2020 from 718 yuan per set to 666 yuan per set. |
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| 2. | Other contents in the original Entrustment Technical Service Agreement shall remain unchanged. |
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| 3. | This supplementary agreement has the same legal effect as the original entrustment technical service agreement. |
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| 4. | This agreement is made in two copies, one for each party, with the same legal effect. |
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This page is the signature page to the Entrustment Technical Service Agreement.
Party A: Yubo International Biotech (Beijing) Limited (Seal)
Legal Representative: Wang Jun
2020.07.02
Party B: Beijing Zhenhuikang Biotechnology Co., Ltd. (Seal)
Legal Representative: Bai Zhihui
2020.07.02
Signature Page to Entrustment Technical Service Agreement
| 8 |
EXHIBIT 10.8
CERTAIN PERSONALLY IDENTIFIABLE INFORMATION CONTAINED IN
THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED.
AGREEMENT OF JOINT RESEARCH AND DEVELOPMENT
Party A: Beijing Zhenxigu Medical Research Center (L.P.)
Party B: Yubo International Biotech (Beijing) Limited
WHEREAS:
Party A is a high-tech R&D center in the biomedicine field, which owns numerous core patent technologies and GMP standard laboratory environment. Its expert team has participated in many national major renewable medical subject and special projects.
Party B is a company holding shares by Party A. Through friendly consultation, the Parties have reached an agreement to carry out filing application and market cooperation of medical devices on the basis of “repaired liquid dressings (temporary name subject to the approval by FDA)” independently developed by Party A. Now therefore, the Parties agree as follows:
| 1. | Both Parties agree that Party A will entrust a full-fledged third party to apply for filing of medical devices, the right to decide on manufacturing of the medical devices and other relevant intellectual property rights shall be owned by Party A. Provided that to the extent permitted by national laws and regulations, the products after the filing, shall bear the words of “Joint Research by Beijing Zhenxigu Medical Research Center, Yubo International Biotech (Beijing) Limited” (the details shall be implemented pursuant to the relevant national regulations) on the package thereof. |
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| 2. | Party A shall be solely responsible for the research and development, the development and application of medical devices of this Project. Party B is responsible for part of the relevant R&D expenses: RMB241,880 (two hundred and forty-one thousand, eight hundred and eighty yuan) shall be deemed as joint research expenses and be paid within 3 working days following the execution of this Agreement. |
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| 3. | As the owner of the manufacturing decision right of filed products and relevant intellectual property rights, Party A hereby authorizes Party B to be the nationwide exclusive distributor of supporting products for Platinum specific atomization inhaler applications, to be responsible for the comprehensive sales and after-sale service of products in the field. Other applications shall not be subject to this restriction. |
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| 4. | After the successful filing and listing, the contribution and cost allocation of the scientific research team shall be taken into full account, and the price shall be re-determined after the actual production costs are accounted for. Party A shall continue to develop other application fields beyond this application, and the Parties shall carry out cooperation in the form of entrustment or joint research and development and enter into agreement on relevant interests in advance. |
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| 5. | Party A’s account information is as follows: |
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| Company Name: Beijing Zhenxigu Medical Research Center (L.P.)
Unified Social Credit Code: [***************]
Opening Bank: China Merchants Bank Beijing West Railway Station Branch
Bank Account Number: [***************]
Address: Room 301, Building 23, No. 31 Xishiku Street, Xicheng District, Beijing, Tel: 010-56256475 |
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| 6. | Party B’s invoicing information is as follows: |
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| Account Name: Yubo International Biotech (Beijing) Limited
Unified Social Credit Code: [***************] |
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| This Agreement is made in quadruplicate. Party A and Party B shall each hold two copies. This Agreement will be effective as long as it is signed and/or sealed. Scanned copies shall have the same legal effect as the originals. |
(The remainder of this page is intentionally left blank)
(This page is the signature page, without text)
Party A: Beijing Zhenxigu Medical Research Center (L.P.) (Seal)
Authorized Representative (Signature)
Party B: Yubo International Biotech (Beijing) Limited (Seal)
Authorized Representative (Signature)
Date of Signature:
Signing time: February 17, 2020
| 2 |
EXHIBIT 10.9
CERTAIN PERSONALLY IDENTIFIABLE INFORMATION CONTAINED IN
THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED.
Cooperation Agreement
Party A: Beijing Zhenxigu Medical Research Center (L.P.)
Party B: Yubo International Biotech (Beijing) Limited
Party C: Huailai Huayue Hengsheng Medical Device Co., Ltd.
Through friendly consultations, the Parties hereby agree as follows on [March 1], 2020:
1. All parties concerned agree to carry out strategic cooperation in such aspects as application of scientific research projects, integration of products and technical plans, record-filing of medical devices and preparation for production in response to the novel coronavirus pneumonia epidemic, so as to provide all local health commissions, scientific research institutions and medical units with quality and efficient technical services and operation support for biological medical products, and finally hope to help patients get rid of their suffering as soon as possible.
2. Party B is the joint R&D company of the “Liquid Dressings” achieved in this Agreement, so Party B will provide part of the R&D funds for the cooperation under this Agreement.
3. Party C undertakes to provide plant, personnel, technology, products and equipment in relation to the matters under this Agreement. Party A may conduct sample trial production and clinical scientific research in the production workshop of Party C. If construction of the clean workshop is required, both Party A and Party B shall negotiate and make decision on the construction of the clean workshop, while the related costs, personnel and site costs of the detailed rules of cooperation shall be further negotiated and determined.
4. Party A owns the technical results and intellectual property rights relating to the products researched and developed hereunder. The nationwide total distribution right of “ Liquid Dressings” (5ml specifications only) belongs to Party B, unless otherwise agreed by both Party A and Party B.
5. Party C shall complete the filing of medical devices for liquid dressings of Class 1 (“Medical Device Filing”) within [10] business days following the execution of this Agreement.
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| a) | Party A shall assist Party C in the review of the filing materials and contents, especially, the product information and the scope of indications which shall be reflected on the filing certificate of medical devices. The person specially appointed by Party A and the person specially appointed by Party C shall be confirmed in writing. |
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| b) | Party C shall inform Party A of progress of the Medical Device Filing Procedures in a timely manner, including without limitation specific information to be submitted. |
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| c) | The processing fee of medical device filing shall be RMB180,000 (tax inclusive) (RMB in words: one hundred and eighty thousand). |
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| d) | Within three business days following the execution of this Agreement, Party A shall advance the payment of RMB50,000 to Party C’s corporate account. The balance of RMB130,000 shall be paid within [3] business days following Party B and Party C issue the authorization for the product certificate, and Party A receives the scanned copy of the Medical Device Filing Certificate and confirms same. If Party C fails to obtain the Medical Device Filing Certificate within two weeks after the submission of application materials, Party C shall unconditionally refund the advance payment of RMB50,000 to Party A within three weeks upon submission of application materials. |
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| e) | Party C shall issue the corresponding VAT invoice to Party A within 5 days after the receipt of the advance payment and the last payment respectively. |
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| Party A’s invoicing information is as follows: |
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| Company Name: Beijing Zhenxigu Medical Research Center (L.P.)
Unified Social Credit Code: [*************]
Opening Bank: China Merchants Bank Beijing West Railway Station Branch
Bank Account Number: [*************]
Address: Room 301, Building 23, No. 31 Xishiku Street, Xicheng District, Beijing
Telephone: [*************] |
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| Party B’s receiving and invoicing information is as follows: |
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| Account Name: Huailai Huayue Hengsheng Medical Device Co., Ltd.
Tax Number: [*************]
Bank: Shacheng Sub-branch of Zhangjiakou Bank Co., Ltd.
Account Number: [*************]
Address: Plant No. 11, 301 Jingxi Small Business Start-up Guide Base, Shacheng Economic Development Zone, Huailai County
Telephone: [*************] |
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6. After the successful filing, Party A authorizes Party C to manufacture liquid dressings researched and developed by Party A hereunder (“liquid dressings”). The license term shall expire on [March 1], 2021]. Party C covenants that it has obtained all qualifications required for liquid dressings production, and undertakes to produce and provide liquid dressings based on the request of Party A. Without the prior written consent of Party A, Party C shall not manufacture, sell, authorize or entrust a third party to manufacture, sell liquid dressings or other products researched and developed by Party A. Party A may unilaterally revoke its authorization for Party C to manufacture liquid dressings if Party C breaches the provision of this article and Party C shall pay Party A [RMB500,000] as compensation for breach of contract.
7. This Agreement is made in triplicate with Party A, Party B and Party C holding one copy respectively. The Agreement shall become effective from the date of signature and seal of the Parties.
8. Any dispute arising from or in connection with this Agreement shall be settled by the Parties through consultation based on the principle of mutual benefit. If such consultation fails, each Party may file a lawsuit to the people’s court of competent jurisdiction in the place where Party A is located. During the course of litigation, this Agreement shall continue to be performed except for the part in dispute in litigation.
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As the signature page to the Cooperation Agreement, this page is intentionally left blank.
Party A: Beijing Zhenxigu Medical Research Center (L.P.) (Seal)
Authorized Representative (Signature)
Date: 2020.5.16
Party B: Yubo International Biotech (Beijing) Limited (Seal)
Authorized Representative (Signature)
Date: 2020.5.16
Party C: Huailai Huayue Hengsheng Medical Device Co., Ltd. (Seal)
Authorized Representative (Signature)
Date: 2020.5.16
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EXHIBIT 10.10
Loan Contract
Party A: Yubo International Biotech (Beijing) Limited (hereinafter referred to as “Party A”)
Address: Building 5, Yard 31, Xishiku Street, Xicheng District, Beijing
Legal Representative: Jun Wang
Party B: Beijing Zhenhuikang Biotechnology Co., Ltd. (hereinafter referred to as “Party B”)
Address: Room 202, 2/F, Building 23, No. 31, Xishiku Street, Xicheng District, Beijing
Legal Representative: Yulin Cao
In accordance with relevant laws and regulations, Party A and Party B, on the basis of equality and voluntariness, in order to clarify responsibilities and abide by the credit, and after adequate consultation, enter into this Loan Contract in Beijing on October 10, 2019, and undertake to abide by and perform this Loan Contract jointly.
I. Amount of the loan: see appendix.
II. Term of the loan: no fixed term.
III. Interest rate of the loan: no interest accrued.
IV. Purpose of the loan: to be used for Party B’s daily operating expenses.
V. Repayment method: Party B shall set off payment with future business accounts receivable from Party A.
VI. Effectiveness of the Contract: This contract shall come into force upon the signatures and seals of both parties. This contract is made in two counterparts, one to be held by each party and shall have the equal force. For any other matters not covered herein, both parties hereto may negotiate supplemental agreement.
VII. Dispute Resolution: any dispute arising from or in connection with this Contract shall be settled through friendly consultation between the Parties hereto on the basis of the principle of mutual benefit. If such consultation fails, both Parties may bring a lawsuit to the people’s court where this Contract is executed.
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Signature Page of the Loan Agreement without text.
Lender (Party A): Yubo International Biotech (Beijing) Limited (seal)
Signature by the Legal Representative:
Borrower (Party B): Beijing Zhenhuikang Biotechnology Co., Ltd. (seal)
Signature by the Legal Representative:
| 2 |
APPENDIX:
| Term of the Loan
| Amount of Loan
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| September 10, 2019
| RMB 1,410,000 yuan (in words: one million four hundred and ten thousand)
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| October 10, 2019
| RMB 1,370,000 (in words: one million three hundred and seventy thousand yuan)
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| Total:
| RMB 2,780,000 (in words: two million seven hundred and eighty thousand yuan)
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EXHIBIT 10.11
CERTAIN PERSONALLY IDENTIFIABLE INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY [***], HAS BEEN OMITTED.
JIUSI CULTURAL CREATIVE PARK
LEASE CONTRACT
Party A: JIUSICHENG INVESTMENT MANAGEMENT (BEIJING) CO., LTD.
Party B: YUBO INTERNATIONAL BIOTECH (BEIJING) LIMITED
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| 北京市西城区西什库大街 31 号院九思文创园 |
九思成投资管理（北京）有限公司
LEASE CONTRACT
Lessor: JIUSICHENG INVESTMENT MANAGEMENT (BEIJING) CO., LTD.
Address: 31 Xishiku Ave.
Representative:
Lessee: YUBO INTERNATIONAL BIOTECH (BEIJING) LIMITED
Address: 31 Xishiku Ave.
Representative:
Party B leases the premises that Party A has the right to lease as office space. The Parties, through friendly consultation, enter into this lease contract (hereinafter referred to as the “ Contract”) and agree that this Contract together with the schedules hereto and any supplementary agreements (if any) entered into in the future with respect to this Contract shall constitute integral parts of the Contract. and shall have the same legal effect.
Article 1 Leased Unit and Purpose
| 1.1 | [Address] Subject to the terms and conditions of this Contract, Party A agrees to lease and Party B agrees to lease from the premises set forth in Schedule [IV] hereto (the “Unit”) located at [JIUSI CULTURAL CREATIVE PARK] (the “Park”) in Beijing. The floor plan of the leased unit is used for the convenience of identification only. |
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| 1.2 | [Area] Party A and Party B jointly confirm that the actual leased area of the Unit leased by Party B is set forth in Part [2] of Schedule [I] hereto. |
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| 1.3 | [Purpose] The purpose of the Unit leased by Party B is listed in Part [3] of Schedule [I] hereto (the “Purpose of Lease”). Party B shall comply with the regulations of the Client Manual of JIUSI CULTURAL CREATIVE PARK (the “Client Manual”) and the Decoration Manual of JIUSI CULTURAL CREATIVE PARK (the “Decoration Manual”) during the term of its lease and use of the leased Unit. |
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| 1.4 | The Client Manual of JIUSI CULTURAL CREATIVE PARK (the “Client Manual”) and the Decoration Manual of JIUSI CULTURAL CREATIVE PARK (the “Decoration Manual”) shall be schedules to this Contract. Party A shall have the right to adjust the same, and Party A shall notify Party B of the corresponding adjustments in writing in a timely manner. |
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| 1.5 | [Use in accordance with law and contract] Party B covenants to Party A that it will comply with the relevant laws and regulations of the People’s Republic of China and Beijing Municipality on the use of property and management of the park during the lease term (the “Term”) set forth in Part [4] of Schedule [I] hereto, and during the Term, Party B shall not alter the lease purpose of the leased Unit without the prior written consent of Party A. |
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| 北京市西城区西什库大街 31 号院九思文创园 |
Article 2 Lease Term and Rent-Free Period
The lease term of the leased Unit has been included in Part [4] of Schedule [I] hereto.
| 2.1 | [Lease Term] In accordance with the contract between Party A and the owner of property at Xishiku No. 31, there are two phases: phase 1, 2 years and 4 months. The firstlease term is from August 1, 2019 to November 30, 2021, and the second phase shall be implemented for a period of 2 years and 8 months upon the successful renewal of the lease by Party A and the owner of property, which is from December 1, 2021 to July 31, 2024. In case Party A fails to renew the lease of the leased property with the owner, this Contract shall naturally terminate after both Parties perform the first phase, without any responsibility by the two Parties. |
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| 2.2 | [Delivery List] Upon the delivery of the leased Unit by Party A to Party B, Party A shall deliver the leased Unit in accordance with the contents confirmed by both Parties in Schedule [VII] Delivery List of Leased Unit, and Party A warrants that the leased Unit has been in compliance with the Delivery Condition (See Article 7.6 of this Contract). |
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| 2.3 | [Rent-Free Period] The rent-free period of the leased Unit has been included in Part [4] of Schedule [I] hereto (the “Rent-free Period”). Within the Rent-free Period, Party B shall not be required to pay Party A the rent for the property, but Party B shall still pay Party A the management service fee of the property and water, electricity and other fees payable in Article 3.3 and 3.4 herein. The rent-free period shall be implemented in two times, i.e., for the first lease year, the rent-free period shall be implemented for [two months], and for the second lease year, the rent-free period shall be implemented for [one month]. |
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| 2.4 | [Expiration of Lease] Unless otherwise agreed by both Parties, Party A shall have the right to take back the leased Unit upon the expiration of the lease term. |
Article 3 Rent, Management Service Fees and Other Expenses
| 3.1 | [Rent] |
Party B shall pay to Party A the rent set forth in Part [1] of Schedule [II] hereto in the manner and on the dates set forth in the entire Lease Term. The rent shall be paid to Party A within five days after the Parties enter into a formal lease contract. This Contract shall become effective upon the receipt of such amount into the account of Party A. Party B agrees that the annual rent for the 2 years plus 4 months for the first phase shall be increased by no less than 4% each year, and the rental standard for the 2 years plus 8 months for the second phase lease term shall be increased accordingly based on the lease renewal terms between Party A and the owner of property at Xishiku No. 31, with the specific rent set forth in the supplementary agreement to be entered into by and between Party A and the owner of property after the successful lease renewal.
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| 北京市西城区西什库大街 31 号院九思文创园 |
| 3.2 | [Management Service Fees of the Park] |
Party B shall pay to Party A the park management service fee set forth in Part [2] of Schedule [II] hereto in the manner and on the dates specified throughout the Lease Term. The park management service fee shall be paid by Party B to Party A together with the rent after the Parties enter into a formal lease contract. Party B agrees that during the lease term, either Party A or Party A shall have the right to adjust the park management and service fee synchronizing with the governmental authorities in charge of price adjustment or the market price level. During the contract term, the increase percentage of the park management service fee shall be the same as the rent.
| 3.3 | [Other Expenses] |
In addition to the above rental and the park management service fee, all the expenses including but not limited to electricity, water, heating, telephone, TV reception, internet access, indoor facilities maintenance, indoor hygiene and other costs during the lease term shall be borne by Party B. If Party B advances the fees to be paid by Party A, Party A shall return the corresponding fees to Party B on the basis of the relevant payment credentials presented by Party B. Party B agrees that during the lease term, Party A has the right to adjust the aforesaid fees synchronizing with the governmental authorities in charge of price adjustment or the market price level. In case such adjustment should be notified to Party B by Party A at least 1 month in advance. And Party A shall provide related adjustment basis to Party B. The parking fee is calculated by the owner of property at Xishiku No. 31, where Jiusi Cultural Creative Park is located, in accordance with the approved price approved by NDRC, and paid directly by Party B to it.
| 3.4 | [Time of Payment] |
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| (1) | Payment of rent and park management service fee shall be prepaid, and the payment period is [3 months]. Party B shall pay Party A the rent and park management service fee within five days after both parties sign the formal lease contract. Throughout lease term, Party B must pay Party A the rent, the park management service fee in advance for the next phase of lease term 15 days prior to the next lease term. In case of occurrence of any national statutory holiday or public holiday which coincides with the statutory holiday, Party B shall bring the payment date of rent and park management service fee forward to the working day before the above-mentioned holiday. If Party B fails to make payment on time, Article 12.1 of this Contract shall apply. |
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| (2) | Party A shall, after actually receiving the rent and park management service fee paid by Party B, , issue VAT invoice which is in line with national rules and regulations, except for the delay caused by update or upgrade of state tax authority or policies and systems. |
Article 4 Deposit
[Definition] Party B shall pay Party A the rent deposit listed in part [3] of Schedule [II] hereto as well as the deposit for the park management service fee listed in part [3] of Schedule [II] five (5) days after the Parties enter into the formal lease contract. The rent deposit and the deposit for the park management service fee are collectively referred to as the deposit.
