NOTES TO (UNAUDITED)
FINANCIAL STATEMENTS
MAY 31, 2018
1.
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Organization and Business
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US-China Biomedical
Technology, Inc., formerly Cloud Security Corporation (the “Company”), was incorporated in the State of Nevada on December
20, 2010. On May 22, 2012, the Company merged with Cloud Star Corporation (“Cloud Star”), a privately held Nevada corporation
incorporated on October 17, 2011 headquartered in California (the “Merger”). Cloud Star’s then Chief Executive
Officer assigned his rights and interests in technology named “The VirtualKey Desktop Solution” (“MyComputerKey”)
and additional cloud security technology products to the Company in connection with the Merger. Following the Merger, the Company
conducted the business of Cloud Star and changed its name from “Accend Media” to “Cloud Star Corporation”.
On May 28, 2013, the Company changed its corporate name to “Cloud Security Corporation”.
On December 8, 2014,
the Company entered into a stock purchase agreement (the “SPA”) with Goldenrise Development, Inc., a California corporation
(“Goldenrise”) whereby the Company sold 12,000,000 shares of its common stock for $180,000 to Goldenrise representing
approximately 92% of our outstanding shares. In connection with the SPA, we also agreed to effectuate a 1:100 reverse stock split
of the Company’s issued and outstanding common stock (“Reverse Split”) which became effective on January 22,
2015. The Company’s then directors and officers immediately preceding the close of this transaction resigned at closing.
Goldenrise designated the current directors and officers of the Company. The transaction effectuated a change in control of the
Company.
On June 28, 2017, Goldenrise
and the Company entered into a Stock Purchase Agreement (the “Dunn Agreement”) with Michael R. Dunn, the Company’s
sole officer and director (the “Dunn”). Pursuant to the Dunn Agreement, Goldenrise agreed to sell and Dunn agreed to
purchase 12,000,000 restricted common stock shares of the Company, representing approximately 92.12% of the Company’s outstanding
shares of common stock. In consideration for the shares, the Dunn will pay to Goldenrise a total of $400,000 as follows: (i) $180,000
on or before July 15, 2017 (extended to July 28, 2017), (ii) $180,000 shall be withheld by Dunn and applied towards monies owed
by Goldenrise to Dunn; and (iii) $40,000 shall be with withheld by Dunn and applied towards invoices related to the audit and legal
fees associated with the reporting requirements of the Company through the date of Closing.
Concurrently, on June
28, 2017, Dunn and
China Israel Biotechnology Co. Ltd. and Central Bio-MD Technology
Co. Ltd.
, each a Chinese corporation (collectively, the “Buyers” or “China-Israel”), entered into
a Stock Purchase Agreement (the “SPA”). Pursuant to the SPA, Dunn agreed to sell and Buyers agreed to purchase 6,000,000
restricted common stock shares of the Company (the “Shares”), representing approximately 46.06% of the Company’s
outstanding shares of common stock. In consideration for the Shares, Buyers agreed to pay to Dunn a total of $200,000 upon execution
of the SPA (the “Purchase Price”). The Closing of the SPA was extended mutually by the parties and closed on July 28,
2017. The Purchase Price was wired directly to the Company for the benefit of Dunn.
Prior to the Closing
of the Dunn Agreement with Goldenrise, on July 25, 2017, the Company entered into an unsecured promissory note with Goldenrise
in the amount of $90,000 (the “Note”) (See Note 4). As such, when remitting the purchase price under the Dunn Agreement,
$90,000 was paid to Goldenrise as payment under the Dunn Agreement and $90,000 was retained in the Company’s account as payment
from Goldenrise to the Company for the Note. The Dunn Agreement purchase price has been paid in full.
The Closing of the
Dunn Agreement and SPA occurred on July 28, 2017. The Dunn Agreement and SPA resulted in a change in control of the Company.
