ITEM
1. FINANCIAL STATEMENTS
Heyu Biological Technology Corporation
(Formerly known as Pacific Webworks, Inc.)
Consolidated Balance Sheets
(Unaudited)
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
452,318
|
|
|
$
|
37,555
|
|
Other receivables
|
|
|
24,566
|
|
|
|
21,324
|
|
Advances to suppliers
|
|
|
81,431
|
|
|
|
-
|
|
Inventory
|
|
|
311,134
|
|
|
|
-
|
|
Total current assets
|
|
|
869,449
|
|
|
|
58,879
|
|
|
|
|
|
|
|
|
|
|
Non-current Assets
|
|
|
|
|
|
|
|
|
Operating lease right-of-use asset
|
|
|
209,587
|
|
|
|
-
|
|
Total non-current assets
|
|
|
209,587
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
1,079,036
|
|
|
$
|
58,879
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
111,718
|
|
|
$
|
16,628
|
|
Advances from customers
|
|
|
420,406
|
|
|
|
-
|
|
Income tax and other taxes payable
|
|
|
22
|
|
|
|
23
|
|
Operating lease liability - current portion
|
|
|
66,473
|
|
|
|
-
|
|
Related party payables
|
|
|
957,409
|
|
|
|
279,464
|
|
Total current liabilities
|
|
|
1,556,028
|
|
|
|
296,115
|
|
|
|
|
|
|
|
|
|
|
Noncurrent liabilities
|
|
|
|
|
|
|
|
|
Operating lease liability
|
|
|
143,325
|
|
|
|
-
|
|
Total noncurrent liabilities
|
|
|
143,325
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
$
|
1,699,353
|
|
|
$
|
296,115
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock ($0.001 par value, 2,000,000,000 shares authorized, 1,032,466,000
and 1,141,472,861 shares issued and outstanding respectively as of September 30, 2019 and December 31, 2018,
respectively)
|
|
|
1,032,466
|
|
|
|
1,141,473
|
|
Shares to be cancelled
|
|
|
-
|
|
|
|
(109,007
|
)
|
Additional paid-in capital
|
|
|
17,149,050
|
|
|
|
17,149,050
|
|
Accumulated other comprehensive income
|
|
|
16,945
|
|
|
|
2,567
|
|
Accumulated deficit
|
|
|
(18,778,535
|
)
|
|
|
(18,421,319
|
)
|
Stockholders’ equity - HYBT and Subsidiaries
|
|
|
(580,074
|
)
|
|
|
(237,236
|
)
|
Noncontrolling interests in subsidiaries
|
|
|
(40,243
|
)
|
|
|
-
|
|
Total stockholders’ deficit
|
|
|
(620,317
|
)
|
|
|
(237,236
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Deficit
|
|
$
|
1,079,036
|
|
|
$
|
58,879
|
|
The accompanying notes are an integral part of these consolidated financial statements.
Heyu Biological Technology Corporation
(Formerly known as Pacific Webworks, Inc.)
Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
|
|
For the Three Months Ended
September
30,
|
|
|
For the Nine Months Ended
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue, net
|
|
$
|
7,387
|
|
|
$
|
-
|
|
|
$
|
57,317
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenue
|
|
$
|
3,666
|
|
|
$
|
-
|
|
|
$
|
31,938
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
$
|
3,721
|
|
|
$
|
-
|
|
|
$
|
25,379
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
5,992
|
|
|
|
-
|
|
|
|
7,377
|
|
|
|
-
|
|
Administrative expenses
|
|
|
202,505
|
|
|
|
125,957
|
|
|
|
412,207
|
|
|
|
147,797
|
|
Total operating expenses
|
|
|
208,497
|
|
|
|
125,957
|
|
|
|
419,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on operations
|
|
|
(204,776
|
)
|
|
|
(125,957
|
)
|
|
|
(394,205
|
)
|
|
|
(147,797
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income(Expenses)
|
|
|
(370
|
)
|
|
|
-
|
|
|
|
(1,708
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on operations before income taxes
|
|
|
(205,146
|
)
|
|
|
(125,957
|
)
|
|
|
(395,913
|
)
|
|
|
(147,797
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(205,146
|
)
|
|
$
|
(125,957
|
)
|
|
$
|
(395,913
|
)
|
|
$
|
(147,797
|
)
|
Loss attributable to noncontrolling interests
|
|
|
(20,455
|
)
|
|
|
-
|
|
|
|
(38,697
|
)
|
|
|
-
|
|
Net loss attributable to HYBT shareholders
|
|
|
(184,691
|
)
|
|
|
(125,957
|
)
|
|
|
(357,216
|
)
|
|
|
(147,797
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
12,506
|
|
|
|
-
|
|
|
|
15,924
|
|
|
|
-
|
|
Total Comprehensive Loss
|
|
$
|
(172,185
|
)
|
|
$
|
(125,957
|
)
|
|
$
|
(341,292
|
)
|
|
$
|
(147,797
|
)
|
Total comprehensive income attributable to noncontrolling interests
|
|
|
(1,320
|
)
|
|
|
-
|
|
|
|
(1,546
|
)
|
|
|
-
|
|
Total comprehensive loss attributable to HYBT shareholders
|
|
|
(173,505
|
)
|
|
|
(125,957
|
)
|
|
|
(342,838
|
)
|
|
|
(147,797
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares - basic and diluted
|
|
|
1,019,289,346
|
|
|
|
1,032,266,000
|
|
|
|
1,660,239,731
|
|
|
|
636,661,604
|
|
The accompanying notes are an integral part of these consolidated financial statements.