| 4.1 | [Refund of Deposit] If the Lease Term expires or this Contract is early terminated or rescinded, Party B shall perform all the obligations set out in Article 10.4 of this Contract. After the return of the leased Unit in accordance with that article to Party A, Party A shall have the right to refund the balance of the deposit to Party B in Renminbi (without interest) after deducting the rent, park management service fee, other fees, breach of contract damages, compensations and other fees that shall be borne by Party B (if any) within 30 days. If the deposit is not sufficient to pay the aforesaid fees, Party B shall make up the shortfall within 5 working days of receipt of the written notice from Party A and/or Party A. Upon occurrence of any circumstance as prescribed in Article 10.2 hereof, Party A shall have the right to treat the deposit as liquidated damages instead of deducting all the fees Party B owes from the deposit. |
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| 北京市西城区西什库大街 31 号院九思文创园 |
| 4.2 | [Deposit Offset] Unless Party A and Party B unanimously agree upon between them, Party B shall not use the deposit to offset the rent or other amounts payable by it. |
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| 4.3 | [Deposit Replemishment] At any time during the lease term, the deposit shall be equal to the sum of [three months] rent and park management service fee of the property. If the deposit is not sufficient, Party B shall pay the shortfall within 5 working days of receipt of the written notice from Party A and/or Party A. |
Article 5 Lease Renewal
| 5.1 | [If Renewal] If Party B intends to extend the lease at the expiration of the lease term, it shall notify Party A in writing within [90] to [60] days prior to expiration of the lease term and negotiate with Party A. The rent during the renewal term shall be based on those negotiated by the Parties. |
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| 5.2 | [If No Renewal] If the Parties fail to decide to enter into a renewal contract, upon prior notice to Party B, Party A may accompany the new tenant to visit the leased Unit to Party B during the normal business hours (to the extent not interfering with Party B’s normal business activities) within [60] days prior to the expiration of the lease term hereof, and Party B shall not have any objection thereto and shall provide assistance. |
Article 6 Decoration and Renovation
| 6.1 | [Decoration Manual] After Party B and Party A complete the handover procedure of the leased Unit in accordance with the provisions of the Client Manual, Party B may go through the decoration formalities in accordance with the provisions of the Decoration Manual so that the leased Unit can start the decoration. Party B’s decoration and renovation shall be carried out in accordance with the provisions of the Decoration Manual. |
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| 6.2 | [Conditions for Decoration] If Party B re-decorates or refurbishes the interior of the leased Unit during the lease term, the construction works of the park shall under no circumstances affect the building structure of the park and the interests of other tenants, and Party B shall notify Party A in writing fourteen (14) days prior to the commencement of the construction works. Only with the written consent of Party A and the relevant authorities (if necessary) may Party B go through the relevant procedures and carry out decorations pursuant to the provisions of the Decoration Manual. |
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| 6.3 | [Decoration Liabilities] Party B shall carry out the decoration works provided that the decoration design, materials selection and construction plan comply with the national regulations governing fire control and safety. Party B shall provide Party A with the undertaking letter regarding fire control and safety liability before the commencement of the construction, and the decoration construction company entrusted by Party B shall enter into with Party A liability letter regarding fire control and safety liability during decoration works. Party B shall be liable for all consequences arising from the decoration works and renovation works. |
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| 北京市西城区西什库大街 31 号院九思文创园 |
| 6.4 | [Hidden Risks in Decoration] If within the scope of the leased Unit, Party A or relevant authorities discover any danger or other hidden safety risks (normal wear and tear of the public supporting facilities in the Unit shall be borne by Party A), and upon reasonable request of Party A or the relevant authorities, Party B shall repair or replace any equipment and pipes installed by it within the time specified by Party A. |
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| 6.5 | [Installation of Air-conditioning Equipment] Party B shall install the Air-conditioning Equipment in the leased area on its own but it must comply with the relevant national industry standards and meet the power load requirements of the leased area.. If it causes losses to Party A due to improper installation, Party B shall bear all the consequences on its own and shall indemnify Party A’s losses. |
Article 7 Rights and Obligations of Party A
| 7.1 | [Rent collection right and continuous guarantee of lease status obligation] Under the premise that Party B pays the Deposit, rent, park management service fee and other fees in accordance with the terms of this Contract and performs this Contract, Party A shall ensure the safe and normal use of the leased Unit by Party B during the entire Lease Term. Party A or the property owner shall have the right to repair and reconstruct the building, but shall minimize the impact of the works on the normal operation of Party B. |
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| 7.2 | [Scope of Party A’s repairs] The following repair responsibilities shall be borne by Party A: |
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| (1) | The Public Areas of the leased Unit (excluding the fees incurred for repair damage caused by Party B); |
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| (2) | Normal wear and tear of the main structure and ancillary facilities of the leased Unit. |
| 7.3 | [Repair and Management Responsibilities of Party A] Party A shall repair, fire control, rescue and test the fire control, air conditioning and other equipment and facilities in the leased Unit in a timely manner and shall conduct other management acts [excluding: fire control activities (which shall be designated and recognized by the fire authority of relevant national government) carried out by Party B in the leased Unit, settlement of air conditioning installation, fire control approval matters and relevant documents, but Party A shall provide assistance]. If Party A delays the repair, Party B may perform the repair for Party A or may hire a third party to perform the repair at the expenses of Party A. |
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| 7.4 | [Emergency] In case of repair, fire control, rescue or test the fire fighting, air conditioning and other equipment and facilities in the leased Unit, Party A shall have the right to enter the leased Unit under the condition that it gives prior notice to enter the leased Unit to repair or maintain the leased Unit and test relevant equipment and facilities. In the case of emergency where Party A cannot get in touch with Party B in advance, Party A may enter into the leased Unit of a forcible nature and take necessary measures (Party A shall minimize losses and avoid expansion of losses, otherwise Party A shall bear liability for losses caused by Party A). However, a report shall be submitted to Party B in a timely manner afterwards. |
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| 7.5 | [Decoration of the Public Areas] To decorate the Public Areas of the building as Party A deems necessary. |
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| 7.6 | [Delivery Conditions] To deliver the leased Unit to Party B in accordance with the standards and time limit agreed in this Contract. Upon delivery, the leased Unit shall be maintained in a condition suitable for decoration, and there shall be no garbage or other obstacles or abandoned objects left in the rooms. Upon delivery, any articles within the leased Unit, except those set forth in Schedule [VII] hereto, shall be deemed to have been abandoned, and Party B shall not be responsible for any of the items lost in the leased Unit. |
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| 7.7 | [Fire Control Liability] Party B shall not change the existing fire control measures in the leased Unit without Party A’s consent. If the fire control end equipment shall be added by Party B according to the latest fire control standards, the scheme drawings shall be submitted to Party A. After review and approval of Party A, Party B shall be responsible for the construction on its own. |
Article 8 Rights and Obligations of Party B
Throughout the Lease Term, Party B shall have the following rights and undertake to comply with and perform the following provisions and obligations:
| 8.1 | [Make timely payment] To pay the rent, the park management service fee and other fees under this Contract within the time limit agreed in this Contract. |
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| 8.2 | [legal compliance] Party B shall carry out the activities strictly in compliance with the laws and regulations of the People’s Republic of China. Party B shall not conduct any illegal activities or other activities that may cause damage or hindrance to Party A or other parties in the leased Unit. |
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| 8.3 | [Compliance with the Contract] Party B shall comply with the terms and conditions of this Contract and the provisions of the Client Manual and the Decoration Manual and cooperate with Party A and Party A’s management of the Park. |
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| 8.4 | [Use of Public Areas] In accordance with the management regulations of the Park, Party B shall have the right to use the public areas and facilities of the Park on equal basis with others. Meanwhile, Party B shall have the liability to keep the leased Unit and public area in clean conditions and the equipment and facilities in good condition. In case of damages caused to the leased Unit or the equipment and facilities in the common area (except for normal wear and tear and force majeure), Party B shall repair or replace the same within a specified time as required by Party A. In case of repair or replacement by Party A, Party B shall bear the expenses. Party B shall actively cooperate with Party A in the inspection and maintenance of the leased Unit. Party B shall be liable for compensation for any personal and property damage caused to Party A or a third party due to the delay of maintenance of the Park. |
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| 8.5 | [Decoration and Alterations] Any decorations and alterations made by Party B shall be carried out after the written consent from Party A. If government approval is required in advance, Party B shall go through the relevant examination and approval procedures. Without the written consent of Party A and Party A, Party B shall not occupy or alter any areas other than the leased Unit. |
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| 8.6 | [Liabilities of Accidents] Party B shall promptly notify Party A in writing any personal injury or death occurring to the leased Unit and any damage to the leased Unit. In the event of fire alarm or other accident, in addition to immediately calling the police and taking necessary measures, Party B shall also inform Party A. Party B shall bear the liabilities and economic compensation in accordance with its fault and bear the liabilities and economic compensation for any personal injury or death and/or property loss or damage caused by any activity or accident occurring in the leased Unit. |
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| 8.7 | [Responsibilities of Fire Control, Security and Public Security] Party B shall bear the responsibilities of fire control, security and public security in the leased Unit. |
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| 8.8 | [No Open Fire] Party B shall not use natural gas or open fire in the leased Unit. |
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| 8.9 | [Responsibilities of Party B’s people] Any act conducted by Party B’s employees, invitees or visitors in the leased Unit shall be deemed as Party B’s own acts and Party B shall be fully liable to Party A. |
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| 8.10 | [No Sublease or assignment] Party B shall not sublease or assign the leased Unit in whole or in part to any third party or use the Unit jointly with any third party, unless otherwise agreed upon by the Parties. |
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| 8.11 | Party B shall provide Party A with the licenses, approvals or permits issued by the relevant government authorities which are valid during the lease term. Party B shall not use the leased Unit for purposes other than the lease purpose, otherwise Party B shall bear all the liabilities and consequences arising therefrom. Upon the expiration or replacement of Party B’s valid license, approval or permit, Party B shall make documentation to Party A in a timely manner. Party B shall carry out the cultural and creative industry project strictly in accordance with the scope specified in the Classification Form of Beijing Cultural and Creative Industries; otherwise, Party B shall bear all the liabilities and consequences arising therefrom. Party B shall actively cooperate with Party A in providing Party A with relevant materials and information required by the Premises. |
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| 8.12 | [Insurance Recommended] Party A advises Party B to procure insurance from an insurance company with good reputation for its properties, articles, furnishings and decorations in the leased Unit at its own expense so as to reduce risks and increase protection. |
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| 8.13 | [Neighboring Relationship] If the activities of another office unit adjacent to Party B violate the law or interfere with its normal business activities, Party B shall have the right to make a complaint to Party A or the property management company, and Party A or its agents shall provide assistance in resolving such complaint. |
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| 8.14 | Party B shall check the equipment and facilities of the leased Unit with Party A before entering the site for decoration. Party B shall be allowed to enter the site for construction only after being confirmed and signed by both parties. |
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| 8.15 | Party B shall obtain the relevant licenses and permits for operation in compliance with the provisions of the administrative authorities for industry and commerce, tax and other administrative authorities in Xicheng District (where Jiusi Cultural Creative Park is located), otherwise Party B shall bear corresponding liabilities. Party A may cooperate in providing relevant materials for the valid registered address that may be used as offices within Jiusi Cultural Creative Park, at Party B ‘s cost. |
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| 8.16 | After the execution of this Contract, Party B shall also comply with the relevant regulations of the Client Manual and Decoration Manual formulated by Party A. |
Article 9 Party A reserves the following rights:
| 9.1 | [Municipal Facilities] The owner of municipal utilities shall have the right to ensure all service pipelines supply to the park or buildings adjacent thereto pass through the leased unit without interruption. Such owner of municipal utilities or its staff shall have the right to enter the leased unit with prior notice to Party A to inspect, repair, replace and construct new service pipelines so as to connect the park or to attach to the park for provision of municipal utilities. |
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| 9.2 | [Name Change] During the lease term, Party A shall have the right to change the name of the park or parts of it. Party A shall not bear any costs incurred to Party B due to the name change; provided, however, that Party A shall notify Party B one (1) month before the name change. In case Party B cannot have normal operation due to the renaming of the park, Party B shall have the right to terminate the lease contract with a one- month notice to Party A, and Party A may return the outstanding rent, park management service fee, and return the deposit to Party B. Otherwise, Party A shall be entitled to refund the outstanding rent, the park management service fee and the deposit to Party B after deducting one month rent. |
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| 9.3 | [Decoration of Non-leased Unit] Party A shall have the right to rebuild, expand, remove or decorate any other part of the unit not included in the leased Unit. Party A shall have the right to give Party B a one-month prior written notice. |
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| 9.4 | [Party A’s Exemption] Party A shall not be liable for the following matters if those matters are not attributable to Party A: |
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| (1) | In order to carry out necessary building repair and maintenance works, and the temporary stop of use of the public facilities not for any reason attributable to Party A. |
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| (2) | Party B suffers losses due to Force Majeure or other reasons not attributable to Party A. |
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| (3) | Other losses caused to Party B by Party B or a third party. |
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| (4) | Theft and destruction in the leased Unit. |
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Article 10 Termination and Rescission of this Contract
| 10.1 | [termination] The parties may terminate this Contract by reaching a written agreement through consultation. |
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| 10.2 | [Party A’s unilateral termination right] Unless otherwise stipulated by laws and regulations or provided in this Contract, Party A shall have the right to terminate this Contract with immediate effect and repossess the leased Unit, in any of the following circumstances. Moreover, 1) the deposit paid by Party B in accordance with part [3] of Schedule [II] hereof shall be treated as the liquidated damages and shall not be refunded; 2) Party B shall pay up the unpaid rent, the park management service fee and the rent of the rent-free period; and 3) Party A reserves the right to recover the losses caused thereby by Party B. |
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| (1) | Party B conducts illegal business operations in violation of the laws or regulations of the People’s Republic of China; |
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| (2) | Party B becomes insolvent due to bankruptcy. |
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| (3) | Party B fails to pay the rent, the park management service fee, the deposit and other fees (including water, electricity, and other fees that should be paid on time) (see the user’s manual) or Party B fails to make up for the shortfall of the deposit within the time limit agreed on herein, and Party B fails to pay or supplement in full within 30 days upon expiry of the time limit agreed on in this Contract. |
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| (4) | Party B changes the main structure of the leased Unit without authorization. |
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| (5) | Party B unilaterally terminate this Contract for reasons attributable to Party B. |
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| (6) | Other circumstances under which Party A shall have the right to unilaterally terminate or rescind this Contract due to reasons attributable to Party B. |
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| (7) | In the event of Party B’s breach of this Contract again after receiving a written warning from Party A and causing any loss or damage, Party A may terminate this Contract unilaterally based on the severity of Party B’s breach. |
| 10.3 | [Party A’s unilateral right to terminate] If this Contract is terminated due to reasons attributable to Party A, Party A shall notify Party B one month in advance, refund the deposit, the prepayment of the rent and park management service fee (deducting the rent, park management service fee and relevant fees occurred on or before the removal date) in full within 30 days upon termination of this Contract, and pay the fee equivalent to the deposit as liquidated damages. |
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| 10.4 | [Return of Leased Unit] Party B shall complete the return of the Leased Unit in accordance with this Article within five (5) days after the expiry of the Lease Term or early termination or rescission of this Contract. |
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| (1) | Party B shall complete the procedures on relocation with Party A in accordance with the provisions of the Client Manual. |
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| (2) | If neither party commits no breach of contract upon the expiry of this Contract, Party B shall demolish the decoration and restore the premises to its original state, provided that it must obtain the written consent of Party A, otherwise Party A shall not refund the deposit to Party B. For the decorative and decorative materials that do not form attachment, Party A must permit such removal if Party B requests to do so. In the event that Party B does not demolish the decoration or renew the lease, the decoration shall belong to Party A, but Party A shall refund the deposit to Party B. |
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| (3) | In the event that this Contract has not expired and Party B unilaterally requests to terminate this Contract, Party B shall leave the leased Unit in its current as-is status, and the decorations on the premises shall belong to Party A. Party B shall not damage the original basic decoration, facilities and equipment and articles in the leased premises. After Party B withdraws from the leased premises, the goods left over shall be deemed to be abandoned, and Party A shall have the right to dispose. |
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| (4) | Upon consultation with Party B and written consent of Party B, Party A shall have the right to recover the leased Unit on the “as-is, where-is” basis at the expiry of the lease term without Party B’s paying any additional compensation. In this case, Party A shall refund the deposit to Party B. |
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| (5) | Party B shall complete the relocation procedures for the registered address (if any) provided by Party A within fifteen (15) days following the expiry of the lease term or early termination or rescission of this Contract, and provide Party A with the relevant certificate. |
| 10.5 | [Force Majeure Termination] If the occurrence of any force majeure mentioned in Article 11 hereof renders both parties unable to continue the performance of this Contract, this Contract shall be terminated. |
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| 10.6 | [Party B’s unilateral right for termination] Party B shall be entitled to early terminate this Contract by notifying Party A three months in advance. In this case, Party A shall not refund the deposit already paid. Within 30 days after Party B moves out of the leased Unit, the prepaid rent and park management service fee shall be deducted from the rent and park management service fee incurred prior to the day Party B moves out of the leased Unit (including that day). The balance of such fee shall be refunded, or Party A shall have the right to deduct the prepaid rent for three months and the park management service fee. If the period is less than three months, Party B shall pay the shortfall within 5 working days. |
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| 10.7 | [Party B’s unilateral right for termination] After Party B unilaterally terminates this Contract and before Party B moves out of the leased Unit, Party A shall have the right to accompany the new tenant to visit the leased Unit to Party B’s use during the normal business hours with a prior notice to Party B (so as not to interfere with Party B’s normal business activities), and Party B shall not oppose the same and shall provide assistance to Party A. |
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| 10.8 | [termination of contract] If the contract is not successfully renewed by Party A and owner of property at Xishiku No. 31 before the expiration of the lease term for the first phase hereof, this Contract shall terminate naturally, the lease term for the second phase shall not be performed, and the lease term for the second phase shall not be performed, and the Parties shall not bear any liability therefor. |
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Article 11 Force Majeure and Disclaimer of Liability
| 11.1 | Should either party be prevented from executing this Contract by force majeure, such as earthquake, typhoon, rainstorm, war, riots, policies and other unforeseeable events and their occurrence and consequences are unpreventable or unavoidable, the affected party shall provide the other party with notice thereof without any delay, and within fifteen (15) days thereafter provide the detailed information of the event and a supporting document for the reason of its inability to execute all or any part of this Contract or of the necessity to delay such execution. The document shall be issued by the local notary office where the force majeure event occurs. The party encountering the force majeure shall be exempted from the liabilities of compensation to the other party. |
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| 11.2 | Unless otherwise stipulated in this Contract, if the leased Unit cannot be used or cannot be used due to force majeure or the reason not attributable to Party B, the two parties shall seek solution through consultation. |
Article 12 Default Liabilities
| 12.1 | If Party B fails to pay in full the rent, deposit, the park management service fee and other fees payable (including water rate, electricity rate and other fees payable) within the time period specified in this Contract, or fails to make up for the deposit within the time period specified in this Contract, Party B shall pay liquidated damages in the amount equal to 0.2% of the total outstanding payments per day until the actual repayment date (both the due date and the actual repayment date are included). Meanwhile, Party A or Party A shall have the right to take such measures as deemed reasonable by Party A, including without limitation, cutting off the supply of utilities (including but not limited to water and electricity) to the leased Unit and the park services provided by or in connection with the park. During the aforesaid cut-off period, Party B shall still pay the rent, the park management service fee and other fees stipulated in this Contract. Any losses suffered by Party B due to the aforesaid cutting off shall be borne by Party B. If Party B fails to pay or supplement the deficiency for more than 30 days, Party A shall have the right to terminate this Contract. |
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| 12.2 | If Party A fails to deliver the leased Unit on time due to Party A’s reasons, Party A shall waive all expenses in connection with the leased Unit including the rent and the park management service fee from the Commencement Date to the date on which the leased Unit is delivered to Party A. The date of payment of the rent and the park management service fee shall be calculated from the date of takeover of the premises, and the rent-free period shall commence from the date of actual takeover of the premises by Party B. In the event that Party A delivers the leased Unit to Party B in accordance with the standards and within the time period as set forth in this Contract but fails to complete house inspection in a timely manner due to Party B’s reasons, Party A shall not waive the rent and the park management service fee for the period before Party B makes such inspection. |
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| 12.3 | If this Contract is rescinded or terminated early for reasons not attributable to Party B (except for force majeure), Party A shall refund the deposit and the prepayment of rent and park management service fee in full amount (deducting the rent, management service fee and relevant expenses occurred on and before the removal date) to Party B and pay Party B liquidated damages in the amount equivalent to three months (of the current year) rent. |
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| 12.4 | If this Contract is terminated due to reasons attributable to Party B, Party B shall pay Party A liquidated damages in the amount equivalent to three months (of the current year) rent. Party A shall refund the deposit and the prepayment of rent and park management service fee (if any) to Party B after deducting the sum of the rent, park management service fee and other fees incurred on and before the date of transfer. In case the deposit and the prepayment of rent and management service fee of the park is not sufficient to cover the above expenses, Party B shall make up the deficiency within 3 working days after receiving Party A’s written notice. If the amount of the liquidated damages is equal to the amount of deposit, Party A may offset directly the liquidated damages, and the deposit shall not be refunded. |
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| 12.5 | Except for the foregoing, the Parties shall perform this Contract in accordance with the provisions. Any Party in breach of this Agreement shall bear the liability for breach of contract to the other Party. |
Article 13 Waiver of Rights
| 13.1 | When Party B commits any breach of contract and Party A has already collected the rent, Party A shall not be deemed as a waiver of its right to make such breach. Party A’s waiver of any of its rights under this Agreement may only be made subject to Party A’s written confirmation. If Party B’s rental payment or other payments fall short of the amounts specified in this Contract or if Party A accepts insufficient rental or other payments, such underpayment shall not be deemed as Party A’s consent to the underpayment, which shall not affect Party A’s right to claim the overdue rental and other payments or affect its right to take other measures in accordance with the provisions of applicable PRC laws. |
Article 14 Settlement of Disputes
| 14.1 | [Applicable Law] The conclusion, interpretation, performance of this Contract and the settlement of disputes shall be governed by the laws of the People’s Republic of China and shall be governed by the laws of the People’s Republic of China (excluding HK SAR, Macao SAR and Taiwan region). |
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| 14.2 | [Consultation for Resolution] All disputes in connection with this Contract or the performance thereof shall be settled through friendly consultation as far as possible. |
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| 14.3 | [Jurisdiction] If a dispute cannot be resolved through consultation, either Party may file a lawsuit in the people’s court of competent jurisdiction where Jiusi Cultural Creative Park is located. |
Article 15 Fees and Expenses
| 15.1 | Each Party shall bear its own incidental expenses incurred in connection with this Contract. Other taxes and duties published by the Government of the People’s Republic of China from time to time shall be borne by the Parties respectively in accordance with the relevant regulations. |
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| 15.2 | All the expenses claimed by Party A and Party B against the other Party shall be supported by corresponding evidences. |
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Article 16 Supplementary Provisions
| 16.1 | If there is any discrepancy between this Contract and all agreements, letters of intent, memorandums and letters signed by the Parties prior to this Contract, this Contract shall prevail. |
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| 16.2 | [Appendices, Amendment and Supplement to this Contract] Any amendments of and matters not covered by this Contract shall be agreed upon by both parties and become effective upon a written supplementary agreement. The supplementary agreement, all appendices and ancillary agreement hereto shall constitute an integral part of this Contract, and shall have the same legal force as this Contract. |
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| 16.3 | Notices and Delivery |
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| (1) | All the notices required to be given under this Contract shall be in writing. |
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| (2) | Each Party shall send written notices to the other Party at the following address. If either Party changes its mailing address and mailing information, such change shall be notified within seventy-two (72) hours after the change. If the other Party fails to receive the notification of change, the notices sent to the following addresses shall be deemed to have been received at the time specified in the following paragraph. |
Mailing Address of Party A: 1st Floor, Building 5, Jiusi Cultural Creative Park, No. 31 Xishiku Ave,
Postal Code: 100034
Facsimile Number: 010- 66028831
Attention: LI Jian
Mailing Address of Party B:
Postal Code:
Facsimile Number:
Attention:
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| (3) | If the notice is sent by facsimile, the time of sending shall be regarded as the time of service; if the notice is delivered by hand, the time when the notice is received by the addressee; if the notice is delivered by post (including express mail), the service time shall be the third working day after it is posted. Either party shall be obliged to contact the other party by telephone after sending the written notice to ensure the smooth delivery of the written notice. |
| 16.4 | [Severability] Each of the provisions contained in this Contract is an independent provision, so if any of the provisions is held invalid, the legal effect of the remaining provisions shall not be affected. |
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| 16.5 | [Effectiveness] This Contract shall become effective upon signature by Party A and Party B and payment of the Deposit by Party B to Party A in full. This Contract and its schedules are written and executed in Chinese language. This contract is made in duplicate, each of which shall be held by Party A and Party B, each of which shall have the same legal force. |
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Signature Page
This Contract shall be sealed by both Parties or signed by their authorized representatives:
| Party A: |
| Party B: |
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| Legal or authorized representative: |
| Legal or authorized representative: |
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| (signature) |
| (signature) |
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| Date: August 1, 2019 |
| Date: August 1, 2019 |
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Schedule I
Details of the Unit Leased and Lease Term
1 Part – Leased Unit
| This park | [31 Xishiku Street] |
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| Leased Unit | The park area: Suite C-1002 |
2 Part – Leased Area
| Leased Area | The actual leased area of the unit leased is: Totaling 746.3 square meters. |
3 Part 3 – Lease Purpose
| Lease Purpose | Office |
4 Part – Lease Term
| Lease Term | There are two phases in total: [5 years]. The lease term of the leased Unit is as follows: Phase I [2 years plus 4 months] from August [2], 2019 (inclusive) to November [30], 2021.
