Company Quick10K Filing
Advanced Biomedical Technologies
Price-0.00 EPS-0
Shares70 P/E0
MCap-0 P/FCF0
Net Debt-0 EBIT-1
TEV-0 TEV/EBIT0
TTM 2019-07-31, in MM, except price, ratios
10-Q 2021-01-31 Filed 2021-03-22
10-K 2020-10-31 Filed 2021-01-29
10-Q 2020-07-31 Filed 2020-09-21
10-Q 2020-04-30 Filed 2020-06-22
10-Q 2020-01-31 Filed 2020-04-30
10-K 2019-10-31 Filed 2020-03-20
10-Q 2019-07-31 Filed 2019-09-20
10-Q 2019-04-30 Filed 2019-06-19
10-Q 2019-01-31 Filed 2019-04-01
10-K 2018-10-31 Filed 2019-02-13
10-Q 2018-07-31 Filed 2018-09-19
10-Q 2018-04-30 Filed 2018-06-19
10-Q 2018-01-31 Filed 2018-03-26
10-K 2017-10-31 Filed 2018-02-13
10-Q 2017-07-31 Filed 2017-09-19
10-Q 2017-04-30 Filed 2017-06-19
10-Q 2017-01-31 Filed 2017-03-22
10-K 2016-10-31 Filed 2017-02-14
10-Q 2016-07-31 Filed 2016-09-14
10-Q 2016-04-30 Filed 2016-06-20
10-Q 2016-01-31 Filed 2016-03-21
10-K 2015-10-31 Filed 2016-02-16
10-Q 2015-07-31 Filed 2015-09-21
10-Q 2015-04-30 Filed 2015-06-22
10-Q 2015-01-31 Filed 2015-03-23
10-K 2014-10-31 Filed 2015-01-29
10-Q 2014-07-31 Filed 2014-09-22
10-Q 2014-04-30 Filed 2014-06-23
10-Q 2014-01-31 Filed 2014-03-17
10-K 2013-10-31 Filed 2014-02-13
10-Q 2013-07-31 Filed 2013-09-16
10-Q 2013-04-30 Filed 2013-06-14
10-Q 2013-01-31 Filed 2013-03-25
10-K 2012-10-31 Filed 2013-02-13
10-Q 2012-07-31 Filed 2012-09-19
10-Q 2012-04-30 Filed 2012-06-19
10-Q 2012-01-31 Filed 2012-03-21
10-K 2011-12-31 Filed 2012-02-15
10-Q 2011-07-31 Filed 2011-09-19
10-Q 2011-04-30 Filed 2011-06-20
10-Q 2011-01-31 Filed 2011-03-17
10-K 2010-10-31 Filed 2011-02-15
10-Q 2010-07-30 Filed 2010-09-17
10-Q 2010-04-30 Filed 2010-06-14
10-Q 2010-01-31 Filed 2010-03-22
10-K 2009-10-31 Filed 2010-02-12
8-K 2020-03-13
8-K 2020-03-09
8-K 2018-04-19

ABMT 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1 Basis of Presentation
Note 2 Organization
Note 3 Principles of Consolidation
Note 4 Use of Estimates
Note 5 Related Party Transactions
Note 6 Commitments and Contingencies
Note 7 Fair Value of Financial Instruments
Note 8 Going Concern
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex31-1.htm
EX-31.2 ex31-2.htm
EX-32.1 ex32-1.htm
EX-32.2 ex32-2.htm

Advanced Biomedical Technologies Earnings 2021-01-31

Balance SheetIncome StatementCash Flow

10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarter ended January 31, 2021

 

OR

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number 000-53051

 

Advanced BioMedical Technologies, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada

(State or other jurisdiction of incorporation or organization)

 

200 Park Avenue, Suite 1700

New York City, NY 10166

(Address of principal executive offices, including zip code.)

 

(718) 766-7898

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Class A Common Stock   ABMT   OTCQB

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [X] NO [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ]   Accelerated filer [  ]
Non-accelerated filer [  ]   Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [  ] No [X]

 

As of March 22, 2021, there are 70,224,850 shares of common stock outstanding.

 

All references in this Report on Form 10-Q to the terms “we”, “our”, “us”, the “Company”, “ABMT” and the “Registrant” refer to Advanced BioMedical Technologies, Inc. unless the context indicates another meaning.

 

 

 

 
 

 

TABLE OF CONTENTS

 

 

2
 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

The accompanying condensed consolidated unaudited financial statements of Advanced BioMedical Technologies, Inc., a Nevada corporation are condensed and, therefore, do not include all disclosures normally required by accounting principles generally accepted in the United States of America. These statements should be read in conjunction with the Company’s most recent annual financial statements for the year ended October 31, 2020 included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on January 29, 2021. In the opinion of management, all adjustments necessary for a fair presentation have been included in the accompanying condensed consolidated financial statements and consist of only normal recurring adjustments. The results of operations presented in the accompanying condensed consolidated financial statements for the period ended January 31, 2021 are not necessarily indicative of the operating results that may be expected for the full year ending October 31, 2021.

 

3
 

 

ADVANCED BIOMEDICAL TECHNOLOGIES, INC.

AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JANUARY 31, 2021

(UNAUDITED)

 

 
 

 

ADVANCED BIOMEDICAL TECHNOLOGIES, INC.