Heyu Biological Technology Corporation
(Formerly known as Pacific Webworks, Inc.)
Consolidated Statements of Cash Flows
(Unaudited)
|
|
For the Nine Months Ended
September 30,
|
|
|
|
2019
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(395,913
|
)
|
|
$
|
(147,797
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Change in assets and liabilities
|
|
|
|
|
|
|
|
|
Other receivables
|
|
|
(3,242
|
)
|
|
|
-
|
|
Advances to suppliers
|
|
|
(81,431
|
)
|
|
|
-
|
|
Inventory
|
|
|
(311,134
|
)
|
|
|
-
|
|
Operating lease right-of-use asset
|
|
|
(209,587
|
)
|
|
|
-
|
|
Accounts payable and accrued liabilities
|
|
|
95,090
|
|
|
|
(9,677
|
)
|
Advances from customers
|
|
|
420,406
|
|
|
|
-
|
|
Income tax and other taxes payable
|
|
|
(1
|
)
|
|
|
-
|
|
Lease liability
|
|
|
209,798
|
|
|
|
-
|
|
Net cash used from operating activities
|
|
|
(276,014
|
)
|
|
|
(157,474
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from related party lending
|
|
|
677,945
|
|
|
|
157,474
|
|
Net cash used in financing activities
|
|
|
677,945
|
|
|
|
157,474
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
12,832
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
414,763
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
37,555
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
|
$
|
452,318
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for income tax
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-cash activities
|
|
|
|
|
|
|
|
|
Shares issued for repayment of debt
|
|
|
|
|
|
$
|
10,000
|
|
Related party forgiveness of debt
|
|
|
|
|
|
$
|
52,087
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements
Heyu Biological Technology Corporation
(Formerly known as Pacific Webworks, Inc.)
Condensed Consolidated Statements of Stockholders’ Deficit
(Unaudited)
|
|
Heyu Biological Shareholders’ Equity
|
|
|
|
Common Stock
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares
|
|
|
Par value
|
|
|
Shares to be cancelled
|
|
|
Additional Paid in Capital
|
|
|
Other Comprehensive Income
|
|
|
Accumulated Deficit
|
|
|
Non - controlling Interest
|
|
|
Total
|
|
Balance at January 1, 2018
|
|
|
150,642,240
|
|
|
|
150,642
|
|
|
|
-
|
|
|
|
17,968,787
|
|
|
|
-
|
|
|
|
(18,173,542
|
)
|
|
|
-
|
|
|
|
(54,113
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
1 for 464 reverse split
|
|
|
(150,317,580
|
)
|
|
|
(150,318
|
)
|
|
|
-
|
|
|
|
150,318
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
1 for 100 split
|
|
|
32,141,340
|
|
|
|
32,141
|
|
|
|
-
|
|
|
|
(32,141
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Common stock issued April 13, 2018
|
|
|
1,000,000,000
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
(990,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
Waiver of payable to ex-shareholder
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,087
|
|
Loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(147,797
|
)
|
|
|
-
|
|
|
|
(147,797
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2018
|
|
|
1,032,466,000
|
|
|
$
|
1,032,466
|
|
|
$
|
-
|
|
|
$
|
17,149,050
|
|
|
$
|
-
|
|
|
$
|
(18,321,339
|
)
|
|
$
|
-
|
|
|
$
|
(139,823
|
)
|
|
|
Common Stock
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares
|
|
|
Par value
|
|
|
Shares to be cancelled
|
|
|
Additional Paid in Capital
|
|
|
Other Comprehensive Income
|
|
|
Accumulated Deficit
|
|
|
Non - controlling Interest
|
|
|
Total
|
|
Balance at January 1, 2019
|
|
|
1,141,472,861
|
|
|
|
1,141,473
|
|
|
|
(109,007
|
)
|
|
|
17,149,050
|
|
|
|
2,567
|
|
|
|
(18,421,319
|
)
|
|
|
-
|
|
|
|
(237,236
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares cancelled March 20, 2019
|
|
|
(109,006,861
|
)
|
|
|
(109,007
|
)
|
|
|
109,007
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,378
|
|
|
|
-
|
|
|
|
(1,546
|
)
|
|
|
12,832
|
|
Loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(357,216
|
)
|
|
|
(38,697
|
)
|
|
|
(395,913
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2019
|
|
|
1,032,466,000
|
|
|
$
|
1,032,466
|
|
|
$
|
-
|
|
|
$
|
17,149,050
|
|
|
$
|
16,945
|
|
|
$
|
(18,778,535
|
)
|
|
$
|
(40,243
|
)
|
|
$
|
(620,317
|
)
|
The accompanying notes are an integral part of these consolidated financial statements.
Heyu
Biological Technology Corporation
(Formerly
known as Pacific Webworks, Inc.)
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
NOTE
1 – THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
Heyu
Biological Technology Corporation (the “Company”) 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 February 23, 2016, the Company filed a voluntary petition for bankruptcy in the U.S. Bankruptcy
Court for the District of Utah, and soon afterwards ceased its business activities. On August 19, 2016 the Company proposed a
Plan of Liquidation and on November 28, 2016, the Court entered an order confirming the Plan of Liquidation and establishing a
Liquidating Trust. On December 28, 2016, all assets and liabilities of the Company were transferred to the Liquidating Trust.