If the lease is renewed successfully by Party A and the owner of property at Xishiku No. 31, the parties can continue to perform the lease term for Phase II [2 years and 8 months], i.e. from December 1, 2021 to July 31, 2024. In case Party A fails to successfully renew the lease with the property owner, this Contract shall terminate naturally after Party A has performed the first phase, for which neither party shall bear any responsibilities.
Party B must make full payment of the Deposit and Rent as set forth in Article 3 and Article 4 of this Contract.
The Leased Unit Delivery List (refer to Schedule VII) shall be deemed to have been delivered after Party A and Party B have signed and sealed and handover the key to the Leased Unit. |
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| Rent-free Period | [3 months] totally. The Rent-free Period shall be separated in two parts from the effective date of this Contract. For the first year, the rent-free term shall be two months, Namely:
The first time shall be from August [2], 2019 to October [1], 2019 (both the starting day and the end day are included)
The second time shall be from August [1], 2020 to August [31], 2020 (both the starting day and the end day are included) |
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Schedule II
Rent, Park Management Service Fee and Deposit
1 Part –Rent (to be paid by Party B to Party A)
Description for calculation:
1. Annual Rent = area * unit price * 365 days; Monthly Rent = Annual Rent/12 months; The first year’s rent shall be 364 days;
2. The rent for the third year of the first phase shall be 4 months;
3. The Rent-free Period shall be in two parts: for the first year, the rent shall be exempted for two months, meaning that for the first year shall be 10 months/year and eleven months for the second year.
4. The above is the rent for the first phase, the increase of the rent for the second phase shall be correspondingly based on the successful renewal of the lease by Party A and the property owner.
2 Part – Park Management Service Fee (to be paid by Party B to Party A)
The calculation formula:
1. park management service fee = area * unit price * 365 days. Monthly service fee = annual service fee/12 months. The service fee for the first year shall be 364 The calculation of days;
2. The park management service fee for the third year shall be four months;
3. Rent-free period non-exempted from the park management service fee during rent-free period
4. The above is the park management service fee for the first phase, the increase of the park service fee for the second phase shall be correspondingly based on the successful renewal of the lease by Party A and the property owner.
Within the lease term, Party A or Party A shall have the right to adjust the park management service fee synchronizing with government authorities in charge of price adjustment or the market price level. During the rent-free period, the park management service fee shall not be reduced or exempted.
3 Part –Deposit and Down Payment
Remark:
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| 1. | Deposit = monthly rent of the premises * (3) months + the park management service fee * (3) months |
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| 2. | The first installment: Does not include the rent for two (2) months rent-free period, but including the park management service fee for the two (2) months rent-free period |
Total amount of [RMB 778,738] to be paid after the execution of this contract
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4 Part – Time and Terms of Payment
| Payment schedule: | The rent and management service fee of the park shall be prepaid. The payment period is [3 months]. Party B shall pay the first installment of rent and park management service fee to Party A within five days after both parties enter into the formal lease contract. Throughout lease term, Party B must pay Party A and the park management service fee in advance for the next phase of lease term 15 days prior to the next lease commencement term. In case of occurrence of any statutory holiday or public holiday which coincides with the statutory holidays, Party B shall bring forward the payment time of rent and management service fee of the park to the day before the aforesaid statutory holidays. |
| Note: | The deposit as specified in Article 4.3] of the deposit shall be equal to the sum of the current rent and park management service fee of [three (3) months].
Please see the following Payment Details:
First Phase |
Payment Method: Bank Transfer
Bank Details of both parties
Party A: Jiusicheng Investment Management (Beijing) Co., Ltd.,
Tax Payer Identification Number: [************************]
Bank: [************************]
Account Number: [************************]
Party B’s Bank Account Information:
Party B: Yubo International Biotech (Beijing) Limited
Tax Payer Identification Number: [************************]
Bank: [************************]
Account Number: [************************]
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| 北京市西城区西什库大街 31 号院九思文创园 |
Schedule III – Special Terms
1. Unless otherwise specified, if any clauses and contents of any part of this Contract are inconsistent with any Special Terms and Conditions, the Special Terms and Conditions shall prevail.
2. The Contract is executed by Party B being a natural person and in the name of such natural person when executing this Contract, who is the company established and registered later as the legal representative or shareholder thereof. Party B shall guarantee that the registered company under this Contract completes the industrial and commercial registration formalities within three months after the execution of this Contract, and shall renew the signing of the Lease Contract between Party B and our party in the name of the company.
3. Change of the contract party. Such change shall be made free of charge after being confirmed by both parties hereto subject to the confirmation of both parties hereto for the performance of contractual rights and obligations. The costs for applying for and obtaining relevant property information arising from the change of the lessee shall be paid to the property owner, and Party B shall bear deposit (if no examination is necessary, no deposit is required). The lessee after the change shall succeed to all rights and obligations of the lessee before the change, and if the new entity fails to assume the rights and obligations under the lease contract, the previous entity shall assume joint and several liabilities for the terms of the lease contract.
4. Party B shall not remove or alter all the pipelines and ventilation ducts in the kitchen and toilet in the park, and the gas pipelines in the kitchen shall not be sealed. If Party B violates the above provisions and causes damage to the waterproof layer caused by Party B’s removal or alteration of the above walls and floors and any loss to Party A or any third party, Party B shall bear full responsibilities and make compensation. The improvements within the leased Unit shall be in compliance with the relevant provisions including decoration and reconstruction stipulated in Article 6 of this Contract.
5. In order to unify the public image of the entire floor, Party B shall not change the color of the exterior walls, doors and windows and other public facilities without the consent of Party A.
[The remainder of this page is intentionally left blank.]
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| 北京市西城区西什库大街 31 号院九思文创园 |
Schedule IV – Floor Plan of Leased Units
Floor Plan:
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| 北京市西城区西什库大街 31 号院九思文创园 |
Schedule V – Copy of Party A’s Business License and Power of Attorney by Legal Representative
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| 北京市西城区西什库大街 31 号院九思文创园 |
Schedule VI – Copy of Party B’s Business License and Power of Attorney of Legal Representative
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| 北京市西城区西什库大街 31 号院九思文创园 |
Schedule VII – Delivery List of Leased Unit
| The Equipment |
| Air Conditioning |
| Lamps |
| Smoke |
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| Room No. |
| (table) |
| (lamps) |
| detectors (s) |
| Sprinklers (s) |
| Water meter (s) |
| No. |
| Table |
| Lamps |
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The said quantity shall be subject to on-site check by both Parties.
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| 北京市西城区西什库大街 31 号院九思文创园 |
Schedule VIII – Business License of Leased Unit Property Owner
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| 北京市西城区西什库大街 31 号院九思文创园 |
Schedule IX –Building Ownership Certificate of Leased Unit (Property Ownership Certificate of Jingyi)
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| 北京市西城区西什库大街 31 号院九思文创园 |
Schedule X – Document of Property Owner’s Consent to Sub-lease
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EXHIBIT 10.12
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this “Agreement”), dated as of January 14, 2021, is made by and between YUBO INTERNATIONAL BIOTECH LIMITED (f/k/a Magna-Lab, Inc.), a New York corporation (the “Company”), and the undersigned, who is either a director or an officer of the Company (the “Indemnitee”), with this Agreement to be deemed effective as of the date that the Indemnitee first became a director or an officer of the Company.
RECITALS
A. The Company is aware that competent and experienced persons are reluctant to serve as directors or officers of corporations unless they are protected by comprehensive liability insurance and indemnification, due to the exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure frequently bears no reasonable relationship to the compensation of such directors and officers;
B. The Board of Directors of the Company (the “Board”) has concluded that, to retain and attract talented and experienced individuals to serve as officers or directors of the Company, it is necessary for the Company contractually to indemnify certain of such persons and to assume for itself maximum liability for expenses and damages in connection with claims against such persons in connection with their service to the Company;
C. Section 772 of the New York Business Corporation Law, under which the Company is organized (“Section 772”), empowers the Company to indemnify by agreement its present and former officers and directors and persons who serve, at the request of the Company, as directors or officers of other corporations, partnerships, joint ventures, trusts, or other enterprises and expressly provides that the indemnification provided by Section 772 is not exclusive; and
D. The Company desires and has requested the Indemnitee to serve or continue to serve as a director or an officer of the Company free from undue concern for claims for damages arising out of or related to such services to the Company.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions
1.1 Agent. For the purposes of this Agreement, “agent” of the Company means any person who is or was a director or an officer of the Company or a subsidiary of the Company; or is or was serving at the request of the Company or a subsidiary of the Company as a director or an officer of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise or an affiliate of the Company. The term “enterprise” includes any employee benefit plan of the Company, its subsidiaries, affiliates, and predecessor corporations.
1.2 Company. For purposes of this Agreement, the “Company” includes, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger that, if its separate existence had continued, would have had power and authority to indemnify its directors or officers so that any person who is or was a director or an officer of such constituent corporation, or is or was serving at the request of such constituent corporation as a director or an officer of another corporation, partnership, joint venture, trust, or other enterprise, shall stand in the same position under this Agreement with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.
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1.3 Expenses. For the purposes of this Agreement, “expenses” includes all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements and other out-of-pocket costs) actually and reasonably incurred by the Indemnitee in connection with the investigation, defense, or appeal of a proceeding or establishing or enforcing a right to indemnification or advancement of expenses under this Agreement, Section 772 or otherwise; provided, however, that expenses shall not include any judgments, fines, ERISA excise taxes or penalties, or amounts paid in settlement of a proceeding.
1.4 Fines. For purposes of this Agreement, references to “fines” includes any excise taxes assessed on a person with respect to any employee benefit plan.
1.5 Liabilities. For purposes of this Agreement, “liabilities” means judgments, fines, ERISA execute taxes or penalties, and amounts paid in settlement in connection with a proceeding.
1.6 Other Enterprises. For purposes of this Agreement, “other enterprises” includes employee benefit plans.
1.7 Proceeding. For the purposes of this Agreement, “proceeding” means any threatened, pending, or completed action, suit, or other proceeding, whether civil, criminal, administrative, or investigative.
1.8 Subsidiary. For purposes of this Agreement, “subsidiary” means any corporation of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company, by the Company and one or more of its subsidiaries, or by one or more of the Company’s subsidiaries.
1.9 Serving at the Request of the Company. For purposes of this Agreement, “serving at the request of the Company” includes any service as a director or an officer of the Company that imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.
2. Agreement to Serve. The Indemnitee agrees to serve and/or continue to serve as an agent of the Company, at the will of the Company (or under separate agreement, if such agreement exists), in the capacity the Indemnitee currently serves as an agent of the Company, faithfully and to the best of his ability, so long as he is duly appointed or elected and qualified in accordance with the applicable provisions of the charter documents of the Company or any subsidiary of the Company; provided, however, that the Indemnitee may at any time and for any reason resign from such position (subject to any contractual obligation that the Indemnitee may have assumed apart from this Agreement), and the Company and any subsidiary shall have no obligation under this Agreement to continue the Indemnitee in any such position.
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3. Directors’ and Officers’ Insurance. The Company shall, to the extent that the Board determines it to be economically reasonable, maintain a policy of directors’ and officers’ liability insurance (“D&O Insurance”), on such terms and conditions as may be approved by the Board.
4. Mandatory Indemnification. Subject to Section 9 below, the Company shall indemnify the Indemnitee:
4.1 Third-Party Actions. If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding (except an action by or in the right of the Company) by reason of the fact that the Indemnitee is or was an agent of the Company, or by reason of anything done or not done by the Indemnitee in any such capacity, against any and all expenses and liabilities of any type whatsoever incurred by the Indemnitee in connection with such proceeding if (a) the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful, or (b) the Indemnitee, if a director or an officer of the Company, did not act or fail to act in a manner that constituted a breach of the Indemnitee’s fiduciary duties as a director or an officer or such Indemnitee’s breach of those duties did not involve intentional misconduct, fraud, or a knowing violation of law; and
4.2 Derivative Actions. If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding by or in the right of the Company to procure a judgment in its favor by reason of the fact that the Indemnitee is or was an agent of the Company, or by reason of anything done or not done by the Indemnitee in any such capacity, against any and all expenses and liabilities incurred by the Indemnitee in connection with such proceeding if (a) the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company, or (b) the Indemnitee, if a director or an officer of the Company, did not act or fail to act in a manner that constituted a breach of the Indemnitee’s fiduciary duties as a director or an officer or such Indemnitee breach of those duties involved intentional misconduct, fraud, or a knowing violation of law; except that no indemnification under this subsection shall be made in respect of any claim, issue, or matter as to which the Indemnitee shall have been adjudged by a court of competent jurisdiction, after the exhaustion of all appeals therefrom, to be liable to the Company or for amounts paid in settlement to the Company, unless and only to the extent that the court in which such proceeding was brought or another court of competent jurisdiction determines upon application that, in view of all the circumstances of the case, the Indemnitee is fairly and reasonable entitled to indemnity for such expenses as the court deems proper; and
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4.3 Exception for Amounts Covered by Insurance. Notwithstanding the foregoing, the Company shall not be obligated to indemnify the Indemnitee for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the extent such have been paid to the Indemnitee by D&O Insurance.
5. Partial Indemnification and Contribution.
5.1 Partial Indemnification. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any expenses or liabilities of any type whatsoever incurred by the Indemnitee in connection with a proceeding but is not entitled, however, to indemnification for all of the total amount thereof, then the Company shall nevertheless indemnify the Indemnitee for such total amount except as to the portion thereof to which the Indemnitee is not entitled to indemnification.
5.2 Contribution. If the Indemnitee is not entitled to the indemnification provided in Section 4 for any reason other than the statutory limitations set forth in the New York Business Corporation Law, then in respect of proceeding in which the Company is jointly liable with the Indemnitee (or would be if joined in such proceeding), the Company shall contribute to the amount of expenses and liabilities paid or payable by the Indemnitee in such proportion as is appropriate to reflect (a) the relative benefits received by the Company on the one hand and the Indemnitee on the other hand from the transaction from which such proceeding arose and (b) the relative fault of the Company on the one hand and of the Indemnitee on the other hand in connection with the events that resulted in such expenses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Indemnitee on the other hand shall be determined by reference to, among other things, the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent the circumstances resulting in such expenses, judgments, fines, or settlement amounts. The Company agrees that it would not be just and equitable if contribution pursuant to this Section 5 were determined by pro rata allocation or any other method of allocation which does not take account of the foregoing equitable considerations.
6. Mandatory Advancement of Expenses.
6.1 Advancement. Subject to Section 9 below, the Company shall pay as incurred and in advance of the final disposition of a civil or criminal proceeding all expenses incurred by the Indemnitee in connection with defending any such proceeding to which the Indemnitee is a party or is threatened to be made a party by reason of the fact that the Indemnitee is or was an agent of the Company or by reason of anything done or not done by the Indemnitee in any such capacity. The Indemnitee hereby undertakes to promptly repay such amounts advanced only if, and to the extent that, it shall ultimately by determined that the Indemnitee is not entitled to be indemnified by the Company under the provisions of this Agreement, the Articles of Incorporation or Bylaws of the Company, the New York Business Corporation Law, or otherwise. The advances to be made hereunder shall be paid by the Company to the Indemnitee within thirty (30) days following delivery of a written request therefor by the Indemnitee to the Company.
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6.2 Exception. Notwithstanding the foregoing provisions of this Section 6, the Company shall not be obligated to advance any expenses to the Indemnitee arising from a lawsuit filed directly by the Company against the Indemnitee if an absolute majority of the members of the Board reasonably determines in good faith, within thirty (30) days of the Indemnitee’s request to be advanced expenses, that the facts known to them at the time such determination is made demonstrate clearly and convincingly that the Indemnitee acted in bad faith. If such a determination is made, the Indemnitee may have such decision reviewed in the manner set forth in Section 8.5 hereof, with all references therein to “indemnification” being deemed to refer to “advancement of expenses,” and the burden of proof shall be on the Company to demonstrate clearly and convincingly that, based on the facts known at the time, the Indemnitee acted in bad faith. The Company may not avail itself of this Section 6.2 as to a given lawsuit if, at any time after the occurrence of the activities or omissions that are the primary focus of the lawsuit, the Company has undergone a change in control. For this purpose, a “change in control” shall mean a given person of group of affiliated persons or groups increasing their beneficial ownership interest in the Company by at least twenty (20) percentage points without advance Board approval.
7. Notice and Other Indemnification Procedures.
7.1 Notification. Promptly after receipt by the Indemnitee of notice of the commencement of or the threat of commencement of any proceeding, the Indemnitee shall, if the Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company of the commencement or threat of commencement thereof.
7.2 Insurance. If, at the time of the receipt of a notice of the commencement of a proceeding pursuant to Section 7.1 hereof, the Company has D&O Insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such D&O Insurance policies.
7.3 Defense. In the event the Company shall be obligated to advance the expenses for any proceeding against the Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by the Indemnitee (which approval shall not be unreasonably withheld), upon the delivery to the Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by the Indemnitee and the retention of such counsel by the Company, the Company will not be liable to the Indemnitee under this Agreement for any fees of counsel subsequently incurred by the Indemnitee with respect to the same proceeding, provided that (a) the Indemnitee shall have the right to employ the Indemnitee’s own counsel in any such proceeding at the Indemnitee’s expense; (b) the Indemnitee shall have the right to employ the Indemnitee’s own counsel in connection with any such proceeding, at the expense of the Company, if such counsel serves in a review, observer, advice, and counseling capacity and does not otherwise materially control or participate in the defense of such proceeding; and (c) if (i) the employment of counsel by the Indemnitee has been previously authorized by the Company, (ii) the Indemnitee shall have reasonably concluded that there may be conflict of interest between the Company and the Indemnitee in the conduct of any such defense, or (iii) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, then the fees and expenses of the Indemnitee’s counsel shall be at the expense of the Company.
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8. Determination of Right to Indemnification.
8.1 Success on Merits. To the extent the Indemnitee has been successful on the merits or otherwise in defense of any proceeding referred to in Section 4.1 or 4.2 of this Agreement or in the defense of any claim, issue, or matter described therein, the Company shall indemnify the Indemnitee against expenses actually and reasonably incurred by the Indemnitee in connection with the investigation, defense, or appeal of such proceeding, or such claim, issue, or matter, as the case may be.
8.2 Proof by Company. In the event that Section 8.1 is inapplicable, or does not apply to the entire proceeding, the Company shall nonetheless indemnify the Indemnitee unless the Company shall prove by clear and convincing evidence to a forum listed in Section 8.4 below that the Indemnitee has not met the applicable standard of conduct required to entitle the Indemnitee to such indemnification.
8.3 Termination of Proceeding. The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere its equivalent, does not, of itself, create a presumption that a person (a) did not act in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Company, (b) with respect to any criminal action or proceeding, that the person had reasonable cause to believe that the person’s conduct was unlawful, or (c) the person’s act or failure to act constituted a breach of the person’s fiduciary duties as a director or an officer or the person’s breach of those duties involved intentional misconduct, fraud, or a knowing violation of law.
8.4 Applicable Forums. The Indemnitee shall be entitled to select the forum in which the validity of the Company’s claim under Section 8.2 hereof that the Indemnitee is not entitled to indemnification will be heard from among the following, except that the Indemnitee can select a forum consisting of the stockholders of the Company only with the approval of the Company and, if the Indemnitee is a director or an officer at the time of such determination, the determination shall be made in accordance with (a), (b), (c) or (d) below at the election of the Company:
(a) A majority vote of the directors who are not parties to the proceeding for which indemnification is being sought even though less than a quorum;
(b) By a committee of directors who are not parties to the proceeding for which indemnification is being sought designated by a majority vote of such directors, even though less than a quorum;
(c) If there are no directors who are not parties to the proceeding for which indemnification is sought, or if such directors so direct, by independent legal counsel in a written opinion;
(d) The stockholders of the Company;
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(e) A panel of three arbitrators, one of whom is selected by the Company, another of whom is selected by the Indemnitee and the last of whom is selected by the first two arbitrators so selected; or
(f) A court having jurisdiction of subject matter and the parties.
8.5 Submission. As soon as practicable, and in no event later than thirty (30) days after the forum has been selected pursuant to Section 8.4 above, the Company shall, at its own expense, submit to the selected forum its claim that the Indemnitee is not entitled to indemnification, and the Company shall act in the utmost good faith to assure the Indemnitee a complete opportunity to defend against such claim.
8.6 Appeals. If the forum selected in accordance with Section 8.4 hereof is not a court, then after the final decision of such forum is rendered, the Company or the Indemnitee shall have the right to apply to a court of New York, the court in which the proceeding giving rise to the Indemnitee’s claim for indemnification is or was pending, or any other court of competent jurisdiction, for the purpose of appealing the decision of such forum, provided that such right is executed within sixty (60) days after the final decision of such forum is rendered. If the forum selected in accordance with Section 8.4 hereof is a court, then the rights of the Company or the Indemnitee to appeal any decision of such court shall be governed by the applicable laws and rules governing appeals of the decision of such court.
8.7 Expenses for Interpretation. Notwithstanding any other provision in this Agreement to the contrary, the Company shall indemnify the Indemnitee against all expenses incurred by the Indemnitee in connection with any hearing or proceeding under this Section 8 involving the Indemnitee and against all expenses incurred by the Indemnitee in connection with any other proceeding between the Company and the Indemnitee involving the interpretation or enforcement of the rights of the Indemnitee under this Agreement unless a court of competent jurisdiction finds that each of the material claims and/or defenses of the Indemnitee in any such proceeding was frivolous or not made in good faith.
9. Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement in the following circumstances:
9.1 Claims Initiated by Indemnitee. To indemnify or advance expenses to the Indemnitee with respect to proceedings or claims initiated or brought voluntarily by the Indemnitee and not by way of defense, except with respect to proceedings specifically authorized by the Board or brought to establish or enforce a right to indemnification and/or advancement of expenses arising under this Agreement, the charter documents of the Company or any subsidiary, or any statute or law or otherwise, but such indemnification or advancement of expenses may be provided by the Company in specific cases if the Board finds it to be appropriate; or
9.2 Unauthorized Settlements. To indemnify the Indemnitee hereunder for any amounts paid in settlement of a proceeding unless the Company consents in advance in writing to such settlement, which consent shall not be unreasonably withheld; or
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9.3 Securities Law Actions. To indemnify the Indemnitee on account of any suit in which judgment is rendered against the Indemnitee for an accounting of profits made from the purchase or sale by the Indemnitee of securities of the company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state, or local statutory law; or
9.4 Unlawful Indemnification. To indemnify the Indemnitee if a final decision by a court having jurisdiction in the mater shall determine that such indemnification is not lawful. In this respect, the Company and the Indemnitee have been advised that the Securities and Exchange Commission takes the position that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication.
