The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements (unaudited) and the related notes and other financial
information included elsewhere in this quarterly report on Form 10-Q and our
consolidated financial statements (unaudited) included in our current report on
Form 8-K field on January 14, 2021. In addition to historical consolidated
financial information, the following discussion contains forward-looking
statements that reflect our plans, estimates, and beliefs. Our actual results
could differ materially from those discussed in the forward-looking statements.
You should review the subsection titled "Cautionary Note Regarding
Forward-Looking Statements" below for a discussion of forward-looking statements
and the section titled "Risk Factors" included in our current report on Form 8-K
field on January 14, 2021 for a discussion of factors that could cause actual
results to differ materially from the results described in or implied by the
forward-looking statements contained in the following discussion and analysis
and elsewhere in this quarterly report on Form 10-Q.
Cautionary Note Regarding Forward-Looking Statements
Some of the statements contained in this quarterly report on Form 10-Q discuss
our plans and strategies for our business or state other forward-looking
statements, as this term is defined in the Private Securities Litigation Reform
Act of 1995. Statements that are not statements of historical facts may be
deemed to be forward-looking statements. The words "anticipate," "believe,"
"estimate," "expect," "plan," "intend," "should," "seek," "will," and similar
expressions are intended to identify these forward-looking statements but are
not the exclusive means of identifying them. These forward-looking statements
reflect the current views of our management. However, various risks,
uncertainties and contingencies could cause our actual results, performance or
achievements to differ materially from those expressed in, or implied by, these
statements. See our current report on Form 8-K filed on January 14, 2021 for a
discussion of certain known risks.
We are a technology company focused on the research and development and
application of endometrial stem cells. We are committed to building the first
public endometrial stem cell repository in the world. We offer our products and
services under the brand "VIVCELL". Our product offerings include healthcare
products for respiratory system, skincare products, hair care products, healthy
beverages and male and female personal care products. We also offer stem cell
related services including cell testing and health management consulting
We are a U.S. holding company primarily operating in China through our wholly
owned subsidiary, Platinum International Biotech Co., Ltd., a company organized
under the laws of the Cayman Islands ("Platinum"), which in turn operates in
China through its wholly-owned subsidiaries and contractual arrangements with a
variable interest entity (the "VIE"), Yubo International Biotech (Beijing)
Limited, a company organized under the laws of the People's Republic of China
("Yubo") that conducts our daily operations.
Key factors affecting our results of operations include revenues, cost of
revenues, operating expenses and income and taxation.
We were incorporated as a New York corporation on February 22, 1991 and
commenced operations on February 10, 1992. Prior to March 2003, our business had
been focused on pre-revenue development and commercialization of disposable
medical devices designed to enhance the effectiveness of magnetic resonance
imaging in detection and diagnosis of heart disease. Due to the unavailability
of funding, beginning in the Fall of 2002 we essentially ceased all of our
operations including product development and commercialization activities. Our
efforts to realize value for our prior business and MRI technology have been
unsuccessful. As a result, we view our most viable option to be merging with an
unrelated operating company that could benefit from our status as a reporting
company in a so-called "reverse merger" transaction. In November 2006, our then
shareholders approved a 1 for 100 reverse stock split of our common stock. On
March 1, 2007, such reverse stock split became effective. Fractional shares were
rounded up to the next full share.
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Change of Control
On September 23, 2020, Activist Investing LLC (the "Seller"), the owner of
116,697,438 common shares (the "Shares") upon conversion of $1,472,000 of
promissory notes and accrued interest acquired by the Seller after the Seller
purchased control of our Company in July 2020, agreed to sell the Shares to Lina
Liu (the "Purchaser), a resident of China, for $255,000, pursuant to an Amended
and Restated Stock Purchase Agreement (the "Stock Purchase Agreement"). The
first agreement between the Seller and the Purchase was superseded because it
had the incorrect name of the Seller. The Seller is owned 100% by David Lazar.
