The following discussion and analysis of financial condition and results of operations relates to the operations and financial condition reported in our consolidated financial statements, which appear elsewhere in this Report, and should be read in conjunction with such financial statements and related notes included in this Report. Except for the historical information contained herein, the following discussion, as well as other information in this Report, contain "forward-looking statements," within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the "safe harbor" created by those sections. Actual results and the timing of the events may differ materially from those contained in these forward-looking statements due to many factors, including those discussed in the "Forward-Looking Statements" set forth elsewhere in this Report.





Overview

Heyu Biological Technology Corporation (the "Company" or "we") was incorporated in the state of Nevada on May 18, 1987, as Asphalt Associates, Inc. and changed its name to Pacific WebWorks in January 1999. From 1999 to 2016, the Company engaged in the development and distribution of web tools software, electronic business storefront hosting, and Internet payment systems for individuals and small to mid-sized businesses.

On July 3, 2018, the Company changed its name to Heyu Biological Technology Corporation and applied for a new ticker symbol HYBT.

On January 17, 2019, Jiashierle (Xiamen) Healthcare Technology Co., Ltd. ("JSEL"), a limited liability company organized under the laws of the People's Republic of China (the "PRC"), and an indirect wholly owned subsidiary of the Company, entered into a Share Transfer Agreement (the "Share Transfer Agreement") with Mr. Yu Xu ("Mr. Xu"), an individual who owned 90% of the equity interests of Shanghai Kangzi Medical Technology Co., Ltd., a limited liability company organized under the laws of the PRC ("Kangzi"). Pursuant to the Share Transfer Agreement, Mr. Xu transferred 60% of the equity interests of Kangzi to JSEL on January 17, 2019 for the purpose of developing a joint venture in the business of selling medical equipment. In return, JSEL would fund the operations of Kangzi in proportion to its equity interest in Kangzi. Kangzi owned no assets and conducts no business operation of its own. As a result, as of January 17, 2019, Kangzi became an indirect subsidiary of the Company.

Since the beginning of 2019, Mr. Xu has led the core research and development team of Kangzi to develop and manufacture a new medical product, the Submillimeter Wave (Terahertz) Quantized Space Therapy Chamber (the "Chamber"). Utilizing submillimeter waves, the Chamber is a medical equipment designed to treat cancer through cold nuclear fusion caused by cosmic ray muons in an enclosed chamber. Specifically, we believe that exposure to an appropriate amount of submillimeter waves could accelerate the generation of a large number of cosmic ray muons inside the human body and that such cosmic ray muons could further facilitate cold nuclear fusion, which could reverse the process of cancer by converting selenium into nickel inside cells.





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The core research and development team consists of researchers who have extensive experience in medicine and physics. The lead scientist of the team, Mr. Xu, served as the deputy chief engineer of the New Energy Base of the National Defense-Science and Technology Commission in 1995, the director of Shanghai Hengbian New Energy Research Institute from 2003 to 2008, and the chairman and chief scientist of Shanghai Guangzhui New Energy Technology Co., Ltd. from 2011 to 2019. In 2012, Mr. Xu was awarded the "Harmony Person of the Year in China" at the "2011 Harmony China Annual Summit" in Beijing. He was also jointly recognized as "Leaping China: One of the Most Influential People of the Year in 2011" by China International Economic and Technical Cooperation Promotion Association, China Elite Culture Promotion Association, and China Outstanding Chinese Merchants Association. In 2013, the Organizing Committee of Boau Forum on Asian Small and Medium Enterprise Development awarded Mr. Xu "2013 China Economic Outstanding Contribution Award."