AND SUBSIDIARIES

 

CONTENTS

 

 

F-1
 

 

ADVANCED BIOMEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   January 31,   October 31, 
   2021   2020 
   (Unaudited)     
ASSETS          
           
CURRENT ASSETS          
Cash and cash equivalents  $8,491   $201,664 
Other receivables and prepaid expenses   56,398    29,260 
Inventory   122,221    100,026 
Total current assets   187,110    330,950 
           
NON-CURRENT ASSETS          
Property and equipment, cost   593,036    552,423 
Less: Accumulated depreciation   (470,746)   (446,949)
Property and equipment, net   122,290    105,474 
Operating lease right-of-use assets   22,392    32,802 
Total non-current assets   144,682    138,276 
           
TOTAL ASSETS  $331,792   $469,226 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
CURRENT LIABILITIES          
Other payables and accrued expenses   1,687,519    1,942,316 
Operating lease liabilities, current portion   20,303    28,028 
Due to directors   311,127    308,031 
Due to a stockholder   892,664    880,108 
Advances from related parties   5,249,202    4,705,512 
Total current liabilities   8,160,815    7,863,995 
           
NON-CURRENT LIABILITIES          
Operating lease liabilities, less current portion   3,690    7,029 
           
STOCKHOLDERS’ DEFICIT          
Common stock, $0.00001 par value, 100,000,000 shares authorized, 70,224,850 issued and outstanding as of January 31, 2021 and October 31, 2020   702    702 
Additional paid-in capital   2,827,832    2,824,279 
Stock-based compensation reserves   12,702    8,160 
Accumulated deficit   (10,428,408)   (10,256,364)
Accumulated other comprehensive income/(loss)   (245,541)   21,425 
Total stockholders’ deficit   (7,832,713)   (7,401,798)
           
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $331,792   $469,226 

 

The accompanying notes are an integral part of these consolidated financial statements

 

F-2
 

 

ADVANCED BIOMEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

 

   3 months ended 
   January 31,   January 31, 
   2021   2020 
SALES  $47,233   $60,501 
Cost of sales   (10,147)   (33,127)
Gross margin   37,086    27,374 
           
OPERATING EXPENSES          
General and administrative expenses   38,645    54,285 
Research and development   66,806    56,780 
Depreciation on property and equipment   4,174    5,132 
Depreciation on operating lease right-of-use assets   11,561    10,822 
Stock-based compensation expenses   4,542    - 
Total Operating Expenses   125,728    127,019 
           
LOSS FROM OPERATIONS   (88,642)   (99,645)
           
OTHER (EXPENSES) INCOME          
Government grants   -    125,652 
Interest income   74    5 
Interest paid to a stockholder and related parties   (73,018)   (80,254)
Interest on operating lease liabilities   (557)   (1,297)
Imputed interest   (3,553)   (3,389)
Other, net   (6,348)   (4,861)
Total Other (Expenses) Income, net   (83,402)   35,856 
           
LOSS BEFORE TAXES   (172,044)   (63,789)
Income tax expense   -    - 
NET LOSS   (172,044)   (63,789)
Net loss attributable to non-controlling interests   -    - 
          
NET LOSS ATTRIBUTABLE TO ABMT COMMON STOCKHOLDERS   (172,044)   (63,789)
           
OTHER COMPREHENSIVE LOSS          
Foreign currency translation loss   (266,966)   (100,290)
Total other comprehensive loss   (266,966)   (100,290)
          
COMPREHENSIVE LOSS ATTRIBUTABLE TO ABMT COMMON STOCKHOLDERS  $(439,010)  $(164,079)
           
Net loss per share-basic and diluted          
- basic and diluted  $(0.00)  $(0.00)
           
Weighted average number of shares outstanding during the period          
- basic   70,224,850    69,874,850 
- diluted   70,298,275    69,874,850 

 

The accompanying notes are an integral part of these consolidated financial statements

 

F-3
 

 

ADVANCED BIOMEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (UNAUDITED)

 

                       Accumulated     
   Common stock   Additional   Stock-based       other     
   Number       paid-in   compensation   Accumulated   comprehensive     
   of shares   Amount   capital   reserve   deficit   loss   Total 
Balance at October 31, 2019   69,874,850   $698   $2,768,138   $-   $(9,581,438)  $334,363   $(6,478,239)
                                    
Effect of adoption of ASU 2016-02   -    -    -    -    (2,926)   -    (2,926)
                                    
Imputed interest on advances from directors   -    -    3,389    -    -    -    3,389 
                                    
Net loss for the period   -    -    -    -    (63,789)   -    (63,789)
                                    
Foreign currency translation loss   -    -    -    -    -    (100,290)   (100,290)
                                    
Balance at January 31, 2020   69,874,850   $698   $2,771,527   $-   $(9,648,153)  $234,073   $(6,641,855)
                                    
Balance at October 31, 2020      70,224,850    702    2,824,279    8,160    (10,256,364)   21,425    (7,401,798)
                                    
Imputed interest on advances from directors   -    -    3,553    -    -    -    3,553 
                                    
Stock-based compensation expenses   -    -    -    4,542    -    -    4,542 
                                    
Net loss for the period   -    -    -    -    (172,044)   -    (172,044)
                                    
Foreign currency translation loss   -    -    -    -    -    (266,966)   (266,966)
                                    
Balance at January 31, 2021   70,224,850   $702   $2,827,832   $12,702   $(10,428,408)  $(245,541)  $(7,832,713)

 

The accompanying notes are an integral part of these consolidated financial statements

 

F-4
 

 

ADVANCED BIOMEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   3 months ended 
   January 31, 
   2021   2020 
CASH FLOWS FROM OPERATING ACTIVITIES          
Net loss attributable to ABMT common stockholders  $(172,044)  $(63,789)
Adjustments to reconcile net loss to cash used in operating activities          
Depreciation on property & equipment   4,174    5,132 
Depreciation on operating lease right-of-use assets   11,561    10,822 
Imputed interest   3,553    1,297 
Interest on operating lease liabilities   557    3,389 
Stock-based compensation expenses   4,542    - 
Changes in operating assets and liabilities          
Decrease (Increase) in:          
Inventory   (17,791)   15,685 
Other receivables and prepaid expenses   (27,684)   (9,351)
Depreciation allocated to inventory   1,715    153 
Increase in:          
Other payables and accrued expenses   (323,400)   (15,198)
Net cash used in operating activities   (514,817)   (51,860)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Purchase of property and equipment   (18,192)   (525)
Net cash used in investing activities   (18,192)   (525)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Due to a stockholder   12,532    12,448 
Due to directors   (8,398)   13,748 
Due to related parties   343,852    40,640 
Principal element of operating lease payments   (12,294)   (10,734)
Interest element of operating lease payments   (557)   (1,297)
Net cash provided by financing activities   335,135    54,805 
           
