Note 1 – ORGANIZATION AND NATURE OF BUSINESS
VitaSpring Biomedical Co., Ltd (formerly Shemn Corp.)
(“the Company”) was incorporated in the State of Nevada on September 6, 2016. The Company aims to build a cell medical industry,
invest in research and development of stem cell applications in regenerative medicine, establish advanced medical research centers and
high standard cell production centers, and provide “GTP” standard stem cell preparations for the development of cellular drugs.
Through the development of cell medicine, it will become a leading international business group in the fields of regenerative medicine
applied to the innovative fields of medicine, preventive health care, beauty, and anti-aging. The “GTP Cell Center” is basis
for its business, which is cross-domain in biotechnology medical treatment, medicine and medical materials, and focuses on the development
of cell medical treatment.
Note 2 – GOING CONCERN
The accompanying financial statements have been prepared
in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company
has retained earnings of $810,964 and a negative cash flow from operations amounting to $83,162 for the nine months ended October 31,
2022. The Company had $1,490,000 in revenues for the nine months ended October 31, 2022. There is substantial doubt about the Company’s
ability to continue as a going concern due to the limited operating history of the business. As such, no assurance that the Company will
continue to be profitable. Management anticipates that the Company will be dependent, for the near future, on additional investment capital
to fund operating expenses. The Company intends to position itself so that it will be able to raise additional funds through the capital
markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors
or become financially viable and continue as a going concern.
Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of presentation
The accompanying financial statements have been prepared
in accordance with generally accepted accounting principles in the United States of America. The Company’s year-end is January 31.
Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount
of revenues and expenses during the reporting year. Actual results could differ from those estimates.
Cash
and Cash Equivalents
The
Company considers
all highly liquid
investments
with the original
maturities of
nine months
or less to be cash
equivalents.
The Company had $24,050 of cash and cash equivalents as of October 31, 2022.
Allowance
for Doubtful Accounts
The allowance for doubtful accounts represents an
estimate by the Company's management of specific accounts deemed uncollectible. The estimate takes into account prior bad debt experience
and customer receivables outstanding for 90 days or more. Allowance for doubtful accounts was $0 as of October 31, 2022.
Prepaid Expenses and Deposits
Prepaid Expenses are recorded at cost less amortized
value. The Company had $5,559 and $17,614 in prepaid expenses and deposits respectively as of October 31, 2022.
7
Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Inventories
Inventories are stated at the lower of cost or market.
Cost is principally determined using the first-in, first out (FIFO) method. The Company had $0 in finished goods inventory as of October
31, 2022. The Company had $0 prepaid inventory as of October 31, 2022.
Depreciation, Amortization, and Capitalization
The Company records depreciation and amortization
when appropriate using straight-line balance method over the estimated useful life of the assets. The Company estimates that the useful
life of necessary equipment is 5 years. Expenditures for maintenance and repairs are charged to expense as incurred. Additions, major
renewals, and replacements that increase the property's useful life are capitalized. Property sold or retired, together with the related
accumulated depreciation is removed from the appropriated accounts and the resultant gain or loss is included in net income.
Accounts Payable and Accrued Liabilities
Accounts payable discloses a liability to a creditor,
carried on open account, usually for purchases of goods and services. Accrued liabilities represent unpaid goods and services. The Company
had $0 in accounts payable and accrued liabilities as of October 31, 2022.
Credit Card Liability
Credit card liability represents amounts owed to credit
card issuers for money borrowed to pay merchants for goods and services based on the cardholder’s promise to pay the card issuer
borrowed amounts plus other agreed upon charges. The Company had $0 in credit card liability as of October 31, 2022.
Fair Value of Financial Instruments
Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, establishes a three-tier
fair value hierarchy, which prioritizes the inputs in measuring fair value. The hierarchy prioritizes the inputs into three levels based
on the extent to which inputs used in measuring fair value are observable in the market.
These tiers include:
| Level 1: |
defined as observable inputs such as quoted prices in active markets; |
| Level 2: |
defined as inputs other than quoted prices in active
markets that are either directly or indirectly
observable; |
| Level 3: |
defined as unobservable inputs in which little or
no market data exists, therefore requiring an entity
to develop its own assumptions. |
The carrying value of cash and the Company’s
loan from shareholder approximates its fair value due to their short-term maturity.