10. Non-Exclusivity. The provisions for indemnification and advancement of expenses set forth in this Agreement shall not be deemed exclusive of any other rights that the Indemnitee may have under any provision of law, the Company’s Certificate of Incorporation or Bylaws, the vote of the Company’s stockholders or disinterested directors, other agreements, or otherwise, both as to action in the Indemnitee’s official capacity and to action in another capacity while occupying the Indemnitee’s position as an agent of the Company, and the Indemnitee’s rights hereunder shall continue after the Indemnitee has ceased acting as an agent of the Company and shall inure to the benefit of the heirs, executors, and administrators of the Indemnitee.
11. General Provisions.
11.1 Interpretation of Agreement. It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification and advancement of expenses to the Indemnitee to the fullest extent now or hereafter permitted by law, except as expressly limited herein.
11.2 Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal, or unenforceable for any reason whatsoever, then: (a) the validity, legality, and enforceability of the remaining provisions of this Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal, or unenforceable that are not themselves invalid, illegal, or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal, or unenforceable, that are not themselves invalid, illegal, or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal, or unenforceable and to give effect to Section 11.1 hereof.
11.3 Modification and Waiver. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver.
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11.4 Subrogation. In the event of full payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all documents required and shall do all acts that may be necessary or desirable to secure such rights and to enable the Company effectively to bring suit to enforce such rights.
11.5 Counterparts. This Agreement may be executed in one or more counterparts, which shall together constitute one agreement.
11.6 Successors and Assigns. The terms of this Agreement shall bind, and shall inure to the benefit of, the successors and assigns of the parties hereto. The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or an officer and shall inure to the benefit of the heirs, executors, and administrators of such a person.
11.7 Notice. All notices, requests, demands, and other communications under this Agreement shall be in writing and shall be deemed duly given if (a) delivered by hand and receipted for by the party addressee, or (b) mailed by certified or registered mail, with postage prepaid, on the third business day after the mailing date. Addresses for notice to either party are as shown on the signature page of this Agreement or as subsequently modified by written notice.
11.8 Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the state of New York, as applied to contracts between New York residents entered into and to be performed entirely within New York.
11.9 Consent to Jurisdiction. The Company and the Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the state of New York for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement.
11.10 Attorneys’ Fees. In the event Indemnitee is required to bring any action to enforce rights under this Agreement (including, without limitation, the expenses of any proceeding described in Section 4), the Indemnitee shall be entitled to all reasonable fees and expenses in bringing and pursuing such action, unless a court of competent jurisdiction finds each of the material claims of the Indemnitee in any such action was frivolous and not made in good faith.
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IN WITNESS WHEREOF, the parties hereto have entered into this Indemnification Agreement effective as of the date first written above.
| YUBO INTERNATIONAL BIOTECH LIMITED |
| INDEMNITEE | ||
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| By: | /s/ Jun Wang |
| /s/ Jun Wang |
|
| Name: | Jun Wang |
| Jun Wang |
|
| Title: | Chief Executive Officer and President |
|
| |
[Signature Page to Indemnification Agreement]
EXHIBIT 10.13
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this “Agreement”), dated as of January 14, 2021, is made by and between YUBO INTERNATIONAL BIOTECH LIMITED (f/k/a Magna-Lab, Inc.), a New York corporation (the “Company”), and the undersigned, who is either a director or an officer of the Company (the “Indemnitee”), with this Agreement to be deemed effective as of the date that the Indemnitee first became a director or an officer of the Company.
RECITALS
A. The Company is aware that competent and experienced persons are reluctant to serve as directors or officers of corporations unless they are protected by comprehensive liability insurance and indemnification, due to the exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure frequently bears no reasonable relationship to the compensation of such directors and officers;
B. The Board of Directors of the Company (the “Board”) has concluded that, to retain and attract talented and experienced individuals to serve as officers or directors of the Company, it is necessary for the Company contractually to indemnify certain of such persons and to assume for itself maximum liability for expenses and damages in connection with claims against such persons in connection with their service to the Company;
C. Section 772 of the New York Business Corporation Law, under which the Company is organized (“Section 772”), empowers the Company to indemnify by agreement its present and former officers and directors and persons who serve, at the request of the Company, as directors or officers of other corporations, partnerships, joint ventures, trusts, or other enterprises and expressly provides that the indemnification provided by Section 772 is not exclusive; and
D. The Company desires and has requested the Indemnitee to serve or continue to serve as a director or an officer of the Company free from undue concern for claims for damages arising out of or related to such services to the Company.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions
1.1 Agent. For the purposes of this Agreement, “agent” of the Company means any person who is or was a director or an officer of the Company or a subsidiary of the Company; or is or was serving at the request of the Company or a subsidiary of the Company as a director or an officer of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise or an affiliate of the Company. The term “enterprise” includes any employee benefit plan of the Company, its subsidiaries, affiliates, and predecessor corporations.
1.2 Company. For purposes of this Agreement, the “Company” includes, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger that, if its separate existence had continued, would have had power and authority to indemnify its directors or officers so that any person who is or was a director or an officer of such constituent corporation, or is or was serving at the request of such constituent corporation as a director or an officer of another corporation, partnership, joint venture, trust, or other enterprise, shall stand in the same position under this Agreement with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.
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1.3 Expenses. For the purposes of this Agreement, “expenses” includes all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements and other out-of-pocket costs) actually and reasonably incurred by the Indemnitee in connection with the investigation, defense, or appeal of a proceeding or establishing or enforcing a right to indemnification or advancement of expenses under this Agreement, Section 772 or otherwise; provided, however, that expenses shall not include any judgments, fines, ERISA excise taxes or penalties, or amounts paid in settlement of a proceeding.
1.4 Fines. For purposes of this Agreement, references to “fines” includes any excise taxes assessed on a person with respect to any employee benefit plan.
1.5 Liabilities. For purposes of this Agreement, “liabilities” means judgments, fines, ERISA execute taxes or penalties, and amounts paid in settlement in connection with a proceeding.
1.6 Other Enterprises. For purposes of this Agreement, “other enterprises” includes employee benefit plans.
1.7 Proceeding. For the purposes of this Agreement, “proceeding” means any threatened, pending, or completed action, suit, or other proceeding, whether civil, criminal, administrative, or investigative.
1.8 Subsidiary. For purposes of this Agreement, “subsidiary” means any corporation of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company, by the Company and one or more of its subsidiaries, or by one or more of the Company’s subsidiaries.
1.9 Serving at the Request of the Company. For purposes of this Agreement, “serving at the request of the Company” includes any service as a director or an officer of the Company that imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.
2. Agreement to Serve. The Indemnitee agrees to serve and/or continue to serve as an agent of the Company, at the will of the Company (or under separate agreement, if such agreement exists), in the capacity the Indemnitee currently serves as an agent of the Company, faithfully and to the best of his ability, so long as he is duly appointed or elected and qualified in accordance with the applicable provisions of the charter documents of the Company or any subsidiary of the Company; provided, however, that the Indemnitee may at any time and for any reason resign from such position (subject to any contractual obligation that the Indemnitee may have assumed apart from this Agreement), and the Company and any subsidiary shall have no obligation under this Agreement to continue the Indemnitee in any such position.
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3. Directors’ and Officers’ Insurance. The Company shall, to the extent that the Board determines it to be economically reasonable, maintain a policy of directors’ and officers’ liability insurance (“D&O Insurance”), on such terms and conditions as may be approved by the Board.
4. Mandatory Indemnification. Subject to Section 9 below, the Company shall indemnify the Indemnitee:
4.1 Third-Party Actions. If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding (except an action by or in the right of the Company) by reason of the fact that the Indemnitee is or was an agent of the Company, or by reason of anything done or not done by the Indemnitee in any such capacity, against any and all expenses and liabilities of any type whatsoever incurred by the Indemnitee in connection with such proceeding if (a) the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful, or (b) the Indemnitee, if a director or an officer of the Company, did not act or fail to act in a manner that constituted a breach of the Indemnitee’s fiduciary duties as a director or an officer or such Indemnitee’s breach of those duties did not involve intentional misconduct, fraud, or a knowing violation of law; and
4.2 Derivative Actions. If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding by or in the right of the Company to procure a judgment in its favor by reason of the fact that the Indemnitee is or was an agent of the Company, or by reason of anything done or not done by the Indemnitee in any such capacity, against any and all expenses and liabilities incurred by the Indemnitee in connection with such proceeding if (a) the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company, or (b) the Indemnitee, if a director or an officer of the Company, did not act or fail to act in a manner that constituted a breach of the Indemnitee’s fiduciary duties as a director or an officer or such Indemnitee breach of those duties involved intentional misconduct, fraud, or a knowing violation of law; except that no indemnification under this subsection shall be made in respect of any claim, issue, or matter as to which the Indemnitee shall have been adjudged by a court of competent jurisdiction, after the exhaustion of all appeals therefrom, to be liable to the Company or for amounts paid in settlement to the Company, unless and only to the extent that the court in which such proceeding was brought or another court of competent jurisdiction determines upon application that, in view of all the circumstances of the case, the Indemnitee is fairly and reasonable entitled to indemnity for such expenses as the court deems proper; and
4.3 Exception for Amounts Covered by Insurance. Notwithstanding the foregoing, the Company shall not be obligated to indemnify the Indemnitee for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the extent such have been paid to the Indemnitee by D&O Insurance.
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5. Partial Indemnification and Contribution.
5.1 Partial Indemnification. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any expenses or liabilities of any type whatsoever incurred by the Indemnitee in connection with a proceeding but is not entitled, however, to indemnification for all of the total amount thereof, then the Company shall nevertheless indemnify the Indemnitee for such total amount except as to the portion thereof to which the Indemnitee is not entitled to indemnification.
5.2 Contribution. If the Indemnitee is not entitled to the indemnification provided in Section 4 for any reason other than the statutory limitations set forth in the New York Business Corporation Law, then in respect of proceeding in which the Company is jointly liable with the Indemnitee (or would be if joined in such proceeding), the Company shall contribute to the amount of expenses and liabilities paid or payable by the Indemnitee in such proportion as is appropriate to reflect (a) the relative benefits received by the Company on the one hand and the Indemnitee on the other hand from the transaction from which such proceeding arose and (b) the relative fault of the Company on the one hand and of the Indemnitee on the other hand in connection with the events that resulted in such expenses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Indemnitee on the other hand shall be determined by reference to, among other things, the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent the circumstances resulting in such expenses, judgments, fines, or settlement amounts. The Company agrees that it would not be just and equitable if contribution pursuant to this Section 5 were determined by pro rata allocation or any other method of allocation which does not take account of the foregoing equitable considerations.
6. Mandatory Advancement of Expenses.
6.1 Advancement. Subject to Section 9 below, the Company shall pay as incurred and in advance of the final disposition of a civil or criminal proceeding all expenses incurred by the Indemnitee in connection with defending any such proceeding to which the Indemnitee is a party or is threatened to be made a party by reason of the fact that the Indemnitee is or was an agent of the Company or by reason of anything done or not done by the Indemnitee in any such capacity. The Indemnitee hereby undertakes to promptly repay such amounts advanced only if, and to the extent that, it shall ultimately by determined that the Indemnitee is not entitled to be indemnified by the Company under the provisions of this Agreement, the Articles of Incorporation or Bylaws of the Company, the New York Business Corporation Law, or otherwise. The advances to be made hereunder shall be paid by the Company to the Indemnitee within thirty (30) days following delivery of a written request therefor by the Indemnitee to the Company.
6.2 Exception. Notwithstanding the foregoing provisions of this Section 6, the Company shall not be obligated to advance any expenses to the Indemnitee arising from a lawsuit filed directly by the Company against the Indemnitee if an absolute majority of the members of the Board reasonably determines in good faith, within thirty (30) days of the Indemnitee’s request to be advanced expenses, that the facts known to them at the time such determination is made demonstrate clearly and convincingly that the Indemnitee acted in bad faith. If such a determination is made, the Indemnitee may have such decision reviewed in the manner set forth in Section 8.5 hereof, with all references therein to “indemnification” being deemed to refer to “advancement of expenses,” and the burden of proof shall be on the Company to demonstrate clearly and convincingly that, based on the facts known at the time, the Indemnitee acted in bad faith. The Company may not avail itself of this Section 6.2 as to a given lawsuit if, at any time after the occurrence of the activities or omissions that are the primary focus of the lawsuit, the Company has undergone a change in control. For this purpose, a “change in control” shall mean a given person of group of affiliated persons or groups increasing their beneficial ownership interest in the Company by at least twenty (20) percentage points without advance Board approval.
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7. Notice and Other Indemnification Procedures.
7.1 Notification. Promptly after receipt by the Indemnitee of notice of the commencement of or the threat of commencement of any proceeding, the Indemnitee shall, if the Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company of the commencement or threat of commencement thereof.
7.2 Insurance. If, at the time of the receipt of a notice of the commencement of a proceeding pursuant to Section 7.1 hereof, the Company has D&O Insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such D&O Insurance policies.
7.3 Defense. In the event the Company shall be obligated to advance the expenses for any proceeding against the Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by the Indemnitee (which approval shall not be unreasonably withheld), upon the delivery to the Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by the Indemnitee and the retention of such counsel by the Company, the Company will not be liable to the Indemnitee under this Agreement for any fees of counsel subsequently incurred by the Indemnitee with respect to the same proceeding, provided that (a) the Indemnitee shall have the right to employ the Indemnitee’s own counsel in any such proceeding at the Indemnitee’s expense; (b) the Indemnitee shall have the right to employ the Indemnitee’s own counsel in connection with any such proceeding, at the expense of the Company, if such counsel serves in a review, observer, advice, and counseling capacity and does not otherwise materially control or participate in the defense of such proceeding; and (c) if (i) the employment of counsel by the Indemnitee has been previously authorized by the Company, (ii) the Indemnitee shall have reasonably concluded that there may be conflict of interest between the Company and the Indemnitee in the conduct of any such defense, or (iii) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, then the fees and expenses of the Indemnitee’s counsel shall be at the expense of the Company.
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8. Determination of Right to Indemnification.
8.1 Success on Merits. To the extent the Indemnitee has been successful on the merits or otherwise in defense of any proceeding referred to in Section 4.1 or 4.2 of this Agreement or in the defense of any claim, issue, or matter described therein, the Company shall indemnify the Indemnitee against expenses actually and reasonably incurred by the Indemnitee in connection with the investigation, defense, or appeal of such proceeding, or such claim, issue, or matter, as the case may be.
8.2 Proof by Company. In the event that Section 8.1 is inapplicable, or does not apply to the entire proceeding, the Company shall nonetheless indemnify the Indemnitee unless the Company shall prove by clear and convincing evidence to a forum listed in Section 8.4 below that the Indemnitee has not met the applicable standard of conduct required to entitle the Indemnitee to such indemnification.
8.3 Termination of Proceeding. The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere its equivalent, does not, of itself, create a presumption that a person (a) did not act in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Company, (b) with respect to any criminal action or proceeding, that the person had reasonable cause to believe that the person’s conduct was unlawful, or (c) the person’s act or failure to act constituted a breach of the person’s fiduciary duties as a director or an officer or the person’s breach of those duties involved intentional misconduct, fraud, or a knowing violation of law.
8.4 Applicable Forums. The Indemnitee shall be entitled to select the forum in which the validity of the Company’s claim under Section 8.2 hereof that the Indemnitee is not entitled to indemnification will be heard from among the following, except that the Indemnitee can select a forum consisting of the stockholders of the Company only with the approval of the Company and, if the Indemnitee is a director or an officer at the time of such determination, the determination shall be made in accordance with (a), (b), (c) or (d) below at the election of the Company:
(a) A majority vote of the directors who are not parties to the proceeding for which indemnification is being sought even though less than a quorum;
(b) By a committee of directors who are not parties to the proceeding for which indemnification is being sought designated by a majority vote of such directors, even though less than a quorum;
(c) If there are no directors who are not parties to the proceeding for which indemnification is sought, or if such directors so direct, by independent legal counsel in a written opinion;
(d) The stockholders of the Company;
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(e) A panel of three arbitrators, one of whom is selected by the Company, another of whom is selected by the Indemnitee and the last of whom is selected by the first two arbitrators so selected; or
(f) A court having jurisdiction of subject matter and the parties.
8.5 Submission. As soon as practicable, and in no event later than thirty (30) days after the forum has been selected pursuant to Section 8.4 above, the Company shall, at its own expense, submit to the selected forum its claim that the Indemnitee is not entitled to indemnification, and the Company shall act in the utmost good faith to assure the Indemnitee a complete opportunity to defend against such claim.
8.6 Appeals. If the forum selected in accordance with Section 8.4 hereof is not a court, then after the final decision of such forum is rendered, the Company or the Indemnitee shall have the right to apply to a court of New York, the court in which the proceeding giving rise to the Indemnitee’s claim for indemnification is or was pending, or any other court of competent jurisdiction, for the purpose of appealing the decision of such forum, provided that such right is executed within sixty (60) days after the final decision of such forum is rendered. If the forum selected in accordance with Section 8.4 hereof is a court, then the rights of the Company or the Indemnitee to appeal any decision of such court shall be governed by the applicable laws and rules governing appeals of the decision of such court.
8.7 Expenses for Interpretation. Notwithstanding any other provision in this Agreement to the contrary, the Company shall indemnify the Indemnitee against all expenses incurred by the Indemnitee in connection with any hearing or proceeding under this Section 8 involving the Indemnitee and against all expenses incurred by the Indemnitee in connection with any other proceeding between the Company and the Indemnitee involving the interpretation or enforcement of the rights of the Indemnitee under this Agreement unless a court of competent jurisdiction finds that each of the material claims and/or defenses of the Indemnitee in any such proceeding was frivolous or not made in good faith.
9. Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement in the following circumstances:
9.1 Claims Initiated by Indemnitee. To indemnify or advance expenses to the Indemnitee with respect to proceedings or claims initiated or brought voluntarily by the Indemnitee and not by way of defense, except with respect to proceedings specifically authorized by the Board or brought to establish or enforce a right to indemnification and/or advancement of expenses arising under this Agreement, the charter documents of the Company or any subsidiary, or any statute or law or otherwise, but such indemnification or advancement of expenses may be provided by the Company in specific cases if the Board finds it to be appropriate; or
9.2 Unauthorized Settlements. To indemnify the Indemnitee hereunder for any amounts paid in settlement of a proceeding unless the Company consents in advance in writing to such settlement, which consent shall not be unreasonably withheld; or
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9.3 Securities Law Actions. To indemnify the Indemnitee on account of any suit in which judgment is rendered against the Indemnitee for an accounting of profits made from the purchase or sale by the Indemnitee of securities of the company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state, or local statutory law; or
9.4 Unlawful Indemnification. To indemnify the Indemnitee if a final decision by a court having jurisdiction in the mater shall determine that such indemnification is not lawful. In this respect, the Company and the Indemnitee have been advised that the Securities and Exchange Commission takes the position that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication.
10. Non-Exclusivity. The provisions for indemnification and advancement of expenses set forth in this Agreement shall not be deemed exclusive of any other rights that the Indemnitee may have under any provision of law, the Company’s Certificate of Incorporation or Bylaws, the vote of the Company’s stockholders or disinterested directors, other agreements, or otherwise, both as to action in the Indemnitee’s official capacity and to action in another capacity while occupying the Indemnitee’s position as an agent of the Company, and the Indemnitee’s rights hereunder shall continue after the Indemnitee has ceased acting as an agent of the Company and shall inure to the benefit of the heirs, executors, and administrators of the Indemnitee.
11. General Provisions.
11.1 Interpretation of Agreement. It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification and advancement of expenses to the Indemnitee to the fullest extent now or hereafter permitted by law, except as expressly limited herein.
11.2 Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal, or unenforceable for any reason whatsoever, then: (a) the validity, legality, and enforceability of the remaining provisions of this Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal, or unenforceable that are not themselves invalid, illegal, or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal, or unenforceable, that are not themselves invalid, illegal, or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal, or unenforceable and to give effect to Section 11.1 hereof.
11.3 Modification and Waiver. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver.
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11.4 Subrogation. In the event of full payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all documents required and shall do all acts that may be necessary or desirable to secure such rights and to enable the Company effectively to bring suit to enforce such rights.
11.5 Counterparts. This Agreement may be executed in one or more counterparts, which shall together constitute one agreement.
11.6 Successors and Assigns. The terms of this Agreement shall bind, and shall inure to the benefit of, the successors and assigns of the parties hereto. The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or an officer and shall inure to the benefit of the heirs, executors, and administrators of such a person.
11.7 Notice. All notices, requests, demands, and other communications under this Agreement shall be in writing and shall be deemed duly given if (a) delivered by hand and receipted for by the party addressee, or (b) mailed by certified or registered mail, with postage prepaid, on the third business day after the mailing date. Addresses for notice to either party are as shown on the signature page of this Agreement or as subsequently modified by written notice.
11.8 Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the state of New York, as applied to contracts between New York residents entered into and to be performed entirely within New York.
11.9 Consent to Jurisdiction. The Company and the Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the state of New York for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement.
11.10 Attorneys’ Fees. In the event Indemnitee is required to bring any action to enforce rights under this Agreement (including, without limitation, the expenses of any proceeding described in Section 4), the Indemnitee shall be entitled to all reasonable fees and expenses in bringing and pursuing such action, unless a court of competent jurisdiction finds each of the material claims of the Indemnitee in any such action was frivolous and not made in good faith.
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IN WITNESS WHEREOF, the parties hereto have entered into this Indemnification Agreement effective as of the date first written above.
| YUBO INTERNATIONAL BIOTECH LIMITED | INDEMNITEE | ||||
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| By: | /s/ Jun Wang | /s/ Yang Wang | |||
| Name: | Jun Wang | Yang Wang | |||
| Title: | Chief Executive Officer and President | ||||
[Signature Page to Indemnification Agreement]
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EXHIBIT 10.14
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this “Agreement”), dated as of January 14, 2021, is made by and between YUBO INTERNATIONAL BIOTECH LIMITED (f/k/a Magna-Lab, Inc.), a New York corporation (the “Company”), and the undersigned, who is either a director or an officer of the Company (the “Indemnitee”), with this Agreement to be deemed effective as of the date that the Indemnitee first became a director or an officer of the Company.
