YUBO INTERNATIONAL BIOTECH LTD Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q) | MarketScreener

2022-11-25 05:19:36 By : Mr. David Xu

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 and nine months ended September 30, 2022 and 2021 included under "Part I Financial Information-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 "Part II Other Information-Item 1A. Risk Factors" and elsewhere in our Annual Report on Form 10-K filed with the SEC on April 15, 2022.

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. Oseltamivir Phosphate Granules

YUBO INTERNATIONAL BIOTECH LTD  Management

Yubo Beijing conducts the day-to-day business operations of our Company in China through contractual relationships with us and our subsidiaries. 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 goods sold, 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 International Biotech Co., Ltd., a company organized under the laws of the Cayman Islands ("Platinum"), pursuant to that certain Agreement and Plan of Share Exchange, dated January 14, 2021 (the "Exchange Agreement"), by and among us, Platinum, Yubo 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.

Platinum was incorporated on April 7, 2020 under the laws of the Cayman Islands as a holding company.

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:

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 Beijing formed a new wholly owned subsidiary, Yubo Jingzhi Biotechnology (Chengdu) Co. Ltd., a company organized under the laws of the PRC ("Yubo Jingzhi").

As discussed below, Yubo Beijing and/or its shareholders have entered into various agreements with the WFOE to allow us to consolidate the financial results of Yubo Beijing in our consolidated financial statements. We acquired 100% of the issued and outstanding capital stock of Platinum, which, in turn, holds a 100% equity interest in the WFOE, in exchange for the issuance of 117,000,000 shares of our common stock to the shareholders of Platinum, which constituted more than 99% of our issued and outstanding common stock.

Effective December 4, 2020, we changed our corporate name from Magna-Lab, Inc. to Yubo International Biotech Limited under the stock symbol "YBGJ."

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 119,816,343 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 Global and Yubo Chengdu, each a company organized under the laws of the PRC, in each of which we hold equity ownership interests, and (ii) Yubo Beijing, the VIE and the Chinese operating company that conducts the day-to-day business operations of our Company in China through contractual relationships with us and our subsidiaries, including Yubo Jingzhi and a wholly owned subsidiary of Yubo Beijing. We do not own any equity interest in Yubo Beijing or Yubo Jingzhi.

On September 11, 2020, the WFOE entered into a series of contractual arrangements with Yubo Beijing and its shareholders, allowing us, for accounting purposes only, to consolidate the financial results of Yubo Beijing in our consolidated financial statements. These agreements include:

Neither we nor holders of our common stock have any equity ownership interest in, direct foreign investment in, or control through such contractual agreements of the VIE. 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 holders of our common stock 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 holders of our common stock. 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. Further, the Chinese regulatory authorities could disallow our contractual arrangements with Yubo Beijing, which would likely result in a material adverse change in our operations, and, given the resulting inability to consolidate Yubo Beijing's financial results in our consolidated financial statements, in the value of our Class A common stock, which could significantly decline or become worthless.

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.

Implication of the Holding Foreign Companies Accountable Act

The Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on December 18, 2020. The HFCA Act states that if the SEC determines that an issuer's audit reports issued by a registered public accounting firm have not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit such issuer's securities from being traded on a national securities exchange or in the over-the-counter trading market in the United States. As of the date of this Quarterly Report, our auditor, Michael T. Studer CPA P.C., an independent registered public accounting firm headquartered in the United States, is currently subject to PCAOB inspections and has been inspected by the PCAOB on a regular basis, and our auditor was not included in the determinations made by the PCAOB, on December 16, 2021. However, in the event it is later determined that the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by an authority in a foreign jurisdiction, then such lack of inspection could cause trading in our securities to be delisted from the stock exchange in the U.S pursuant to the HFCA Act. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if passed by the U.S. House of Representatives and signed into law, would amend the HFCA Act and require the SEC to prohibit an issuer's securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three.