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS   4,701    74 
           
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   (193,173)   2,494 
           
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD   201,664    5,592 
           
CASH AND CASH EQUIVALENTS AT THE END OF PERIOD  $8,491   $8,086 
           
Supplemental of cash flow information          
Interest income  $74   $5 
           
Other non cash items          
Interest expenses  $73,575   $81,551 

 

The accompanying notes are an integral part of these consolidated financial statements

 

F-5
 

 

ADVANCED BIOMEDICAL TECHNOLOGIES, INC.
AND SUBSIDIARIES

 

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

 

 

NOTE 1 BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

 

In the opinion of management, the unaudited condensed consolidated financial statements contain adjustments considered necessary to present fairly the Company’s financial position as of January 31, 2021, the consolidated results of operations for the three months ended January 31, 2021 and 2020 and consolidated statements of cash flows for the three months ended January 31, 2021 and 2020 on an accrual basis and in accordance with accounting principles generally accepted in the United States of America for interim financial information and rules and regulations of the SEC. The consolidated results for the three months ended January 31, 2021 are not necessarily indicative of the results to be expected for the entire fiscal year ending October 31, 2021. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes for the year ended October 31, 2020 appearing in the Company’s annual report on Form 10-K as filed with the Securities and Exchange Commission on January 29, 2021.

 

The reporting currency of the Company is US dollar.

 

NOTE 2 ORGANIZATION

 

Advanced BioMedical Technologies, Inc. (fka “Geostar Mineral Corporation” or “Geostar”) (“ABMT”) was incorporated in Nevada on September 12, 2006.

 

Shenzhen Changhua has been involved in the development of polymer screws, rods and binding wires for fixation on human fractured bones. The Company is currently involved in researching, manufacturing and conducting clinical trials on its products and intends to raise additional capital to produce and market its products commercially. The Company holds one Class III permit, one Class II permit and one Class I permit from the National Medical Products Administration of the PRC (“NMPA”), formally the China Food and Drug Administration (“CFDA”) and the State Food and Drug Administration (“SFDA”) of the PRC. The Company holds four patents issued by the State Intellectual Property Office of the P.R.C. (“SIPO”).

 

Masterise Holdings Limited (“Masterise”) was incorporated in the British Virgin Islands on May 31, 2007 as an investment holding company and was then owned as to 63% by the spouse of Shenzhen Changhua’s 70% majority stockholder at the time and 37% by a third party corporation.

 

On January 29, 2008, Masterise entered into a Share Purchase Agreement (“the Agreement”) with a stockholder of Shenzhen Changhua whereupon Masterise acquired 70% of Shenzhen Changhua for US$64,100 in cash. The acquisition was completed on February 25, 2008. As both Masterise and Shenzhen Changhua were under common control and management, the acquisition was accounted for as a reorganization of entities under common control. Accordingly, the operations of Shenzhen Changhua were included in the consolidated financial statements as if the transactions had occurred retroactively.

 

On December 31, 2008, ABMT consummated a Share Exchange Agreement (“the Exchange Agreement”) with the stockholders of Masterise pursuant to which ABMT issued 50,000 shares of Common Stock to the stockholders of Masterise for 100% equity interest in Masterise.

 

F-6
 

 

Concurrently, on December 31, 2008, a major stockholder of ABMT also consummated an Affiliate Stock Purchase Agreement (the “Affiliate Agreement”) with thirteen individuals including all the stockholders of Masterise, pursuant to which the major stockholder sold a total of 5,001,000 shares of ABMT’s common stock for a total aggregate consideration of $5,000, including 4,438,250 shares to the stockholders of Masterise.

 

On consummation of the Exchange Agreement and the Affiliate Agreement, the 70% majority stockholder of Masterise became an 80.7% stockholder of ABMT.

 

On March 13, 2009, the name of the Company was changed from Geostar Mineral Corporation to Advanced Biomedical Technologies, Inc.

 

The merger of ABMT and Masterise was treated for accounting purposes as a capital transaction and recapitalization by Masterise (“the accounting acquirer”) and a re-organization by ABMT (“the accounting acquiree”). The financial statements have been prepared as if the re-organization had occurred retroactively.

 

Accordingly, these financial statements include the following:

 

(1)The balance sheet consisting of the net assets of the acquirer at historical cost and the net assets of the acquiree at historical cost.

 

(2)The statement of operations including the operations of the acquirer for the periods presented and the operations of the acquiree from the date of the transaction.

 

ABMT, Masterise and Shenzhen Changhua are hereinafter referred to as (“the Company”).

 

NOTE 3 PRINCIPLES OF CONSOLIDATION

 

The accompanying condensed consolidated financial statements include the financial statements of ABMT and its wholly owned subsidiaries, Masterise and its 70% owned subsidiary, Shenzhen Changhua. The non-controlling interests in periods prior to 2012 represent the non-controlling stockholders’ 30% proportionate share of the results of Shenzhen Changhua.

 

All significant inter-company balances and transactions have been eliminated in consolidation.

 

NOTE 4 USE OF ESTIMATES

 

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

NOTE 5 RELATED PARTY TRANSACTIONS

 

As of January 31, 2021 and October 31, 2020, the Company owed a stockholder $892,664 and $880,108 respectively which are unsecured and repayable on demand. Interests are charged at 7% per annum on the amount owed.

 

As of January 31, 2021 and October 31, 2020, the Company owed four related parties a total of $5,249,202 and $4,705,512 respectively which are unsecured and repayable on demand. Interests are charged at 7% per annum on the amounts owed.

 

Total interest expenses on advances from a stockholder and the related parties accrued for the three months ended January 31, 2021 and 2020 were $73,018 and $80,254 respectively.

 

As of January 31, 2021 and October 31, 2020, the Company owed $311,127 and $308,031 respectively, to three directors for advances made on an unsecured basis, repayable on demand and interest free. Imputed interest charged at 5% per annum on the amounts owed to the directors is $3,553 and $3,389 for the three months ended January 31, 2021 and 2020 respectively.

