BIO ESSENCE CORPORATION

(BIOE)
End-of-day quote OTC Markets  - 
- USD   -.--%
05/16BIO ESSENCE CORP Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)
AQ
05/16Bio Essence Corporation Reports Earnings Results for the First Quarter Ended March 31, 2022
CI
03/31Bio Essence Corporation Reports Earnings Results for the Full Year Ended December 31, 2021
CI
SummaryQuotesNewsCompany 
SummaryMost relevantAll NewsOther languagesPress ReleasesOfficial PublicationsSector news

BIO ESSENCE CORP Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/16/2022 | 01:28pm EDT

Business Overview




Bio Essence Corporation ("the Company" or "Bio Essence") was incorporated in
2000 in the state of California. Fusion Diet Systems ("FDS") was incorporated in
2010 in the state of Utah. Bio Essence and FDS were owned under common control
since 2016. Bio Essence and FDS are mainly engaged in manufacturing and
distributing health supplement products. In January 2017, Bio Essence
incorporated two subsidiaries in the state of California: BEP and BEH, Bio
Essence transferred its manufacturing operation into BEP, and transferred its
distributing operation into BEH. On March 1, 2017, the 100% shareholder of FDS
transferred all her ownership in FDS into Bio Essence. On December 7, 2021, the
Company dissolved FDS. On November 12, 2021, Bio Essence incorporated a wholly
owned subsidiary McBE Pharma Inc. ("McBE") in the state of California, McBE will
be engaged in research and development and manufacture of prescription medicine.
As a result of the ownership restructure, BEP, BEH, and MCBE became wholly owned
subsidiaries of Bio Essence, and Bio Essence serves as a holding corporation for
these subsidiaries. McBE has not engaged any operations since its inception.



The primary focus of BEP is producing products for BEH, along with providing OEM
services to other companies. BEH targets healthcare practitioners with herbal
products in the form of granules, capsules, pills and tablets. It also offers
special formulation service to practitioners. The Company intends to develop the
subsidiary into an integrated healthcare platform that provides customers direct
connections with integrative healthcare practitioners such as dietitians,
nutraceutical practitioners, and other practitioners in this discipline
worldwide.



However, the pandemic could result in significant disruption of global financial markets, reducing the Company's ability to access capital, which could negatively affect the Company's liquidity.



Related Party Transactions



Loans from Officer



At March 31, 2022 and December 31, 2021, the Company had loans from one major
shareholder (also the Company's senior officer) of $2,035,155 and $1,785,154,
respectively. At March 31, 2022 and December 31, 2021, the Company had loan from
another major shareholder for $608,631 for settling the litigation (see Note 8).
There are no written loan agreements for these loans. These loans are unsecured,
non-interest bearing and have no fixed terms of repayment, and therefore, deemed
payable on demand.


Critical Accounting Policies and Estimates




Our management's discussion and analysis of our financial condition and results
of operations are based on our consolidated financial statements ("CFS"), which
were prepared in accordance with accounting principles generally accepted in the
United States of America ("US GAAP"). The preparation of these financial
statements requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements as well as the
reported net sales and expenses during the reporting periods. On an ongoing
basis, we evaluate our estimates and assumptions. We base our estimates on
historical experience and various other factors that we believe are reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.



While our significant accounting policies are more fully described in Note 2 to
our CFS, we believe the following accounting policies are the most critical to
assist you in fully understanding and evaluating this management discussion
and
analysis.



Basis of Presentation


The accompanying consolidated financial statements ("CFS") are prepared in
conformity with U.S. Generally Accepted Accounting Principles ("US GAAP") and
applicable rules and regulations of the Securities and Exchange Commission
("SEC") regarding interim financial reporting. The functional currency of Bio
Essence is U.S. dollars ("$''). The accompanying financial statements are
presented in U.S. dollars ("$"). The consolidated financial statements include
the financial statements of the Company and its subsidiaries, BEP, BEH and McBE.
All significant inter-company transactions and balances were eliminated in
consolidation.