Pursuant to the terms of the Share Transfer Agreement, JSEL has the right to monitor and manage all aspects of operation of Kangzi, including its research and development activities relating to the Chamber. As the development of the Chamber enters its final stage at Kangzi, JSEL started accepting pre-orders for the Chamber in September 2019. On October 15, 2019, JSEL entered into a clinical cooperation agreement (the "Clinical Cooperation Agreement") with Shenzhen Saikun Biotechnology Co., Ltd. ("Saikun"). Pursuant to the Clinical Cooperation Agreement, Saikun agreed to pay JSEL RMB5.5 million as the total pre-order payment. RMB1.5 million and RMB1.5 million were delivered to JSEL on September 7 and September 27, 2019, respectively. The parties are currently working on the timing for payment of the remaining RMB2.5 million due under the Clinical Cooperation Agreement. In exchange, JSEL is obligated to purchase all the components of a Chamber from Kangzi, fully assemble it, and conduct a clinical trial with Saikun, third-party hospital partners, and patients using the Chamber. Specifically, after receiving the full amount of payment from Saikun, JSEL shall transport the Chamber to Saikun's preferred location, properly install it, and conduct a clinical trial that lasts at least one month. During the clinical trial, JSEL shall provide training sessions regarding the proper operation of the Chamber to Saikun's employees. Both Saikun and JSEL are obligated to find third-party hospitals that will agree to act as partners to co-host the clinical trial and patients who will voluntarily undergo treatment provided by the Chamber. While Saikun is responsible for various expenses related to the clinical trial, JSEL is responsible for communicating with patients receiving treatment and other patient-related administrative matters. When JSEL determines that Saikun is capable of properly operating the Chamber and managing activities related to the Chamber, Saikun may request JSEL to move the Chamber to a location designated by Saikun and reinstall it. Furthermore, upon the successful completion of the clinical trial, JSEL shall provide Saikun governmental permits necessary for the operation of the Chamber, and Saikun shall operate the Chamber and provide related services to patients under the supervision of JSEL. In addition, JSEL shall transfer the right of using the Chamber and any beneficiary right affiliated with using the Chamber to Saikun upon receiving the full amount of payment from Saikun. JSEL, nevertheless, owns all the intellectual property rights affiliated with the Chamber. If the two parties decide to terminate the Clinical Cooperation Agreement prior to the expiration of its term, Saikun's right of using the Chamber during the term is still effective as long as its use of the Chamber does not infringe any of JSEL's intellectual property rights affiliated with the Chamber. The two parties agreed that the term of the Clinical Cooperation Agreement would not end until Kangzi successfully obtains permits issued by relevant government entities supervising development and sale of medical equipment.

To prepare for mass production of the Chambers, Kangzi is conducting clinical experiments to make further improvements on the Chamber and adjusting features of the mass-production mold for the Chambers. As its long-term business strategy, Kangzi focuses on researching, developing, and manufacturing high-technology medical equipment while targeting both individual and institutional customers. It plans to mass-produce the Chambers in small and medium sizes, establish operation centers to sell the Chambers in various cities across China, and initiate advertising and marketing campaigns on different media platforms. Kangzi will also monetize on services provided to customers who use the Chambers and other medical products. As of the date of this Report, we are still in the clinical experiment phase and Kangzi is still in the process of obtaining official governmental permits from relevant government authorities to produce and sell the Chambers on a national scale. There is no assurance that we will obtain the official governmental permits.





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In addition to business activities related to the Chamber, the Company is also conducting research, development, manufacturing, and sale of healthcare equipment and plant-based disinfectant spray for treating skin infections and disinfecting wounds. On March 17, 2020, we entered into a business service cooperation agreement with Xiamen Qingda Intelligent Technology Co., Ltd., a wholly-owned subsidiary of Cross-strait Tsinghua Research Institute, pursuant to which the parties agreed to jointly improve a plant-based disinfectant spray for treating skin infections and disinfecting wounds. The term of such agreement is three years, and the agreement can be renewed upon mutual agreement of both parties. The original plant-based disinfectant spray was developed and owned by the Company, while the improved product shall be owned by both the Company and Cross-strait Tsinghua Research Institute. The Cross-strait Tsinghua Research Institute will receive 2% of the gross proceeds from sales of such improved product. By September 30, 2020, we had generated revenues of approximately $21,796 through sales of the improved product. In the near future, the Company aims to standardize the production and sale of healthcare equipment and plant-based disinfectant spray, while increasing its brand awareness in the healthcare markets.

