Management's Discussion and Analysis of Financial Condition and Results of Operations

Caution Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q, including, without limitation, statements containing the words "believes", "anticipates", "expects" and words of similar import, constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Such factors include, among others, the following: international, national and local general economic and market conditions: demographic changes; the ability of the Company to sustain, manage or forecast its growth; the ability of the Company to successfully make and integrate acquisitions; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; and other factors referenced in this and previous filings.

Given these uncertainties, readers of this Form 10-Q and investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.





Overview

VitaSpring Biomedical Co. Ltd., is a leader in placenta stem cells, leveraging its novel placenta mesenchymal stem cells and exosomes to develop array of cell related products for patients with autoimmune disease. We aim to build a cell medical industry, invest in research and development of stem cell applications in regenerative medicine, establish advanced medical research centers and high standard cell production centers, and provide "GTP" standard stem cell preparations for the development of cellular drugs.

Our GTP standard stem cell production center is in Taipei, Taiwan for mass production of our MSC(mesenchymal stem cell), exesome and cytopharmaceuticals. We also cooperate with affiliated companies to support the mass production and commercialization of X.MSC-related medical projects. Some X.MSC-based projects are researches and trials of Investment New Drugs and part of them are related to X.exosome, the critical material in the related skincare products.

We have also entered into research collaborations with leading academic institutions such as National Taiwan University College of Medicine and ZheJiang University School of Medicine (China) pursuant to which we acquired rights to novel and proprietary technologies and programs. VitaSpring management also expect X.msc-related medical projects to implement in hospitals from a small scale in the future five years.

Our research facilities in Taipei, Taiwan contain our translational and pre-clinical sciences, analytical development and process science functions. These facilities support our product pipeline, process development and leverage our allogeneic cell therapy platform to drive innovation.





Recent Developments

In August 2022, VitaSpring Biomedical Co. Ltd. announced that it would temporarily suspend shipments of products and accepting purchase orders from distributors, national brokers, and reginal agents until end of the quarter. We also decided to review our marketing strategies for all stem cell product in Asia region.

Due to restricted Covid quarantine policies in Greater China and Taiwan, our management team have been actively communicating with distributors, national brokers, and reginal agents, and clinical clients regarding the challenges of the market and concluded to temporally suspend shipments and marketing due to the followings:

• protecting our rights in our intellectual property portfolio, including by obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;

• qualifying our and our CDMOs' manufacturing facilities for clinical and commercial manufacturing purposes;

• acceptance of our products, if approved by applicable regulatory authorities, by patients and the medical community;

• experiencing delayed on receipt of regulatory approvals from applicable authorities, including required authorizations to use and marketing authorizations;

We, however expect a significant increase in demand of our MSC and Exesome products in next quarter due to mass Covid infections when China official eases quarantine during the post-pandemic period in Asia. We also continue to evaluate opportunities to deploy different marketing strategies to different markets with sales channels, reginal brokers, and agents to enhance our products and profit margins.



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COVID-19 Business Update

We continue to closely monitor the impact of the ongoing and evolving COVID-19 pandemic on our business and operations and have taken steps designed to ensure the health and safety of our employees, staff, clinical site staff and patients and to maintain business continuity. We have transitioned a portion of our workforce to a remote, work-from-home model, while maintaining essential in-person laboratory functions in order to advance key research, development and manufacturing priorities. We implemented safety protocols and procedures to support our onsite workforce.

In addition to implementing measures designed to protect the health and safety of our workforce, our clinical study and operational teams are working closely with clinical sites to support the safety of site staff and patients as well as preserve data integrity and access to treatment as appropriate.

To date, the COVID-19 pandemic has not materially impacted our or our partners' clinical, research and development, regulatory and manufacturing operations or timelines. However, at the onset of the pandemic, we experienced, and depending on the evolving impacts of the ongoing COVID-19 pandemic, we may again experience, some transient delays in clinical study operations, as a result COVID-19.

The full extent to which the COVID-19 pandemic may impact our business and operations is subject to future developments which are uncertain and difficult to predict. We continue to monitor the impact of the COVID-19 pandemic on our business and operations and will adjust our activities as appropriate.