                                       16





Going Concern



The Company incurred net losses of $233,120 and $210,355 for the three months
ended March 31, 2022 and 2021, respectively. The Company also had an accumulated
deficit of $7,592,036 as of March 31, 2022. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. The Company
plans to increase its income by strengthening its sales force, providing
attractive sales incentive programs, and increasing marketing and promotion
activities. Management also intends to raise additional funds by way of a
private or public offering, or by obtaining loans from banks or others. While
the Company believes in the viability of its strategy to generate sufficient
revenue and in its ability to raise additional funds on reasonable terms and
conditions, there can be no assurances to that effect. The ability of the
Company to continue as a going concern is dependent upon the Company's ability
to further implement its business plan and generate sufficient revenue and its
ability to raise additional funds by way of a public or private offering. The
financial statements do not include any adjustments that might result from
the
outcome of this uncertainty.



Use of Estimates



In preparing financial statements in conformity with US GAAP, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the dates of
the financial statements, as well as the reported amounts of revenues and
expenses during the reporting period.



Significant estimates, required by management, include the recoverability of
long-lived assets, allowance for doubtful accounts, and the reserve for obsolete
and slow-moving inventories. Actual results could differ from those estimates



Accounts Receivable



The Company's policy is to maintain an allowance for potential credit losses on
accounts receivable. Management reviews the composition of accounts receivable
and analyzes historical bad debts, customer concentrations, customer credit
worthiness, current economic trends and changes in customer payment patterns to
evaluate the adequacy of these reserves. As of March 31, 2022 and December 31,
2021, the bad debt allowance was $2,252 and $2,252, respectively.



Revenue Recognition



The Company recognizes revenues following the five-step model prescribed under
ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance
obligations in the contract; (iii) determine the transaction price; (iv)
allocate the transaction price to the performance obligations in the contract;
and (v) recognize revenues when (or as) we satisfy the performance obligation.



Revenue is measured at the amount of consideration we expect to receive in
exchange for the sale of our product, which occurs at a point in time, typically
upon delivery to the customer. The Company expenses incremental costs of
obtaining a contract as and when incurred if the expected amortization period of
the asset that it would have recognized is one year or less or the amount is
immaterial.



Revenues from sales of goods are measured at net of reserves established for
applicable discounts and allowances that are offered within contracts with the
Company's customers, and are recognized when the goods are delivered to the
customers.



Product revenue reserves, which are classified as a reduction in product
revenues, are generally characterized in the following categories: discounts,
returns and rebates. These reserves are based on estimates of the amounts earned
or to be claimed on the related sales and are classified as reductions of
accounts receivable as the amount is payable to the Company's customers.



Revenues from manufacture services are recognized when the manufacture process
is completed pursuant to the customers' requirement and the finished goods
were
delivered to the customers.



                                       17





The Company's return policy allows for the return of damaged or defective
products and shipment errors. A notice of damage or wrong items should make
within five days from receiving the goods, and actual return of the products
must be completed within 30 days from the date of receiving the goods. Delayed
notification for damaged or wrong products will not be accepted for return or
exchange. Custom formulas and capsules are not returnable. The amount for return
of products was immaterial for the three months ended March 31, 2022 and 2021.



Results of operations


Comparison of three months ended March 31, 2022 and 2021




The following table sets forth the results of our operations for the
periods indicated as a percentage of net sales. Certain columns may not add due
to rounding.



                                                                                                           Dollar          Percent
                                                                                                          Increase         Increase
                                         2022         % of Sales          2021         % of Sales        (Decrease)       (Decrease)
Sales of goods                        $  181,579            59.26 %    $  212,028              100 %    $    (30,449 )         (14.36 )%
Manufacture service revenue              124,835            40.74 %             -                - %         124,835                - %
Total revenues                           306,414              100 %       212,028              100 %          94,386            44.52 %
Sales of goods cost                      145,665            80.22 %       135,309            63.82 %          10,356             7.65 %
Cost of manufacture service               90,293            72.33 %             -                - %          90,293                - %
Total cost of revenues                   235,958            77.01 %       135,309            63.82 %         100,649            74.38 %
Gross profit                              70,456            22.99 %        76,179            36.18 %          (6,263 )          (8.16 )%
Selling expenses                          10,614             3.46 %        15,523             7.32 %          (4,909 )         (31.62 )%
Bad debts                                      -                - %           380             0.18 %            (380 )           (100 )%
General and administrative expenses      286,274            93.43 %       265,347           125.15 %          20,927             7.89 %
Operating expenses                       296,888            96.89 %       281,250           132.65 %          15,638             5.56 %
Loss from operations                    (226,432 )          (73.9 )%     (204,531 )         (96.46 )%        (21,901 )          10.71 %
Other income (expense), net               (6,688 )          (2.18 )%       (2,524 )          (1.19 )%         (4,164 )         164.98 %
Loss before income taxes                (233,120 )         (76.08 )%     (207,055 )         (97.65 )%        (26,065 )          12.59 %
Income tax expense                             -                - %         3,300             1.56 %          (3,300 )           (100 )%
Net loss                              $ (233,120 )         (76.08 )%   $ (210,355 )         (99.21 )%   $    (22,765 )          10.82 %