 

F-7
 

 

As of January 31, 2021 and October 31, 2020, the Company has contract liabilities of US$1,032,373 and US$1,343,281 with a company in which Mr. Chen Tie Jun has a significant equity interest. Sales for the quarter ended 31 January 2021 and 31 January 2020 to the related company amounted to US$47,233 and US$60,501 respectively.

 

Sales for the three months ended January 31, 2021 and 2020 of US$47,233 and $60,501 respectively were made to a company in which Mr. Chen Tie Jun has a significant equity interest.

 

NOTE 6 COMMITMENTS AND CONTINGENCIES

 

Leases

 

Pursuant to ASC 842, the Company recognizes operating leases as right-of-use assets and lease liabilities as shown in the consolidated balance sheet. The Company has two operating leases with unrelated parties for factory space and director’s quarter in the P.R.C., which are non-cancelable and expiring on dates between 28 March 2021 and 30 April 2022, and do not include options to renew. The depreciable life of right-of use assets are limited by the term of leases.

 

As of January 31, 2021, the Company has lease commitments as follows:

 

For the year ending October 31,    
2021  $17,423 
2022   7,467 
Total lease payment payables   24,890 
Less: Interest element   (897)
Total lease liabilities   23,993 
Lease liabilities current portion   (20,303)
Lease liabilities less current portion  $3,690 

 

In determining the lease liability and corresponding right-of-use asset for each lease, the Company calculated the present value of future lease payments using the Company’s incremental borrowing rate. The incremental borrowing rate was determined with reference to the interest rate applicable to borrowings from related parties disclosed in Note 4, Related Parties Transactions.

 

NOTE 7 FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The Financial Accounting Standards Board (FASB) Codification Topic 825 (ASC Topic 825), “Disclosure About Fair Value of Financial Instruments,” requires certain disclosures regarding the fair value of financial instruments. The carrying amounts of other receivables and prepaid expenses, other payables and accrued liabilities and due to a stockholder, directors and related parties approximate their fair values because of the short-term nature of the instruments. The management of the Company is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial statements.

 

NOTE 8 GOING CONCERN

 

As reflected in the accompanying unaudited condensed consolidated financial statements, the Company has an accumulated deficit of $10,428,408 as of January 31, 2021 that includes a net loss of $172,044 for the three months ended January 31, 2021. As of January 31, 2021, the Company’s total current liabilities exceeded its total current assets by $7,973,705 and the Company used cash in operations of $514,817 for the three months ended on that date. These factors raise substantial doubt about its ability to continue as a going concern. In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying condensed consolidated balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Management has taken the following steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern. The Company is actively pursuing additional funding and strategic partners, which will enable the Company to implement its business plan. Management believes that these actions as successful will allow the Company to continue its operations through the next fiscal year.

 

F-8
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward Looking Statements

 

This section of the report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. Actual results could differ materially from those anticipated in these forward looking statements as a result of any number of factors, including those set forth in this Quarterly Report, and in the Company’s most recent Annual Report on Form 10-K filed on January 29, 2021.

 

All written and oral forward-looking statements made in connection with this Quarterly Report on Form 10-Q that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements, which apply only as of the date of this quarterly report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.

 

Overview

 

The following discussion is an overview of the important factors that management focuses on in evaluating our businesses, financial condition and operating performance and should be read in conjunction with the financial statements included in this Quarterly Report on Form 10-Q.

 

The Company is subject to a number of risks similar to other companies in the medical device industry. These risks include but are not limited to rapid technological change, uncertainty of market acceptance of our products, uncertainty of regulatory approval, competition from substitute products and larger companies, the need to obtain additional financing, compliance with government regulation, protection of proprietary technology, product liability, and the dependence on key individuals.

 

Our Business

 

We are engaged in the business of designing, developing, manufacturing and marketing of biomaterial internal fixation devices. We hold one Class III medical device permit from the National Medical Products Administration of the PRC (“NMPA”) for our product - polymer orthopaedic internal fixation screws, one Class II permit and one Class I permit. We hold four patents issued by the State Intellectual Property Office of the P.R.C. (“SIPO”). Our polyamide materials, their uses and manufacturing processes are protected by Patent No. ZL201511006236.7 and ZL971190739. Patent No. ZL201410647464.1 titled “Bone Fracture Plate Made of High Polymer Materials” and patent No. ZL201511005531.0 titled “Composite fiber, manufacturing method and orthopaedic binding wire” were granted to us in 2018 and 2020 respectively. Our polyamide materials are used in producing screws, binding wires, rods and related products. These products are used in a variety of applications including orthopaedic trauma, sports related medical treatment, or cartilage injuries, and reconstructive dental procedures. At this time, our company is the sole patent holder and market permit holder of PA technologies in China, as well as the only company currently engaged in clinical trials, manufacturing and marketing for PA orthopaedic internal fixation devices in the PRC. Our products are made of a very unique material called PA6-P(MMA-CO-NVP)-HA (“PA”). Our PA products, such as screws, binding wires, rods, suture anchors and rib-pins consist of enhanced fibers and high molecular polymers which are designed to facilitate quick healing of complex fractures in many areas of the human skeletal system.

 

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Our products offer a number of significant advantages over existing metal implants and the first generation of degradable implants (i.e. PLLA) for patients, surgeons and other customers including:

 

  1. A notably reduced need for a secondary surgery to remove implant due to post-operative complications, therefore avoiding unnecessary risk and expense on all patient care;
  2. Enhancing the performance of the materials by manufacturing them to be easily fitted to each patient, forming an exact fit;
  3. Improving the biological activity of materials. Clinical trial results have shown that PA implants promote a progressive shift of load to the new bone creating micro-motion and thereby avoiding bone atrophy due to ‘stress shielding’;
  4. Reducing the chance of post-operative infection;
  5. Stimulate bone tissues to facilitate effective biological integration, benefitting the regeneration of bone;
  6. Ease of post-operative care i.e. no distortion during x-ray imaging;
  7. Simple and cost-effective to manufacture.