Income Taxes
Income taxes are computed using the asset and liability
method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between
the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation
allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
8
Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Revenue Recognition
The Company recognizes revenue in accordance with
ASC Topic 606, Revenue from Contracts with Customers. The core principle of ASC 606 is that an entity recognizes revenue to depict
the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. An entity recognizes revenue in accordance with that core principle by applying the
following steps: Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3:
Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognize
revenue when (or as) the entity satisfies a performance obligation.
Specifically, Section 606-10-50 requires an entity
to provide information about: a. Revenue recognized from contracts with customers, including the disaggregation of revenue into appropriate
categories; b. Contract balances, including the opening and closing balances of receivables, contract assets, and contract liabilities;
c. Performance obligations, including when the entity typically satisfies its performance obligations and the transaction price that is
allocated to the remaining performance obligations in a contract; d. Significant judgments, and changes in judgments, made in applying
the requirements to those contracts. For the nine months ended October 31, 2022, the Company generated $1,490,000 in revenue.
Basic Income (Loss) Per Share
The Company computes income (loss) per share in accordance
with ASC Topic 260, Earnings per Share. Basic loss per share is computed by dividing net income (loss) available to common shareholders
by the weighted average number of outstanding common shares during the year.
Diluted income (loss) per share gives effect to all
dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their
effect is anti-dilutive. As of October 31, 2022, there were no potentially dilutive debt or equity instruments issued or outstanding.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as all changes
in stockholders’ equity, exclusive of transactions with owners, such as capital investments. Comprehensive income (loss) includes
net income (loss), changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments
in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. As of October 31, 2022, there were no differences
between our comprehensive income (loss) and net income (loss).
Stock-Based Compensation
The Company measures all stock-based awards granted
to employees, directors and non-employees based on the fair value on the date of grant in accordance with ASC Topic 718, Compensation
– Stock Compensation. Compensation expense of those awards is recognized over the requisite service period, which is generally
the vesting period of the respective award. Generally, the Company issues awards with either service-only vesting conditions and records
the expense using the straight-line method or service and performance vesting conditions and records the expense when achievement of the
performance condition becomes probable using the graded-vesting method. The Company accounts for forfeitures as they occur.
The fair value of stock-based grant awards is estimated
using the fair value of the Company’s most recent historical transaction with third parties. The Company classifies stock-based
compensation expense in its statements of operations in the same manner in which the award recipient’s payroll costs are classified
or in which the award recipient’s service payments are classified.
9
Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Foreign Currency Translation
The Company’s functional and reporting currency
is the U.S. dollar. Transactions may occur in foreign currencies and management has adopted ASC Topic 830, Foreign Currency Matters.
Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet
date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date
of the transaction. Average monthly rates are used to translate revenues and expenses. Gains (losses) arising on translation or settlement
of foreign currency denominated transactions or balances are included in the statement of operations.
Leases
The Company determines whether a contract is or contains
a lease at contract inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current
liabilities, and operating lease liabilities on our balance sheets. Finance leases are included in property and equipment, other current
liabilities, and other long-term liabilities on the Company’s balance sheets.
Operating lease ROU assets and operating lease liabilities
are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the
Company’s leases do not provide an implicit rate, we use the Company’s incremental borrowing rate based on the information
available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease
payments made and excludes lease incentives and initial direct costs incurred. The Company’s lease terms may include options to
extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense for fixed
lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are generally expensed as incurred
and may include certain index-based changes in rent and other non-fixed payments for services provided by the lessor. The Company’s
leases do not contain any material residual guarantees or material restrictive covenants.
Lease arrangements with lease and non-lease components
are generally accounted for separately. For certain equipment leases, such as vehicles, the Company will account for the lease and non-lease
components as a single lease component. Additionally, for certain equipment leases, the Company will apply a portfolio approach to effectively
account for the operating lease ROU assets and liabilities.
Risk Factors
The following risks could adversely affect the Company’s
business, financial condition, cash flows, and results of operations. These risk factors do not identify all risks that we face; our operations
could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations.
Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance, and
historical trends should not be used to anticipate results or trends in future years.