The recent COVID-19 outbreak has spread throughout the world, especially in China, the United States, and Europe. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic-the first pandemic caused by a coronavirus. The outbreak has resulted in the implementation of significant governmental measures, including lockdowns, closures, quarantines, and travel bans, intended to control the spread of the virus, which measures have caused severe disruptions to our business operations. We suspended our business operation in early February 2020 due to government mandates and most of our staff members were forced to work from home. We partially resumed our business operations on February 17, 2020, and we fully resumed our business operations on March 1, 2020. However, as of the date of this Report, our management and scientists have been working remotely. Accordingly, our business, results of operations, and financial condition during the fiscal year ending December 31, 2020 have been adversely affected. As of the date of this Report, the COVID-19 outbreak seems to be under relative control in China and our management expects that our results of operations will improve in the coming fiscal quarter.

Liquidity and Capital Resources

As of September 30, 2020, we had assets of $743,555, which consisted of current assets of $3,277 in cash, $92,073 in other receivables, $19,055 as advances to suppliers, $481,438 as inventory, and noncurrent asset of $147,712 as operating lease right-of-use asset. We had liabilities of $1,787,178, which consisted of current liabilities of $17,152 in accounts payable, $236,599 in accrued expenses and other payables, $484,674 in advances from customers, $31 in taxes payable, $898,344 in related party payables, and $75,723 in short-term operating lease liabilities. We also had recognized long-term operating lease liabilities of $74,655 as noncurrent liabilities. We had an accumulated deficit of $19,156,356.

As of December 31, 2019, we had assets of $852,453, which mainly consisted of $95,522 in cash and cash equivalents, $421,533 in inventory, and $202,976 in operating lease right-of-use. As of December 31, 2019, we had liabilities of $1,620,394, which mainly consisted of $111,374 in accounts payable, $430,616 in advances from customers, $28 in other taxes payables, $874,749 in related party payables, and $172,610 in operating lease liabilities. We also had an accumulated deficit of $18,909,705. Since we started our business operations in March 2019, our director, Mr. Hungseng Tan, has been advancing the Company's daily operating expenses.

In light of the impacts of the COVID-19 outbreak, if the economic environment in China worsens, or if we incur unanticipated capital expenditures or decide to accelerate growth, we may need additional financing. As of September 30, 2020, we had borrowed a total of $898,344 from a stockholder for working capital purposes. The loan is unsecured, non-interest bearing, and payable on demand. We cannot guarantee, however, that additional financing, if required, would be available on favorable terms, if at all. Such financing may include the use of additional debt or the sale of the Company's equity interests. Any financing which involves the sale of the Company's equity interests or instruments that are convertible into the Company's equity interests could result in immediate and possibly significant dilution to our existing stockholders.





Results of Operations

From December 28, 2016 to September 6, 2019, we were a shell company without any substantive assets or operations. Since September 7, 2019, we have ceased to be a shell company and adopted the business of Kangzi, receiving our first pre-order payment from Saikun. For a more detailed description, please see "Overview" above.





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Comparison of the Three Months Ended September 30, 2020 and 2019

Our revenues during the three months ended September 30, 2020, were $16,600, and cost of revenues was $5,543, as compared to revenues of $7,387 and cost of revenues $3,666 for the same period in 2019, respectively. The increase in our revenue were mainly due to adjustment of our product line in reaction to the COVID-19 outbreak.. On March 17, 2020, we entered into a business service cooperation agreement with Xiamen Qingda Intelligent Technology Co., Ltd., pursuant to which we agreed to jointly improve the plant-based disinfectant spray for treating skin infections and disinfecting wounds. By September 30, 2020, we had generated revenues of approximately $21,796 through sales of the improved product. We have experienced significant growth in sales during the fiscal quarter ended September 30, 2020, as compared to that of the fiscal quarter ended June 30, 2020. Our management believes that our revenues will keep growing in the upcoming fiscal quarters.