On
April 18, 2018, the Company entered into a Share Purchase Agreement with Mr. Ban Siong Ang and Mr. Dan Masters, pursuant to which
Mr. Ang acquired 1,021,051,700 shares, representing 98.91% of the issued and outstanding shares of common stock of the Company
(“Common Stock”) from Mr. Masters for an aggregate purchase price of $335,000 (the “Share Purchase”).
As a result of the Share Purchase Agreement, the Company accepted the resignation of Dan Masters, as the Company’s President,
Chief Executive Officer, Chief Financial Officer, Secretary and Chairman of the Board. This resignation was given in connection
with the closing of the Share Purchase and was not the result of any disagreement with the Company on any matter relating to the
Company’s operations, policies, or practices. Additionally, all debt due to Mr. Masters from the Company was cancelled as
of the closing of the Share Purchase and recognized as contributed capital.
On
April 18, 2018, to fill the vacancies created by Mr. Masters’s resignations, Ban Siong Ang and Hung Seng Tan were elected
as the directors of the Company. Mr. Ang was appointed as President, Chief Executive Officer, and Chairman of the Board. Mr. Tan
was appointed as Executive Director of the Company. Ms. Wendy Wei Li was appointed as Chief Financial Officer.
On
July 3, 2018, the Company changed its name to Heyu Biological Technology Corporation, with a new ticker symbol, HYBT.
During
2018, the Company established the following subsidiaries: (1) HP Technology Limited, a British Virgin Islands business company
incorporated on September 20, 2018 and (2) Heyu Healthcare Technology Limited, a Hong Kong company incorporated on March 29, 2018.
Further, on November 5, 2018, the Company acquired the following subsidiary: Jiashierle (Xiamen) Healthcare Technology Co., Ltd.
(“JSEL”), a limited liability company incorporated under the laws of the People’s Republic of China (the “PRC”)
on November 16, 2017.
On
January 17, 2019, JSEL entered into a Share Transfer Agreement (the “Share Transfer Agreement”) with Mr. Yu Xu (“Mr.
Xu”), an individual with an address at No. 68 Chengde South Road, Qingpu District, Huaian City, Jiangsu Province, the PRC,
and 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”). JSEL received 60% of the outstanding equity interest of Kangzi from Mr. Xu for
the purpose of developing a joint venture in the business of selling medical equipment. It was the parties’ intention that
JSEL would fund the operations of Kangzi in proportion to its equity interest in Kangzi. At the time of the share transfer, Kangzi
owned no assets and conducted no business operation of its own.
In
March 2019, the Company entered into a Raspberry Purchase Agreement and a Raspberry Juice Processing Agreement with Luoyang Ditiantai
Agricultural Development Co., Ltd. (“Ditiantai”). Pursuant to these two agreements, the Company purchased six tons
of raspberry from Ditiantai, which were processed by Ditiantai into raspberry juice and delivered to the Company. The Company
then sold the raspberry juice to a corporate buyer and five individual buyers. The Company, however, does not plan to engage in
the business of selling raspberry juice in the long term.
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 cancering process through which selenium is converted into nickel inside cells.
The team consists of researchers whom have
years of extensive experience in medicine and physics. The lead scientist of the team, Mr. Xu, had served as the deputy chief engineer
of the New Energy Base of the National Defense-Science and Technology Commission in 1995, as the chairman and chief scientist of
Shanghai Guangcon New Energy Technology Co., Ltd. from 2011 to 2019, and the director of Shanghai Hengbian New Energy Research
Institute from 2003 to 2008. In 2012, Mr. Xu was rewarded the “Harmony-Person of the Year in China” at the “2011
Harmony China Annual Summit” in Beijing and 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 SME
Development awarded Mr. Xu “2013 China Economic Outstanding Contribution Award.”
Pursuant to the terms of the Share Transfer
Agreement entered into by JSEL and Kangzi on January 17, 2019, 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.
Basis of Presentation
The consolidated financial statements have
been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).
The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company
transactions and balances have been eliminated in consolidation.
The
condensed consolidated financial statements of the Company as of and for the three and nine months ended September 30, 2019 and
2018 are unaudited. In the opinion of management, all adjustments (including normal recurring adjustments) that have been made
are necessary to fairly present the financial position of the Company as of September 30, 2019, the results of its operations
for the three and nine months ended September 30, 2019 and 2018, and its cash flows for the nine months ended September 30, 2019
and 2018. Operating results for the interim periods presented are not necessarily indicative of the results to be expected for
a full fiscal year. The balance sheet as of December 31, 2018 has been derived from the Company’s audited financial statements
included in the Form 10-K for the year ended December 31, 2018.
The
statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission
(the “SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared
in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations. These financial statements should be read
in conjunction with the financial statements and other information included in the Company’s Annual Report on Form 10-K as filed
with the SEC for the fiscal year ended December 31, 2018.
As
of September 30, 2019, the details of the consolidating subsidiaries are as follows:
Name of Company
|
|
Place of
incorporation
|
|
Attributable
equity
interest %
|
|
HP Technology Limited
|
|
British Virgin Islands
|
|
|
100
|
%
|
|
|
|
|
|
|
|
Heyu Healthcare Technology Limited
|
|
Hong Kong
|
|
|
100
|
%
|
|
|
|
|
|
|
|
JSEL
|
|
The PRC
|
|
|
100
|
%
|
|
|
|
|
|
|
|
Kangzi
|
|
The PRC
|
|
|
60
|
%
|
Use
of Estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the amounts reported in the consolidated financial statements and accompanying notes. Management believes that the estimates used
in preparing the financial statements are reasonable and prudent; however, actual results could differ from these estimates. Significant
estimates include the allowance for doubtful accounts, impairment assessments of goodwill, valuation of deferred tax assets, rebilling
collections and certain accrued liabilities such as contingent liabilities.