The COVID-19 pandemic has adversely affected significant
portions of our business and could have a material adverse effect on our financial condition and results of operations. The Company is
subject to numerous pandemic-related risks, including those described below. The degree to which COVID-19 impacts the results will depend
on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and severity of
the pandemic, the actions taken to contain the virus or treat its impact, other actions taken by governments, businesses, and individuals
in response to the virus and resulting economic disruption, and how quickly and to what extent normal economic and operating conditions
can resume. We are similarly unable to predict the extent of the impact of the pandemic on our customers, suppliers, vendors, and other
partners, and their financial conditions, but a material effect on these parties could also materially adversely affect us.
10
Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Risk Factors (Continued)
The pandemic has resulted in authorities imposing,
and businesses and individuals implementing, numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines,
shelter-in-place/stay-at-home and social distancing orders, and shutdowns. These measures have impacted and may further impact our workforce
and operations, the operations of our customers, and those of our respective vendors, suppliers, and partners.
There is considerable uncertainty regarding the business
impacts from such measures and potential future measures. Shelter-in-place orders and other measures, including work-from-home and social
distancing policies implemented to protect employees.
The pandemic has caused the Company to modify its
business practices, including with respect to employee travel; employee work locations; cancellation of physical participation in meetings,
events, and conferences; and social distancing measures.
The Company may take further actions as required by
government authorities or others, or that we determine are in the best interests of our employees, customers, suppliers, vendors, and
partners. Work-from-home and other measures introduce additional operational risks, including cybersecurity risks, and have affected the
way we conduct our product development, validation, and qualification, customer support, and other activities, which could have an adverse
effect on our operations. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, and illness
and workforce disruptions could lead to unavailability of key personnel and harm our ability to perform critical functions.
Note 4 – ADVANCES FROM RELATED PARTY
For the nine months ended October 31, 2022, one of
the Company's shareholders and officers, a related party, had outstanding advances to the Company. Advances are unsecured, non-interest
bearing and due on demand and amounted to $215,959 as of October 31, 2022.
Note 5 – COMMON STOCK
The number of authorized shares of common stock under
the Certificate of Incorporation was 75,000,000, $0.001 par value, when the Company was incorporated on September 6, 2016. The number
of authorized shares of common stock under the Certificate of Incorporation was amended to 225,000,000 shares on November 29, 2018. The
number of authorized shares of common stock under the Certificate of Incorporation was amended to 500,000,000 shares, $0.0001 par value,
on May 22, 2020.
Effective on January 21, 2020, Liu Shan Shan, the
previous sole officer and director and a majority shareholder of the Company owning a total of 82.55% of the issued and outstanding shares
of common stock of the Company, together with all other minority shareholders (31) of the Company owning an aggregate of 17.45% of the
issued and outstanding shares of common stock of the Company, entered into stock purchase agreement for the sale of 100% of the outstanding
shares of common stock of the Company (10,902,006 shares), to a group of purchasers (32), including Li-Li Chu (2,666,666 shares); the
incoming CEO, Chu Pao-Chi (1,666,667 shares); and the incoming Secretary, Kao Chen-Hsiang (800,000 shares).
On May 12, 2020, the Company amended its articles
of incorporation to affect the following: (a) the number of authorized shares of common stock under the Certificate of Incorporation was
amended to 500,000,000 shares, having a $0.0001 par value; (b) a stock split on a 1:5 basis, such that each share of the issued and outstanding
Common stock of the Corporation be forward split into five (5) shares of Common stock of the Corporation, effective on June 8, 2020 (the
“Record Date”).
11
Note 5 – COMMON STOCK (Continued)
On May 12, 2021, the Company issued 1,000,000 shares
of common stock to investors for cash proceeds of $50,000 at a price of $0.005 per share.
On May 12, 2021, the Company issued 7,135,015 shares
of common stock related to its stock-based compensation plan to certain non-U.S. consultants, directors, and employees of the Company.
There were 206,520,030 and 209,670,030 shares of common
stock issued and outstanding as of January 31, 2022 and 2021, respectively.
There were 206,520,030 shares of common stock issued
and outstanding as of October 31, 2022.
Note 6 – STOCK-BASED COMPENSATION
The Company’s stock-based compensation programs
are long-term retention programs that are intended to attract, retain, and provide incentives for employees, officers, and directors,
and to align stockholder and employee interests.