The Shares represent approximately 99.0% of the 117,875,323 Class A common
shares outstanding at November 30, 2020.
The sale of the Shares to Ms. Liu was completed on October 2, 2020. Ms. Liu, as
our 99.0% majority shareholder, then appointed Jun Wang, Yang Wang and Zhihui
Bai as members of our board of director (the "Board") and Ms. Liu as a director
and CFO, Treasurer and Secretary (together, the "Designees"). As a result, there
was a change of control of our Company; and the change of management was
completed on or about October 12, 2020 (the "New Management Date"), ten (10)
days after our Information Statement pursuant to SEC Rule 14f-1 was filed with
the SEC and mailed to our stockholders. There is no family relationship or other
relationship between the Seller and the Purchaser.
In connection with the sale under the Stock Purchase Agreement, Mr. Lazar
resigned as an officer and director, and John B. Lowy and Dovid Kotkes have
resigned as directors, and have appointed the Designees as our directors, on the
New Management Date. As a result thereof, the Designees became our directors, on
or about October 12, 2020.
After obtaining the approval of the Board and the majority stockholder, we
amended our Article of Incorporations by filing of a Certificate of Amendment
changing the name of the Company to "Yubo International Biotech Limited" under
stock symbol "YBGJ". The name change became effective December 4, 2020, pursuant
to the Certificate of Amendment, upon completion of processing by the Financial
Industry Regulatory Authority and in accordance with the SEC rules and
Reverse Merger with Platinum International Biotech Co., Ltd.
On January 14, 2021 (the "Closing Date"), we entered into 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 us, Platinum, Yubo International Biotech
(Beijing) Limited, a company organized under the laws of the People's Republic
of China ("Yubo"), and certain selling stockholders named therein.
In accordance with the terms of the Exchange Agreement, on the Closing Date, we
issued a total of 117,000,000 shares of our Class A common stock to the 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 our issued and outstanding capital stock, Platinum
became our wholly-owned subsidiary, and we acquired the business and operations
of Platinum and Yubo.
Platinum was incorporated on April 7, 2020 under the laws of the Cayman Islands
as a holding company. Commencing April 2020, its consolidated variable interest
entity 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.
Immediately prior to the Exchange Transaction, we 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 of Class A common stock previously held by
Lina Liu, and as of the date hereof, our authorized capital stock consists of
120,000,000 shares of common stock, par value $.001 per share, of which
118,177,885 Class A common plus 4,447 Class B common) are issued and
outstanding, and 5,000,000 shares of Preferred Stock, $.001 par value, none of
which shares are issued or outstanding. Each share of Class A common stock is
entitled to one vote with respect to all matters to be acted on by the
stockholders; and each share of Class B common stock is entitled to five votes
per share, and is convertible into one share of Class A common stock.
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On March 11, 2020, the World Health Organization declared the COVID-19 outbreak
to be a global pandemic. In addition to the devastating effects on human life,
the pandemic is having a negative ripple effect on the global economy, leading
to disruptions and volatility in the global financial markets. Most U.S. states
and many countries have issued policies intended to stop or slow the further
spread of the disease.
COVID-19 and the U.S's response to the pandemic are significantly affecting the
economy. There are no comparable events that provide guidance as to the effect
the COVID-19 pandemic may have, and, as a result, the ultimate effect of the
pandemic is highly uncertain and subject to change. We do not yet know the full
extent of the effects on the economy, the markets we serve, our business, or our
Critical Accounting Principles
This section discusses our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
income and expenses during the reporting period. On an on-going basis,
management evaluates its estimates and judgments, including those related to
accrued expenses, financing operations, and contingencies and litigation.