On December 29, 2017,
the Board of Directors of the Company approved the incorporation of US-China Biomedical Technology, Inc. (“US-China”)
in the state of Nevada as a wholly-owned subsidiary of the Company. US-China was incorporated on January 11, 2018. Mr. Qingxi Huang
is the sole officer and Director of US-China.
The Company’s
principal business through July 2017 has been the software development of MyComputerKey; however, due to cash flow constraints,
we were unable to proceed with development of this software. In August 2017, the Company began considering a revised business plan
wherein the Company’s primary focus will be the integration and development of synergistic relationships with high profiled
doctors and hospitals that will act as a bridge for connecting patients and bio-technology advances in China with the Company’s
network of US based doctors and hospitals. The Company intends to develop a scalable biomedical bridge for the US and China markets.
The bridge would provide concierge services for moving patients from China to the US with a focus on the following demographics:
(i) cancer patient referrals that are in non-critical, non-life threatening positions, (ii) pre-screening and genetic testing for
family members of cancer patients, (iii) patients suffering from Diabetes, and (iv) general medical services including preventative
care and physicals. The Company intends to develop working relationships with key medical innovators for possible joint ventures
related to medical device manufacturing in China, including working towards obtaining CFDA approval for medical device sales to
government owned hospitals. As of the date of this report, the Company has not yet implemented this business plan and is currently
in the development phase.
On May 8, 2018, we completed a subscription
agreement for the sale of 2,000,000 shares of our common stock to our largest shareholder for $800,000. $230,195 of the purchase
price was applied to the settlement of related party notes payable and accrued interest and the remaining $569,805 was paid
in cash. During the three months ended May 31, 2018, the Company recorded a loss on settlement of debt of $184,156 on the
accompanying statement of operations based on the excess in fair market value of the shares issued to settle the debt.
Matters Relating to Former Officers and Directors
On January 31, 2017,
our former Chief Executive Officer, President, and Chairman of the Board of Directors, Ning Liu resigned after being detained in
China. Mr. Liu’s legal troubles are unrelated to the Company, have had no effect on our operations, and we do not believe
this poses any business risk.
On November 23, 2017,
our former Chief Executive Officer and Director, Michael R. Dunn, passed away unexpectedly.
On January 9, 2018,
Ms. Amanda Huang resigned as the Senior Vice President of the Company effective immediately. The Board approved and accepted Ms.
Huang’s resignation as the Company’s Senior Vice President on January 10, 2018.
2.
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Summary of Significant Accounting Policies
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Basis of Presentation
The accompanying unaudited
interim financial statements have been prepared by the Company pursuant to the rules and regulations of the United States Securities
Exchange Commission (“SEC”). Certain information and disclosures normally included in the annual financial statements
prepared in accordance with the accounting principles generally accepted in the Unites States of America have been condensed or
omitted pursuant to such rules and regulations. In the opinion of management, all adjustments and disclosures necessary for a fair
presentation of these financial statements have been included. Such adjustments consist of normal recurring adjustments. These
interim financial statements should be read in conjunction with the historical financial statements and related notes thereto of
the Company filed with the SEC including our Annual Report on Form 10-K for the fiscal year ended February 28, 2018 filed with
the SEC on June 13, 2018. The results of operations for the three months ended May 31, 2018, are not necessarily indicative of
the results that may be expected for the full year.
Going Concern Considerations and Management’s
Plans
The accompanying financial
statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which
contemplate continuation of the Company as a going concern. The Company has no revenues, has incurred net losses, and
has an accumulated deficit of $2,500,488 as of May 31, 2018. The Company currently has limited liquidity and limited access to
capital. These factors raise substantial doubt about our ability to continue as a going concern within one year after the date
of the financial statements are issued. If the Company is unable to obtain adequate capital, we could be forced to cease operations.
Management anticipates
the Company will be dependent, for the foreseeable future, on additional capital to fund further development of our infrastructure
and to fund operations until such time we have sufficient revenues to meet our cost structure. Additional capital is required in
order to acquire source code developed by consultants retained to complete the project and to ultimately launch our anticipated
products in the marketplace. In light of management’s efforts, there are no assurances that the Company will be
successful in obtaining sufficient capital to continue as a going concern.