Sales


Sales for the three months ended March 31, 2022 and 2021 were $306,414 and
$212,028, respectively, an increase of $94,386 or 44.52%. The increase was
primarily attributable to (i) increase the big purchase orders from new
customers, (ii) increased revenue from manufacture service (OEM) provided by
BEP, and (iii) purchased of new equipment to enhance our ability to complete and
deliver the big orders in a more speedy and efficient way.



Costs of sales



Costs of sales for the three months ended March 31, 2022 and 2021 was $235,958
and $135,309, respectively, an increase of $100,649 or 74.38%. The increase of
COGS in 2022 was due to increased revenue and increased cost of production
especially the labor. During the three months ended March 31, 2022, we received
quite a few big orders especially the OEM orders, which required more
manufacture labors to complete the orders. In addition, we had inventory
adjustment for obsolete inventory of $41,854 during the three months ended March
31, 2022. The percentage of cost of sales of goods to total sales of goods was
80.22% and 63.82% for the three months ended March 31, 2022 and 2021,
respectively. The percentage of cost of manufacture services to total
manufacture income was 72.33% and 0.00% for the three months ended March 31,
2022 and 2021, respectively.



                                       18





Gross profit



The gross profit for the three months ended March 31, 2022 and 2021 was $70,456
and $76,719, respectively, a decrease of $6,263 or 8.16%. The blended profit
margin was 23.0% and 36.2% for the three months ended March 31, 2022 and 2021,
respectively.



Operating expenses



Selling expenses consist mainly of advertising, show expense, products
marketing, shipping expenses, and promotion expenses. Selling expense was
$10,614 for the three months ended March 31, 2022, compared to $15,523 for the
three months ended March 31, 2021, a decrease of $4,909 or 31.62%, mainly
resulting from decreased advertising expense by $5,960, was partly offset by
increased shipping expense by $1,200.



Bad debt expense was $0 for the three months ended March 31, 2022, compared to $380 for the three months ended March 31, 2021, a decrease of $380 or 100%.

General and administrative expenses consist mainly of employee salaries and
welfare, business meeting, utilities, accounting, consulting, and legal
expenses. General and administrative expenses were $286,274 for the three months
ended March 31, 2022, compared to $265,347 for the three months ended March 31,
2021, an increase of $20,927 or 7.89%, the increase was mainly due to increased
salaries expense by $46,650, was partly offset by decreased consulting fee by
$17,200, and decreased other G&A expenses by $8,520.



Other expenses, net



Other expenses was $6,688 and $2,524 for the three months ended March 31, 2022
and 2021, respectively. For the three months ended March 31, 2022, other
expenses mainly consisted of interest expense of $5,160, financial expense of
$1,568 and other income of $40. For the three months ended March 31, 2021, other
expenses mainly consisted of interest expense of $2,763, financial expense of
$3,299 and other income of $3,538.



Net loss


We had a net loss of $233,120 for the three months ended March 31, 2022, compared to $210,355 for the three months ended March 31, 2021, an increase of $22,765 or 10.82%, reflected the above-mentioned factors combined.

Liquidity and Capital Resources




As of March 31, 2022, we had cash and equivalents of $225, bank overdraft of
27,400, other current assets of $378,638, other current liabilities (excluding
bank overdraft) of $3,074,991, working capital deficit of $2,723,528, a current
ratio of 0.12:1. As of December 31, 2021, we had cash and equivalents of $303,
bank overdraft of $19,032, other current assets of $261,659, other current
liabilities (excluding bank overdraft) of $2,736,932, working capital deficit of
$2,494,002, a current ratio of 0.10:1. The following is a summary of cash
provided by or used in each of the indicated types of activities during the
three months ended March 31, 2022, and 2021, respectively.