On December 28, 2021, the CAC published the revised Cybersecurity Review Measures ("CRM"), which further restates and expands the applicable scope of the cybersecurity review. The revised CRM took effect on February 15, 2022. Pursuant to the revised CRM, if a network platform operator holding personal information of over one million users seeks for "foreign" listing, it must apply for the cybersecurity review. In addition, operators of critical information infrastructure purchasing network products and services are also obligated to apply for the cybersecurity review for such purchasing activities. Although the CRM provides no further explanation on the extent of "network platform operator" and "foreign" listing, we do not believe we are obligated to apply for a cybersecurity review pursuant to the revised CRM, considering that (i) we are not in possession of or otherwise holding personal information of over one million users and it is also very unlikely that we will reach such threshold in the near future; (ii) as of the date of this this Quarterly Report, we have not received any notice or determination from applicable PRC governmental authorities identifying it as a critical information infrastructure operator or requiring us to go through cybersecurity review or similar government reviews. In light of the foregoing, which are consistent with the local market practice, we did not retain any PRC legal counsel, and we did not rely on the advice of PRC legal counsel, with respect to such matters. Our understanding with regards to the permission requirements under the revised CRM is based on a risk-based analysis of the currently effective PRC laws, regulations and rules, as well as the local market practice as of the date of this Quarterly Report. We cannot assure you that our understanding is correct, or consistent with the opinion of PRC legal counsel if one were retained to opine on such permission requirements.

That being said, the revised CRM empowers the cybersecurity review office to initiate cybersecurity review when they believe any particular data processing activities "affect or may affect national security." In addition, on 14 November 2021, the CAC promulgated the Regulations on the Administration of Cyber Data Security (Draft for Comments) (the "Draft CAC Regulations"), and according to the Draft CAC Regulations, any data processors shall, in accordance with relevant state provisions, apply for a cybersecurity review when carrying out, among other things, "other data processing activities that affect or may affect national security." However, neither the revised CRM nor the Draft CAC Regulations provides for any further explanation or interpretation over what constitutes activities that "affect or may affect national security." Therefore, if any competent government authorities deem that Yubo Beijing's data processing activities may affect national security or if the competent government authorities, including the CAC, adopt new laws, regulations or rules related to the revised CRM, we may be subject to cybersecurity review, and in that scenario, we may be required to suspend our operations or experience other disruptions to our operations. Cybersecurity review could also result in negative publicity with respect to our Company and diversion of our managerial and financial resources, which could materially and adversely affect our business, financial condition, and results of operations. Failure to pass such cybersecurity review and/or to comply with the data privacy and data security requirements raised during a cybersecurity review could subject Yubo Beijing to penalties, damage its reputation and brand, and harm its business and results of operations.

On August 20, 2021, the Standing Committee of the National People's Congress promulgated the PRC Personal Information Protection Law, which took effect in November 2021. The Personal Information Protection Law provides that any entity involving processing of personal information ("Personal Information Processer") shall take various measures to prevent the disclosure, modification or losing of the personal information processed by such entity, including, but not limited to, formulating a related internal management system and standard of operation, conducting classified management of personal information, taking safety technology measures to encrypt and de-identify the processed personal information, providing regular safety training and education for staff and formulating a personal information safety emergency accident plan. The Personal Information Protection Law further provides that a Personal Information Processer shall conduct a prior evaluation of the impact of personal information protection before the occurrence of various situations, including, but not limited to, processing of sensitive personal information (personal information that, once leaked or illegally used, may lead to discrimination against an individual or serious harm to an individual's personal or property safety, including information on an individual's ethnicity, religious beliefs, personal biological characteristics, medical health, financial accounts, personal whereabouts), using personal information to make automated decisions and providing personal information to any overseas entity. Yubo Beijing's business involves the processing of personal information of customers using Yubo Beijing's healthcare products and receiving Yubo Beijing's services, which may be deemed as sensitive personal information. If Yubo Beijing does not take measures to review and improve its mechanisms in protecting personal information after the new Personal Information Protection Law takes effect, failure of personal information protection compliance could subject Yubo Beijing to penalties, damage its reputation and brand and harm its business and results of operations.

