The accompanying notes are an integral part of
these unaudited consolidated financial statements.
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 (the “Share Purchase Agreement”), 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, Dan Masters resigned from his positions as the President, Chief Executive Officer, Chief Financial Officer, Secretary and Chairman
of the Board of the Company. Such resignation took place 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’ resignation, 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 the Executive Director of the
Company. Ms. Wendy Li was appointed as the Chief Financial Officer of the Company. On February 28, 2021, Ms. Wendy Li resigned from her
position with the Company as the Chief Financial Officer. To fill the vacancies created by Ms. Wendy Wei Li’s resignation, Mr. Ang
was appointed as the Chief Financial Officer. On November 30, 2021, Mr. Bo Lyu has been appointed as the Chief Financial Officer.
On July 3, 2018, the Company changed its name
to Heyu Biological Technology Corporation and applied for 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. 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. Mr. Xu 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 selling medical equipment.
It was Mr. Xu and JSEL’s intention that JSEL would fund the operations of Kangzi in proportion to JSEL’s equity interest in
Kangzi. At the time of the share transfer, Kangzi owned no assets and conducted no business operation.
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. We believe that exposure to an appropriate amount
of submillimeter waves would 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 cancer by converting selenium into nickel inside cells.
Our team consists of researchers who have years
of extensive experience in medicine and physics. The lead scientist of the team, Mr. Xu, had extensive professional experience in the
aforementioned fields and has served as the deputy chief engineer of the New Energy Base of the National Defense-Science and Technology
Commission in 1995, the chairman and chief scientist of Shanghai Guangzhui 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 received the “Harmony-Person of the
Year in China” award at the “2011 Harmony China Annual Summit” in Beijing. He was 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. Mr. Xu also received the “2013 China
Economic Outstanding Contribution Award” from the Organizing Committee of Boau Forum on Asian SME Development.
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, JSEL started
accepting pre-orders for the Chamber in September 2019.
The outbreak of the novel coronavirus, commonly
referred to as “COVID-19”, first found in mainland China, then in Asia and eventually throughout the world, has significantly
affected business and manufacturing activities within China, including travel restrictions, widespread mandatory quarantines, and suspension
of business activities within China. These measures have caused substantial disruptions to our business operations. We suspended our business
operation in early February 2020 due to government mandates. We partially recovered our business operation on February 17, 2020, and on
March 1, 2020, most of our staff members returned to the office and we fully resumed our business operations on the same day. Accordingly,
our business, results of operations and financial condition were adversely affected. As of the date of this Report, Chinese industries
have gradually resumed businesses as government officials started to ease the restrictive measures since April 2020. However, as most
of our top management team is an overseas team, due to the international travel ban, we still operate under remote-working conditions,
so the business of the Company is still recovering. Our management believes that our revenues will gradually improve as the epidemic and
the travel ban are lifted.
On March 17, 2020, we entered into a business
service cooperation agreement with Xiamen Qingda Intelligent Technology Co., Ltd., a wholly-owned subsidiary of Cross-strait Tsinghua
Research Institute, pursuant to which we agreed to jointly improve the plant based disinfectant spray for treating skin infections and
disinfecting wounds. The term of such agreement is three years, and can be renewed upon mutual agreement of both parties. The original
plant based disinfectant spray was developed and owned by the Company, while the improved product shall be owned by both the Company and
the Cross-strait Tsinghua Research Institute. The Cross-strait Tsinghua Research Institute will receive 2% of gross proceeds from the
sales of such improved product.
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 months ended March 2023 and 2022 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 March 31,
2023, the results of its operations for the three months ended March 31, 2023 and 2022, and its cash flows for the three months ended
March 31, 2023 and 2022. 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, 2022 has been derived from the Company’s audited financial statements
included in the Form 10-K for the year ended December 31, 2022.
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, 2022.
As of March 31, 2023, the details of the consolidating subsidiaries
are as follows:
Name of Company | |
Jurisdiction of Formation | |
Attributable equity interest % | |
HP Technology Limited | |
British Virgin Islands | |
| 100 | % |
| |
| |
| | |
Heyu Healthcare Technology Limited | |
Hong Kong | |
| 100 | % |
| |
| |
| | |
JSEL | |
PRC | |
| 100 | % |
| |
| |
| | |
Kangzi | |
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.
Accounts receivable and allowance for doubtful
accounts
Accounts receivable are stated at the historical
carrying amount net of allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts which reflects its best
estimate of amounts that potentially will not be collected. The Company determines the allowance for doubtful accounts taking into consideration
various factors, including but not limited to historical collection experience and credit-worthiness of the debtors, as well as the age
of the individual receivables balance. Additionally, the Company makes specific bad debt provisions based on any specific knowledge the
Company has acquired that might indicate that an account is uncollectible. The facts and circumstances of each account may require the
Company to use substantial judgment in assessing its collectability.
Inventories
Inventories consist of finished goods, work in
process, and raw materials. Inventories are stated at the lower 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 $ 192,574
of ROU assets and $ 192,574 of lease liabilities on our consolidated balance sheet related to office space lease commitment on March 31,
2023.