 

Our products are designed to replace the traditional internal fixation device made of stainless steel and titanium and overcome the limitations of previous generations of products such as PLA and PLLA. Our laboratory statistics show that our PA products have a higher mechanical strength, last longer in degradation ratio and are more evenly absorbed form outer layer inwards as compared with similar materials such as PLA and PLLA. Thus PA allows increased restoration time for bone healing and re-growth. The Company’s polymer orthopaedic internal fixation screws received approval from the National Medical Products Administration of the PRC (“NMPA”) in April 2018. We launched our sales campaign at the end of our fiscal year ended October 31, 2019 and achieved a milestone in the Company’s history by generating revenue through the sales of our PA Screws.

 

NMPA Application Process and Approval for Polymer Screws

 

The Company first submitted its application for PA Screws to the NMPA (formerly the SFDA/CFDA) in 2008. The application has been withheld by the NMPA pending additional clinical trial cases. This is due to the amended NMPA regulations, which unlike previous regulations require the applicant to specify the position on the body where the clinical trial is carried out. Our amended NMPA application has specified the ankle fracture as the body part of our clinical trial. This is because bones around this part carry most of the body weight.

 

Due to the uniqueness of our material, there were no established NMPA Product Standards that we could follow during our application process for our PA Screws. To establish our own Product Standards, the Company had been carrying out extra tests. The Company submitted its Product Standards and supplementary reports to the NMPA in 2014. In December 2016, the Company received a notice from the NMPA requesting supplementary report as part of the review process. The Company completed the supplementary report and submitted it to the NMPA in June 2017.

 

In April 2018, the Company’s application for its PA Screws was approved by the NMPA in China (Medical Device Certification Number: 20183460133).

 

Process of Human Trials

 

As of January 31, 2021, for medical study and comparison purpose, the Company has completed a total of 83 successful clinical human trial cases, including 71 cases on ankle fractures and 57 successful PA Binding Wire trial cases. We have been conducting human trials at the 6 state level hospitals recognized by NMPA for clinical trials in different cities throughout China; including Nanchang, Changsha, Luoyang, Nanning and Tianjin. The cities and provinces where our clinical trial hospitals are based will be the initial target regions on our marketing plan. These regions are both densely populated and have experienced high or above medium economic growth. The clinical trials for the Company’s PA Screws have been completed with 100 percent success rate. Having gained NMPA approval for PA Screws, the Company is planning to start clinical trials on series of orthopaedic products the Company has developed using the same unique biomaterial.

 

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Government Regulation

 

Medical implant devices/products manufactured or marketed by the Company in China are subject to extensive regulations by the NMPA. Pursuant to the related laws and acts, as amended, and the regulations promulgated there under (the “NMPA Regulations”), the NMPA regulates the clinical testing, manufacture, labeling, distribution and promotion of medical devices. The NMPA also has the authority to request repair, replacement, or refund of the cost of any device manufactured or distributed by the Company.

 

Under the NMPA Regulations, medical devices are classified into three classes (class I, II or III), the basis of the controls deemed necessary by the NMPA to reasonably assure their safety and efficacy. Under the NMPA’s regulations, class I devices are subject to general controls (for example, labeling and adherence to Good Manufacturing Practices (“GMP”) requirements) and class II devices are subject to general and special controls. Generally, class III devices are those which must receive premarket approval by the NMPA to ensure their safety and efficacy (for example, life-sustaining, life-supporting and certain implantable devices, or new devices which have not been found substantially equivalent to legally marketed class I or class II devices). The Company is classified as a manufacturer of class III medical devices. Current NMPA enforcement policy prohibits the marketing of approved medical devices for unapproved uses.

 

Before a new device can be introduced into the market in China, the manufacturer generally must obtain NMPA marketing clearance through clinical trials. Since the Company is classified as a manufacturer of Class III medical devices, the Company must carry out all clinical trials in pre-selected NMPA approved hospitals.

 

Manufacturers of medical devices for marketing in China are required to adhere to GMP requirements. Enforcement of GMP requirements has increased significantly in the last several years and the NMPA has publicly stated that compliance will be more strictly scrutinized. From time to time the NMPA has made changes to the GMP and other requirements that increase the cost of compliance. Changes in existing laws or requirements or adoption of new laws or requirements could have a material adverse effect on the Company’s business, financial condition and results of operations. There can be no assurance that the Company will not incur significant costs to comply with applicable laws and requirements in the future or that applicable laws and requirements will not have a material adverse effect upon the Company’s business, financial condition and results of operations.

 

Regulations regarding the development, manufacturing and sale of the Company’s products are subject to change. The Company cannot predict the impact, if any, that such changes might have on its business, financial condition and results of operations.

 

Results of Operations

 

The “Results of Operations” discussed in this section merely reflect the information and results of the Company for the period from September 25, 2002 (Shenzhen Changhua’s date of inception) to January 31, 2021 and 2020.

 

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Revenues

 

Our revenue for the three months ended January 31, 2021 and 2020 were $47,233 and $60,501 respectively. The Company achieved a milestone in its history at the end of the fiscal year ended October 31, 2019, by completing sales of $11,657 to its distributor, a company in which Mr. Tie Jun Chen, a key management personnel of Shenzhen Changhua, has a significant equity interest.

 

Our management team is continuously looking for fundraising possibilities for sales and marketing expansion, product improvement, machinery upgrades, facility expansions and continuous research and development.

 

Estimate current production lines in full capacity

 

Our facility is located in Shenzhen, China, which is built to meet the GMP standards. Our facility covers about 865 square meters, which includes the combined facilities of offices, laboratories, and workshops. There is one production line for the PA Screw and another production line for the PA Binding Wire. The annual production capabilities of each production line are 100,000 pieces for PA Screw, and 240,000 packs for the PA Binding Wires. Both production lines, at their maximum production capacities are capable of generating approximately $30,000,000 in annual revenue.