RECITALS
A. The Company is aware that competent and experienced persons are reluctant to serve as directors or officers of corporations unless they are protected by comprehensive liability insurance and indemnification, due to the exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure frequently bears no reasonable relationship to the compensation of such directors and officers;
B. The Board of Directors of the Company (the “Board”) has concluded that, to retain and attract talented and experienced individuals to serve as officers or directors of the Company, it is necessary for the Company contractually to indemnify certain of such persons and to assume for itself maximum liability for expenses and damages in connection with claims against such persons in connection with their service to the Company;
C. Section 772 of the New York Business Corporation Law, under which the Company is organized (“Section 772”), empowers the Company to indemnify by agreement its present and former officers and directors and persons who serve, at the request of the Company, as directors or officers of other corporations, partnerships, joint ventures, trusts, or other enterprises and expressly provides that the indemnification provided by Section 772 is not exclusive; and
D. The Company desires and has requested the Indemnitee to serve or continue to serve as a director or an officer of the Company free from undue concern for claims for damages arising out of or related to such services to the Company.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions
1.1 Agent. For the purposes of this Agreement, “agent” of the Company means any person who is or was a director or an officer of the Company or a subsidiary of the Company; or is or was serving at the request of the Company or a subsidiary of the Company as a director or an officer of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise or an affiliate of the Company. The term “enterprise” includes any employee benefit plan of the Company, its subsidiaries, affiliates, and predecessor corporations.
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1.2 Company. For purposes of this Agreement, the “Company” includes, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger that, if its separate existence had continued, would have had power and authority to indemnify its directors or officers so that any person who is or was a director or an officer of such constituent corporation, or is or was serving at the request of such constituent corporation as a director or an officer of another corporation, partnership, joint venture, trust, or other enterprise, shall stand in the same position under this Agreement with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.
1.3 Expenses. For the purposes of this Agreement, “expenses” includes all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements and other out-of-pocket costs) actually and reasonably incurred by the Indemnitee in connection with the investigation, defense, or appeal of a proceeding or establishing or enforcing a right to indemnification or advancement of expenses under this Agreement, Section 772 or otherwise; provided, however, that expenses shall not include any judgments, fines, ERISA excise taxes or penalties, or amounts paid in settlement of a proceeding.
1.4 Fines. For purposes of this Agreement, references to “fines” includes any excise taxes assessed on a person with respect to any employee benefit plan.
1.5 Liabilities. For purposes of this Agreement, “liabilities” means judgments, fines, ERISA execute taxes or penalties, and amounts paid in settlement in connection with a proceeding.
1.6 Other Enterprises. For purposes of this Agreement, “other enterprises” includes employee benefit plans.
1.7 Proceeding. For the purposes of this Agreement, “proceeding” means any threatened, pending, or completed action, suit, or other proceeding, whether civil, criminal, administrative, or investigative.
1.8 Subsidiary. For purposes of this Agreement, “subsidiary” means any corporation of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company, by the Company and one or more of its subsidiaries, or by one or more of the Company’s subsidiaries.
1.9 Serving at the Request of the Company. For purposes of this Agreement, “serving at the request of the Company” includes any service as a director or an officer of the Company that imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.
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2. Agreement to Serve. The Indemnitee agrees to serve and/or continue to serve as an agent of the Company, at the will of the Company (or under separate agreement, if such agreement exists), in the capacity the Indemnitee currently serves as an agent of the Company, faithfully and to the best of his ability, so long as he is duly appointed or elected and qualified in accordance with the applicable provisions of the charter documents of the Company or any subsidiary of the Company; provided, however, that the Indemnitee may at any time and for any reason resign from such position (subject to any contractual obligation that the Indemnitee may have assumed apart from this Agreement), and the Company and any subsidiary shall have no obligation under this Agreement to continue the Indemnitee in any such position.
3. Directors’ and Officers’ Insurance. The Company shall, to the extent that the Board determines it to be economically reasonable, maintain a policy of directors’ and officers’ liability insurance (“D&O Insurance”), on such terms and conditions as may be approved by the Board.
4. Mandatory Indemnification. Subject to Section 9 below, the Company shall indemnify the Indemnitee:
4.1 Third-Party Actions. If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding (except an action by or in the right of the Company) by reason of the fact that the Indemnitee is or was an agent of the Company, or by reason of anything done or not done by the Indemnitee in any such capacity, against any and all expenses and liabilities of any type whatsoever incurred by the Indemnitee in connection with such proceeding if (a) the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful, or (b) the Indemnitee, if a director or an officer of the Company, did not act or fail to act in a manner that constituted a breach of the Indemnitee’s fiduciary duties as a director or an officer or such Indemnitee’s breach of those duties did not involve intentional misconduct, fraud, or a knowing violation of law; and
4.2 Derivative Actions. If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding by or in the right of the Company to procure a judgment in its favor by reason of the fact that the Indemnitee is or was an agent of the Company, or by reason of anything done or not done by the Indemnitee in any such capacity, against any and all expenses and liabilities incurred by the Indemnitee in connection with such proceeding if (a) the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company, or (b) the Indemnitee, if a director or an officer of the Company, did not act or fail to act in a manner that constituted a breach of the Indemnitee’s fiduciary duties as a director or an officer or such Indemnitee breach of those duties involved intentional misconduct, fraud, or a knowing violation of law; except that no indemnification under this subsection shall be made in respect of any claim, issue, or matter as to which the Indemnitee shall have been adjudged by a court of competent jurisdiction, after the exhaustion of all appeals therefrom, to be liable to the Company or for amounts paid in settlement to the Company, unless and only to the extent that the court in which such proceeding was brought or another court of competent jurisdiction determines upon application that, in view of all the circumstances of the case, the Indemnitee is fairly and reasonable entitled to indemnity for such expenses as the court deems proper; and
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4.3 Exception for Amounts Covered by Insurance. Notwithstanding the foregoing, the Company shall not be obligated to indemnify the Indemnitee for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the extent such have been paid to the Indemnitee by D&O Insurance.
5. Partial Indemnification and Contribution.
5.1 Partial Indemnification. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any expenses or liabilities of any type whatsoever incurred by the Indemnitee in connection with a proceeding but is not entitled, however, to indemnification for all of the total amount thereof, then the Company shall nevertheless indemnify the Indemnitee for such total amount except as to the portion thereof to which the Indemnitee is not entitled to indemnification.
5.2 Contribution. If the Indemnitee is not entitled to the indemnification provided in Section 4 for any reason other than the statutory limitations set forth in the New York Business Corporation Law, then in respect of proceeding in which the Company is jointly liable with the Indemnitee (or would be if joined in such proceeding), the Company shall contribute to the amount of expenses and liabilities paid or payable by the Indemnitee in such proportion as is appropriate to reflect (a) the relative benefits received by the Company on the one hand and the Indemnitee on the other hand from the transaction from which such proceeding arose and (b) the relative fault of the Company on the one hand and of the Indemnitee on the other hand in connection with the events that resulted in such expenses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Indemnitee on the other hand shall be determined by reference to, among other things, the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent the circumstances resulting in such expenses, judgments, fines, or settlement amounts. The Company agrees that it would not be just and equitable if contribution pursuant to this Section 5 were determined by pro rata allocation or any other method of allocation which does not take account of the foregoing equitable considerations.
6. Mandatory Advancement of Expenses.
6.1 Advancement. Subject to Section 9 below, the Company shall pay as incurred and in advance of the final disposition of a civil or criminal proceeding all expenses incurred by the Indemnitee in connection with defending any such proceeding to which the Indemnitee is a party or is threatened to be made a party by reason of the fact that the Indemnitee is or was an agent of the Company or by reason of anything done or not done by the Indemnitee in any such capacity. The Indemnitee hereby undertakes to promptly repay such amounts advanced only if, and to the extent that, it shall ultimately by determined that the Indemnitee is not entitled to be indemnified by the Company under the provisions of this Agreement, the Articles of Incorporation or Bylaws of the Company, the New York Business Corporation Law, or otherwise. The advances to be made hereunder shall be paid by the Company to the Indemnitee within thirty (30) days following delivery of a written request therefor by the Indemnitee to the Company.
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6.2 Exception. Notwithstanding the foregoing provisions of this Section 6, the Company shall not be obligated to advance any expenses to the Indemnitee arising from a lawsuit filed directly by the Company against the Indemnitee if an absolute majority of the members of the Board reasonably determines in good faith, within thirty (30) days of the Indemnitee’s request to be advanced expenses, that the facts known to them at the time such determination is made demonstrate clearly and convincingly that the Indemnitee acted in bad faith. If such a determination is made, the Indemnitee may have such decision reviewed in the manner set forth in Section 8.5 hereof, with all references therein to “indemnification” being deemed to refer to “advancement of expenses,” and the burden of proof shall be on the Company to demonstrate clearly and convincingly that, based on the facts known at the time, the Indemnitee acted in bad faith. The Company may not avail itself of this Section 6.2 as to a given lawsuit if, at any time after the occurrence of the activities or omissions that are the primary focus of the lawsuit, the Company has undergone a change in control. For this purpose, a “change in control” shall mean a given person of group of affiliated persons or groups increasing their beneficial ownership interest in the Company by at least twenty (20) percentage points without advance Board approval.
7. Notice and Other Indemnification Procedures.
7.1 Notification. Promptly after receipt by the Indemnitee of notice of the commencement of or the threat of commencement of any proceeding, the Indemnitee shall, if the Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company of the commencement or threat of commencement thereof.
7.2 Insurance. If, at the time of the receipt of a notice of the commencement of a proceeding pursuant to Section 7.1 hereof, the Company has D&O Insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such D&O Insurance policies.
7.3 Defense. In the event the Company shall be obligated to advance the expenses for any proceeding against the Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by the Indemnitee (which approval shall not be unreasonably withheld), upon the delivery to the Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by the Indemnitee and the retention of such counsel by the Company, the Company will not be liable to the Indemnitee under this Agreement for any fees of counsel subsequently incurred by the Indemnitee with respect to the same proceeding, provided that (a) the Indemnitee shall have the right to employ the Indemnitee’s own counsel in any such proceeding at the Indemnitee’s expense; (b) the Indemnitee shall have the right to employ the Indemnitee’s own counsel in connection with any such proceeding, at the expense of the Company, if such counsel serves in a review, observer, advice, and counseling capacity and does not otherwise materially control or participate in the defense of such proceeding; and (c) if (i) the employment of counsel by the Indemnitee has been previously authorized by the Company, (ii) the Indemnitee shall have reasonably concluded that there may be conflict of interest between the Company and the Indemnitee in the conduct of any such defense, or (iii) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, then the fees and expenses of the Indemnitee’s counsel shall be at the expense of the Company.
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8. Determination of Right to Indemnification.
8.1 Success on Merits. To the extent the Indemnitee has been successful on the merits or otherwise in defense of any proceeding referred to in Section 4.1 or 4.2 of this Agreement or in the defense of any claim, issue, or matter described therein, the Company shall indemnify the Indemnitee against expenses actually and reasonably incurred by the Indemnitee in connection with the investigation, defense, or appeal of such proceeding, or such claim, issue, or matter, as the case may be.
8.2 Proof by Company. In the event that Section 8.1 is inapplicable, or does not apply to the entire proceeding, the Company shall nonetheless indemnify the Indemnitee unless the Company shall prove by clear and convincing evidence to a forum listed in Section 8.4 below that the Indemnitee has not met the applicable standard of conduct required to entitle the Indemnitee to such indemnification.
8.3 Termination of Proceeding. The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere its equivalent, does not, of itself, create a presumption that a person (a) did not act in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Company, (b) with respect to any criminal action or proceeding, that the person had reasonable cause to believe that the person’s conduct was unlawful, or (c) the person’s act or failure to act constituted a breach of the person’s fiduciary duties as a director or an officer or the person’s breach of those duties involved intentional misconduct, fraud, or a knowing violation of law.
8.4 Applicable Forums. The Indemnitee shall be entitled to select the forum in which the validity of the Company’s claim under Section 8.2 hereof that the Indemnitee is not entitled to indemnification will be heard from among the following, except that the Indemnitee can select a forum consisting of the stockholders of the Company only with the approval of the Company and, if the Indemnitee is a director or an officer at the time of such determination, the determination shall be made in accordance with (a), (b), (c) or (d) below at the election of the Company:
(a) A majority vote of the directors who are not parties to the proceeding for which indemnification is being sought even though less than a quorum;
(b) By a committee of directors who are not parties to the proceeding for which indemnification is being sought designated by a majority vote of such directors, even though less than a quorum;
(c) If there are no directors who are not parties to the proceeding for which indemnification is sought, or if such directors so direct, by independent legal counsel in a written opinion;
(d) The stockholders of the Company;
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(e) A panel of three arbitrators, one of whom is selected by the Company, another of whom is selected by the Indemnitee and the last of whom is selected by the first two arbitrators so selected; or
(f) A court having jurisdiction of subject matter and the parties.
8.5 Submission. As soon as practicable, and in no event later than thirty (30) days after the forum has been selected pursuant to Section 8.4 above, the Company shall, at its own expense, submit to the selected forum its claim that the Indemnitee is not entitled to indemnification, and the Company shall act in the utmost good faith to assure the Indemnitee a complete opportunity to defend against such claim.
8.6 Appeals. If the forum selected in accordance with Section 8.4 hereof is not a court, then after the final decision of such forum is rendered, the Company or the Indemnitee shall have the right to apply to a court of New York, the court in which the proceeding giving rise to the Indemnitee’s claim for indemnification is or was pending, or any other court of competent jurisdiction, for the purpose of appealing the decision of such forum, provided that such right is executed within sixty (60) days after the final decision of such forum is rendered. If the forum selected in accordance with Section 8.4 hereof is a court, then the rights of the Company or the Indemnitee to appeal any decision of such court shall be governed by the applicable laws and rules governing appeals of the decision of such court.
8.7 Expenses for Interpretation. Notwithstanding any other provision in this Agreement to the contrary, the Company shall indemnify the Indemnitee against all expenses incurred by the Indemnitee in connection with any hearing or proceeding under this Section 8 involving the Indemnitee and against all expenses incurred by the Indemnitee in connection with any other proceeding between the Company and the Indemnitee involving the interpretation or enforcement of the rights of the Indemnitee under this Agreement unless a court of competent jurisdiction finds that each of the material claims and/or defenses of the Indemnitee in any such proceeding was frivolous or not made in good faith.
9. Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement in the following circumstances:
9.1 Claims Initiated by Indemnitee. To indemnify or advance expenses to the Indemnitee with respect to proceedings or claims initiated or brought voluntarily by the Indemnitee and not by way of defense, except with respect to proceedings specifically authorized by the Board or brought to establish or enforce a right to indemnification and/or advancement of expenses arising under this Agreement, the charter documents of the Company or any subsidiary, or any statute or law or otherwise, but such indemnification or advancement of expenses may be provided by the Company in specific cases if the Board finds it to be appropriate; or
9.2 Unauthorized Settlements. To indemnify the Indemnitee hereunder for any amounts paid in settlement of a proceeding unless the Company consents in advance in writing to such settlement, which consent shall not be unreasonably withheld; or
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9.3 Securities Law Actions. To indemnify the Indemnitee on account of any suit in which judgment is rendered against the Indemnitee for an accounting of profits made from the purchase or sale by the Indemnitee of securities of the company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state, or local statutory law; or
9.4 Unlawful Indemnification. To indemnify the Indemnitee if a final decision by a court having jurisdiction in the mater shall determine that such indemnification is not lawful. In this respect, the Company and the Indemnitee have been advised that the Securities and Exchange Commission takes the position that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication.
10. Non-Exclusivity. The provisions for indemnification and advancement of expenses set forth in this Agreement shall not be deemed exclusive of any other rights that the Indemnitee may have under any provision of law, the Company’s Certificate of Incorporation or Bylaws, the vote of the Company’s stockholders or disinterested directors, other agreements, or otherwise, both as to action in the Indemnitee’s official capacity and to action in another capacity while occupying the Indemnitee’s position as an agent of the Company, and the Indemnitee’s rights hereunder shall continue after the Indemnitee has ceased acting as an agent of the Company and shall inure to the benefit of the heirs, executors, and administrators of the Indemnitee.
11. General Provisions.
11.1 Interpretation of Agreement. It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification and advancement of expenses to the Indemnitee to the fullest extent now or hereafter permitted by law, except as expressly limited herein.
11.2 Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal, or unenforceable for any reason whatsoever, then: (a) the validity, legality, and enforceability of the remaining provisions of this Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal, or unenforceable that are not themselves invalid, illegal, or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal, or unenforceable, that are not themselves invalid, illegal, or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal, or unenforceable and to give effect to Section 11.1 hereof.
11.3 Modification and Waiver. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver.
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11.4 Subrogation. In the event of full payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all documents required and shall do all acts that may be necessary or desirable to secure such rights and to enable the Company effectively to bring suit to enforce such rights.
11.5 Counterparts. This Agreement may be executed in one or more counterparts, which shall together constitute one agreement.
11.6 Successors and Assigns. The terms of this Agreement shall bind, and shall inure to the benefit of, the successors and assigns of the parties hereto. The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or an officer and shall inure to the benefit of the heirs, executors, and administrators of such a person.
11.7 Notice. All notices, requests, demands, and other communications under this Agreement shall be in writing and shall be deemed duly given if (a) delivered by hand and receipted for by the party addressee, or (b) mailed by certified or registered mail, with postage prepaid, on the third business day after the mailing date. Addresses for notice to either party are as shown on the signature page of this Agreement or as subsequently modified by written notice.
11.8 Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the state of New York, as applied to contracts between New York residents entered into and to be performed entirely within New York.
11.9 Consent to Jurisdiction. The Company and the Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the state of New York for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement.
11.10 Attorneys’ Fees. In the event Indemnitee is required to bring any action to enforce rights under this Agreement (including, without limitation, the expenses of any proceeding described in Section 4), the Indemnitee shall be entitled to all reasonable fees and expenses in bringing and pursuing such action, unless a court of competent jurisdiction finds each of the material claims of the Indemnitee in any such action was frivolous and not made in good faith.
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IN WITNESS WHEREOF, the parties hereto have entered into this Indemnification Agreement effective as of the date first written above.
| YUBO INTERNATIONAL BIOTECH LIMITED |
| INDEMNITEE |
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| By: | /s/ Jun Wang |
| /s/ Zhihui Bai |
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| Name: Jun Wang |
| Zhihui Bai |
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| Title: Chief Executive Officer and President |
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[Signature Page to Indemnification Agreement]
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EXHIBIT 10.15
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this “Agreement”), dated as of January 14, 2021, is made by and between YUBO INTERNATIONAL BIOTECH LIMITED (f/k/a Magna-Lab, Inc.), a New York corporation (the “Company”), and the undersigned, who is either a director or an officer of the Company (the “Indemnitee”), with this Agreement to be deemed effective as of the date that the Indemnitee first became a director or an officer of the Company.
RECITALS
A. The Company is aware that competent and experienced persons are reluctant to serve as directors or officers of corporations unless they are protected by comprehensive liability insurance and indemnification, due to the exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure frequently bears no reasonable relationship to the compensation of such directors and officers;
B. The Board of Directors of the Company (the “Board”) has concluded that, to retain and attract talented and experienced individuals to serve as officers or directors of the Company, it is necessary for the Company contractually to indemnify certain of such persons and to assume for itself maximum liability for expenses and damages in connection with claims against such persons in connection with their service to the Company;
C. Section 772 of the New York Business Corporation Law, under which the Company is organized (“Section 772”), empowers the Company to indemnify by agreement its present and former officers and directors and persons who serve, at the request of the Company, as directors or officers of other corporations, partnerships, joint ventures, trusts, or other enterprises and expressly provides that the indemnification provided by Section 772 is not exclusive; and
D. The Company desires and has requested the Indemnitee to serve or continue to serve as a director or an officer of the Company free from undue concern for claims for damages arising out of or related to such services to the Company.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions
1.1 Agent. For the purposes of this Agreement, “agent” of the Company means any person who is or was a director or an officer of the Company or a subsidiary of the Company; or is or was serving at the request of the Company or a subsidiary of the Company as a director or an officer of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise or an affiliate of the Company. The term “enterprise” includes any employee benefit plan of the Company, its subsidiaries, affiliates, and predecessor corporations.
1.2 Company. For purposes of this Agreement, the “Company” includes, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger that, if its separate existence had continued, would have had power and authority to indemnify its directors or officers so that any person who is or was a director or an officer of such constituent corporation, or is or was serving at the request of such constituent corporation as a director or an officer of another corporation, partnership, joint venture, trust, or other enterprise, shall stand in the same position under this Agreement with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.
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1.3 Expenses. For the purposes of this Agreement, “expenses” includes all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements and other out-of-pocket costs) actually and reasonably incurred by the Indemnitee in connection with the investigation, defense, or appeal of a proceeding or establishing or enforcing a right to indemnification or advancement of expenses under this Agreement, Section 772 or otherwise; provided, however, that expenses shall not include any judgments, fines, ERISA excise taxes or penalties, or amounts paid in settlement of a proceeding.
1.4 Fines. For purposes of this Agreement, references to “fines” includes any excise taxes assessed on a person with respect to any employee benefit plan.
1.5 Liabilities. For purposes of this Agreement, “liabilities” means judgments, fines, ERISA execute taxes or penalties, and amounts paid in settlement in connection with a proceeding.
1.6 Other Enterprises. For purposes of this Agreement, “other enterprises” includes employee benefit plans.
1.7 Proceeding. For the purposes of this Agreement, “proceeding” means any threatened, pending, or completed action, suit, or other proceeding, whether civil, criminal, administrative, or investigative.
1.8 Subsidiary. For purposes of this Agreement, “subsidiary” means any corporation of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company, by the Company and one or more of its subsidiaries, or by one or more of the Company’s subsidiaries.
1.9 Serving at the Request of the Company. For purposes of this Agreement, “serving at the request of the Company” includes any service as a director or an officer of the Company that imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.
2. Agreement to Serve. The Indemnitee agrees to serve and/or continue to serve as an agent of the Company, at the will of the Company (or under separate agreement, if such agreement exists), in the capacity the Indemnitee currently serves as an agent of the Company, faithfully and to the best of his ability, so long as he is duly appointed or elected and qualified in accordance with the applicable provisions of the charter documents of the Company or any subsidiary of the Company; provided, however, that the Indemnitee may at any time and for any reason resign from such position (subject to any contractual obligation that the Indemnitee may have assumed apart from this Agreement), and the Company and any subsidiary shall have no obligation under this Agreement to continue the Indemnitee in any such position.