We had incurred selling expenses of $301 and administrative expenses of $88,037 during the three months ended September 30, 2020, as compared to $5,992 and $202,505 for the same period in 2019, respectively. The decrease in selling expenses was mainly due to fewer sales activities for the our new products in the quarter ended September 30, 2020 compared with the same period in 2019, selling expenses. The decrease in administrative expenses was mainly due to decreased office rental expenses and employment expenses during the period. We might incur operating expenses without sufficient revenues, as we determined to focus on the research, development, and manufacturing of healthcare equipment and products. We will depend upon our officers and directors to make loans to the Company to meet any costs that may occur. All such advances will be interest-free loans or equity contributions. By the end of September 2019, we have received customer prepayments for our new medical product and services pursuant to the Clinical Cooperation Agreement. When we start fulfilling our obligations under the Clinical Cooperation Agreement, we expect to see significant increase in revenues. As of the date of this Report, we have yet to fulfill our obligations under the agreement.

Comparison of the Nine Months Ended September 30, 2020 and 2019

Our revenues during the nine months ended September 30, 2020, were $52,383, and the cost of revenues was $22,732, as compared to $49,930 and $28,272 for the same period in 2019, respectively. The increases in revenues and cost of revenues were due to an adjustment of product line based on the impact of the COVID-19 outbreak. As our prospective customers' businesses had been adversely affected by the COVID-19 outbreak, the demand for our main products and services decreased. Moreover, as of September 30, 2020, our sales and marketing team could not implement offline sales and marketing strategies as originally planned due to the COVID-19 outbreak. As a result, we were unable to secure the same amount of new revenue sources during the nine months ended September 30, 2020 as compared to the same period in 2019. On March 17, 2020, we entered into a business service cooperation agreement with Xiamen Qingda Intelligent Technology Co., Ltd., pursuant to which we agreed to jointly improve the plant-based disinfectant spray for treating skin infections and disinfecting wounds. By September 30, 2020, we had generated revenues of approximately $21,796 through sales of the improved product. As of the date of this Report, the COVID-19 outbreak seems to be under relative control in China. We believe that the impact of the COVID-19 outbreak on our business is both temporary and limited, and our revenues will start growing again as we resume our business activities.

We had incurred selling expenses of $6,527 and administrative expenses of $280,134 during the nine months ended September 30, 2020, as compared to $1,385 and $209,702 for the same period in 2019, respectively. The increase in selling expenses was mainly due to the launch of sales of the Company's improved plant-based disinfectant spray during the period. The increase in administrative expenses was mainly due to increased consulting expenses during the period. We might incur operating expenses without sufficient revenues, as we have recently determined to focus on the research, development, and manufacturing of healthcare equipment and products. We will depend upon our officers and directors to make loans to the Company to meet any costs that may occur. All such advances will be interest-free loans or equity contributions. However, by the end of September 2019, we have received customer prepayments for our new medical product and services pursuant to the Clinical Cooperation Agreement. When we start fulfilling our obligations under the Clinical Cooperation Agreement, we expect to see significant increase in revenues. As of the date of this Report, we have yet to fulfill our obligations under the agreement.





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Going Concern

The accompanying financial statements are presented on a going concern basis. The Company's financial condition raises substantial doubt about the Company's ability to continue as a going concern. As of September 30, 2020, the Company had an accumulated deficit of $19,156,356, and a net loss of $77,612 and $257,972 for the three and nine months ended September 30, 2020, respectively. It is relying on advances from its director, Mr. Hungseng Tan, to meet its limited operating expenses.

In light of the impacts of the COVID-19 outbreak, if the economic environment in China worsens, or if we incur unanticipated capital expenditures or decide to accelerate growth, we may need additional financing. As of September 30, 2020, we had borrowed a loan from a stockholder for working capital purposes. The loan is unsecured, non-interest bearing and payable on demand. We cannot guarantee, however, that additional financing, if required, would be available on favorable terms, if at all. Such financing may include the use of additional debt or the sale of the Company's equity interests. Any financing which involves the sale of the Company's equity interests or instruments that are convertible into the Company's equity interests could result in immediate and possibly significant dilution to our existing stockholders.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues, or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

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