Management bases its estimates and judgments on historical experience and on
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The most significant accounting estimates inherent in
the preparation of our financial statements include estimates as to the
appropriate carrying value of certain assets and liabilities which are not
readily apparent from other sources. We consider certain accounting policies
related to fair value measurements and earnings per share to be critical
accounting policies that require the use of significant judgments and estimates
relating to matters that are inherently uncertain and may result in materially
different results under different assumptions and conditions. See Note 2 -
Summary of Significant Accounting Policies.
As of September 30, 2021, the impact of COVID-19 on our business continued to
unfold. As a result, many of our estimates and assumptions carry a higher degree
of variability and volatility. As events continue to evolve and additional
information becomes available, our estimates may change in future periods.
Recently Issued and Adopted Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update ("ASU") 201409, Revenue
from Contracts with Customers (Topic 606), which supersedes all existing revenue
recognition requirements, including most industry specific guidance. The new
standard requires a company to recognize revenue when it transfers goods or
services to customers in an amount that reflects the consideration that the
company expects to receive for those goods or services. This guidance was
originally effective for interim and annual periods beginning after December 15,
2016 and allowed for adoption using a full retrospective method, or a modified
retrospective method. The Company has adopted ASC 606.
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
Results of Operations for the Three Months Ended September 30, 2021 Compared to
the Three Months Ended September 30, 2020 and for the Nine Months Ended
September 30, 2021 Compared to the Nine Months Ended September 30, 2020
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Sales, Cost of Goods Sold and Gross Profit
We generated sales of $98,303 for the three months ended September 30, 2021, as
compared to $194,459 for the three months ended September 30, 2020. Such
decrease was primarily due to decrease in sale of oral liquid health products.
Our cost of goods sold was $25,106 for the three months ended September 30,
2021, as compared to $62,990 for the three months ended September 30, 2020. Such
decrease was primarily due to sale of oral liquid health products. As a result,
our gross profit decreased from $131,469 for the three months ended September
30, 2020 to $73,197 for the three months ended September 30, 2021.
We generated sales of $913,103 for the nine months ended September 30, 2021, as
compared to $471,148 for the nine months ended September 30, 2020. Such increase
was primarily due to sale of oral liquid health products. Our cost of goods sold
was $310,312 for the nine months ended September 30, 2021, as compared to
$39,724 for the nine months ended September 30, 2020. Such increase was
primarily due to sale of oral liquid health products. As a result, our gross
profit increased from $431,424 for the nine months ended September 30, 2020 to
$601,791 for the nine months ended September 30, 2021.
Our operating expenses were $419,211 for the three months ended September 30,
2021, as compared to $435,934 for the three months ended September 30, 2020. The
decrease in operating expenses was primarily due to decreases in operating
expenses partially offset by increases in employee compensation and occupancy.
Our operating expenses were $1,756,460 for the nine months ended September 30,
2021, as compared to $861,568 for the nine months ended September 30, 2020. The
increase in operating expenses was primarily due to increases in employee
compensation, occupancy, and other operating expenses.
Loss from Operations
Our loss from operations was $346,014 for the three months ended September 30,
2021, as compared to $304,465 for the three months ended September 30, 2020. The
increase in loss from operations was due to decrease in gross profit $58,272.
Our loss from operations was $1,154,669 for the nine months ended September 30,
2021, as compared to $430,144 for the nine months ended September 30, 2020. The
increase in loss from operations was due to increase in gross profit $170,367
offset by increase in operating expense of $894,892.
Other Income (Expense)
Our other expense (income) was $9,430 for the three months ended September 30,
2021, as compared to $(247) for the three months ended September 30, 2020. The
increase in other expense was primarily due to write off of an intangible asset.
Our other expense (income) was $9,402 for the nine months ended September 30,
2021, as compared to $(157) for the nine months ended September 30, 2020. The
increase in other income was primarily due to write off of an intangible asset.
Our net loss was $336,584 for the three months ended September 30, 2021, as
compared to $304,712 for the three months ended September 30, 2020. The increase
in net loss was primarily due to decrease in gross profit $58,272.