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3. Directors’ and Officers’ Insurance. The Company shall, to the extent that the Board determines it to be economically reasonable, maintain a policy of directors’ and officers’ liability insurance (“D&O Insurance”), on such terms and conditions as may be approved by the Board.
4. Mandatory Indemnification. Subject to Section 9 below, the Company shall indemnify the Indemnitee:
4.1 Third-Party Actions. If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding (except an action by or in the right of the Company) by reason of the fact that the Indemnitee is or was an agent of the Company, or by reason of anything done or not done by the Indemnitee in any such capacity, against any and all expenses and liabilities of any type whatsoever incurred by the Indemnitee in connection with such proceeding if (a) the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful, or (b) the Indemnitee, if a director or an officer of the Company, did not act or fail to act in a manner that constituted a breach of the Indemnitee’s fiduciary duties as a director or an officer or such Indemnitee’s breach of those duties did not involve intentional misconduct, fraud, or a knowing violation of law; and
4.2 Derivative Actions. If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding by or in the right of the Company to procure a judgment in its favor by reason of the fact that the Indemnitee is or was an agent of the Company, or by reason of anything done or not done by the Indemnitee in any such capacity, against any and all expenses and liabilities incurred by the Indemnitee in connection with such proceeding if (a) the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company, or (b) the Indemnitee, if a director or an officer of the Company, did not act or fail to act in a manner that constituted a breach of the Indemnitee’s fiduciary duties as a director or an officer or such Indemnitee breach of those duties involved intentional misconduct, fraud, or a knowing violation of law; except that no indemnification under this subsection shall be made in respect of any claim, issue, or matter as to which the Indemnitee shall have been adjudged by a court of competent jurisdiction, after the exhaustion of all appeals therefrom, to be liable to the Company or for amounts paid in settlement to the Company, unless and only to the extent that the court in which such proceeding was brought or another court of competent jurisdiction determines upon application that, in view of all the circumstances of the case, the Indemnitee is fairly and reasonable entitled to indemnity for such expenses as the court deems proper; and
4.3 Exception for Amounts Covered by Insurance. Notwithstanding the foregoing, the Company shall not be obligated to indemnify the Indemnitee for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the extent such have been paid to the Indemnitee by D&O Insurance.
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5. Partial Indemnification and Contribution.
5.1 Partial Indemnification. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any expenses or liabilities of any type whatsoever incurred by the Indemnitee in connection with a proceeding but is not entitled, however, to indemnification for all of the total amount thereof, then the Company shall nevertheless indemnify the Indemnitee for such total amount except as to the portion thereof to which the Indemnitee is not entitled to indemnification.
5.2 Contribution. If the Indemnitee is not entitled to the indemnification provided in Section 4 for any reason other than the statutory limitations set forth in the New York Business Corporation Law, then in respect of proceeding in which the Company is jointly liable with the Indemnitee (or would be if joined in such proceeding), the Company shall contribute to the amount of expenses and liabilities paid or payable by the Indemnitee in such proportion as is appropriate to reflect (a) the relative benefits received by the Company on the one hand and the Indemnitee on the other hand from the transaction from which such proceeding arose and (b) the relative fault of the Company on the one hand and of the Indemnitee on the other hand in connection with the events that resulted in such expenses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Indemnitee on the other hand shall be determined by reference to, among other things, the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent the circumstances resulting in such expenses, judgments, fines, or settlement amounts. The Company agrees that it would not be just and equitable if contribution pursuant to this Section 5 were determined by pro rata allocation or any other method of allocation which does not take account of the foregoing equitable considerations.
6. Mandatory Advancement of Expenses.
6.1 Advancement. Subject to Section 9 below, the Company shall pay as incurred and in advance of the final disposition of a civil or criminal proceeding all expenses incurred by the Indemnitee in connection with defending any such proceeding to which the Indemnitee is a party or is threatened to be made a party by reason of the fact that the Indemnitee is or was an agent of the Company or by reason of anything done or not done by the Indemnitee in any such capacity. The Indemnitee hereby undertakes to promptly repay such amounts advanced only if, and to the extent that, it shall ultimately by determined that the Indemnitee is not entitled to be indemnified by the Company under the provisions of this Agreement, the Articles of Incorporation or Bylaws of the Company, the New York Business Corporation Law, or otherwise. The advances to be made hereunder shall be paid by the Company to the Indemnitee within thirty (30) days following delivery of a written request therefor by the Indemnitee to the Company.
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6.2 Exception. Notwithstanding the foregoing provisions of this Section 6, the Company shall not be obligated to advance any expenses to the Indemnitee arising from a lawsuit filed directly by the Company against the Indemnitee if an absolute majority of the members of the Board reasonably determines in good faith, within thirty (30) days of the Indemnitee’s request to be advanced expenses, that the facts known to them at the time such determination is made demonstrate clearly and convincingly that the Indemnitee acted in bad faith. If such a determination is made, the Indemnitee may have such decision reviewed in the manner set forth in Section 8.5 hereof, with all references therein to “indemnification” being deemed to refer to “advancement of expenses,” and the burden of proof shall be on the Company to demonstrate clearly and convincingly that, based on the facts known at the time, the Indemnitee acted in bad faith. The Company may not avail itself of this Section 6.2 as to a given lawsuit if, at any time after the occurrence of the activities or omissions that are the primary focus of the lawsuit, the Company has undergone a change in control. For this purpose, a “change in control” shall mean a given person of group of affiliated persons or groups increasing their beneficial ownership interest in the Company by at least twenty (20) percentage points without advance Board approval.
7. Notice and Other Indemnification Procedures.
7.1 Notification. Promptly after receipt by the Indemnitee of notice of the commencement of or the threat of commencement of any proceeding, the Indemnitee shall, if the Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company of the commencement or threat of commencement thereof.
7.2 Insurance. If, at the time of the receipt of a notice of the commencement of a proceeding pursuant to Section 7.1 hereof, the Company has D&O Insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such D&O Insurance policies.
7.3 Defense. In the event the Company shall be obligated to advance the expenses for any proceeding against the Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by the Indemnitee (which approval shall not be unreasonably withheld), upon the delivery to the Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by the Indemnitee and the retention of such counsel by the Company, the Company will not be liable to the Indemnitee under this Agreement for any fees of counsel subsequently incurred by the Indemnitee with respect to the same proceeding, provided that (a) the Indemnitee shall have the right to employ the Indemnitee’s own counsel in any such proceeding at the Indemnitee’s expense; (b) the Indemnitee shall have the right to employ the Indemnitee’s own counsel in connection with any such proceeding, at the expense of the Company, if such counsel serves in a review, observer, advice, and counseling capacity and does not otherwise materially control or participate in the defense of such proceeding; and (c) if (i) the employment of counsel by the Indemnitee has been previously authorized by the Company, (ii) the Indemnitee shall have reasonably concluded that there may be conflict of interest between the Company and the Indemnitee in the conduct of any such defense, or (iii) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, then the fees and expenses of the Indemnitee’s counsel shall be at the expense of the Company.
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8. Determination of Right to Indemnification.
8.1 Success on Merits. To the extent the Indemnitee has been successful on the merits or otherwise in defense of any proceeding referred to in Section 4.1 or 4.2 of this Agreement or in the defense of any claim, issue, or matter described therein, the Company shall indemnify the Indemnitee against expenses actually and reasonably incurred by the Indemnitee in connection with the investigation, defense, or appeal of such proceeding, or such claim, issue, or matter, as the case may be.
8.2 Proof by Company. In the event that Section 8.1 is inapplicable, or does not apply to the entire proceeding, the Company shall nonetheless indemnify the Indemnitee unless the Company shall prove by clear and convincing evidence to a forum listed in Section 8.4 below that the Indemnitee has not met the applicable standard of conduct required to entitle the Indemnitee to such indemnification.
8.3 Termination of Proceeding. The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere its equivalent, does not, of itself, create a presumption that a person (a) did not act in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Company, (b) with respect to any criminal action or proceeding, that the person had reasonable cause to believe that the person’s conduct was unlawful, or (c) the person’s act or failure to act constituted a breach of the person’s fiduciary duties as a director or an officer or the person’s breach of those duties involved intentional misconduct, fraud, or a knowing violation of law.
8.4 Applicable Forums. The Indemnitee shall be entitled to select the forum in which the validity of the Company’s claim under Section 8.2 hereof that the Indemnitee is not entitled to indemnification will be heard from among the following, except that the Indemnitee can select a forum consisting of the stockholders of the Company only with the approval of the Company and, if the Indemnitee is a director or an officer at the time of such determination, the determination shall be made in accordance with (a), (b), (c) or (d) below at the election of the Company:
(a) A majority vote of the directors who are not parties to the proceeding for which indemnification is being sought even though less than a quorum;
(b) By a committee of directors who are not parties to the proceeding for which indemnification is being sought designated by a majority vote of such directors, even though less than a quorum;
(c) If there are no directors who are not parties to the proceeding for which indemnification is sought, or if such directors so direct, by independent legal counsel in a written opinion;
(d) The stockholders of the Company;
| 6 |
(e) A panel of three arbitrators, one of whom is selected by the Company, another of whom is selected by the Indemnitee and the last of whom is selected by the first two arbitrators so selected; or
(f) A court having jurisdiction of subject matter and the parties.
8.5 Submission. As soon as practicable, and in no event later than thirty (30) days after the forum has been selected pursuant to Section 8.4 above, the Company shall, at its own expense, submit to the selected forum its claim that the Indemnitee is not entitled to indemnification, and the Company shall act in the utmost good faith to assure the Indemnitee a complete opportunity to defend against such claim.
8.6 Appeals. If the forum selected in accordance with Section 8.4 hereof is not a court, then after the final decision of such forum is rendered, the Company or the Indemnitee shall have the right to apply to a court of New York, the court in which the proceeding giving rise to the Indemnitee’s claim for indemnification is or was pending, or any other court of competent jurisdiction, for the purpose of appealing the decision of such forum, provided that such right is executed within sixty (60) days after the final decision of such forum is rendered. If the forum selected in accordance with Section 8.4 hereof is a court, then the rights of the Company or the Indemnitee to appeal any decision of such court shall be governed by the applicable laws and rules governing appeals of the decision of such court.
8.7 Expenses for Interpretation. Notwithstanding any other provision in this Agreement to the contrary, the Company shall indemnify the Indemnitee against all expenses incurred by the Indemnitee in connection with any hearing or proceeding under this Section 8 involving the Indemnitee and against all expenses incurred by the Indemnitee in connection with any other proceeding between the Company and the Indemnitee involving the interpretation or enforcement of the rights of the Indemnitee under this Agreement unless a court of competent jurisdiction finds that each of the material claims and/or defenses of the Indemnitee in any such proceeding was frivolous or not made in good faith.
9. Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement in the following circumstances:
9.1 Claims Initiated by Indemnitee. To indemnify or advance expenses to the Indemnitee with respect to proceedings or claims initiated or brought voluntarily by the Indemnitee and not by way of defense, except with respect to proceedings specifically authorized by the Board or brought to establish or enforce a right to indemnification and/or advancement of expenses arising under this Agreement, the charter documents of the Company or any subsidiary, or any statute or law or otherwise, but such indemnification or advancement of expenses may be provided by the Company in specific cases if the Board finds it to be appropriate; or
9.2 Unauthorized Settlements. To indemnify the Indemnitee hereunder for any amounts paid in settlement of a proceeding unless the Company consents in advance in writing to such settlement, which consent shall not be unreasonably withheld; or
| 7 |
9.3 Securities Law Actions. To indemnify the Indemnitee on account of any suit in which judgment is rendered against the Indemnitee for an accounting of profits made from the purchase or sale by the Indemnitee of securities of the company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state, or local statutory law; or
9.4 Unlawful Indemnification. To indemnify the Indemnitee if a final decision by a court having jurisdiction in the mater shall determine that such indemnification is not lawful. In this respect, the Company and the Indemnitee have been advised that the Securities and Exchange Commission takes the position that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication.
10. Non-Exclusivity. The provisions for indemnification and advancement of expenses set forth in this Agreement shall not be deemed exclusive of any other rights that the Indemnitee may have under any provision of law, the Company’s Certificate of Incorporation or Bylaws, the vote of the Company’s stockholders or disinterested directors, other agreements, or otherwise, both as to action in the Indemnitee’s official capacity and to action in another capacity while occupying the Indemnitee’s position as an agent of the Company, and the Indemnitee’s rights hereunder shall continue after the Indemnitee has ceased acting as an agent of the Company and shall inure to the benefit of the heirs, executors, and administrators of the Indemnitee.
11. General Provisions.
11.1 Interpretation of Agreement. It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification and advancement of expenses to the Indemnitee to the fullest extent now or hereafter permitted by law, except as expressly limited herein.
11.2 Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal, or unenforceable for any reason whatsoever, then: (a) the validity, legality, and enforceability of the remaining provisions of this Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal, or unenforceable that are not themselves invalid, illegal, or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal, or unenforceable, that are not themselves invalid, illegal, or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal, or unenforceable and to give effect to Section 11.1 hereof.
11.3 Modification and Waiver. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver.
| 8 |
11.4 Subrogation. In the event of full payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all documents required and shall do all acts that may be necessary or desirable to secure such rights and to enable the Company effectively to bring suit to enforce such rights.
11.5 Counterparts. This Agreement may be executed in one or more counterparts, which shall together constitute one agreement.
11.6 Successors and Assigns. The terms of this Agreement shall bind, and shall inure to the benefit of, the successors and assigns of the parties hereto. The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or an officer and shall inure to the benefit of the heirs, executors, and administrators of such a person.
11.7 Notice. All notices, requests, demands, and other communications under this Agreement shall be in writing and shall be deemed duly given if (a) delivered by hand and receipted for by the party addressee, or (b) mailed by certified or registered mail, with postage prepaid, on the third business day after the mailing date. Addresses for notice to either party are as shown on the signature page of this Agreement or as subsequently modified by written notice.
11.8 Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the state of New York, as applied to contracts between New York residents entered into and to be performed entirely within New York.
11.9 Consent to Jurisdiction. The Company and the Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the state of New York for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement.
11.10 Attorneys’ Fees. In the event Indemnitee is required to bring any action to enforce rights under this Agreement (including, without limitation, the expenses of any proceeding described in Section 4), the Indemnitee shall be entitled to all reasonable fees and expenses in bringing and pursuing such action, unless a court of competent jurisdiction finds each of the material claims of the Indemnitee in any such action was frivolous and not made in good faith.
| 9 |
IN WITNESS WHEREOF, the parties hereto have entered into this Indemnification Agreement effective as of the date first written above.
| YUBO INTERNATIONAL BIOTECH LIMITED |
| INDEMNITEE | ||
|
|
| |||
| By: | /s/ Jun Wang |
| /s/ Lina Liu | |
| Name: | Jun Wang Lina Liu |
|
| |
| Title: | Chief Executive Officer and President |
|
| |
[Signature Page to Indemnification Agreement]
EXHIBIT 99.1
PLATINUM INTERNATONAL BIOTECH CO., LTD AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2020 and September 30, 2019 (unaudited) and for the years ended December 31, 2019 and December 31, 2018
Table of Contents
| Report of Independent Registered Public Accounting Firm | F-1 |
|
|
|
| Consolidated Balance Sheets | F-2 |
|
|
|
| Consolidated Statements of Operations and Comprehensive Loss | F-3 |
|
|
|
| Consolidated Statements of Changes in Shareholders’ Equity | F-4 |
|
|
|
| Consolidated Statements of Cash Flows | F-5 |
|
|
|
| Notes to Consolidated Financial Statements | F-6 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To: The Board of Directors and Stockholders of Platinum International Biotech Co., LTD
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Platinum International Biotech Co., Ltd and subsidiaries and variable interest entity (collectively, the “Company”) as of December 31, 2019 and December 31, 2018 and the related consolidated statements of operations and comprehensive loss, changes in shareholders’ equity, and cash flows for the years ended December 31, 2019 and December 31, 2018, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and December 31, 2018 and the results of its operations and its cash flows for the years ended December 31, 2019 and December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph Regarding Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company’s present financial situation raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to this matter is also described in Note 3. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Michael T. Studer CPA P.C.
Michael T. Studer CPA P.C.
Freeport, New York
January 14, 2021
We have served as the Company’s auditor since 2020
| F-1 |
PLATINUM INTERNATIONAL BIOTECH CO., LTD AND SUBSIDIARIES AND
VARIABLE INTEREST ENTITY
CONSOLIDATED BALANCE SHEETS
(Expressed in US Dollars)
|
|
| September 30, |
|
| December 31, |
|
| December 31, |
| |||
|
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
|
|
| (Unaudited) |
|
|
|
|
|
|
| |||
| ASSETS |
| |||||||||||
| Current assets |
|
|
|
|
|
|
|
|
| |||
| Cash |
| $ | 749,440 |
|
| $ | 1,262 |
|
| $ | 145 |
|
| Receivables |
|
| 5,458 |
|
|
| — |
|
|
| — |
|
| Prepaid expenses |
|
| 42,295 |
|
|
| 62,089 |
|
|
| — |
|
| Inventory |
|
| 83,607 |
|
|
| — |
|
|
| — |
|
| Due from related parties |
|
| 463,831 |
|
|
| 399,251 |
|
|
| — |
|
| Total Current Assets |
|
| 1,344,631 |
|
|
| 462,602 |
|
|
| 145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Property and equipment, net |
|
| 77,255 |
|
|
| 36,597 |
|
|
|
|
|
| Intangible assets, net |
|
| 54,872 |
|
|
| — |
|
|
| — |
|
| Operating lease right of use asset |
|
| 364,426 |
|
|
| 546,350 |
|
|
| — |
|
| Lease security deposit |
|
| 80,008 |
|
|
| 83,386 |
|
|
|
|
|
| Total Assets |
| $ | 1,921,192 |
|
| $ | 1,128,935 |
|
| $ | 145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
| Accounts payable and accrued expenses (including accounts payable and accrued expenses of VIE without recourse to the Company of $120,852, $0, and $0 as of September 30, 2020, December 31, 2019, and December 31, 2018, respectively) |
| $ | 120,852 |
|
| $ | — |
|
| $ | — |
|
| Customer deposits (including customer deposits of VIE without recourse to the Company of $10,603, $0 and $0 as of September 30, 2020, December 31, 2019, and December 31, 2018, respectively) |
|
| 15,378 |
|
|
| — |
|
|
| — |
|
| Due to related parties (including due to related parties without recourse to the Company of $93,134, $93,852, and $145 as of September 30, 2020, December 31, 2019, and December 31, 2018, respectively) |
|
| 88,359 |
|
|
| 93,852 |
|
|
| 145 |
|
| Operating lease liability – current (including operating lease liability -current of VIE without recourse to the Company of $306,707, $262,928, and $0 as of September 30, 2020, December 31, 2019, and December 31, 2018, respectively) |
|
| 306,707 |
|
|
| 262,928 |
|
|
| — |
|
| Total Current Liabilities |
|
| 531,296 |
|
|
| 356,780 |
|
|
| 145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
| Operating lease liability - non-current (including operating lease liability – non- current of VIE without recourse to the Company of $57,718, $283,422, and $0 as of September 30, 2020, December 31, 2019, and December 31, 2018, respectively) |
|
| 57,718 |
|
|
| 283,422 |
|
|
| — |
|
| Total Liabilities |
|
| 589,014 |
|
|
| 640,202 |
|
|
| 145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shareholders’ Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock, par value $ 0.0001 per share; authorized 500,000,000 shares, issued and outstanding 10,152,284, 0, and 0 shares, respectively. |
| 1,015 |
|
| — |
|
|
| — |
| ||
| Additional Paid in Capital |
|
| 1,993,197 |
|
|
| 723,861 |
|
|
| — |
|
| Accumulated deficit |
|
| (661,494 | ) |
|
| (231,193 | ) |
|
| — |
|
| Accumulated other comprehensive income (loss) |
|
| (540 | ) |
|
| (3,935 | ) |
|
| — |
|
| Total Shareholders’ Equity |
|
| 1,332,178 |
|
|
| 488,733 |
|
|
| — |
|
| Total Liabilities and Shareholders’ Equity |
| $ | 1,921,192 |
|
| $ | 1,128,935 |
|
| $ | 145 |
|
The accompanying notes are an integral part of these consolidated financial statements.