Cash
Equivalents
The
Company considers all highly liquid debt instruments purchased with a maturity period of three months or less to be cash or cash
equivalents. The carrying amounts reported in the accompanying unaudited condensed consolidated balance sheets for cash and cash
equivalents approximate their fair value. All of the Company’s cash that is held in bank accounts in the PRC and Hong Kong
is not protected by Federal Deposit Insurance Corporation (“FDIC”) insurance or any other similar insurance in the
PRC, or Hong Kong.
Inventories
Inventories
are stated at the lower of cost or market value. The Company applies the weighted average cost method to its inventory.
Leases
The
Company adopted Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02), as amended, which supersedes
the lease accounting guidance under Topic 840, and generally requires lessees to recognize operating and financing lease liabilities
and corresponding right-of-use (ROU) assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing
and uncertainty of cash flows arising from leasing arrangements.
Operating
leases are included in operating lease right-of-use (“ROU”) assets and short-term and long-term lease liabilities
in our consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other
long-term liabilities in our consolidated balance sheets.
ROU
assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s
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. As most of the leases do not provide an implicit rate,
we use the industry incremental borrowing rate based on the information available at commencement date in determining the present
value of lease payments. We use the implicit rate when readily determinable. The operating lease ROU asset also includes any lease
payments made and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably
certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease
term.
Adoption
of the standard resulted in the initial recognition of $215,298 of ROU assets and $215,298 of lease liabilities on our consolidated
balance sheet related to office space lease commitment on September 1, 2019.
ASU
2016-02 requires that public companies use a secured incremental browning rate for the present value of lease payments when the
rate implicit in the contract is not readily determinable. We determine a secured rate on a quarterly basis and update the weighted
average discount rate accordingly. Lease terms and discount rate follow.
|
|
September 1, 2019
|
|
Weighted Average Remaining Lease Term(Year)
|
|
|
3
|
|
Weighted Average Discount Rate
|
|
|
4.75
|
%
|
The
approximate future minimum lease payments under operating leases as:
|
|
Operating Leases
|
|
Fiscal 2019
|
|
|
25,409
|
|
Fiscal 2020
|
|
|
77,074
|
|
Fiscal 2021
|
|
|
79,615
|
|
Fiscal 2022
|
|
|
54,206
|
|
Total Lease payments
|
|
|
236,304
|
|
Less Imputed interest
|
|
|
21,005
|
|
Present value of lease liabilities
|
|
$
|
215,298
|
|
Foreign
Currency
For
fiscal year 2019, the Company’s principal country of operations is the PRC. The accompanying consolidated financial statements
are presented in US$. The functional currency of the Company is US$, and the functional currency of the Company’s subsidiaries
is RMB. The consolidated financial statements are translated into US$ from RMB at year-end exchange rates as to assets and liabilities
and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when
the capital transactions occurred. The resulting translation adjustments are recorded as a component of shareholders’ equity
included in other comprehensive income. Gains and losses from foreign currency transactions are included in profit or loss. There
were no gains and losses from foreign currency transactions during the quarter ended September 30, 2019 and 2018.
|
|
As of
|
|
|
|
September 30, 2019
|
|
|
December 31, 2018
|
|
RMB: US$ exchange rate
|
|
|
7.1360
|
|
|
|
6.8764
|
|
|
|
Nine months ended
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
RMB: US$ exchange rate
|
|
|
6.8618
|
|
|
|
6.6146
|
|
|
|
|
|
|
|
|
|
|
The
RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions.
No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.
General
and administrative costs
General
and administrative expenses include personnel expenses for executive, finance, and internal support personnel. In addition, general
and administrative expenses include fees for bad debt costs, professional legal and accounting services, insurance, office space,
banking and merchant fees, and other overhead-related costs.
Income
Taxes
The
Company accounts for income taxes pursuant to ASC Topic 740, Income Taxes. Income taxes are provided on an asset and liability
approach for financial accounting and reporting of income taxes. Any tax paid by subsidiaries during the year is recorded. Current
tax is based on the profit or loss from ordinary activities adjusted for items that are non-assessable or disallowable for income
tax purpose and is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date. ASC Topic
740 also requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the
financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax
losses and tax credit carry-forwards. ASC Topic 740 additionally requires the establishment of a valuation allowance to reflect
the likelihood of realization of deferred tax assets. Realization of deferred tax assets, including those related to the U.S.
net operating loss carry-forwards, are dependent upon future earnings, if any, of which the timing and amount are uncertain.
The
Company adopted ASC Topic 740-10-05, Income Tax, which provides guidance for recognizing and measuring uncertain tax positions.
It prescribes a threshold condition that a tax position must meet for any of the benefits of the uncertain tax position to be
recognized in the financial statements. It also provides accounting guidance on derecognizing, classification and disclosure of
these uncertain tax positions.
The
Company’s policy on classification of all interest and penalties related to unrecognized income tax positions, if any, is
to present them as a component of income tax expense.
Capital
Structure
The
Company had 2,000,000,000 shares of authorized common stock, par value $0.001 per share, with 1,032,466,000 shares issued and
outstanding as of September 30, 2019, and 1,141,472,861 shares issued and outstanding as of December 31, 2018.