Foreign Currency
For fiscal year 2022, 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 quarters ended
March 31, 2023 and 2022.
| |
As of | |
| |
March 31, 2023 | | |
December 31, 2022 | |
RMB: US$ exchange rate | |
| 6.8717 | | |
| 6.8983 | |
| |
Three Months ended March 31, | |
| |
2023 | | |
2022 | |
RMB: US$ exchange rate | |
| 6.8476 | | |
| 6.3454 | |
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 common
stock authorized, par value $0.001 per share, with 1,032,466,000 shares issued and outstanding as of March 31, 2023, and December 31,
2022.
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.
For the three months ended March 31, 2023 and 2022, there were no potentially
dilutive shares.
| |
For the three months ended March 31, | |
| |
2023 | | |
2022 | |
Statement of Operations Summary Information: | |
| | |
| |
Net loss | |
$ | (148,377 | ) | |
$ | (49,515 | ) |
Weighted-average common shares outstanding - basic and diluted | |
| 1,032,466,000 | | |
| 1,032,466,000 | |
Net loss per share, basic and diluted | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
NOTE 2 – GOING CONCERN
During the quarter ended March 31, 2023, the Company was unable to
generate cash flows sufficient to support its operations and was dependent on related party advances from the two directors. In addition,
the Company had experienced recurring net losses, and had an accumulated deficit of $20,035,077 and working capital deficit of $2,219,843
as of March 31, 2023. 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 will 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 fund 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 March 31,
2023 | | |
As of December 31, 2022 | |
Bank Deposits-China & HK | |
| 29,210 | | |
| 11,428 | |
| |
$ | 29,210 | | |
$ | 11,428 | |
NOTE 4 – OTHER RECEIVABLE
Other receivable consists of the following:
| |
As of March 31,
2023 | | |
As of December 31, 2022 | |
Rental and POS machine deposits | |
| 1,333 | | |
| 13,954 | |
Others | |
| 22,868 | | |
| 3,891 | |
Less: Allowance for doubtful accounts | |
| - | | |
| - | |
| |
$ | 24,201 | | |
$ | 17,845 | |
Management periodically reviews account balance.
If any indication occurs, the allowance for doubtful debts would be recognized. No such allowance has been recognized during the three
months ended March 31, 2023.
NOTE 5 – ADVANCES TO SUPPLIERS
Advances to suppliers consists of the following:
| |
As of March 31,
2023 | | |
As of December 31, 2022 | |
Purchases of scientific research equipment | |
| 3,143 | | |
| 3,131 | |
| |
$ | 3,143 | | |
$ | 3,131 | |
NOTE 6 – OPERATING LEASE RIGHT-OF-USE ASSET
AND LIABILITIES
On March 31, 2023, the Company entered in a lease
agreement for office space, the right-of-use asset is recognized as following:
| |
As of March 31, 2023 | | |
As of December 31, 2022 | |
Operating lease right-of-use asset | |
| 192,574 | | |
| - | |
| |
$ | 192,574 | | |
$ | - | |
Operating lease liability consist both current and noncurrent component
as the following:
| |
As of March 31, 2023 | | |
As of December 31, 2022 | |
Operating lease liability - current portion | |
| 57,664 | | |
| - | |
Operating lease liability- long term | |
| 112,215 | | |
| - | |
| |
$ | 169,879 | | |
$ | - | |
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.
| |
March 31, 2022 | |
Weighted Average Remaining Lease Term(Year) | |
| 3 | |
Weighted Average Discount Rate | |
| 4.30 | % |
The approximate future
minimum lease payments under operating leases as:
| |
Operating Leases | |
2023 | |
| 47,792 | |
2024 | |
| 63,722 | |
2025 | |
| 63,722 | |
2026 | |
| 5,310 | |
Total Lease payments | |
| 180,546 | |
Less Imputed interest | |
| 10,667 | |
Present value of lease liabilities | |
$ | 169,879 | |
NOTE 7 – ADVANCES FROM CUSTOMERS
| |
As of March 31, 2023 | | |
As of December 31, 2022 | |
Advances from customers(1) | |
| 438,028 | | |
| 434,890 | |
| |
$ | 438,028 | | |
$ | 434,890 | |
| (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 the 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 8 – ACCRUED EXPENSES AND OTHER PAYABLES
Accrued expenses and other payables consist of the following:
| |
As of March 31, 2023 | | |
As of December 31, 2022 | |
Accrued payroll | |
| 134,697 | | |
| 155,078 | |
Other Payables | |
| 48,670 | | |
| 130,003 | |
| |
$ | 183,367 | | |
$ | 285,081 | |
Accrued payroll includes all company employee
payroll liabilities as of March 31, 2023, and other payables contains employee reimbursements.
NOTE 9 – RELATED PARTY TRANSACTIONS
As of March 31, 2023 and December 31, 2022, the
Company owed related parties $ 1,581,133 and $1,268,749, respectively. Almost all expenses incurred during this reporting period are paid
by two directors. Expenses mainly included auditing, consulting and legal advisory expenses, government registration expenses, and payrolls.
NOTE 10 – EQUITY
The Company had not recorded any equity transactions
during the three months ended March 31, 2023.
The Company had not recorded any equity transactions
during the year ended December 31, 2022.
NOTE 11 – 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.