| F-2 |
PLATINUM INTERNATIONAL BIOTECH CO., LTD AND SUBSIDIARIES AND
VARIABLE INTEREST ENTITY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Expressed in US Dollars)
|
|
| For the nine months ended September 30, |
|
| For the year ended December 31, |
| ||||||||||
|
|
| 2020 |
|
| 2019 |
|
| 2019 |
|
| 2018 |
| ||||
|
|
| (Unaudited) |
|
| (Unaudited) |
|
|
|
|
| ||||||
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Sales |
| $ | 471,148 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| Cost of Goods Sold |
|
| 39,724 |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Gross Profit |
|
| 431,424 |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sales commissions |
|
| 187,963 |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Employee compensation |
|
| 113,748 |
|
|
| 4,984 |
|
|
| 4,951 |
|
|
| — |
|
| Occupancy |
|
| 159,889 |
|
|
| 46,189 |
|
|
| 101,702 |
|
|
| — |
|
| Depreciation and amortization of property and equipment |
|
| 16,250 |
|
|
| — |
|
|
| 91 |
|
|
| — |
|
| Amortization of intangible assets |
|
| 1,929 |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Other operating expenses |
|
| 381,789 |
|
|
| 2,378 |
|
|
| 124,322 |
|
|
| — |
|
| Total Operating Expenses |
|
| 861,568 |
|
|
| 53,551 |
|
|
| 231,066 |
|
|
|
|
|
| Income (loss) from operations |
|
| (430,144 | ) |
|
| (53,551 | ) |
|
| (231,066 | ) |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other Income (Expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest expenses |
|
| (157 | ) |
|
| (161 | ) |
|
| (127 | ) |
|
| — |
|
| Total Other Income (Expenses) |
|
| (157 | ) |
|
| (161 | ) |
|
| (127 | ) |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss before Provision for Income Tax |
|
| (430,301 | ) |
|
| (53,712 | ) |
|
| (231,193 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Provision for Income Tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
| $ | (430,301 | ) |
| $ | (53,712 | ) |
| $ | (231,193 | ) |
| $ | — |
|
| Net loss per share basic and diluted |
| $ | (0.04 | ) |
| $ | (0.01 | ) |
| $ | (0.02 | ) |
| $ | — |
|
| Weighted average common shares outstanding basic and diluted |
|
| 10,011,116 |
|
|
| 10,000,000 |
|
|
| 10,000,000 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
| $ | (430,301 | ) |
| $ | (53,712 | ) |
| $ | (231,193 | ) |
| $ | — |
|
| Foreign currency translation adjustment |
|
| 3,395 |
|
|
| — |
|
|
| (3,935 | ) |
|
| — |
|
| Total comprehensive income (loss) |
| $ | (426,906 | ) |
| $ | (53,712 | ) |
| $ | (235,128 | ) |
| $ | — |
|
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
PLATINUM INTERNATIONAL BIOTECH CO., LTD AND SUBSIDIARIES AND
VARIABLE INTEREST ENTITY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Expressed in US Dollars)
|
|
| Common Stock: |
|
| Additional Paid-In |
|
| Accumulated |
|
| Accumulated Other Comprehensive Income |
|
|
|
| |||||||||
|
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| (loss) |
|
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
| Balance, January 1, 2018 |
|
| — |
|
| $ | — |
|
| $ | - |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Balance, December 31, 2018 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Capital contributions to Yubo Beijing |
|
| — |
|
|
| — |
|
|
| 723,861 |
|
|
| — |
|
|
| — |
|
|
| 723,861 |
|
| Foreign currency translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,935 | ) |
|
| (3,935 | ) |
| Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (231,193 | ) |
|
|
|
|
|
| (231,193 | ) |
| Balance, December 31, 2019 |
|
| — |
|
|
| — |
|
|
| 723,861 |
|
|
| (231,193 | ) |
|
| (3,935 | ) |
|
| 488,733 |
|
| Issuance of ordinary shares and capital contributions to Yubo Beijing |
|
| 10,000,000 |
|
|
| 1,000 |
|
|
| 519,351 |
|
|
| — |
|
|
| — |
|
|
| 520,351 |
|
| Sale of ordinary shares on September 11, 2020 |
|
| 152,284 |
|
|
| 15 |
|
|
| 749,985 |
|
|
|
|
|
|
|
|
|
|
| 750,000 |
|
| Foreign currency adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,395 |
|
|
| 3,395 |
|
| Net Loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (430,301 | ) |
|
| — |
|
|
| (430,301 | ) |
| Balance, September 30, 2020 (Unaudited) |
|
| 10,152,284 |
|
| $ | 1,015 |
|
| $ | 1,993,197 |
|
| $ | (661,494 | ) |
| $ | (540 | ) |
| $ | 1,332,178 |
|
The accompanying notes are an integral part of these consolidated financial statements
| F-4 |
PLATINUM INTERNATIONAL BIOTECH CO., LTD AND SUBSIDIARIES AND
VARIABLE INTEREST ENTITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in US Dollars)
|
|
| For the nine months ended September 30, |
|
| For the year ended December 31, |
| ||||||||||
|
|
| 2020 |
|
| 2019 |
|
| 2019 |
|
| 2018 |
| ||||
|
|
| (Unaudited) |
|
| (Unaudited) |
|
|
|
|
|
|
| ||||
| Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Net loss |
| $ | (430,301 | ) |
| $ | (53,712 | ) |
| $ | (231,193 | ) |
|
| — |
|
| Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and amortization |
|
| 18,179 |
|
|
| — |
|
|
| 91 |
|
|
| — |
|
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Receivables |
|
| (5,458 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
| Prepaid expense |
|
| 19,794 |
|
|
| — |
|
|
| (62,089 | ) |
|
| — |
|
| Inventory |
|
| (83,607 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
| Due from related parties |
|
| (64,580 | ) |
|
| (207,643 | ) |
|
| (399,251 | ) |
|
| — |
|
| Lease security deposit |
|
| 3,378 |
|
|
| (73,502 | ) |
|
| (83,386 | ) |
|
| — |
|
| Accounts payable and accrued expenses |
|
| 120,852 |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Customer deposits |
|
| 15,378 |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Due to related parties |
|
| (5,493 | ) |
|
| 19,259 |
|
|
| 93,707 |
|
|
| 145 |
|
| Net cash used in operating activities |
| $ | (411,858 | ) |
| $ | (315,598 | ) |
| $ | (682,121 | ) |
| $ | 145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Purchases of property and equipment |
|
| (53,330 | ) |
|
| (6,558 | ) |
|
| (36,983 | ) |
|
| — |
|
| Purchases of intangible assets |
|
| (54,872 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
| Net cash used in investing activities |
|
| (108,202 | ) |
|
| (6,558 | ) |
|
| (36,983 | ) |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
| Capital Contributions to Yubo Beijing |
|
| 520,351 |
|
|
| 349,770 |
|
|
| 723,861 |
|
|
|
|
|
| Sale of ordinary shares on September 11, 2020 |
|
| 750,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Net cash provided by financing activities |
|
| 1,270,351 |
|
|
| 349,770 |
|
|
| 723,861 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Effect of exchange rate changes |
|
| (2,113 | ) |
|
| 2,884 |
|
|
| (3,640 | ) |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net increase (decrease) in cash |
|
| 748,178 |
|
|
| 30,498 |
|
|
| 1,117 |
|
|
| 145 |
|
| Cash at beginning of period |
|
| 1,262 |
|
|
| 145 |
|
|
| 145 |
|
|
| — |
|
| Cash at end of period |
| $ | 749,440 |
|
| $ | 30,643 |
|
| $ | 1,262 |
|
| $ | 145 |
|
| Supplemental Cash Flow Information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income taxes paid |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| Interest paid |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| Non-cash Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating lease right of use asset acquired |
| $ | — |
|
| $ | 688,631 |
|
| $ | 688,631 |
|
| $ | — |
|
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
PLATINUM INTERNATIONAL BIOTECH CO., LTD AND SUBSIDIARIES AND
VARIABLE INTEREST ENTITY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2020 and September 30, 2019 (Unaudited) and for the years ended December 31, 2019 and December 31, 2018
NOTE 1 – ORGANIZATION
Platinum International Biotech Co., LTD (“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 nine months ended September 30, 2020 (commencing April 2020), Yubo Beijing sold approximately 300 nebulizers to customers in the People’s Republic of China (“PRC”).
Upon executing the series of VIE agreements in September 2020, Yubo Beijing has been considered a Variable Interest Entity (“VIE”) of Yubo Chengdu, its primary beneficiary. Accordingly, Yubo Beijing has been consolidated under the guidance of FASB Accounting Standards Codification (“ASC”) 810, Consolidation.
The officers, directors, and controlling beneficial owners of Yubo Beijing from its inception on June 14, 2016 are also officers, directors, and controlling beneficial owners of Platinum. Accordingly, the accompanying consolidated financial statements include Yubo Beijing’s operations from its inception on June 14, 2016.
Platinum and its consolidated subsidiaries and VIE are collectively referred to herein as the “Company” unless specific reference is made to an entity.
| F-6 |
A flow chart of the Company follows:
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”).
The accompanying consolidated financial statements for the nine months ended September 30, 2020 and 2019 (unaudited) and for the years ended December 31, 2019 and 2018 comprise the following periods for each entity:
| Name |
| Periods |
| Platinum |
| April 7, 2020 (Inception) – September 30, 2020 |
| Yubo HK |
| May 4, 2020 (Inception) – September 30, 2020 |
| Yubo Chengdu |
| September 4, 2020 (Inception) – September 30, 2020 |
| Yubo Beijing |
| January 1, 2018 – September 30, 2020 |
| F-7 |
Interim Financial Statements
The accompanying Consolidated Balance Sheet as of September 30, 2020 and the Consolidated Statements of Operations and Comprehensive Loss, Consolidated Statements of Changes in Shareholders’ Equity, and Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and September 30, 2019 are unaudited. In the opinion of management, all adjustments, which include only normal recurring adjustments necessary to present fairly the financial position, results of operations and cash flows for these interim periods presented, have been made. The results of operations for the interim periods presented are not necessarily indicative of the operating results for the respective full years.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, its two 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 |
| Platinum International Biotech Co. LTD (“Platinum”) |
| · A Cayman Island company · Incorporated on April 7, 2020 · A holding company |
|
|
| Platinum International Biotech (Hong Kong) Limited. (“Platinum HK”) |
| · A Hong Kong company · Incorporated on May 4, 2020 · A holding company |
| 100% owned by Platinum |
| Yubo International Biotech (Chengdu) Limited (“Yubo Chengdu”) |
| · A PRC company and deemed a wholly foreign owned enterprise · Incorporated on September 4, 2020 · Subscribed capital of $1,500,000 · A holding company |
| 100% owned by Platinum HK |
| Yubo International Biotech (Beijing) Limited (“Yubo Beijing”) |
| · A PRC limited liability company · Incorporated on June 14, 2016 · Subscribed capital of $1,472,537 (RMB 10,000,000) · Stem cell storage and bank |
| VIE of Yubo Chengdu WFOE |
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:
| F-8 |
Exclusive Consulting Services Agreement
Pursuant to the Exclusive Consulting Services Agreement among Yubo, Yubo WFOE, and the Yubo Shareholders, Yubo WFOE agrees to provide, and Yubo agrees to accept, exclusive management services provided by Yubo WFOE. Such management services include but are not limited to financial management, business management, marketing management, human resource management and internal control of Yubo. The Exclusive Consulting Services Agreement will remain in effect until the acquisition of all assets or equity of Yubo by Yubo WFOE is complete (as more fully described in the Exclusive Purchase Option Agreement below).
Exclusive Purchase Option Agreement
Under the Exclusive Option Agreement among Yubo, Yubo WFOE, and the Yubo Shareholders, the Yubo Shareholders granted Yubo WFOE an irrevocable and exclusive purchase option to acquire Yubo’s equity and/or assets at a nominal consideration. Yubo WFOE may exercise the purchase option at any time.
Equity Pledge Agreement
Under the Equity Pledge Agreement among Yubo WFOE and the Yubo Shareholders, the Yubo Shareholders pledged all of their equity interests in Yubo, including the proceeds thereof, to guarantee all of Yubo WFOE’s rights and benefits under the Exclusive Consulting Services Agreement and the Exclusive Option Agreement. Prior to termination of this Equity Pledge Agreement, the pledged equity interests cannot be transferred without Yubo WFOE’s prior consent. The Yubo Shareholders covenants to Yubo WFOE that among other things, it will only appoint/elect the candidates for the directors of Yubo nominated by Yubo WFOE.
| F-9 |
Financial Statements of Yubo Beijing (VIE)
Except for $739,979 cash at September 30, 2020, all assets and liabilities included in the accompanying Consolidated Balance Sheets at September 30, 2020, December 31, 2019, and December 31 2018 represent assets and liabilities of Yubo Beijing.
Except for $10,021 other operating expenses for the nine months ended September 30, 2020, all revenues and expenses included in the accompanying Consolidated Statements of Operations and Comprehensive Loss for the nine months ended September 30, 2020 and September 30, 2019 and for the years ended December 31, 2019 and December 31, 2018 represent revenues and expenses of Yubo Beijing.
Foreign Currency Translation
The accompanying consolidated financial statements are presented in United States dollars (“$”), 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 subsidiary 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 ($1=7.0145 RMB for the nine months ended September 30, 2020 and $1=6.9074 RMB for the year ended December 31, 2019), assets and liabilities are translated at the current exchange rate at the end of the period ($1=6.7905 RMB at September 30, 2020 and $1=6.9630 RMB at December 31, 2019), and equity is translated at historical exchange rates. The resulting translation adjustments are included in determining other comprehensive income (loss). Transaction gains and losses, which were not significant for the periods presented, are reflected in the consolidated statements of operations.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and judgments on historical experience and on various other assumptions and information that are believed to be reasonable under the circumstances. Estimates and assumptions of future events and their effects cannot be perceived with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes. Significant estimates and assumptions by management include, among others, useful lives and impairment of long-lived assets, and income taxes including the valuation allowance for deferred tax assets. While the Company believes that the estimates and assumptions used in the preparation of the financial statements are appropriate, actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the financial statements in the period they are determined to be necessary.
| F-10 |
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in bank accounts, cash in time deposits, certificates of deposit and all highly liquid instruments with original maturities of three months or less.
Inventories
Inventories, mainly consisting of nebulizers and components, 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 consists of leasehold improvements, air conditioning equipment, and office equipment. All property and equipment are stated at historical cost net of accumulated depreciation. Repairs and maintenance are expensed as incurred. Property and equipment are depreciated on a straight-line basis over the following periods:
| Leasehold improvements |
| Remaining term of lease |
| Air conditioning equipment |
| 5 years |
| Office equipment |
| 3 years |
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 |
| 5 years |
| Patents |
| 20 years |
| F-11 |
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.
Financial instruments include cash, receivables, due from related parties, accounts payable and accrued expenses, 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.
| F-12 |
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.
Revenue Recognition
The Company derives its revenue from the sale of nebulizers containing frozen tubes with medical fluid. The nebulizers are sold directly to consumers on the Company’s online e-commerce platform. The Company recognizes product revenues when the following four revenue recognition criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the selling price is fixed or determinable, and (iv) collectability is reasonably assured. The Company does not allow sales returns or exchanges.
Revenue is recorded net of value-added tax (“VAT”).
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.
The Company applies the provisions of ASC 740 to account for uncertainty in income taxes. ASC 740 clarifies the accounting for uncertainty in income taxes by prescribing the recognition threshold a tax position is required to meet before being recognized in the consolidated financial statements.
The Company will classify interest and penalties related to unrecognized tax benefits, if and when required, as part of income tax expense in the consolidated statements of operations.
Net Loss per Share
Basic loss per ordinary share is computed by dividing net loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
Diluted loss per ordinary shares reflects the potential dilution that could occur if dilutive securities (such as stock options and convertible securities) were exercised or converted into ordinary shares. For the periods presented, the Company had no dilutive securities outstanding.
| F-13 |
Comprehensive Loss
Comprehensive loss is defined as the decrease in equity of the Company during a period from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. Comprehensive loss is reported in the consolidated statements of operations and comprehensive loss, including net loss and foreign currency translation adjustments, presented net of tax.
New Accounting Pronouncements
In February, 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02) “Leases (Topic 842)”. ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted.
For finance leases, a lessee is required to do the following:
| · | Recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the balance sheet. |
|
|
|
| · | Recognize interest on the lease liability separately from amortization of the right-of-use asset in the statement of comprehensive income. |
|
|
|
| · | Classify repayments of the principal portion of the lease liability within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows. |
|
|
|
| For operating leases, a lessee is required to do the following: | |
|
|
|
| · | Recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the balance sheet. |
|
|
|
| · | Recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis. |
|
|
|
| · | Classify all cash payments within operating activities in the statement of cash flows. |
Other than increasing assets and liabilities at the inception of Yubo Beijing’s office lease on August 1, 2019 (See Note 8), ASU 2016-02 has not had a significant effect the Company’s financial position or results of operations.
| F-14 |
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, 2020, December 31, 2019, and December 31, 2018 have been prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues and cash flows sufficient to cover its operating costs and allow it to continue as a going concern. For the nine months ended September 30, 2020 and for the year ended December 31, 2019, the Company had losses of $430,301 and $231,193, respectively. These factors among others raise substantial doubt about the ability of the company to continue as a going concern for a reasonable period of time.
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, |
|
| December 31, |
| |||
|
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
| Product components raw materials: |
| (Unaudited) |
|
|
|
|
| |||||
| Frozen tubes to be attached to the nebulizer product |
| $ | 44,003 |
|
| $ | — |
|
| $ | — |
|
| Unassembled nebulizers |
|
| 18,948 |
|
|
| — |
|
|
| — |
|
| Fluids to be inserted in the frozen tubes |
|
| 7,236 |
|
|
| — |
|
|
| — |
|
| Total product components raw materials |
|
| 70,187 |
|
|
| — |
|
|
| — |
|
| Refrigerated boxes |
|
| 2,777 |
|
|
| — |
|
|
| — |
|
| Delivery boxes |
|
| 10,643 |
|
|
| — |
|
|
| — |
|
| Total Inventory |
| $ | 83,607 |
|
| $ | — |
|
| $ | — |
|
| F-15 |
NOTE 5 – DUE FROM RELATED PARTIES
Due from related parties consisted of:
|
|
| September 30, |
|
| December 31, |
|
| December 31, |
| |||
|
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
|
|
| (Unaudited) |
|
|
|
|
| |||||
| Beijing Zhenhuikang Biotechnology Co., LTD (“Zhenhuikang”) (1) |
| $ | 388,778 |
|
| $ | 399,251 |
|
| $ | — |
|
| Mr. Jun Wang (2) |
|
| 44,179 |
|
|
| — |
|
|
| — |
|
| Beijing Zhenxigu Medical Research Center LP (“Zhenxigu”)(3) |
|
| 22,417 |
|
|
| — |
|
|
| — |
|
| Mr. Wei Jin (4) |
|
| 8,457 |
|
|
| — |
|
|
| — |
|
| Total Due From Related Parties |
| $ | 463,831 |
|
| $ | 399,251 |
|
| $ | — |
|
| (1) | Zhenhuikang is controlled by Zhenxigu. |
|
|
|
| (2) | Mr. Jung Wang owns 34.66% of Yubo Beijing capital stock and is the chief executive officer and a director of Platinum and Yubo Beijing. |
|
|
|
| (3) | Zhenxigu owns 21.67% of Yubo Beijing capital stock and is controlled by Mr. Yulin Cao. Mr. Yulin Cao is a director of Platinum and Yubo Beijing. |
|
|
|
| (4) | Mr. Wei Jin controls Yubo Health Management (Tianjin) Center LP which owns 10% of Yubo Beijing capital stock. |
The due from related parties receivables are noninterest bearing and are due on demand.
NOTE 6 – PROPERTY AND EQUIPMENT
Property and equipment, net, consisted of the following:
|
|
| September 30, 2020 |
|
| December 31, 2019 |
|
| December 31, 2018 |
| |||
|
|
| (Unaudited) |
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
| |||
| Leasehold improvements |
| $ | 54,912 |
|
| $ | 23,231 |
|
| $ | — |
|
| Air conditioning equipment |
|
| 20,672 |
|
|
| — |
|
|
| — |
|
| Office equipment |
|
| 17,126 |
|
|
| 13,457 |
|
|
|
|
|
| Total property and equipment |
|
| 92,710 |
|
|
| 36,688 |
|
|
|
|
|
| Less accumulated depreciation and amortization |
|
| (15,455 | ) |
|
| (91 | ) |
|
|
|
|
| Property and equipment, net |
| $ | 77,255 |
|
| $ | 36,597 |
|
| $ | — |
|
For the nine months ended September 30, 2020 and 2019, depreciation and amortization of property and equipment was $16,250 and $0, respectively. For the years ended December 31, 2019 and 2018, depreciation and amortization of property and equipment was $91 and $0, respectively.
| F-16 |
NOTE 7 – INTANGIBLE ASSETS
Intangible assets, net, consisted of the following:
|
|
| September 30, 2020 |
|
| December 31, 2019 |
|
| December 30, 2018 |
| |||
|
|
| (Unaudited) |
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
| |||
| Distribution software |
| $ | 36,452 |
|
| $ | — |
|
| $ | — |
|
| Patents acquired from related party (Note 11) |
|
| 20,413 |
|
|
| — |
|
|
| — |
|
| Total intangible assets |
|
| 56,865 |
|
|
| — |
|
|
| — |
|
| Less: Accumulated amortization |
|
| (1,993 | ) |
|
| — |
|
|
| — |
|
| Intangible assets, net |
| $ | 54,872 |
|
| $ | — |
|
| $ | — |
|
For the nine months ended September 30, 2020 and 2019, amortization of intangible assets expense was $1,929 and $0, respectively. For the years ended December 31, 2019 and 2018, amortization of intangible assets was $0 and $0, respectively.
At September 30, 2020, the expected future amortization of intangible assets expense was:
| Three months ending December 31, 2020 |
| $ | 2,078 |
|
| Year ending December 31, 2021 |
|
| 8,311 |
|
| Year ending December 31, 2022 |
|
| 8,311 |
|
| Year ending December 31, 2023 |
|
| 8,311 |
|
| Year ending December 31, 2024 |
|
| 8,311 |
|
| Year ending December 31, 2025 |
|
| 4,666 |
|
| Thereafter |
|
| 14,884 |
|
| Total |
| $ | 54,872 |
|
NOTE 8 – OPERATING LEASE RIGHT OF USE ASSET AND OPERATING LEASE LIABILITY
On August 1, 2019 Yubo Beijing executed a lease agreement with Jiu Si Cheng Investment Management (the “Landlord”) to rent approximately 746 square meters of office space in Beijing China. The lease provided for an initial term of 2 years and 4 months from August 2, 2019 to November 30, 2021 with a right to renew for an additional term of 2 years and 8 months from December 1, 2021 to July 31, 2024. The lease also provided for payments of quarterly rent and management fees to the landlord for the initial term of a total of RMB 4,756,649 ($700,486 at the 6.7905 current exchange rate at September 30, 2020) and the payment of a security deposit to the Landlord of RMB 543,306 ($80,008 at the 6.7905 current exchange rate at September 30, 2020).
| F-17 |
At September 30, 2020 the future undiscounted minimum lease payments under this noncancellable lease are as follows:
|
|
| As of September 30, 2020 |
| |
| Three months ending December 31, 2020 |
| $ | 77,531 |
|
| Year ending December 31, 2021 |
|
| 296,568 |
|
| Total |
| $ | 374,099 |
|
The operating lease liabilities totaling $364,425 at September 30, 2020 as presented in the Consolidated Balance Sheet represents the discounted (at a 4.75% estimated incremental borrowing rate) value of the future lease payments of $374,099 at September 30, 2020.
For the nine months ended September 30, 2020 and 2019, occupancy expense attributable to this lease was $159,889 and $46,189, respectively. For the years ended December 31, 2019 and 2018, occupancy expense attributable to this lease was $101,702 and $0, respectively.
NOTE 9 – DUE TO RELATED PARTIES
Due to related parties consisted of the following:
|
|
| September 30, 2020 |
|
| December 31, 2019 |
|
| December 31, 2018 |
| |||
|
|
| (Unaudited) |
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
| |||
| Mr. Jun Wang (1) |
| $ | — |
|
| $ | 88,941 |
|
| $ | 145 |
|
| Mr. Yang Wang (2) |
|
| 88,359 |
|
|
| 4,911 |
|
|
| — |
|
| Total |
| $ | 88,359 |
|
| $ | 93,852 |
|
| $ | 145 |
|
| (1) | Mr. Jun Wang owns 34.66% of Yubo Beijing capital stock and is the chief executive officer and a director of Platinum and Yubo Beijing. |
|
|
|
| (2) | Mr. Yang Wang owns 21.67% of Yubo Beijing capital stock and is a director of Platinum and Yubo Beijing. |
The due to related parties payables are noninterest bearing and are due on demand.