Earnings
(loss) per share
Basic
net income (loss) per share of common stock attributable to common stockholders is calculated by dividing net income (loss) attributable
to common stockholders by the weighted-average shares of common stock outstanding for the period. Potentially dilutive shares,
which are based on the weighted-average shares of common stock underlying outstanding stock-based awards, warrants, options, or
convertible debt using the treasury stock method or the if-converted method, as applicable, are included when calculating diluted
net income (loss) per share of common stock attributable to common stockholders when their effect is dilutive.
Potential
dilutive securities are excluded from the calculation of diluted EPS in loss periods as their effect would be antidilutive.
As
of September 30, 2019 and December 31, 2018, there were no potentially dilutive shares.
|
|
For the Quarter Ended September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Statement of Operations Summary Information:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(395,913
|
)
|
|
$
|
(147,797
|
)
|
Weighted-average common shares outstanding - basic and diluted
|
|
|
1,660,239,731
|
|
|
|
636,661,604
|
|
Net loss per share, basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
NOTE
2 – GOING CONCERN
During
the quarter ended September 30, 2019, the Company had been unable to generate cash flows sufficient to support its operations
despite of Kangzi’s business operation and had been dependent on related party advances from the current controlling shareholder.
In addition, the Company had experienced recurring net losses, and had an accumulated deficit of $18,778,535 and working capital
deficit of $686,579 as of September 30, 2019. These factors raise doubt about the Company’s ability to continue as a going
concern. The accompanying financial statements do not include any adjustments related to the recoverability or classification
of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue
as a going concern.
There
can be no assurance that sufficient funds required during the next year or thereafter will be generated from any future operations
or that funds will be available from external sources such as debt or equity financings or other potential sources. If the Company
is unable to raise capital from external sources when required, there would be a material adverse effect on its business. Furthermore,
there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will
not have a significant dilutive effect on the Company’s existing stockholders. Management is now seeking an operating company
with which to merge or acquire. In the foreseeable future, the Company will rely on related parties, such as its controlling shareholder,
to provide advances to funds general corporate purposes and any potential acquisitions of profitable investments. There is no
assurance, however, that the Company will achieve its objectives or goals.
NOTE
3 – CASH AND CASH EQUIVALENTS
Cash
and cash equivalents consist of the following:
|
|
As of September 30,
2019
|
|
|
As of December 31,
2018
|
|
|
|
|
|
|
|
|
Bank Deposits-China & HK
|
|
|
452,318
|
|
|
|
37,555
|
|
|
|
$
|
452,318
|
|
|
$
|
37,555
|
|
NOTE
4 – OTHER RECEIVABLE
Other
receivable consists of the following:
|
|
As of September 30,
2019
|
|
|
As of December 31,
2018
|
|
|
|
|
|
|
|
|
Fujian Shanzhiling Biological Technology Co., Ltd.
|
|
|
-
|
|
|
|
21,324
|
|
Others
|
|
|
24,566
|
|
|
|
-
|
|
|
|
$
|
24,566
|
|
|
$
|
21,324
|
|
On
October 8, 2018, the Company entered into a non-binding letter of intent with Fujian Shanzhiling Biological Technology Co., Ltd.
(the “Acquirer”), a Chinese biotechnology product manufacturing corporation, whereby the Acquirer agreed to acquire
51% of the outstanding capital of the Company subject to certain adjustment provisions (the “Shanzhiling Acquisition”).
As of the date of this report, the Company has terminated the agreements related to Shanzhiling Acquisition; therefore, the related
balance in the amount of $24,499 has been written off during the quarter ended September 30, 2019.
NOTE
5 – ADVANCES TO SUPPLIERS
Advances
to suppliers consists of the following:
|
|
As of
September 30,
2019
|
|
|
As of
December 31,
2018
|
|
|
|
|
|
|
|
|
Prepayment for purchase of raw materials
|
|
|
81,431
|
|
|
|
-
|
|
|
|
$
|
81,431
|
|
|
$
|
0
|
|
NOTE
6 – INVENTORY
Inventory
consists of the following:
|
|
As of
September 30,
2019
|
|
|
As of
December 31,
2018
|
|
|
|
|
|
|
|
|
Raw materials
|
|
|
301,725
|
|
|
|
-
|
|
Finished goods
|
|
|
9,409
|
|
|
|
-
|
|
|
|
$
|
311,134
|
|
|
$
|
-
|
|
No
impairment was provided for the inventories as of September 30, 2019.
NOTE
7 – OPERATING LEASE RIGHT-OF-USE ASSET AND LIABILITIES
As
of September 1, 2019, company entered in lease agreement for the office space, the right-of-use asset is recognized as following:
|
|
As of
September 30,
2019
|
|
|
As of
December 31,
2018
|
|
|
|
|
|
|
|
|
Operating lease right-of-use asset
|
|
|
209,587
|
|
|
|
-
|
|
|
|
$
|
209,587
|
|
|
$
|
-
|
|
Operating
lease liability consist both current and noncurrent component as the following:
|
|
As of
September 30,
2019
|
|
|
As of
December 31,
2018
|
|
|
|
|
|
|
|
|
Operating lease liability - current portion
|
|
|
(66,473
|
)
|
|
|
-
|
|
Operating lease liability
|
|
|
(143,325
|
)
|
|
|
-
|
|
|
|
$
|
(209,798
|
)
|
|
$
|
-
|
|
ASU
2016-02 requires that public companies use a secured incremental browning rate for the present value of lease payments when the
rate implicit in the contract is not readily determinable. We determine a secured rate on a quarterly basis and update the weighted
average discount rate accordingly. Lease terms and discount rate follow.
