The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited consolidated
financial statements for the three months ended March 31, 2022 and 2021 included
under "Item 1. Financial Statements" of this Quarterly Report. In addition to
historical information, this discussion and analysis contains forward-looking
statements that involve risks, uncertainties and assumptions. Our actual results
may differ materially from those anticipated in these forward-looking statements
as a result of certain factors, including, but not limited, to those set forth
under "Item 1A. Risk Factors" and elsewhere in our Annual Report on Form 10-K
filed with the SEC on April 15, 2022.
Corporate Overview
We are a U.S. holding company primarily operating through our wholly owned
subsidiary, Platinum International Biotech Co., Ltd., a company organized under
the laws of the Cayman Islands ("Platinum"). Platinum is not a Chinese operating
company but a Cayman Islands holding company which in turn operates in China
through its subsidiaries and contractual arrangements with Yubo Beijing, the
Chinese operating company. None of our Company, Platinum, or Platinum
International Biotech (Hong Kong) Limited, a wholly owned subsidiary of Platinum
("Platinum HK"), each as a holding company, conducts any day-to-day business
operations in China.
Yubo Beijing is a technology company focused on the research and development and
application of endometrial stem cells. Yubo Beijing is committed to building the
first public endometrial stem cell repository in the world. Yubo Beijing offers
its products and services under the brand "VIVCELL." Yubo Beijing's product
offerings include healthcare products for respiratory system, skincare products,
hair care products, healthy beverages and male and female personal care
products. Yubo Beijing also offers stem cell related services including cell
testing and health management consulting services.
Key factors affecting our results of operations include revenues, cost of
revenues, operating expenses and income and taxation.
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, pursuant to that certain Agreement and Plan
of Share Exchange, dated January 14, 2021 (the "Exchange Agreement"), by and
among us, Platinum, Yubo Beijing, 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 Beijing.
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"). From and after the Closing Date, our primary operations will
consist of the business and operations of Platinum and Yubo Beijing.
Yubo Beijing 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 Beijing is a Chinese operating company.
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 Platinum Stockholders.
Platinum is not a Chinese operating company but a Cayman Islands holding
company.
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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;
· Ability to formally carry out business and the ability to issuing invoices
to customers in RMB and receive revenues in RMB;
· Capable of converting RMB profits to US dollars or other foreign currency
for remittance to their parent company outside China; and
· Greater protection of intellectual property rights, know-how and
technology since no partner required and therefore more control of
intellectual property.
On December 31, 2020, Platinum HK formed a new wholly-owned subsidiary, Yubo
Global Biotechnology (Chengdu) Co. Ltd. ("Yubo Global").
On January 21, 2021, Yubo formed a new wholly-owned subsidiary, Jingzhi
Biotechnology (Chengdu) Co. Ltd. ("Yubo Jingzhi").
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, $0.001 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.
The VIE and China Operations
As a result of the Exchange Transaction, we became a U.S. holding company
primarily operating through our wholly owned subsidiary, Platinum. Platinum is
not a Chinese operating company but a Cayman Islands holding company which in
turn operates in China through (i) its Hong Kong and PRC subsidiaries, including
Yubo Jingzi , Yubo Global, and Yubo International Biotech (Chengdu) Limited, a
company organized under the laws of the PRC (the "Yubo WFOE" or "WFOE"), in
which we hold equity ownership interests, and (ii) Yubo Beijing, a Chinese
operating company that conducts the day-to-day business operations in China as
descried in this Quarterly Report. We do not own any equity interest in Yubo
Beijing.
We manage Yubo Beijing through our WFOE. On September 11, 2020, our WFOE entered
into a series of contractual arrangements with Yubo Beijing and its
shareholders, allowing us to exercise effective control over Yubo Beijing. These
agreements include:
· Exclusive Consulting Services Agreement. Pursuant to the Exclusive
Consulting Services Agreement, WFOE agrees to provide, and Yubo Beijing
agrees to accept, exclusive management services provided by WFOE.
· Exclusive Option Agreement. Pursuant the Exclusive Option Agreement, the
Yubo Beijing Shareholders granted WFOE an irrevocable and exclusive
purchase option to acquire Yubo Beijing's equity and/or assets at a
nominal consideration. WFOE may exercise the purchase option at any time.
· Equity Pledge Agreement. Pursuant to the Equity Pledge Agreement, the Yubo
Beijing Shareholders pledged all of their equity interests in Yubo
Beijing, including the proceeds thereof, to guarantee all of WFOE's rights
and benefits under the Exclusive Consulting Services Agreement and the
Exclusive Option Agreement.