Under the 2020 Stock Plan, the Company grants Incentive
Stock Options (“ISO”), Non statutory Stock Options (“NSO”), Restricted Stock (“RS”) and Restricted
Stock Units (“RSU). ISO and NSO are granted under service conditions. RS and RSU are granted under vesting criteria set by the Administrator
and could be based upon the achievement of Company-wide, business unit, or individual goals (including, but not limited to, continued
employment or service), or any other basis determined by the Administrator at their discretion. Stock options granted to employees generally
vest over a four-year period, although certain grants may vest over a longer or shorter period. Stock options granted to non-employees
generally vest over a one-year period.
Valuation of Stock-Based Compensation
Stock-based compensation cost is measured at the grant
date based on the fair value of the award. The fair value of the awards are fixed at grant date and amortized over the longer of the remaining
performance or service period. The fair value of stock-based grant awards is estimated using the fair value of the Company’s most
recent historical transaction with third parties.
A summary of restricted share activity under the 2020
Stock Plan for the nine months ended October 31, 2022 are as follows:
| |
|
|
|
|
|
Weighted |
| |
|
|
|
Weighted |
|
Average |
| |
|
|
|
Average |
|
Remaining |
| |
|
Number of |
|
Exercise |
|
Contractual Life |
| |
|
Shares |
|
Price |
|
(Years) |
| January 31, 2022 |
|
53,931,440 |
$ |
- |
|
1 |
| Granted |
|
- |
|
- |
|
|
| Exercised |
|
- |
|
- |
|
|
| Forfeited |
|
- |
|
- |
|
|
| |
|
|
|
|
|
|
| October 31, 2022 |
|
53,931,440 |
$ |
- |
|
1 |
| |
|
|
|
|
|
|
12
Note 6 – STOCK-BASED COMPENSATION (Continued)
A summary of the status of the Company’s nonvested
shares for the nine months ended as of October 31, 2022, and changes during the nine months ended October 31, 2022 are as follows:
| |
|
Number of Shares |
|
Weighted
Average
Grant Date
Fair Value |
| Nonvested at January 31, 2022 |
|
53,931,440 |
$ |
0.005 |
| Granted |
|
- |
|
- |
| Vested |
|
- |
|
- |
| Forfeited |
|
- |
|
- |
| |
|
|
|
|
| Nonvested at October 31, 2022 |
|
53,931,440 |
$ |
0.005 |
| |
|
|
|
|
| Expected to vest |
|
53,931,440 |
$ |
0.005 |
Compensation Costs
The Company recognizes the estimated compensation
cost of all stock-based awards generally on a straight-line basis over the requisite service period of the entire award, which is generally
the vesting period. The estimated compensation cost is based on the fair value of the common stock on the date of grant. The Company accounts
for forfeitures as they occur.
As of October 31, 2022, there was $36,506 of unrecognized
compensation cost related to non-vested stock-based awards which will be recognized over a weighted average period of one year. Total
unrecognized compensation cost will be adjusted for future changes based on actual forfeitures. Share-based compensation recognized for
the three months ended October 31, 2022 amounted to $109,527.
Note 7 – COMMITMENTS AND CONTINGENCIES
Operating Lease Commitment
In July 2021, the Company entered into a non-cancelable
operating lease for an office facility in Irvine, California. The lease agreement requires 36 monthly lease payments that range from $14,796
to $16,013 per month. The lease commences in August 2021 and expires in July 2024. The lease has a remaining lease term of less than three
years, with no options to extend.
The components of lease expense are as follows:
For the nine months ended October 31, 2022, operating
lease costs amounted to $138,589.
Other information related to leases are as follows:
13
Supplemental Cash Flows Information: for
the nine months ended October 31, 2022
Cash paid for amounts included in the measurement
of lease liabilities:
| · | Operating
cash flows from operating leases: $46,164 |
Right-of-use assets obtained in exchange for lease
obligations:
| · | Operating
leases: $551,650 |
Weighted Average Remaining Lease Term for operating
leases: 1.75 years
Weighted Average Discount Rate for operating leases:
0.330%
Future minimum lease payments under non-cancelable
leases as of October 31, 2022 are as follows:
| |
|
|
|
|
| |
Fiscal Year |
|
|
Operating Leases |
| |
2022 * |
|
$ |
46,164 |
| |
2023 |
|
|
188,402 |
| |
2024 |
|
|
96,074 |
| |
Thereafter |
|
|
- |
| Total future minimum lease payments |
|
|
330,640 |
| |
|
|
|
|
| Less imputed interest |
|
|
(1,006) |
| |
|
|
|
|
| |
Total |
|
$ |
329,634 |
* Excluding the nine months ended October 31, 2022
| |
|
October 31, 2022 |
| Operating lease liabilities |
$ |
45,904 |
| Operating lease liabilities, net of current |
$ |
283,730 |
Note 8 – SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
For the nine months ended October 31, 2022, the Company
incurred $582,603 in selling, general and administrative expenses. See financial statements – supplementary information Schedule
I for details.