|
|
September 1, 2019
|
|
Weighted Average Remaining Lease Term (Year)
|
|
|
3
|
|
Weighted Average Discount Rate
|
|
|
4.75
|
%
|
The
approximate future minimum lease payments under operating leases as:
|
|
Operating Leases
|
|
Fiscal 2019
|
|
|
25,409
|
|
Fiscal 2020
|
|
|
77,074
|
|
Fiscal 2021
|
|
|
79,615
|
|
Fiscal 2022
|
|
|
54,206
|
|
Total Lease payments
|
|
|
236,304
|
|
Less Imputed interest
|
|
|
21,005
|
|
Present value of lease liabilities
|
|
$
|
215,298
|
|
NOTE 8 – ADVANCES FROM CUSTOMERS
|
|
As of
September 30,
2019
|
|
|
As of
December 31,
2018
|
|
|
|
|
|
|
|
|
Advances from customers(1)
|
|
|
420,406
|
|
|
|
-
|
|
|
|
$
|
420,406
|
|
|
$
|
-
|
|
(1)
|
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 5.5 million RMB as the total preordering payment. 1.5 million RMB and 1.5 million RMB were
delivered to JSEL respectively on September 7 and September 27, 2019. The parties are working on the timing for payment of the
remaining 2.5 million RMB 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 its
preferred location, properly install it, and conduct a clinical trial that lasts at least one month.
|
NOTE
9 – ACCRUED EXPENSES AND OTHER PAYABLES
Accrued
expenses and other payables consist of the following:
|
|
As of
September 30,
2019
|
|
|
As of
December 31,
2018
|
|
|
|
|
|
|
|
|
Accrued payroll
|
|
|
35,633
|
|
|
|
7,589
|
|
Other Payables
|
|
|
76,085
|
|
|
|
9,039
|
|
|
|
$
|
111,718
|
|
|
$
|
16,628
|
|
Accrued
payroll includes all company employee payroll liabilities as of September 30, 2019, and other payables contains employee reimbursements.
Operating
lease liability consist both current and noncurrent component as the following:
|
|
As of
September 30,
2019
|
|
|
As of
December 31,
2018
|
|
|
|
|
|
|
|
|
Operating lease liability - current portion
|
|
|
(66,473
|
)
|
|
|
-
|
|
Operating lease liability
|
|
|
(143,325
|
)
|
|
|
-
|
|
|
|
$
|
(209,798
|
)
|
|
$
|
-
|
|
NOTE
10 – RELATED PARTY TRANSACTIONS
As
of September 30, 2019, and December 31, 2018, the Company owed related parties $957,409 and $279,464, respectively. As the Company
has just started business activities in March 2019, all expenses incurred during this reporting period are paid by a related party.
Expenses mainly included auditing, consulting and legal advisory expenses, government registration expenses, and payrolls.
A
director of the Company provides the property for the use by the Company without charge.
NOTE
11 – EQUITY
The
Company recorded the following equity transactions during the nine months ended September 30, 2019:
On
March 15, 2019, the Company, with the approval of the Board, entered into a Share Cancellation Agreement (the “Share Cancellation
Agreement”) with Mr. Ban Siong Ang, the President, Chief Executive Officer, and Chairman of the Board of the Company. Pursuant
to the Share Cancellation Agreement, the Company and Mr. Ang agreed to cancel 109,006,861 shares of Common Stock previously issued
to Mr. Ang.
The
Company recorded the following equity transactions during the year ended December 31, 2018:
On
March 12, 2018, the Board of Directors, with the consent of the majority shareholder, voted for a 1-for-464 reverse stock split.
On April 11, 2018 the reverse split became effective.
On
April 13, 2018, 1,000,000,000 shares were issued to a prior related party as a repayment of debt.
On
April 18, 2018, the Company entered into a Share Purchase Agreement with Mr. Ban Siong Ang and Mr. Dan Masters, pursuant to which
Mr. Ang acquired 1,021,051,700 shares, representing 98.91% of the issued and outstanding shares of Common Stock from Mr. Masters
for an aggregate purchase price of $335,000. As a result of the Share Purchase Agreement, the Company accepted the resignation
of Mr. Masters, as the Company’s President, Chief Executive Officer, Chief Financial Officer, Secretary and Chairman of
the Board. This resignation was given in connection with the closing of the Share Purchase and was not the result of any disagreement
with the Company on any matter relating to the Company’s operations, policies, or practices. Additionally, all debt due
to Mr. Masters from the Company was cancelled as of the closing of the Share Purchase and recognized as contributed capital.
On
July 30, 2018, the Company amended its Articles of Incorporation with the State of Nevada in order to increase its authorized
shares of Common Stock from 150,000,000 to 2,000,000,000.
On
September 11, 2018, the Nevada Secretary of State approved the Company’s certificate of amendment to amend its Articles
of Incorporation to effectuate a 100-for-1 forward stock split. The total issued and outstanding shares of Common Stock has been
increased from 10,324,660 to 1,032,466,000 shares, with the par value unchanged at $0.001.
In
October 2018, the controlling stockholder of the Company, Mr. Ban Siong Ang, entered into a series of share transfer agreements
(the “Share Transfer Agreements”) with certain buyers (the “Buyers”). Pursuant to the Share Transfer Agreements,
an aggregate of 109,006,861 shares of Common Stock were issued to the Buyers, but the cancellation of the 109,006,861 shares of
Common Stock held by Mr. Ang was still in process as of December 31, 2018. The cancellation of those shares held by Mr. Ang was
subsequently completed on March 20, 2019, pursuant to a Share Cancellation Agreement dated March 15, 2019, by and between the
Company and Mr. Ang.