To operate its business activities in China, Yubo Beijing is required to obtain the following licenses and approvals. Yubo Beijing has obtained such licenses and approvals, and, to date, no application for any such licenses and approvals has been denied.

Yubo Beijing has historically generated most of its revenue from a limited number of customers. Chengdu Wenjiang Yubo Medical Beauty Hospital Co., Ltd. accounted for approximately 98.5% of Yubo Beijing's total accounts receivable as of September 30, 2022. Chengdu Wenjiang Yubo Medical Beauty Hospital Co., Ltd. is not a related party to us, any of our subsidiaries, or Yubo Beijing.

Our principal executive offices are located at Room 105, Building 5, 31 Xishiku Avenue, Xicheng District, Beijing, PRC. Our telephone number is +86 (010) 6615-5141. Our website address is http://www.yubogroup.com/. The information contained in, or that can be accessed through, our website is not incorporated by reference into, and is not a part of, this Quarterly Report. You should not consider any information on our website to be part of this Quarterly Report or in decides whether to purchase our securities. We have included our website address in this Quarterly Report solely for informational purposes.

We are a holding company, and we may rely on dividends and other distributions on equity paid by our subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders or holders of our Class A common stock or to service any debt we may incur. The following diagram illustrates the typical cash flow among our main subsidiaries, the WFOE and Yubo Beijing, the VIE.

As of the date of this Quarterly Report, except as disclosed below, no transfers of cash or other types of assets, dividends, or distributions have been made between our New York holding company, any of our subsidiaries, and Yubo Beijing. As of the date of this Quarterly Report, neither we nor any of our subsidiaries have ever paid dividends or made distributions to U.S. investors. There has been no capital flow from the WFOE, Yubo Chengdu, to the VIE, Yubo Beijing. On May 15, 2021, Yubo Beijing received $500,000 from Yubo Global in the form of a loan to fund Yubo Beijing's operations. On September 15, 2021, Yubo Global received a loan of $1,538 from Yubo Beijing to supplement Yubo Global's general working capital. See Note 10: Due to Related Parties to our unaudited consolidated financial statements for the three and nine months ended September 30, 2022 and 2021 included elsewhere in this Quarterly Report. These loans are non-interest bearing and payable on demand. While we have not to date adopted a formal cash management policy in writing, we carefully monitor the cash positions of and the fund flows between our New York holding company and each of our subsidiaries, including Yubo Chengdu, and Yubo Beijing. All such fund flows are reviewed regularly by our Chief Executive Officer and Chief Financial Officer and are subject to approval by our board.

In the future, cash proceeds raised from our financing activities may be transferred by us to our Chinese subsidiaries via capital contribution or shareholder loans, as the case may be. As an early-stage company, we do not intend to distribute earnings or settle amount owed under the VIE agreements, if any, in the near future.

According to the Foreign Investment Law of the People's Republic of China and its implementing rules, which jointly established the legal framework for the administration of foreign-invested companies, a foreign investor may, in accordance with other applicable laws, freely transfer into or out of China its contributions, profits, capital earnings, income from asset disposal, intellectual property rights, royalties acquired, compensation or indemnity legally obtained, and income from liquidation, made or derived within the territory of China in RMB or any foreign currency, and any entity or individual shall not illegally restrict such transfer in terms of the currency, amount and frequency. According to the Company Law of the People's Republic of China and other Chinese laws and regulations, our Chinese subsidiaries may pay dividends only out of their respective accumulated profits as determined in accordance with Chinese accounting standards and regulations. In addition, each of our Chinese subsidiaries, namely Yubo Chengdu and Yubo Global, and Yubo Beijing and its wholly owned subsidiary, Yubo Jingzhi, is required to set aside at least 10% of its accumulated after-tax profits, if any, each year to fund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital. Where the statutory reserve fund is insufficient to cover any loss the Chinese subsidiary incurred in the previous financial year, its current financial year's accumulated after-tax profits shall first be used to cover the loss before any statutory reserve fund is drawn therefrom. Such statutory reserve funds and the accumulated after-tax profits that are used for covering the loss cannot be distributed to us as dividends. At their discretion, our Chinese subsidiaries may allocate a portion of their after-tax profits based on Chinese accounting standards to a discretionary reserve fund.