                                               2022           2021

Net cash used in operating activities $ (254,475 ) $ (158,639 ) Net cash used in investing activities $ - $ (6,837 ) Net cash provided by financing activities $ 254,397 $ 170,409

Net cash used in operating activities




Net cash used in operating activities was $254,475 for the three months ended
March 31, 2022, compared to $158,639 in 2021. The increase of cash outflow of
$95,836 from operating activities for the three months ended March 31, 2022 was
principally attributable to increased cash outflow on accounts receivable by
$57,974 and increase cash outflow on inventory by $40,093.



                                       19




Net cash used in investing activities




Net cash used in investing activities was $0 for the three months ended March
31, 2022, compared to $6,837 in 2021. We did not have any investing activities
for the three months ended March 31, 2022; for the three months ended March 31,
2021, we purchased fixed assets of $9,537, but offset with the proceeds from
sale of fixed assets for $2,700.



Net cash provided by financing activities

Net cash provided by financing activities was $254,397 for the three months
ended March 31, 2022, compared to $170,409 in 2021. The net cash provided by
financing activities for the three months ended March 31, 2022 consisted of
proceeds of $250,000 from loans from one major shareholder (also the senior
officer), but partly offset by repayment of loan payable of $3,970. The net cash
provided by financing activities for three months ended March 31, 2021 mainly
consisted of proceeds from government loans of $115,245 due to the Covid-19, and
loan from a major shareholder (also the senior officer) of $84,146, but partly
offset by bank overdraft of $28,982.



Our current liabilities exceed current assets at March 31, 2022, and we incurred
substantial losses and cash outflows from operating activities in the periods
presented. We may have difficulty to meet upcoming cash requirements. As of
March 31, 2022, our principal source of funds was loans from an officer (also is
the Company's major shareholder). As of March 31, 2022, we believe we will need
$1.2 million cash to continue our current business for the next 12 months. In
addition to our continuous effort to improve our sales and net profits, we have
explored and continue to explore other options to provide additional financing
to fund future operations as well as other possible courses of action. Such
actions may include, but are not limited to, securing lines of credit, sales of
debt or equity securities (which may result in dilution to existing
shareholders), loans and cash advances from other third parties or banks, and
other similar actions. There can be no assurance that we will be able to obtain
additional funding (if needed), on acceptable terms or at all, through a sale of
our common stock, loans from financial institutions, or other third parties, or
any of the actions discussed above. If we cannot sustain profitable operations,
and additional capital is unavailable, lack of liquidity could have a material
adverse effect on our business viability, financial position, results of
operations and cash flows.



Off-Balance Sheet Arrangements




We have not entered into any financial guarantees or other commitments to
guarantee the obligations of any third parties. We have not entered into any
derivative contracts that are indexed to our shares and classified as
shareholder's equity or that are not reflected in our consolidated financial
statements. Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity. We do not have any variable interest in
any unconsolidated entity that provides financing, liquidity, market risk or
credit support to us or engages in leasing, hedging or research and development
services with us.

© Edgar Online, source Glimpses

All news about BIO ESSENCE CORPORATION
05/16BIO ESSENCE CORP Management's Discussion and Analysis of Financial Condition and Resul..
AQ
05/16Bio Essence Corporation Reports Earnings Results for the First Quarter Ended March 31, ..
CI
03/31Bio Essence Corporation Reports Earnings Results for the Full Year Ended December 31, 2..
CI
More news
Managers and Directors
Yin Yan Chairman, Chief Executive & Financial Officer
Sia Fooladian Director
Sharon Mair Director
Simon Shavanson Director
Yang Yang Huang Director
Sector and Competitors
1st jan.Capi. (M$)
BIO ESSENCE CORPORATION0.00%0
JOHNSON & JOHNSON4.94%472 389
PFIZER, INC.-11.41%293 506
ELI LILLY AND COMPANY17.55%292 291
ROCHE HOLDING AG-14.90%274 360
ABBVIE INC.13.59%271 782