 

   Output Quantity (Max.)  Price at ex-factory ($)  Total Turnover ($)
PA Screw   100,000   (piece)   180      18,000,000
PA Binding Wire   240,000   (pack)   50      12,000,000
                Total:  30,000,000

 

China’s Marketing Analysis:

 

We have established long term relationships with many hospitals and national distributors in China. Ms. Hui Wang, the Company’s CEO, has over 25 years’ sales experience in medical distribution. Professor Shangli Liu, our chief medical advisor, is one of the highest ranked orthopedic doctors in China as well as being highly renowned in the rest of the world. He will assist the Company in nationwide product promotion and joint projects with associated academic institutions and medical schools. During product development and clinical trial stages, we developed close relationships with many major national hospitals. We expect these relationships to boost our revenue generation.

 

China’s market for PA devices depends on 3 major conditions:

 

- Patients

- Advanced technology level

- Performance and price of the materials

 

China has gradually entered the Old Age Society. It is expected that there will be 245 million people over 60 years of age by 2020, and, according to the survey of 50 years old, the incidence of osteoporosis is as high as 60%, accompanied by osteoporosis, fracture, bone necrosis, disability and other diseases, resulting in continued high demand of orthopaedic implant medical devices. (Source: The UN; Shenwan Hongyuan Securities research report).

 

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The Company has advantages and more opportunities over others competitors due to:

 

- No other similar patent registrations in China.

- We are the only company to receive market approval and permission to perform PA clinical trials by the NMPA to the best of our knowledge.

- We have a timing advantage over other Chinese companies; other companies would need to successfully complete preclinical testing for the NMPA in order to obtain clinical trial permits.

- Under new regulations by the NMPA, it will take at least 5-10 years for clinical trials of new materials.

- Our patented material enables us to rapidly diversify our product line according to market trend and demand.

 

Number of Hospitals at the end of November 2020 Statistic and Census report by the National Health Commission of the People’s Republic of China.

 

Statistic and Census report by the National Health Commission of the People’s Republic of China
(November 2020)
             
   November 2020   November 2019   Increase / (Decrease) 
Total No. of Hospitals   35,112    33,972    1,140 
Public Hospital   11,885    11,891    (6)
Private Hospital   23,227    22,081    1,146 
Hospital Rating               
AAA   2,895    2,681    214 
AA   10,121    9,478    643 
A   11,826    11,014    812 
Unrated   10,270    10,799    (529)

 

In general, technological advancements and the marketing potential within Asia are the biggest factors in driving significant growth within the global orthopedic devices market. Another major factor that positively influences this market is the growing number of aging baby boomers with active lifestyles. This sector represents a large portion of the total population.

 

Cost of Sales

 

Cost of sales for the three months ended January 31, 2021 and 2020 were $10,147 and $33,127 respectively, which accounted for 21.48% and 54.75% of the gross revenue. The main components of cost of sales are expenses for attending exhibitions/trade shows and staff costs.

 

Gross Profits

 

Gross profits for the three months ended January 31, 2021 and 2020 were $37,086 and $27,374 respectively, which accounted for 78.52% and 45.25% of the gross revenue. Compared to the three months ended January 31, 2020, the gross profits percentage for the three months ended January 31, 2021 was increased by 33.27%. The main contributor to this increase was that we had an established initial sales network in the three months ended January 31, 2021.

 

Operating Expenses

 

Operating expenses for the three months ended January 31, 2021 and 2020 were $125,728 and $127,019 respectively.

 

Research and Development

 

Research and development costs related to both present and future products are expensed as incurred. Total expenditure on research and development charged to general and administrative expenses for the quarter ended January 31, 2021 and 2020 was $66,806 and $56,780. The main component of research and development costs is staff costs of the technical personnel on product improvements to enhance industrial design.

 

We expect research and development expenses to grow as we continue to invest in basic research, clinical trials, product development and in our intellectual property. The Company will be working closely with medical institutions and research universities to expedite future clinical trials of upcoming series of polymer fixation devices, including Intramedullary Nailing Fixation, Binding Wires, Micromodule Screws & Plates, Maxillofacial & Craniofacial Plates, and Rib Pins.

 

New Patent Granted

 

The Company was granted one patent in January 2021 by the State Intellectual Property Office of the P.R.China (“SIPO”), patent no. ZL201511006236.7. This patent protects the use and manufacturing process of an unique polymer material used by the Company.

 

Marketing Strategy

 

The Company has been conducting Pre-Market Research before its PA Screws application was approved by the NMPA in April 2018. The research is intended to estimate the potential market success of the company’s products that can be expected. The research also beyond the Company’s initial market - China, and covers international markets. Based on the results of our Pre-Market Research and the positive feedbacks we have received from trade shows and industrial conferences, it is the Company’s intention to apply for additional international regulatory approvals in due course.

 

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The Company will market its products through a hybrid sales force comprised of a managed network of independent regional distributors/sales agents (80%) and direct sales representatives (20%) in China.

 

There are two ways the Company will generate revenue, 1) through our nationwide and regional distributors and 2) through our direct sales channels.

 

Impact of COVID-19 Outbreak

 

The Company’s primary business is carried out through its subsidiary, Shenzhen Changhua Biomedical Engineering Co., Ltd. (“Shenzhen Changhua”), based in Shenzhen, China, where the COVID-19 pandemic started in January 2020.

 

The Company has identified the following areas that had been adversely affected by COVID-19:

 

  1. Operation: Our facilities in China were not fully staffed due to COVID-19 lockdown, travel restrictions and quarantine requirements. This affected our accounting and marketing departments mostly because a large number of staff could not come back to office as they were not allowed to travel or have 14-day quarantine before they came back to work. Our operation gradually came back to normal with the easing of COVID-19 restrictions in China during the third and fourth quarter of 2020.
  2. Manufacturing: We had sufficient raw material stock for 2 months, however, our production was affected by staff shortage and facilities closure during lockdown.
  3. Marketing: We launched our sales campaign in late 2019 and we generated revenue the first time in the history of the Company at the end of 2019 fiscal year. Our sales and marketing plans were disrupted by COVID-19 pandemic because almost all the hospitals in China were dealing with COVID-19 and non-essential operations were postponed or cancelled.