For additional information about risks and uncertainties related to the COVID-19 pandemic that may impact our business, financial condition and operations, see the section titled "Risk Factors" under Part II, Item 1A in this Quarterly Report on Form 10-Q.

Results of Operations for the Nine months ended October 31, 2022 Compared to the Nine months ended October 31, 2021

Revenue and cost of goods sold

For the nine months ended October 31, 2022 and October 31, 2021 the Company generated total revenue of $1,490,000 and $2,124,200, respectively, from sales of products to customers. Revenues for quarter ended October 31, 2022 and October 31, 2021 were $nil and $200,000. The decline in revenues, both in the nine months and quarter ended October 31, 2022 over the similar period in 2021, was a result of the decision to temporarily suspend shipments of products and accepting purchase orders from clients and distributors as a result of the Covid issue described above.

The cost of goods sold for the nine months ended October 31, 2022 and October 31, 2021 were $922,000 and $1,523,200, respectively, which represent the cost of raw materials, direct labor, freight-in costs, and purchase allowances. The cost of goods sold for the quarter ended October 31, 2022 and October 31, 2021 were $nil and $180,000, respectively.





Operating expenses

Total operating expenses for the nine months ended October 31, 2022 and October 31, 2021, remained steady at $582,603 and $601,000, respectively. Total operating expenses for the quarter ended October 31, 2022 and October 31, 2021, increased slightly period over period to $182,942 from $157,453, respectively. The operating expenses for the nine months and quarters ended October 31, 2021 were primarily Selling, general and administrative expenses, which remained constant despite our decision to suspend shipments and orders.





Net Income

The net income/(loss) for the nine months ended October 31, 2022 and October 31, 2021 declined period to period, resulting in a loss of $5,760 from income of $322,629, respectively. Net loss for the quarters ended October 31, 2022 and October 31, 2021, were consistent at losses of $138,004 and $137,453, respectively.

Liquidity and Capital Resources and Cash Requirements

At October 31, 2022, the Company had cash of $24,050. The Company had a working capital of $1,576,155.

During the quarter ended October 31, 2022, the Company used $83,162 of cash in operating activities, compared to the generation of $241,655 of cash from operations in the nine months ended October 31, 2021. The reason for the decline was because of temporally suspend taking orders and shipments.

During the quarter ended October 31, 2022 the Company used no cash in investing activities, compared to $72,996 used in the same period in 2021.

Management believes that current trends toward lower capital investment in start-up companies pose the most significant challenge to the Company's success over the next year and in future years. Additionally, the Company will have to meet all the financial disclosure and reporting requirements associated with being a publicly reporting company. The Company's management will have to spend additional time on policies and procedures to make sure it is compliant with various regulatory requirements, especially that of Section 404 of the Sarbanes-Oxley Act of 2002. This additional corporate governance time required of management could limit the amount of time management has to implement is business plan and impede the speed of its operations.





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Limited operating history; need for additional capital

There is no historical financial information about us upon which to base an evaluation of our performance. We are in a start-up stage of operations and have generated limited revenues since inception. We cannot guarantee that we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns due to price and cost increases in services and products.

Off-Balance Sheet Arrangements

We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon our financial condition or results of operations.





Going Concern

The Company has a retained earnings of 810,964 but a negative cash flow from operations of $83,601 for the nine months ended October 31, 2022. The Company had $1,490,000 in revenues for the nine months ended October 31, 2022, all of which were generated in the first six months of 2022. The Company currently lost $5,760 for the period and is in the process of completing its efforts to establish a stabilized source of revenue sufficient to cover operating costs over an extended period. Therefore, there is still a substantial doubt about the Company's ability to continue as a going concern. Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. The Company intends to position itself so that it will be able to raise additional funds through the capital markets. In light of management's efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.

Recent Accounting Pronouncements

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. .

In February 2016, the FASB issued ASU 2016-02, Leases, which will amend current lease accounting to require lessees to recognize (i) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

Management has considered all recent accounting pronouncements issued since and their potential effect on our financial statements. The Company's management believes that these recent pronouncements will not have a material effect on the Company's consolidated financial statements.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements.

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