Currently, the RMB cannot be freely converted into any foreign currency. The PRC government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of China. Our income is received in RMB and shortages in foreign currencies may restrict our ability to pay dividends or other payments, or otherwise satisfy our foreign currency denominated obligations, if any. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from the PRC State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. However, for most capital account items, approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of the Class A common stock.

Our cash dividends, if any, will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax.

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 and nine months ended September 30, 2022 and 2021 included elsewhere in this Quarterly Report.

As of September 30, 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.

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. We adopted ASU 2016-02 for interim and annual reporting periods beginning after December 15, 2018.

For finance leases, a lessee is required to do the following:

For operating leases, a lessee is required to do the following:

Other than increasing assets and liabilities at the inception of the respective leases (See Note 8: Operating Lease Right of Use Assets and Operating Lease Liabilities to our unaudited consolidated financial statements for the three and nine months ended September 30, 2022 and 2021 included elsewhere in this Quarterly Report), ASU 2016-02 has not had a significant effect on our financial position or results of operations.

We do not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material impact on its consolidated financial position, statements of operations or cash flows.

Results of Operations for the Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021 and for the Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021

Sales, Cost of Goods Sold and Gross Profit

We generated sales of $14,580 for the three months ended September 30, 2022, as compared to $98,303 for the three months ended September 30, 2021. Our cost of goods sold was $4,980 for the three months ended September 30, 2022, as compared to $25,106 for the three months ended September 30, 2021. Such decreases in sales and cost of goods sold were primarily due to a decrease in the sales of oral liquid health products by Yubo Beijing. As a result, our gross profit decreased from $73,197 for the three months ended September 30, 2021 to $9,600 for the three months ended September 30, 2022.

We generated sales of $37,763 for the nine months ended September 30, 2022, as compared to $912,103 for the nine months ended September 30, 2021. Our cost of goods sold was $14,046 for the nine months ended September 30, 2022, as compared to $310,312 for the nine months ended September 30, 2021. The decreases in sales and cost of goods sold were primarily due to a decrease in the sales of neublizers by Yubo Beijing. As a result, our gross profit decreased from $601,791 for the nine months ended September 30, 2021 to $23,717 for the nine months ended September 30, 2022.

Our operating expenses were $247,870 for the three months ended September 30, 2022, as compared to $419,211 for the three months ended September 30, 2021. The decrease in operating expenses was primarily due to a decrease in other operating expenses and reversal of provision for doubtful accounts.

Our operating expenses were $1,332,422 for the nine months ended September 30, 2022, as compared to $1,756,460 for the nine months ended September 30, 2021. The decrease in operating expenses was primarily due to a decrease in other operating expenses and reversal of provision for doubtful accounts, offset by an increase in occupancy expense.

Our loss from operations was $238,096 for the three months ended September 30, 2022, as compared to $346,014 for the three months ended September 30, 2021. The decrease in loss from operations was primarily due to a decrease of $171,341 in total operating expenses.

Our loss from operations was $1,308,705 for the nine months ended September 30, 2022, as compared to $1,154,669 for the nine months ended September 30, 2021. The increase in loss from operations was primarily due to decrease in gross profit of $578,074.

Our other income (expense) was $174 for the three months ended September 30, 2022, as compared to $9,430 for the three months ended September 30, 2021. The decrease in other income (expense) was primarily due to a decrease in interest income

Our other income (expense) was $102 for the nine months ended September 30, 2022, as compared to $9,402 for the nine months ended September 30, 2021. The decrease in other income (expense) was primarily due to a decrease in interest income.

Our net loss was $238,096 for the three months ended September 30, 2022, as compared to $336,584 for the three months ended September 30, 2021. The decrease in net loss was primarily due a decrease of $171,341 in total operating expenses.

Our net loss was $1,308,603 for the nine months ended September 30, 2022, as compared to $1,145,267 for the nine months ended September 30, 2021. The increase in net loss was primarily due to a decrease in gross profit of $578,074.