 

The Company has been working with its business partners and workforce through crisis planning, effective communication and co-operation to minimize the negative impact of the COVID-19 pandemic.

 

Other Income and Expenses

 

Total other (expenses) income, for the three months ended January 31, 2021 and 2020 were ($83,402) and $35,856 respectively. There was no significant changes in total other expenses for the three months ended January 31, 2021. The major contributor to the total other income for the three months ended January 31, 2020 was due to that the Company received a grant of $125,652 from local government in Shenzhen in January 2020. The remaining other expenses comprised mainly interest expenses with no significant differences between the relevant periods of 2021 and 2020.

 

Finance Costs

 

As of January 31, 2021 and October 31, 2020, a stockholder and four related parties had loaned a total of $5,249,202 and $4,705,512 respectively to the Company as unsecured loans repayable on demand and interest is charged at 7% per annum on the amount due. Total interest expenses on advances from a stockholder and the related parties accrued for the three months ended January 31, 2021 and 2020 were $73,018 and $80,254 respectively.

 

As of January 31, 2021 and October 31, 2020, the Company owed $311,127 and $308,031 respectively to the directors for advances made on an unsecured basis, repayable on demand. Total imputed interest expenses on advances from directors, calculated at 5% per annum, recorded as additional paid-in capital amounted to $3,553 and $3,389 for the three months ended January 31, 2021 and 2020 respectively.

 

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Net Loss

 

The net loss attributable to common stockholders for the three months ended January 31, 2021 and 2020 were $172,044 and $63,789 respectively. We started to generate revenue at the end of our fiscal year from inception to October 31, 2019 before our sales campaign was disrupted by the COVID-19 pandemic, but we have to incur operating expenses for the upkeep of the Company and the clinical trials.

 

Liquidity and Capital Resources

 

We had a working capital deficit of $7,973,705 and $7,533,045 as of January 31, 2021 and October 31, 2020 respectively. Our working capital deficit increased as a result of the fact that we only started to market of our NMPA approved PA Screw in China at the end of 2019 fiscal year, and the company has to put resources to market its products, complete the clinical trials of other products. Although we began to generate revenues at the end of 2019 fiscal year, our marketing campaign was disrupted by the COVID-19 pandemic and the revenue income was not sufficient. Our main source of financing during the year came in the form of PA Screws sales and loan from our related parties and stockholders.

 

Cash Flows

 

Net Cash Used in Operating Activities

 

Net cash used in operating activities was $514,817 and $51,860 in the three months ended January 31, 2021 and 2020 respectively. This amount was attributable primarily to the net loss after adjustment for non-cash items, such as depreciation, loss on disposal of property and equipment, imputed interest on advances from directors, and others like charges in other receivables and prepaid expenses and other payables and accrued expenses. Cash used in operating activities increased were a result of increased in operating loss, stock-based compensation expenses, other receivables and prepared expenses, and other payables and accrued expenses. Other items had no significant changes.

 

Net Cash Used in Investing Activities

 

We recorded net cash used of $18,192 and $525 in investing activities in the three months ended January 31, 2021 and 2020 respectively. This amount reflected purchases of property and equipment, primarily for research and development to our facilities.

 

Net Cash Provided by Financing Activities

 

Net cash provided by financing activities in the three months ended January 31, 2021 and 2020 was $335,135 and $54,805 respectively, which represented advances from a stockholder, directors and related parties, loan repayment to directors and advances to a related company. The significant increase in the cash provided by financing activities were cash flow derived from due to related parties which was the current financing source of the Company.

 

Operating Capital and Capital Expenditure Requirements

 

Our ability to continue as a going concern and support the commercialization of current products is dependent upon our ability to market our product while obtaining additional financing in the near term. We anticipate that such funding will be in the form of marketing of our products and equity financing from sales of our common stock. However, there is no assurance that we will be able to raise sufficient funding from the sale of our products and common stock to fund our business plan should we decide to proceed. We anticipate our sales revenue will not meet our financial needs in 2020 and we need to rely on advances from our related parties and stockholders in order to continue to fund our business operations.

 

We believe that our existing cash, cash equivalents at January 31, 2021, will be insufficient to meet our cash needs. Our minimum cash requirement for the next 12 months is projected to be $700,000. This amount may increase if we decide to start clinical trials on new products. The management is actively pursuing additional funding and strategic partners, which will enable the Company to implement our business plan, business strategy, to continue research and development, clinical trials or further development that may arise.

 

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We intend to spend more to support the commercialization of current products and on research and development activities, including new products development, regulatory and compliance, clinical studies, and the enhancement and protection of our intellectual property portfolio.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our investors.

 

CRITICAL ACCOUNTING POLICIES

 

The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including but not limited to those related to income taxes and impairment of long-lived assets. We base our estimates on historical experience and on various other assumptions and factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Based on our ongoing review, we plan to adjust to our judgments and estimates where facts and circumstances dictate. Actual results could differ from our estimates.

 

We believe the following critical accounting policies are important to the portrayal of our financial condition and results and require our management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain.

 

1. Property and equipment
   
  Property and equipment are stated at cost, less accumulated depreciation. Expenditures for additions, major renewals and betterments are capitalized and expenditures for maintenance and repairs are charged to expense as incurred.
   
  Depreciation is provided on a straight-line basis, less estimated residual value over the assets estimated useful lives. The estimated useful lives of the assets are 5 years.
   
2.

Inventories

 

Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an applicable proportion of production overheads. Production overheads are allocated to inventories on the basis of normal operating capacity. Costs are assigned to individual inventory items on weighted average costs basis. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated selling costs.

   
3. Long-lived assets
   
  In accordance with FASB Codification Topic 360 (ASC Topic 360), “Accounting for the impairment or disposal of Long-Lived Assets”, long-lived assets and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows related to the long-lived assets. The Company reviews long-lived assets to determine that carrying values are not impaired.
   