The ability of the
Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the
preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial
statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
New Accounting Pronouncements
We have reviewed all
recently issued accounting pronouncements and these were disclosed in the Company’s most recently filed Form 10-K or are
not believed by us to have a material impact on the Company's present or future financial statements, based on our current operations.
Facility Lease
On March 7, 2018, entered
into a new lease with the Landlord. The new lease has a minimum term of 35 months, expiring January 31, 2021, and requires the
following minimum payments, excluding property taxes and other common area costs: months 1 through 11 - $16,016 per month totaling
$176,176; months 12 through 23 - $16,715 per month totaling $200,580; and months 24 through 35 - $17,472 per month totaling $209,664.
As of May 31, 2018, the future minimum payments towards this lease for the fiscal years ending February 28, 2019, 2020, and 2021
were $144,843, $201,337, and $192,192, respectively.
During the three months
ended May 31, 2018 and 2017, the Company incurred $31,149 and $0 in rent expense. As of May 31, 2018, we had $2,217 of deferred
rent recorded as accrued liabilities on the accompanying balance sheet.
4
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Related Party Transactions
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Related Party Transactions
During the three months
ended May 31, 2018, China-Israel funded the Company with proceeds from sale of common stock of $569,805. As of May 8, 2018, the
buyers converted $223,694 plus accrued interest of $6,501. During the three months ended May 31, 2018, the Company recorded $3,896
of related party interest expense towards the buyers’ related party notes payable. The proceeds and conversion completed
the $800,000 subscription agreement. During the three months ended May 31, 2018, the Company recorded a loss on settlement of debt
of $184,156 on the accompanying statement of operations based on the excess in fair market value of the shares issued to settle
the debt.
Accrued Payroll
The Company approved
compensation to Michael Dunn in the amount of $5,000 per month beginning in June 2017. As of May 31, 2018, the Company has recorded
accrued and unpaid payroll due to Mr. Dunn of $30,000.
On July 25, 2017, the
Company entered into an unsecured promissory note with Goldenrise, a former related party before change of control on June 28,
2017, in the amount of $80,000, which was increased to $90,000 by the Parties (the “Note”). The Note together with
accrued interest is due and payable on August 31, 2017. The note does not bear interest. The Note was settled for $45,000 on January
13, 2018 and thus the Company recorded a gain on settlement of $45,000 during the year ended February 28, 2018. The note was repaid
on April 2, 2018.
Authorizations and Designations
The Company is authorized
to issue 190,000,000 shares of its $0.001 par value common stock and 10,000,000 shares of its $0.001 par value preferred stock.
As of May 31, 2018, no preferred stock has been issued.
On May 8, 2018, we
completed a subscription agreement for the sale of 2,000,000 shares of our common stock to our largest shareholder for $800,000.
$230,195 of the purchase price was applied to the settlement of related party notes payable and accrued interest and the remaining
$569,805 was paid in cash. During the three months ended May 31, 2018, the Company recorded a loss on settlement of debt of
$184,156 on the accompanying statement of operations based on the excess in fair market value of the shares issued to settle the
debt.
2014 Stock Incentive Plan
The Board of Directors
adopted the 2014 Stock Incentive Plan (the “Plan”). The Plan provides for the grant, at the discretion of the Compensation
Committee of the Board of Directors, of stock awards, of common stock, restricted stock, awards of common stock, or stock options
to purchase common stock of the Company, with a maximum of 150,000 shares. The Plan, as originally adopted authorized 15,000,000
shares, however, the authorized shares under the Plan was reversed 100 for 1 in accordance with the Reverse Split of the Company
which became effective on January 22, 2015. As of May 31, 2018, 131,875 shares are available for issuance under the Plan.
There have been no material subsequent events
through the date of this filing.