Unless
otherwise indicated, all common share amounts and per share amounts in the financial statements and disclosures have been presented
giving effect to the 1-for-464 reverse split that became effective on April 11, 2018, and the 100-for-1 forward stock split that
became effective on September 11, 2018.
NOTE
12 – INCOME TAXES
The
Company is subject to U.S. Federal tax laws. The Company has not recognized an income tax benefit for its operating losses in
the United States because the Company does not expect to commence active operations in the United States.
Heyu
Healthcare Technology Limited was incorporated in Hong Kong and is subject to Hong Kong profits tax at a tax rate of 16.5%. Since
Heyu Healthcare Technology Limited had no taxable income during the reporting period, it has not paid Hong Kong profits taxes.
Heyu Healthcare Technology Limited has not recognized an income tax benefit for its operating losses in Hong Kong because the
Company does not expect to commence active operations in Hong Kong.
The
Company has been conducting and plans to continue to conduct its major operations in the PRC through JSEL in accordance with the
relevant tax laws and regulations. The corporate income tax rate in China is 25%. The Company has not paid PRC profits taxes,
since it had no taxable income during the reporting period.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
Statements made in this Quarterly Report
which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations,
financial condition, results of operations, future performance and our business, including, without limitation, (i) our ability
to raise capital, and (ii) statements preceded by, followed by or that include the words “may,” “would,”
“could,” “should,” “expects,” “projects,” “anticipates,” “believes,”
“estimates,” “plans,” “intends,” “targets” or similar expressions.
Forward-looking statements involve inherent
risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ
materially from those set forth in the forward-looking statements, including the following: general economic or industry conditions,
nationally and/or in the communities in which we may conduct business, changes in the interest rate environment, legislation or
regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles,
policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental,
regulatory and technical factors affecting our current or potential business and related matters.
Accordingly, results actually achieved
may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are
made. We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events
or circumstances occurring after the date of such statements.
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 February 23, 2016, the Company filed a voluntary petition for bankruptcy in the U.S. Bankruptcy Court for the District
of Utah, and soon afterwards ceased its business activities. On August 19, 2016, the Company proposed a Plan of Liquidation and
on November 28, 2016, the Court entered an order confirming the Plan of Liquidation and establishing a Liquidating Trust. On December
28, 2016, all assets and liabilities of the Company were transferred to the Liquidating Trust.
On April 18, 2018, the Company entered
into a Share Purchase Agreement with Mr. Ban Siong Ang and Mr. Dan Masters, pursuant to which Mr. Ang acquired 1,021,051,700 shares,
representing 98.91% of the issued and outstanding shares of Common Stock from Mr. Masters for an aggregate purchase price of $335,000.
As a result of the Share Purchase Agreement, the Company accepted the resignation of Mr. Masters, as the Company’s President,
Chief Executive Officer, Chief Financial Officer, Secretary and Chairman of the Board. This resignation was given in connection
with the closing of the Share Purchase and was not the result of any disagreement with the Company on any matter relating to the
Company’s operations, policies, or practices. Additionally, all debt due to Mr. Masters from the Company was cancelled as
of the closing of the Share Purchase and recognized as contributed capital.
On April 18, 2018, to fill the vacancies
created by Mr. Masters’s resignations, Ban Siong Ang and Hung Seng Tan were elected as the directors of the Company. Mr.
Ang was appointed as President, Chief Executive Officer, and Chairman of the Board of the Company. Mr. Tan was appointed as Executive
Director of the Company. Ms. Wendy Li was appointed as Chief Financial Officer.
On July 3, 2018, the Company changed its
name to Heyu Biological Technology Corporation, with a new ticker symbol, HYBT.
On January 17, 2019, JSEL, entered into
the Share Transfer Agreement with Mr. Xu, whereby JSEL received 60% of the outstanding equity interest of Kangzi from Mr. Xu for
the purpose of developing a joint venture in the business of selling medical equipment. It was the parties’ intention that
JSEL would fund the operations of Kangzi in proportion to its equity interest in Kangzi. At the time of the share transfer, Kangzi
owned no assets and conducted no business operation of its own.
On March 15, 2019, the Company, with the
approval of the Board, entered into a Share Cancellation Agreement (the “Share Cancellation Agreement”) with Mr. Ban
Siong Ang, the President, Chief Executive Officer, and Chairman of the Board of the Company. Pursuant to the Share Cancellation
Agreement, the Company and Mr. Ang agreed to cancel 109,006,861 shares of Common Stock previously issued to Mr. Ang.
In March 2019, the Company entered into
a Raspberry Purchase Agreement and a Raspberry Juice Processing Agreement with Ditiantai. Pursuant to these two agreements, the
Company purchased six tons of raspberry from Ditiantai, which were processed by Ditiantai into raspberry juice and delivered to
the Company. The Company then sold the raspberry juice to a corporate buyer and five individual buyers. The Company, however, does
not plan to engage in the business of selling raspberry juice in the long term.
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 cancering process through which selenium is converted into nickel inside cells.