NOTE 10 – SHAREHOLDERS’ EQUITY
Platinum International Biotech Co., LTD (Cayman Island) (“Platinum”)
Platinum has authorized 500,000,000 ordinary shares with a par value of $0.0001 per share with 10,152,284 shares issued and outstanding at September 30, 2020.
On April 7, 2020 Platinum issued a total of 10,000,000 ordinary shares to six entities as follows:
| Entity |
| Shares |
| |
| 1. Flydragon International Limited (controlled by Mr. Jun Wang) |
|
| 3,466,000 |
|
| 2. Chinaone Technology Limited (controlled by Mr. Yang Wang) |
|
| 1,667,000 |
|
| 3. Boao Biotech Limited (controlled by Mr. Yulin Cao) |
|
| 2,167,000 |
|
| 4. Dragoncloud Technology Limited (controlled by Mr. Yang Wang) |
|
| 500,000 |
|
| 5. Focus Draw Group Limited (controlled by Ms. Lina Liu) |
|
| 1,200,000 |
|
| 6. Focusone Technology Group Limited (controlled by Mr. Jin Wei) |
|
| 1,000,000 |
|
| Total |
|
| 10,000,000 |
|
| F-18 |
On September 11, 2020 Platinum sold 152,284 ordinary shares to an investor for $750,000 cash.
Yubo International Biotech (Chengdu) Limited (“Yubo Chengdu”)
Yubo Chengdu has subscribed capital of $1,500,000 which has not yet been paid by its shareholder. The subscribed capital is due for payment on January 1, 2040.
Yubo International Biotech (Beijing) Limited (“Yubo Beijing”)
Yubo Beijing has subscribed capital of $1,472,646 (RMB 10,000,000), of which $198,807 (RMB 1,350,000) has not yet been paid by its shareholders as of September 30, 2020.
In 2019, a total of RMB 5,000,000 ($723,861 at the 6.9074 average exchange rate for the year ended December 31, 2019) was received from Mr. Jun Wang (RMB 2,000,000), Mr. Yang Wang ($1,250,000), Zhenxigu Medical Research Center LP, (RMB 1,250,000) and Borong Hongtai Asset Management LP (RMB 500,000).
In the nine months ended September 30, 2020, a total of RMB 3,650,000 ($520,351 at the 7.0145 average exchange rate for the nine months ended September 30, 2020) was received from Mr. Jun Wang (RMB 2,000,000), Mr. Yang Wang (RMB 1,250,000), Zhengxigu Medical Research Center LP (RMB 100,000), and Borong Hongtai Asset Management LP (RMB 300,000).
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 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 subsidiary 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 and Yubo Beijing.
Yubo Chengdu and Yubo Beijing are required to set aside at least 10% of their after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, Yubo Chengdu and Yubo Beijing may allocate a portion of its after-tax profits based on PRC accounting standards to an enterprise expansion fund and a staff bonus and welfare fund at its discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends.
For the nine months ended September 30, 2020 and for the years ended December 31, 2019 and 2018, Yubo Beijing did not generate any profit and had negative retained earnings as of September 30, 2020. As a result, the Company has not accrued statutory reserve funds.
| F-19 |
The ability of the Company’s PRC subsidiary 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 11 – RELATED PARTY TRANSACTIONS
On February 17, 2020, Yubo Beijing executed an Agreement of Joint Research and Development with Beijing Zhenxigu Medical Research Center LP (“Zhenxigu”), an entity controlled by Mr. Yulin Cao (who owns 21.67% of Yubo Beijing capital stock and is a director of Platinum and Yubo Beijing). Pursuant to the agreement, Yubo Beijing paid RMB 241,880 ($34,483 at the 7.0145 average exchange rate for the nine months ended September 30, 2020) to Zhenxigu for research and development relating to the medical fluid to be included with the nebulizers to be sold to customers. Such expense has been included with other operating expenses in the accompanying Consolidated Statement of Operations and Comprehensive Loss for the nine months ended September 30, 2020.
| F-20 |
On February 27, 2020, Yubo Beijing executed a Patent Transfer Agreement with Beijing Zhenhuikang Biotechnology Co. LTD (“Zhenhuikang”), an entity controlled by Mr. Yulin Cao (who owns 21.67% of Yubo Beijing capital stock and is a director of Platinum and Yubo Beijing). The Agreement provided for the assignment of two patents owned by Zhenhuikang to Yubo Beijing for consideration of RMB 140,000 ($20,413 at the 6.7905 current exchange rate at September 30, 2020) (See Note 7).
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 owns 21.67% of Yubo Beijing capital stock and 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 ($29,423 at the 6.7905 current exchange rate at September 30, 2020). As of September 30, 2020, preparation of the stem cell harvesting packages has not yet commenced, no payments to Zhenhuikang have been made, and no expense or liability has been recorded.
NOTE 12 – 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 16.5%. Platinum HK has had no taxable income or loss from May 4, 2020 (inception) to September 30, 2020.
People’s Republic of China
Yubo International Biotech (Chengdu) Limited (“Yubo Chengdu”) 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 25% enterprise income tax rate to both foreign invested enterprises and domestic enterprises.
Yubo Chengdu has had no taxable income or loss from September 4, 2020 (inception) to September 30, 2020.
Yubo Beijing has had taxable losses of $231,193 for the year ended December 31, 2019 and $420,280 for the nine months ended September 30, 2020. These losses can be carried forward for five years to reduce future years’ taxable income through year 2024 and year 2025, respectively. Based on management’s present assessment, the Company has not yet determined it to be more likely than not that future utilization of the net operating loss carryforwards will be realized. Accordingly, the Company has recorded a 100% valuation allowance against the deferred tax asset at September 30, 2020 and December 31, 2019.
| F-21 |
The components of deferred tax assets were as follows:
|
|
| September 30, 2020 |
|
| December 31, 2019 |
|
| December 31, 2018 |
| |||
|
|
| (Unaudited) |
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
| |||
| Net operating losses carry forward |
| $ | 162,868 |
|
| $ | 57,798 |
|
| $ | — |
|
| Valuation allowance |
|
| (162,868 | ) |
|
| (57,798 | ) |
|
| — |
|
| 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, 2020 |
|
| For the year ended December 31, 2019 |
|
| For the year ended December 31, 2018 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
| Income tax (benefits) at 25% |
| $ | (107,525 | ) |
| $ | (57,798 | ) |
| $ | — |
|
| Increase in valuation allowance |
|
| 107,525 |
|
|
| 57,798 |
|
|
| — |
|
| Provision for income taxes |
| $ | — |
|
| $ | — |
|
| $ | — |
|
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, 2020, December 31, 2019 and December 31, 2018.
NOTE 13 – COMMITMENTS AND CONTINGENCIES
Freelancer Service Contract
On March 30, 2020, Yubo Beijing executed an agreement with Hainan Huiyonggong Service Ltd. (“HHS”). The agreement provides for HHS to engage sales representatives (often Yubo Beijing customers) to refer new customers to Yubo Beijing and for Yubo Beijing to pay fees to HHS based on the amount of sales generated from HHS’s sales representatives. The term of the agreement is for one year expiring March 29, 2021. For the nine months ended September 30, 2020, the Company expensed $187,963 pursuant to this agreement which is included in “Sales Commissions” in the accompanying statement of operations.
| F-22 |
Website Platform Maintenance Agreement
On March 31, 2020, Yubo Beijing executed an agreement with Hainan Haifu Technology Ltd. (“HHT”). The agreement provides for HHT to provide certain website maintenance services for Yubo Beijing and provides for Yubo Beijing to pay a monthly fee of RMB 150,000 ($22,090 using the September 30, 2020 current exchange rate of 6.7905) to HHT. The term of the agreement is for one year expiring April 1, 2021. For the nine months ended September 30, 2020, the Company expensed $121,185 pursuant to this agreement which is included in “Other Operating Expenses” in the accompanying statement of operations.
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 $73,632 at September 30,2020). Accordingly, the Company has a concentration of credit risk related to the uninsured part of bank deposits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk.
Risks of Variable Interest Entity Structure
Although the structure the Company has adopted is consistent with longstanding industry practice, and is commonly adopted by comparable companies in China, the PRC government may not agree that these arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. There are uncertainties regarding the interpretation and application of PRC laws and regulations including those that govern the Company’s contractual arrangements, which could limit the Company’s ability to enforce these contractual arrangements. If the Company or its variable interest entity is found to be in violation of any existing or future PRC laws, rules or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including levying fines, revoking business and other licenses of the Company’s variable interest entity, requiring the Company to discontinue or restrict its operations, restricting its right to collect revenue, requiring the Company to restructure its operations or taking other regulatory or enforcement actions against the Company. In addition, it is unclear what impact the PRC government actions would have on the Company and on its ability to consolidate the financial results of its variable interest entity in the consolidated financial statements, if the PRC government authorities were to find the Company’s legal structure and contractual arrangements to be in violation of PRC laws, rules and regulations. If the imposition of any of these government actions causes the Company to lose its right to direct the activities of Yubo Beijing or the right to receive their economic benefits, the Company would no longer be able to consolidate Yubo Beijing.
| F-23 |
COVID-19 outbreak
In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. The COVID-19 pandemic has negatively impacted the global economy, workforces, customers, and created significant volatility and disruption of financial markets. It has also disrupted the normal operations of many businesses, including ours. This outbreak could decrease spending, adversely affect demand for our services and harm our business and results of operations. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business or results of operations at this time.
NOTE 14 - SUBSEQUENT EVENTS
January 14, 2021, Platinum and its 7 shareholders (the “Shareholders”) entered into a Share Exchange Agreement (the “Exchange Agreement”) with Yubo International Biotech Limited (“YBGJ”), formerly Magna-Lab Inc. Pursuant to the terms of the Exchange Agreement, the Shareholders are to receive a total of 117,000,000 shares of YBGJ Class A common stock (representing approximately 99.00% of YBGJ common stock after the transaction) in exchange for their delivery of 100% of the 10,152,284 ordinary shares of Platinum issued and outstanding making Platinum a wholly owned subsidiary of YBGJ.
| F-24 |
EXHIBIT 99.2
YUBO INTERNATIONAL BIOTECH LIMITED (Formerly Magna-Lab Inc.) AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
Index to Pro Forma Combined Financial Statements
Table of Contents
| Pro Forma Combined Balance Sheets as of September 30, 2020 (Unaudited) | PF-1 |
|
|
|
| Pro Forma Combined Statements of Operations and Comprehensive Loss (Unaudited): | |
|
|
|
| For the year ended December 31, 2019 | PF-2 |
|
|
|
| For the nine months ended September 30, 2020 | PF-3 |
|
|
|
| Notes to Pro Forma Combined Financial Information | PF-4 |
YUBO INTERNATIONAL BIOTECH LIMITED (formerly Magna-Lab Inc.) AND SUBSIDIARIES AND
VARIABLE INTEREST ENTITY
PRO FORMA COMBINED BALANCE SHEETS
As of September 30, 2020
(Expressed in US Dollars)
(Unaudited)
|
|
| Yubo International Biotech Limited |
|
| Platinum International Biotech Co., Ltd and Subsidiaries and VIE |
|
| Pro Forma Adjustments |
|
| Pro Forma Combined |
| ||||
| ASSETS | ||||||||||||||||
| Current assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Cash |
| $ | — |
|
| $ | 749,440 |
|
| $ | — |
|
| $ | 749,440 |
|
| Receivables |
|
| — |
|
|
| 5,458 |
|
|
| — |
|
|
| 5,458 |
|
| Prepaid expenses |
|
| — |
|
|
| 42,295 |
|
|
| — |
|
|
| 42,295 |
|
| Inventory |
|
| — |
|
|
| 83,607 |
|
|
| — |
|
|
| 83,607 |
|
| Due from related parties |
|
| — |
|
|
| 463,831 |
|
|
| — |
|
|
| 463,831 |
|
| Total Current Assets |
|
| — |
|
|
| 1,344,631 |
|
|
| — |
|
|
| 1,344,631 |
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
| Property and equipment, net |
|
| — |
|
|
| 77,255 |
|
|
| — |
|
|
| 77,255 |
|
| Intangible assets, net |
|
| — |
|
|
| 54,872 |
|
|
| — |
|
|
| 54,872 |
|
| Operating lease right of use asset |
|
| — |
|
|
| 364,426 |
|
|
| — |
|
|
| 364,426 |
|
| Lease security deposit |
|
| — |
|
|
| 80,008 |
|
|
| — |
|
|
| 80,008 |
|
| Total Assets |
| $ | — |
|
| $ | 1,921,192 |
|
| $ | — |
|
| $ | 1,921,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accounts payable and accrued expenses |
| $ | 2,737 |
|
| $ | 120,852 |
|
| $ | — |
|
| $ | 123,589 |
|
| Customer deposits |
|
| — |
|
|
| 15,378 |
|
|
| — |
|
|
| 15,378 |
|
| Due to related parties |
|
| 8,471 |
|
|
| 88,359 |
|
|
| — |
|
|
| 96,830 |
|
| Operating lease liability – current |
|
| — |
|
|
| 306,707 |
|
|
| — |
|
|
| 306,707 |
|
| Total Current Liabilities |
|
| 11,208 |
|
|
| 531,296 |
|
|
| — |
|
|
| 542,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating lease liability – non-current |
|
| — |
|
|
| 57,718 |
|
|
| — |
|
|
| 57,718 |
|
| Total Liabilities |
|
| 11,208 |
|
|
| 589,014 |
|
|
| — |
|
|
| 600,222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shareholders’ Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock |
|
| 117,879 |
|
|
| 1,015 |
|
| (a)(116,697) (b)115,985 |
|
|
| 118,182 |
| |
| Additional Paid in Capital |
|
| 28,682,121 |
|
|
| 1,993,197 |
|
| (a)116,697 (b) (28,927,193) |
|
|
| 1,864,822 |
| |
| Accumulated deficit |
|
| (28,811,208 | ) |
|
| (661,494 | ) |
| (b) 28,811,208 |
|
|
| (661,494 | ) | |
| Accumulated other comprehensive income (loss) |
|
| — |
|
|
| (540 | ) |
|
| — |
|
|
| (540 | ) |
| Total Shareholders’ Equity |
|
| (11,208 | ) |
|
| 1,332,178 |
|
|
| — |
|
|
| 1,320,970 |
|
| Total Liabilities and Shareholders’ Equity |
| $ | — |
|
| $ | 1,921,192 |
|
| $ | — |
|
| $ | 1,921,192 |
|
The accompanying notes to pro forma combined financial information are an integral part of these pro forma combined financial statements.
| F-1 |
YUBO INTERNATIONAL BIOTECH LIMITED (formerly Magna-Lab Inc.) AND SUBSIDIARIES AND
VARIABLE INTEREST ENTITY
PRO FORMA COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the year ended December 31, 2019
(Expressed in US Dollars)
(Unaudited)
|
|
| Yubo International Biotech Limited |
|
| Platinum International Biotech Co., Ltd and Subsidiaries and VIE |
|
| Pro Forma Adjustments |
|
| Pro Forma Combined |
| ||||
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Sales |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| Cost of Goods Sold |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Gross Profit |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sales commissions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Employee compensation |
|
| — |
|
|
| 4,951 |
|
|
| — |
|
|
| 4,951 |
|
| Occupancy |
|
| — |
|
|
| 101,702 |
|
|
| — |
|
|
| 101,702 |
|
| Depreciation and amortization of property and equipment |
|
| — |
|
|
| 91 |
|
|
| — |
|
|
| 91 |
|
| Amortization of intangible assets |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Other operating expenses |
|
| 29,000 |
|
|
| 124,322 |
|
|
| — |
|
|
| 153,322 |
|
| Total Operating Expenses |
|
| 29,000 |
|
|
| 231,066 |
|
|
|
|
|
|
| 260,066 |
|
| Income (loss) from operations |
|
| (29,000 | ) |
|
| (231,066 | ) |
|
| — |
|
|
| (260,066 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other Income (Expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest expenses |
|
| (105,000 | ) |
|
| (127 | ) |
|
| — |
|
|
| (105,127 | ) |
| Total Other Income (Expenses) |
|
| (105,000 | ) |
|
| (127 | ) |
|
| — |
|
|
| (105,127 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss before Provision for Income Tax |
|
| (134,000 | ) |
|
| (231,193 | ) |
|
| — |
|
|
| (365,193 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Provision for Income Tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
| $ | (134,000 | ) |
| $ | (231,193 | ) |
| $ | — |
|
| $ | (365,193 | ) |
| Net loss per share basic and diluted |
| $ | (0.11 | ) |
| $ | (0.02 | ) |
| $ | 0.13 |
|
| $ | (0.00 | ) |
| Weighted average common shares outstanding basic and diluted |
|
| 1,179,000 |
|
|
| 10,000,000 |
|
|
| 107,003,322 |
|
|
| 118,182,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
| (134,000 | ) |
|
| (231,193 | ) |
|
| — |
|
|
| (365,193 | ) |
| Foreign currency translation adjustment |
|
| — |
|
|
| (3,935 | ) |
|
| — |
|
|
| (3,935 | ) |
| Total comprehensive income (loss) |
| $ | (134,000 | ) |
| $ | (235,128 | ) |
| $ | — |
|
| $ | (369,128 | ) |
The accompanying notes to pro forma combined financial information are an integral part of these pro forma combined financial statements.
| F-2 |
YUBO INTERNATIONAL BIOTECH LIMITED (formerly Magna-Lab Inc.) AND SUBSIDIARIES AND
VARIABLE INTEREST ENTITY
PRO FORMA COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the nine months ended September 30, 2020
(Expressed in US Dollars)
(Unaudited)
|
|
| Yubo International Biotech Limited |
|
| Platinum International Biotech Co., Ltd and Subsidiaries and VIE |
|
| Pro Forma Adjustments |
|
| Pro Forma Combined |
| ||||
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Sales |
| $ | — |
|
| $ | 471,148 |
|
| $ | — |
|
| $ | 471,148 |
|
| Cost of Goods Sold |
|
| — |
|
|
| 39,724 |
|
|
| — |
|
|
| 39,724 |
|
| Gross Profit |
|
| — |
|
|
| 431,424 |
|
|
| — |
|
|
| 431,424 |
|
| Operating expenses: |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sales commissions |
|
| — |
|
|
| 187,963 |
|
|
| — |
|
|
| 187,963 |
|
| Employee compensation |
|
| — |
|
|
| 113,748 |
|
|
| — |
|
|
| 113,748 |
|
| Occupancy |
|
| — |
|
|
| 159,889 |
|
|
| — |
|
|
| 159,889 |
|
| Depreciation and amortization of property and equipment |
|
| — |
|
|
| 16,250 |
|
|
| — |
|
|
| 16,250 |
|
| Amortization of intangible assets |
|
| — |
|
|
| 1,929 |
|
|
| — |
|
|
| 1,929 |
|
| Other operating expenses |
|
| 28,000 |
|
|
| 381,789 |
|
|
| — |
|
|
| 409,789 |
|
| Total Operating Expenses |
|
| 28,000 |
|
|
| 861,568 |
|
|
|
|
|
|
| 889,568 |
|
| Income (loss) from operations |
|
| (28,000 | ) |
|
| (430,144 | ) |
|
| — |
|
|
| (458,144 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other Income (Expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gain from debt extinguishment |
|
| 191,000 |
|
|
| — |
|
|
| — |
|
|
| 191,000 |
|
| Gain from settlement of accounts payable |
|
| 167,000 |
|
|
| — |
|
|
| — |
|
|
| 167,000 |
|
| Interest expenses |
|
| (53,000 | ) |
|
| (157 | ) |
|
| — |
|
|
| (53,157 | ) |
| Total Other Income (Expenses) |
|
| 305,000 |
|
|
| (157 | ) |
|
| — |
|
|
| 304,843 |
|
|
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (Loss) before Provision for Income Tax |
|
| 277,000 |
|
|
| (430,301 | ) |
|
| — |
|
|
| (153,301 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Provision for Income Tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
| $ | 277,000 |
|
| $ | (430,301 | ) |
| $ | — |
|
| $ | (153,301 | ) |
| Net income (loss) per share basic and diluted |
| $ | 0.23 |
|
| $ | (0.04 | ) |
| $ | (0.19 | ) |
| $ | (0.00 | ) |
| Weighted average common shares outstanding basic and diluted |
|
| 1,179,000 |
|
|
| 10,011,116 |
|
|
| 106,992,216 |
|
|
| 118,182,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
| $ | 277,000 |
|
| $ | (430,301 | ) |
| $ | — |
|
| $ | (153,301 | ) |
| Foreign currency translation adjustment |
|
| — |
|
|
| 3,395 |
|
|
| — |
|
|
| 3,395 |
|
| Total comprehensive income (loss) |
| $ | 277,000 |
|
| $ | (426,906 | ) |
| $ | — |
|
| $ | (149,906 | ) |
The accompanying notes to pro forma combined financial information are an integral part of these pro forma combined financial statements.
| F-3 |
YUBO INTERNATIONAL BIOTECH LIMITED (formerly Magna-Lab Inc.) AND SUBSIDIARIES AND VARIABLE INTEREST ENTITY
Notes to Pro Forma Combined Financial Information
(Unaudited)
NOTE 1 – BASIS OF PRESENTATION
On January 14, 2021, Yubo International Biotech Limited (formerly Magna-Lab Inc.) (“YBGJ”) closed a Share Exchange Agreement (the “Exchange Agreement”) with Platinum International Biotech Co. Ltd (“Platinum”) and its seven shareholders whereby YBGJ acquired all issued and outstanding ordinary shares of Platinum capital stock for consideration of 117,000,000 shares of YBGJ Class A common stock. Coincident with the closing, the 116,697,438 shares of YBGJ Class A common stock acquired by Ms. Lina Liu on October 2, 2020 were cancelled.
The accompanying pro forma combined balance sheet as of September 30, 2020 (unaudited) has been presented as if the acquisition took place on September 30, 2020. The accompanying proforma combined statements of operations (unaudited) have been presented as if the acquisition took place on January 1, 2019. The pro forma information is not necessarily indicative of the results that would have been reported had the acquisition actually occurred on January 1, 2019, nor is it intended to project results of operations for any future period.
NOTE 2 – PRO FORMA ADJUSTMENTS
The pro forma adjustments to the combined financial statements (unaudited) are as follows:
|
| (a) | to reflect the cancellation of the 116,697,438 shares of YBGJ Class A common stock acquired by Ms. Lina Liu on October 2, 2020. |
|
|
|
|
|
| (b) | to reflect the issuance of 117,000,000 shares of YBGJ Class A common stock issued in connection with the acquisition of Platinum. |
| F-4 |