As of September 30, 2022, we had cash and equivalents on hand of $89,966 and a negative working capital of $2,192,473. 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 (File No. 333-255805) 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. Such registration Statement was declared effective by the SEC on July 29, 2022.

The accompanying interim unaudited consolidated financial statements for the three and nine months ended September 30, 2022 and 2021 included an explanatory note referring to our recurring operating losses and expressing substantial doubt in our ability to continue as a going concern. See Note 3: Going Concern to our unaudited consolidated financial statements for the three and nine months ended September 30, 2022 and 2021 included elsewhere in this Quarterly Report. To date, we have not yet established an ongoing source of revenues and cash flows sufficient to cover our operating costs and allow us to continue as a going concern. For the three and nine months ended September 30, 2022, we had net losses of $238,096 and $1,308,603, respectively. These factors among others raise substantial doubt about our ability to continue as a going concern for a reasonable period of time. See "-Going Concern" below. We intend to continue working toward identifying and obtaining new sources of financing and we intend to raise additional capital in the fourth quarter of 2022 through the next fiscal year. 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, Yubo Beijing may be required to delay, scale back or eliminate portions of its operations, cease operations or obtain funds through arrangements with strategic partners or others that may require us to relinquish certain of our contractual rights to Yubo Beijing. Accordingly, the inability to obtain such financing could adversely affect our ability to fund Yubo Beijing's continued operations and the 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 $88,578 for the nine months ended September 30, 2022, as compared to net cash used in operating activities of $957,174 for the nine months ended September 30, 2021. The increase in cash provided by operating activities was primarily due to decreases in accounts payable and accrued expenses and due to related parties.

Net cash provided by (used in) investing activities

Net cash used in investing activities was $39,772 for the nine months ended September 30, 2022, as compared to $546,682 for the nine months ended September 30, 2021. The decrease was primarily due to that no purchases of property and equipment were made during the nine months ended September 30, 2022.

Net cash provided by financing activities

Net cash provided by financing activities was $nil for the nine months ended September 30, 2022, as compared to $127,164 for the nine months ended September 30, 2021. The decrease was due to that no capital contributions were made during the nine months ended September 30, 2022.

As of September 30, 2022, Yubo Beijing received an aggregate amount of $446,851 from ten PRC entities. The related verbal agreements provide for the ten 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 ten PRC entities have the right to request the return of their advances.

In May and November 2021 and April and September 2022, we entered into several verbal loan agreements with World Precision Medicine Technology Inc. ("World Precision"), a company owned and controlled by Mr. Cheung Ho Shun, our existing shareholder, which provided the Company with working capital loans of an aggregate principal amount of $819,229. Such loans have been settled by our issue of an aggregate of 1,638,458 new shares of our Class A common stock to World Precision in September 2022. The shares were issued pursuant to our registration statement on Form S-1 (File No. 333-255805), which was declared effective by the SEC on July 29, 2022. As of the date of this Quarterly Report, Mr. Cheung Ho Shun is the beneficial owner of an aggregate of 7,121,458 shares of our Class A common stock, representing approximately 5.9% of the total shares of such class issued and outstanding.

As of September 30, 2022, we also had payables due to Mr. Yang Wang, our director, in the amount of $404,933, to Mr. Jun Wang, our director, President and Chief Executive Officer, in the amount of $583,107, and to Mr. Huang Li, our indirect shareholder, in the amount of $54,848.

All of our shareholder loans are due on demand and non-interest bearing.

The accompanying interim unaudited consolidated financial statements for the three and nine months ended September 30, 2022 and 2021 included an explanatory note 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. To date, we have not yet established an ongoing source of revenues and cash flows sufficient to cover our operating costs and allow us to continue as a going concern. For the three and nine months ended September 30, 2022, we had net losses of $238,096 and $1,308,603, respectively. These factors among others raise substantial doubt about our ability to continue as a going concern for a reasonable period of time.

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.

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.

YUBO INTERNATIONAL BIOTECH LTD  Management

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