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We do not have any equity ownership interest in, direct foreign investment in,
or control through such contractual agreements of Yubo Beijing. As a result of
our contractual relationships with Yubo Beijing, we consolidate Yubo Beijing's
financial results in our consolidated financial statements and are the primary
beneficiary of Yubo Beijing for accounting purposes only. Our corporate
structure involving the VIE provides investors with contractual exposure to
foreign investment in China-based companies where PRC laws prohibit direct
foreign investment in Chinese operating companies in certain industries, such as
Yubo Beijing. This structure involves unique risks to investors. For example,
management through these contractual arrangements may be less effective than
direct ownership, and we could face heightened risks and costs in enforcing
these contractual arrangements, because there are substantial uncertainties
regarding the interpretation and application of current and future PRC laws,
regulations, and rules relating to these contractual arrangements. Our
contractual arrangements with Yubo Beijing have not been tested in a court of
law. If the PRC government finds such agreements non-compliant with relevant PRC
laws, regulations, and rules, or if these laws, regulations, and rules or the
interpretation thereof change in the future, we could be subject to severe
penalties or be forced to relinquish our interests in Yubo Beijing or forfeit
our rights under the contractual arrangements.
COVID-19
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
operations.
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 to our unaudited consolidated
financial statements for the three months ended March 31, 2022 and 2021 included
elsewhere in this Quarterly Report.
As of March 31, 2022, 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.
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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
permitted.
Results of Operations for the Three Months Ended March 31, 2022 Compared to the
Three Months Ended March 31, 2021
Sales, Cost of Goods Sold and Gross Profit
We generated sales of $15,213 for the three months ended March 31, 2022, as
compared to $462,329 for the three months ended March 31, 2021. Our cost of
goods sold was $6,947 for the three months ended March 31, 2022, as compared to
$146,738 for the three months ended March 31, 2021. The decreases in sales and
cost of goods sold were primarily due to a decrease in the sales of nebulizers.
As a result, our gross profit decreased from $315,591 for the three months ended
March 31, 2021 to $8,266 for the three months ended March 31, 2022.
Operating Expenses
Our operating expenses were $587,201 for the three months ended March 31, 2022,
as compared to $754,161 for the three months ended March 31, 2021. The decrease
was primarily due to a decrease in other operating expenses.
Loss from Operations
Our loss from operations was $578,935 for the three months ended March 31, 2022,
as compared to $438,570 for the three months ended March 31, 2021. The decrease
was primarily due to a decrease of $307,325 in gross profit.
Other Income (Expense)
Our other income (expense) was $(13) for the three months ended March 31, 2022,
as compared to $(105) for the three months ended March 31, 2021. The decrease
was primarily due to a decrease in interest expense.
Net Loss
Our net loss was $578,948 for the three months ended March 31, 2022, as compared
to $438,675 for the three months ended March 31, 2021. The increase was
primarily due to a decrease of $307,325 in gross profit.
Liquidity and Capital Resources
As of March 31, 2022, we had cash and equivalents on hand of $10,435 and a
negative working capital of $2,402,987. 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 our anticipated cash requirements
through May 2023. 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.
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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.
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.
Net cash provided by (used in) operating activities
Net cash provided by operating activities was $50,970 for the three months ended
March 31, 2022, as compared to net cash used by operating activities of
$1,002,578 for the three months ended March 31, 2021. The increase was primarily
due to amounts due to related parties, accounts payable and accrued expense.
Net cash provided by (used in) investing activities
Net cash used in investing activities was $9,611 for the three months ended
March 31, 2022, as compared to $451,555 for the three months ended March 31,
2021. The decrease was primarily due to a decrease in purchase of property and
equipment.
Net cash provided by financing activities
Net cash provided by financing activities was $0 for the three months ended
March 31, 2022, as compared to $127,164 for the three months ended March 31,
2021. The decrease was due to the fact that no capital contributions
were received in the first quarter of 2022.
Current Liabilities
As of March 31, 2022, Yubo Beijing received an aggregate amount of RMB3,073,791
($483,932) from eight PRC entities. The related verbal agreements provide for
the eight entities to purchase inventory from Yubo Beijing or enter into such
other arrangements with Yubo Beijing as the parties mutually agree. Pending
formal approval of any such arrangements, all of the eight PRC entities have the
right to request the return of their advances
Shareholder Loans
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 $670,000. As of March 31, 2022, the entire loan
amount was outstanding.
As of March 31, 2022, we also had payables due to certain of our shareholders
and directors, Mr. Yang Wang, in the amount of $453,658 and Mr. Jun Wang in the
amount of $389,000 and to Mr. Huang Li, an indirect shareholder, in the amount
of $61,804
All of our shareholder loans are due on demand and non-interest bearing.
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Going concern
The accompanying interim unaudited condensed consolidated financial statements
for the quarter ended March 31, 2022 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. See Note 3 - Going Concern to our unaudited consolidated
financial statements for the three months ended March 31, 2022 and 2021 included
elsewhere in this Quarterly Report.
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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YUBO INTERNATIONAL BIOTECH LIMITED 
