The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our audited financial statements
for the years ended December 31, 2021 and 2020 together with notes thereto. 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 this
Annual Report.
Overview
We are 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 its subsidiaries
and contractual arrangements with Yubo Beijing, the Chinese operating
company. None of our Company, Platinum, or 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.
Critical Accounting Policy and Estimates
Our Management's Discussion and Analysis of Financial Condition and Results of
Operations 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.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America ("U.S. GAAP").
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Principles of Consolidation
The consolidated financial statements include our accounts, our wholly owned
subsidiaries, and its consolidated VIE for which we are the primary beneficiary.
All transactions and balances among us, our subsidiaries and consolidated VIE
have been eliminated upon consolidation.
See Note 2: Summary of Significant Accounting Policies to our consolidated
financial statements included elsewhere in this Annual Report.
Leases
We determine if an arrangement is a lease at inception. Operating leases are
included in operating lease right-of-use ("ROU") assets, operating lease
liabilities - current, and operating lease liabilities - noncurrent on the
balance sheets. The initial lease liability is equal to the future fixed minimum
lease payments discounted using our incremental borrowing rate, on a secured
basis. The initial measurement of the right-of-use asset is equal to the initial
lease liability plus any initial direct costs.
ROU assets represent our right to use an underlying asset for the lease term and
lease liabilities represent our obligation to make lease payments arising from
the lease. Operating lease ROU assets and liabilities are recognized at
commencement date based on the present value of lease payments over the lease
term.
Revenue Recognition
We derive our revenue from the sale of nebulizers containing frozen tubes with
medical fluid, which are sold as one unit to our customers, and cell
basidiomycetes compound drink, which was launched in early 2021. Our nebulizers
and cell basidiomycetes compound drink have a shelf life of 12 months and 18
months, respectively, if kept under regular room temperature. The nebulizers are
sold directly to consumers on our online e-commerce platform. We recognize
product revenues from customers following a five-step model, which requires us
to exercise judgment when considering the terms of contracts and includes (1)
identifying the contracts or agreements with a customer, (2) identifying our
performance obligations in the contract or agreement, (3) determining the
transaction price, (4) allocating the transaction price to the separate
performance obligations, and (5) recognizing revenue as each performance
obligation is satisfied, which occurs when our products are delivered to
customers. We do not allow sales returns or exchanges. Revenue is recorded net
of value-added tax ("VAT").
Recently Issued and Adopted Accounting Pronouncements
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 years ended December 31, 2021 and 2020
Sales
Yubo Beijing's sales were $1,244,373 for the year ended December 31, 2021, as
compared to $1,353,868 for the year ended December 31, 2020. The decrease in
sales was due to sale of nebulizers.
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Cost of Goods Sold
The cost of goods sold was $423,726 for the year ended December 31, 2021, as
compared to $114,272 for the year ended December 31, 2020. The increase in cost
of goods sold was due to an increase in the cost of nebulizers sold, which
mainly consists of costs of the medical fluid, nebulizer and packaging
materials.
Gross Profit
Our gross profit was $820,647 for the year ended December 31, 2021, as compared
to $1,239,596 for the year ended December 31, 2020. The decrease in gross profit
was due to a decrease sale of nebulizers.
Operating Expenses
Our operating expenses were $2,373,512 for the year ended December 31, 2021, as
compared to $1,951,394 for the year ended December 31, 2020. Our operating
expenses increased in 2021 as result of increases in employee compensation and
occupancy expense, which was partially offset by a decrease in sales commission.
Income (Loss) from Operations
Our income (loss) from operations was $(1,542,438) for the year ended December
31, 2021, as compared to $(711,798) for the year ended December 31, 2020,
primarily due to the $422,117 increase in operating expenses and $418,929
decrease in gross profit.
Other Income (expense)
Our other income (expense) was $427 for the year ended December 31, 2021, as
compared to $(3) for the year ended December 31, 2020. The increase in other
income (expense) was primarily due to an increase in interest income.
Net Loss
Our net loss was $(1,542,438) for the year ended December 31, 2021, as compared
to $(711,801) for the year ended December 31, 2020. The increase in net loss was
primarily due to the $422,117 increase in operating expenses and $418,929
decrease in gross profit.
Liquidity and Capital Resources
As of December 31, 2021, we had cash and cash equivalents on hand of $27,517 and
a negative working capital of $1,731,686. Generally, the primary sources of our
funds have been cash from operations, loans from our shareholders and capital
contributions. We believe that our cash on hand and working capital will be
sufficient to meet our and Yubo Beijing's anticipated cash requirements through
June 30, 2022. We intend to continue working toward identifying and obtaining
new sources of financing and we intend to raise additional capital in the first
and second quarters of 2022. 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 Yubo Beijing's 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 Yubo
Beijing's continued operations and the expansion efforts.
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During the next 12 months, particularly the second half of 2022, Yubo Beijing
expects to incur significant research and development expenses with respect to
improvements of its existing products and the development of new products. The
majority of Yubo Beijing's research and development activity is focused on
development of the 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.
Net cash provided by (used in) operating activities
Net cash provided by (used in) operating activities was $1,020,861 for the year
ended December 31, 2021, as compared to $101,107 for the year ended December 31,
2020. The increase in net cash provided by operating activities was primarily
due to advances from prospective customers/distributors.
Net cash provided by (used in) investing activities
Net cash used in investing activities was $564,718 for the year ended December
31, 2021, as compared to $97,468 for the year ended December 31, 2020. The
increase in net cash used in investing activities was primarily due to purchase
of property and equipment.
Net cash provided by financing activities
Net cash provided by financing activities was $127,164 for the year ended
December 31, 2021, as compared to $1,384,756 for the year ended December 31,
2020. The decrease in net cash provided by financing activities was primarily
due to decrease sale of ordinary shares.
Going Concern
The audited financial statements for the fiscal year ended December 31, 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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Current Liabilities
As of December 31, 2021, Yubo Beijing received an aggregate amount of RMB
3,079,471 (US$4,948,000) from 12 PRC entities. The related verbal agreements
provide for the 12 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 12 PRC entities
have the right to request the return of their advances.
We also had certain short-term borrowings from our directors totaling $532,168
as of December 31, 2021, respectively. See "Item 13. Certain Relationships and
Related Transactions, and Director Independence."
Contractual Obligations and Off-Balance Sheet Arrangements
Contractual Obligations
Our principal commitments consist of obligations under certain operating leases.
The following table sets forth our principal commitments as of December 31,
2021:
Payments due by period
Less than More than
($ in millions) Total 1 year 1-3 years 4-5 years 5 years
Operating lease
obligations $ 3,257,773 $ 880,860 $ 2,276,997 $ 99,916 $ -
The commitment amounts in the table above are associated with contracts that are
enforceable and legally binding and that specify all significant terms. The
table above does not include obligations under agreements that we can cancel
without a significant penalty.
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 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.
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