The team consists of researchers whom have
years of extensive experience in medicine and physics. The lead scientist of the team, Mr. Xu, had served as the deputy chief engineer
of the New Energy Base of the National Defense-Science and Technology Commission in 1995, as the chairman and chief scientist of
Shanghai Guangcon New Energy Technology Co., Ltd. from 2011 to 2019, and the director of Shanghai Hengbian New Energy Research
Institute from 2003 to 2008. In 2012, Mr. Xu was rewarded the “Harmony-Person of the Year in China” at the “2011
Harmony China Annual Summit” in Beijing and 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 SME
Development awarded Mr. Xu “2013 China Economic Outstanding Contribution Award.”
Pursuant to the terms of the Share Transfer
Agreement entered into by JSEL and Kangzi on January 17, 2109, 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. Subsequently, 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 5.5 million RMB as
the total preordering payment. 1.5 million RMB and 1.5 million RMB were delivered to JSEL respectively on September 7 and September
27, 2019. The parties are working on the timing for payment of the remaining 2.5 million RMB 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 its 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
whom will agree to act as partners to co-host the clinical trial and patients whom will be voluntarily willing to 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 to 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 the 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 the mass production of Chambers,
Kangzi is conducting clinical experiments to make further improvements on Chamber and adjusting features of the mass-production
mold for Chamber. Kangzi is also in the process of obtaining official governmental permits from relevant government authorities
to produce and sell Chambers on a national scale. 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 massively
manufacture Chambers in small and medium sizes, establish operation centers to sell 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 Chambers and other medical products.
In addition to business activities related
to Chamber, the Company will commit to the research, development, manufacturing, and sale of healthcare equipment and various health
products containing natural plateau plants, including cosmetics, nutritional supplements, and drugs. In the near future, the Company
aims to standardize and internationalize the production and sale of healthcare equipment and health products, while increasing
its brand awareness in the healthcare and consumer-product markets.
Liquidity and Capital Resources
As of September
30, 2019, we had assets of $1,079,036, which consisted current assets of $452,318 in cash, $24,566 in other receivables, $81,431
as advances to suppliers, and $311,134 as inventory, and noncurrent asset of $209,587 operating lease right-of-use asset.We had
liabilities of $1,699,353, which consisted current liabilities of $111,718 in accounts payable and accrued expenses, $420,406 in
advances from customers, $22 in taxes payable, $957,409 in related party payables and $66,473 in short term operating lease liabilities.
We also had recognized long term operating lease liabilities of $143,325 as noncurrent liabilities. We had an accumulated deficit
of $18,778,535.
As of December
31, 2018, we had assets of $58,879, liabilities of $296,115 and an accumulated deficit totaled $18,421,319. The increase in the
assets was mainly due to cash balance increased by customer prepayments, increase of inventory in raw materials, and recognition
of the operating lease right-of-use asset. The increase in the liabilities was mainly due to advanced payments received from customers,
relevant operating lease liabilities, and related party payables. Additionally, as the Company started its operation in mid-March
2019, related parties paid expenses totaling $957,409 to vendors for accounting, auditing, consulting, SEC filing services, and
all other operating expenses as of September 30, 2019.
Results of Operations
From the period of the Liquidation on December
28, 2016 to September 6, 2019, we had been a shell company without any significant assets or operations. Since September 7, 2019,
we are no longer a shell company due to the business operation of Kangzi and the first amount of preordering payment received from
Saikun. For a detailed description, please see “Overview” above.
Comparison of the Three Months Ended
September 30, 2019 and 2018
We started operations in mid-March 2019,
and had no revenues or operations for the same period in 2018. Our revenues during the three months ended September 30, 2019, were
$7,387, and the cost of revenue was $3,666, as compared to nil and nil for the same period in 2018, respectively. The increase
in revenues and cost of revenue was due to sale of raspberry juice during the period. We had incurred selling expenses of $5,992
and administrative expenses of $202,505 during the three months ended September 30, 2019, as compared to selling expenses of nil
and administrative expenses of $125,957 for the same period in 2018, respectively. The increase in the expenditure was mainly due
to office lease expenses, employee wages, and other third part agency fees. . We might incur operating expenses without sufficient
revenues, as we have just identified and determined to focus on the research, development, and manufacturing of healthcare equipment
and health 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 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 revenue.
Comparison of the Nine Months Ended
September 30, 2019 and 2018
We started operations in mid-March 2019,
and had no revenues or operations for the same period in 2018. Our revenues during the nine months ended September 30, 2019, were
$57,317, and the cost of revenue was $31,938, as compared to nil and nil for the same period in 2018, respectively. The increase
in revenues and cost of revenue was due to sale of raspberry juice during the period. We had incurred selling expenses of $7,377
and administrative expenses of $412,207 during the nine months ended September 30, 2019, as compared to selling expenses of nil
and administrative expenses of $147,797 for the same period in 2018, respectively. The increase in the expenditure was mainly due
to office lease expenses, employee wages and salary expenses, auditing, and other day-to-day operation related expenses. We might
incur operating expenses without sufficient revenues, as we have just identified and determined to focus on the research, development,
and manufacturing of healthcare equipment and health 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 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 revenue.
Going Concern
The accompanying financial statements are presented on a going concern basis. The Company’s financial
condition raises doubt about the Company’s ability to continue as a going concern. As of September 30, 2019, the Company
had an accumulated deficit of $18,778,535, and a net loss of $205,146 and $395,913 for the three and nine months ended September
30, 2019. As the development of the Chamber enters its final stage and our subsidiary, JSEL, has started accepting pre-orders for
the Chamber in September, we believe that as the number of orders for the Chamber increases in the future the Company will generate
more revenues enabling it to cover its operating expenses.
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.