4. Fair value of financial instruments
   
  FASB Codification Topic 825(ASC Topic 825), “Disclosure About Fair Value of Financial Instruments,” requires certain disclosures regarding the fair value of financial instruments. The carrying amounts of other receivables and prepaid expenses, other payables and accrued expenses, due to a stockholder, directors and related parties approximate their fair values because of the short-term nature of the instruments. The management of the Company is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial statements.

 

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5. Government grant
   
  Government grants are recognized when there is reasonable assurance that the Company complies with any conditions attached to them and the grants will be received.
   
6. Revenue recognition
   
  Revenue from contract with customers is recognized when control of goods is transferred to a customer, at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods. Control is considered to be transferred when the customer has the ability to direct the use of and obtain substantially all of the remaining benefits of that good, generally on delivery of the goods.
   
  Revenues are generated from manufacturing and supply of biomaterial internal fixation devices, which are sold through its network of distributors/agents and direct sales channels. Our performance obligations are satisfied at a point in time. Our contracts have an anticipated duration of less than a year.
   
  Actual returns and claims in any future period are inherently uncertain and thus may differ from our estimates. If actual or expected future returns and claims are significantly greater or lower than the reserves that we have established, we will record a reduction or increase to net revenue in the period in which we make such a determination.
   
7.

Stock-based compensation

 

The fair value of services received, as measured at the fair value of stock granted at the grant date, is expensed in the statements of operations and comprehensive loss with a corresponding increase in the common stock and additional paid-in capital where applicable.

 

Where the shares are granted for services to be rendered over a period of time, the fair value of the stock granted is accounted for as a prepayment with a corresponding increase in the common stock and additional paid-in capital where applicable. This prepaid stock-based compensation is amortized as an expense on a straight-line basis over the period for which the services are rendered.

 

Where, pursuant to an agreement, the stock of the Company is to be granted for services being rendered, the fair value of the stock-based compensation is credited to the stock-based compensation reserve which will be transferred to common stock and additional paid-in-capital upon the actual granting of the shares. The stock-based compensation would be amortized as an expense on a straight-line basis over the period for which the services are rendered.

   
8. Income taxes
   
  The Company accounts for income taxes under the FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized as income in the period included the enactment date.
   
9. Research and Development
   
  Research and development costs related to both present and future products are expensed as incurred.
   
10. Foreign currency translation
   
  The financial statements of the Company’s subsidiary denominated in currencies other than US $ are translated into US $ using the closing rate method. The balance sheet items are translated into US $ using the exchange rates at the respective balance sheet dates. The capital and various reserves are translated at historical exchange rates prevailing at the time of the transactions while income and expenses items are translated at the average exchange rate for the year. All exchange differences are recorded within equity.

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

There has been no newly effective accounting pronouncement that has significance, or potential significance, to our consolidated financial statements.

 

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoptions of any such pronouncements may be expected to cause a material impact on the financial condition or the results of operations. The Company will carefully analyze these recently accounting pronouncements and take action to adopt them as required.

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We have established disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. Our disclosure controls and procedures are designed to ensure that material information relating to us, including our consolidated subsidiaries, is made known to our principal executive officer and principal financial officer by others within our organization. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of January 31, 2021 to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of January 31, 2021.

 

Under the supervision and with the participation of our then principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of January 31, 2021. Based on this evaluation, the management concluded that the disclosure controls and procedures were ineffective at such time to ensure that information required to be disclosed by the company in the reports filed or submitted under the Exchange Act were recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our principal executive officer and principal financial officer also concluded that our disclosure controls, which are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, were inappropriate to allow timely decisions regarding required disclosure.

 

Based on officers’ assessment, the Company determined that there were material weaknesses in its internal control over financial reporting as of January 31, 2021 based on the material weaknesses described below:

 

● Because the Company consists of one person who acts as the financial officer, operating officer, secretary and director of the Company, there are limited controls over information processing.

 

● There is an inadequate segregation of duties consistent with control objectives as financial reporting function is composed of only one person. In order to remedy this situation, we would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties. Management will reassess this matter after the Company have obtained additional financial resources to determine whether improvement in segregation of duty is feasible.

 

● The Company does not have a formal audit committee with a financial expert, and thus the Company lacks the Board oversight role within the financial reporting process.

 

● There is a lack of formal policies and procedures necessary to adequately review significant accounting transactions.

 

The Company utilizes a third-party independent contractor for the preparation of its financial statements. Although the financial statements and footnotes are reviewed by our management, we do not have a formal policy to review significant accounting transactions and the accounting treatment of such transactions. The third-party independent contractor is not involved in the day to day operations of the Company and may not have obtained or provided financial information from and to the management on a timely basis to allow for adequate reporting/consideration of certain transactions.

 

As a result of this material weakness, our management concluded that our internal control over financial reporting was not effective as of January 31, 2021. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness; yet important enough to merit attention by those responsible for oversight of the company’s financial reporting.

 

Changes in Internal Control

 

During the most recently completed fiscal quarter, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

 

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PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

Currently we are not involved in any pending litigation or legal proceeding.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

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ITEM 6. EXHIBITS

 

The following documents are filed as a part of this report or are incorporated by reference to previous filings, if so indicated:

 

Exhibit No.   Description
     
3.1   Articles of Incorporation (1)
3.2   Bylaws (1)
31.1   Section 302 Certification of Chief Executive Officer*
31.2   Section 302 Certification of Chief Financial Officer *
32.1   Section 906 Certification of Chief Executive Officer *
32.2   Section 906 Certification of Chief Financial Officer *
     
101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

*filed herewith

(1) Incorporated by reference to the Form SB-2 registration statement filed on January 16, 2007.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: March 22, 2021 By:  
     
  ADVANCED BIOMEDICAL TECHNOLOGIES, INC.
     
  By: /s/ Chi Ming Yu
    Chi Ming Yu, President and Director
    (Principal Executive Officer)
     
  By: /s/ Hui Wang
    Hui Wang, Director and Chief Executive Officer
    (Controller)
     
  By: /s/ Kai Gui
   

Kai Gui, Director, Secretary and Chief Financial Officer

(Principal Financial Officer)

 

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