Our net loss was $1,145,267 for the nine months ended September 30, 2021, as
compared to $430,301 for the nine months ended September 30, 2020. The increase
in net loss was primarily due to increase in gross profit $170,367 offset by
increase in operating expense of $894,892.
Liquidity and Capital Resources
As of September 30, 2021, we had cash and equivalents on hand of $62,953 and a
negative working capital of $1,099,690. Generally, the primary sources of our
funds have been cash from operations, loans from our shareholders and capital
contributions. In addition, on May 6, 2021, we filed a registration statement on
Form S-1 with the SEC in connection with an offering, on a "best efforts" basis,
up to an aggregate of 5,000,000 shares of our Class A common stock at a fixed
price of $0.50 per share. We estimate that the net proceeds of this offering
will be approximately $2.42 million. We believe that our cash on hand and
working capital will be sufficient to meet its anticipated cash requirements
through January 31, 2022. We intend to continue working toward identifying and
obtaining new sources of financing. No assurances can be given that we will be
successful in obtaining additional financing in the future. Any future financing
that we may obtain may cause significant dilution to existing stockholders. Any
debt financing or other financing of securities senior to common stock that we
are able to obtain will likely include financial and other covenants that will
restrict our flexibility. Any failure to comply with these covenants would have
a negative impact on our business, prospects, financial condition, results of
operations and cash flows.
If adequate funds are not available, we may be required to delay, scale back or
eliminate portions of our operations, cease operations or obtain funds through
arrangements with strategic partners or others that may require us to relinquish
rights to certain of our assets. Accordingly, the inability to obtain such
financing could result in a significant loss of ownership and/or control of our
assets and could also adversely affect our ability to fund our continued
operations and our expansion efforts.
During the next 12 months, we expect to incur significant research and
development expenses with respect to our products. The majority of our research
and development activity is focused on development of our stem cell bank.
We also expect to incur significant legal and accounting costs in connection
with being a public company. We expect those fees will be significant and will
continue to impact our liquidity. Those fees will be higher as our business
volume and activity increases.
On May 11, 2021, we entered into a verbal loan agreement with World Precision
Medicine Technology Inc., a company owned and controlled by Cheung Ho Shun, one
of our existing shareholders, which provided the Company with a working capital
loan in the principal amount of $600,000. As of September 30, 2021, the entire
loan amount was outstanding.
As of September 30, 2021, we also had payables due to our shareholder and
director, Mr. Yang Wang, in the amount of $326,667, and to Mr. Huang Li, an
indirect shareholder, in the amount of $60,585.
All of our shareholder loans are due on demand and non-interest bearing.
The accompanying interim unaudited condensed consolidated financial statements
for the quarter ended September 30, 2021 included an explanatory paragraph
referring to our recurring operating losses and expressing substantial doubt in
our ability to continue as a going concern. Our consolidated financial
statements have been prepared on a going concern basis, which assumes the
realization of assets and settlement of liabilities in the normal course of
business. Our ability to continue as a going concern is dependent upon our
ability to generate profitable operations in the future and/or to obtain the
necessary financing to meet our obligations and repay our liabilities arising
from normal business operations when they become due. The outcome of these
matters cannot be predicted with any certainty at this time and raise
substantial doubt that we will be able to continue as a going concern. Our
consolidated financial statements do not include any adjustments to the amount
and classification of assets and liabilities that may be necessary should we be
unable to continue as a going concern.
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Off Balance Sheet Arrangements
We have not entered into any other financial guarantees or other commitments to
guarantee the payment obligations of any third parties. We have not entered into
any derivative contracts that are indexed to our shares and classified as
shareholder's equity or that are not reflected in its consolidated financial
statements. Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity. We do not have any variable interest in
any unconsolidated entity that provides financing, liquidity, market risk or
credit support to us or engages in leasing, hedging or research and development
services with us.
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