Note 9 – INCOME TAXES
There are inherent uncertainties related to the interpretation
of tax regulations in the jurisdictions in which the Company transacts business. The judgments and estimates made at a point in time may
change based on the outcome of tax audits, as well as changes to, or further interpretations of, regulations. The Company adjusts its
income tax expense in the period in which these events occur. If such changes take place, there is a risk that the tax rate may increase
or decrease in any period.
14
Note 9 – INCOME TAXES (Continued)
The FASB guidance contained in ASC Topic 740, Income
Taxes, addresses the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes
a threshold of “more likely than not” for recognition and derecognition of tax positions taken or expected to be taken in
a tax return.
The Company adopted this guidance and is now required
to recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income
tax positions are measured at the largest amount that is greater than 50% likely of being recognized. Additionally, previously recognized
tax positions that no longer meet the more-likely-than-not threshold should be derecognized in the first financial reporting period in
which that threshold is no longer met. Changes in recognition or measurement will be reflected in the period in which the change in judgment
occurs.
The Company’s income tax filings are subject
to audit by various taxing authorities. The Company’s open audit periods are three years for federal and four years for California.
In evaluating the Company’s tax provisions and accruals, future taxable income, and the reversal of temporary differences, interpretations,
and tax planning strategies are considered. The Company had no material adjustments to its liabilities for unrecognized income taxes under
the guidelines of the ASC Topic 740 for uncertainty in income taxes and believes their estimates are appropriate based on current facts
and circumstances.
The components of provision for income taxes are:
| |
|
October 31,
2022 |
|
January 31,
2022 |
| Income taxes (payable)/receivable currently: |
|
|
|
|
| Federal |
$ |
|
$ |
(210,923) |
| State |
|
(800) |
|
- |
| Total income taxes payable currently |
|
|
| Deferred income tax |
|
|
|
|
| Federal |
|
|
|
|
| Deferred tax benefit (liability) – end of period/year |
|
(4,473) |
|
(6,181) |
| Valuation allowance |
|
- |
|
- |
| Total deferred tax benefit (liability) – end of period/year |
|
(4,473) |
|
(6,181) |
| Deferred tax benefit (liability) – beginning of period/year |
|
(6,181) |
|
93,929 |
| Valuation allowance |
|
- |
|
(93,929) |
| Total deferred tax benefit (liability) – beginning of period/year |
|
(6,181) |
|
- |
| Total federal deferred tax benefit (liability) |
|
1,708 |
|
(6,181) |
| |
|
|
|
|
| State |
|
|
|
|
| Deferred tax benefit (liability) – end of period/year |
$ |
- |
|
- |
| Deferred tax benefit (liability) – beginning of period/year |
|
- |
|
- |
| Total state deferred tax benefit (liability) |
|
- |
|
- |
| |
|
|
|
|
| Total deferred tax income (expense) |
|
1,708 |
|
(6,181) |
| Provision for income tax benefit (expense) |
$ |
908 |
|
(217,104) |
| |
|
|
|
|
| Deferred tax asset (liability) - long-term |
$ |
(4,473) |
|
(6,181) |
Note 10 – CONCENTRATION OF CREDIT RISK
The Company had one customer that accounted for more
than 10% of the Company’s total sales for the nine months ended October 31, 2022. The one customer represented $1,490,000 and 100%
in aggregate of total sales for the nine months ended October 31, 2022.
The Company had one vendor that accounted for more
than 10% of the Company’s total purchases for the nine months ended October 31, 2022. The one vendor represented 100% of the Company’s
total purchases for the nine months ended October 31, 2022. If the Company lost this one vendor, this could have a negative impact upon
the financial well-being of the Company.
Note 11 – SUBSEQUENT EVENTS
In accordance with ASC Subtopic 855-10, Subsequent
Events, the Company has evaluated subsequent events for potential recognition and/or disclosure through December 14, 2022, the date
these financial statements were issued and has determined that there were no material subsequent events to disclose in these financial
statements.
15
