Quarterly Report for Quarter Ending July 31, 2024 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our unaudited financial statements and the related notes included in this Quarterly Report on Form 10-Q. The discussion below contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements due to various factors, including those described in our filings with the Securities and Exchange Commission ("SEC").

Forward-Looking Statements

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate" or "continue," or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

Unless otherwise indicated, references to "we," "us," "our," or "the Company," mean VitaSpring Biomedical Co., Ltd.

All dollar amounts refer to US dollars unless otherwise indicated.

Overview

We are a development-stage biomedical company focused on cell-based technologies for regenerative and preventative health applications. Our business model historically involved sourcing stem cells and exosome products from a related-party vendor and reselling those products to customers.

During the six months ended July 31, 2024, and 2023, we did not generate any revenue as we restructured our commercial strategy, evaluated supplier and regulatory considerations, and assessed future business direction.

Accordingly, our activities during the current fiscal year have primarily consisted of:

	·	Administrative and corporate compliance activities,
	·	Evaluation of future commercialization strategy,
	·	Maintenance of regulatory positioning,
	·	Management of related party obligations, and
	·	Seeking additional capital to support future operations.

As of July 31, 2024, we have not reinitiated revenue-generating operations.

Results of Operation

The following summary of our results of operations should be read in conjunction with our unaudited financial statements for the period ended July 31, 2024, which are included herein.

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Our operating results for the three months ended July 31, 2024, and 2023 and the changes between those periods for the respective items are summarized as follows.

For the three months ended July 31, 2024, compared to the three months ended July 31, 2023

		July 31,
		2024				2023				Changes
Revenues		$	-			$	-			$	-
Operating expenses			218,662				353,583				(134,921	)
Income (loss) from operations			(218,662	)			(353,583	)			134,921
Net income (loss)		$	(218,662	)		$	(353,583	)		$	134,921

Revenue

During the three months ended July 31, 2024, and 2023, we did not generate any revenue. During the year 2023, we suspended commercial sales activity while evaluating our operating model and funding alternatives. We are currently focusing on restructuring our product strategy and developing long-term partnerships rather than pursuing short-term sales.

Operating Expenses

For the three months ended July 31, 2024, and 2023, the operating expenses were primarily attributed to professional fees of $61,004 and $78,945, stock-based compensation of $41,216 and $41,216, lease expenses of $50,103 and $72,465, payroll expenses of $51,838 and $78,883, depreciation of $2,489 and $3,766, and general and administrative expenses of $12,012 and $78,449, respectively.

Net Loss

We had a net loss from operations of $218,662 for the three months ended July 31, 2024, and $353,583 for the three months ended July 31, 2023. The decrease in net loss of $134,921 was primarily due to lower operating expenses, including reductions in professional fees, payroll, and general and administrative costs.

For the six months ended July 31, 2024, compared to the six months ended July 31, 2023

		Six Months ended
		July 31,
		2024				2023				Changes
Revenues		$	-			$	-			$	-
Operating expenses			435,493				658,184				(222,691	)
Income (loss) from operations			(435,493	)			(658,184	)			222,691
Net income (loss)		$	(435,493	)		$	(658,184	)		$	222,691

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Revenue

During the six months ended July 31, 2024, and 2023, we did not generate any revenue. During the year 2023, we suspended commercial sales activity while evaluating our operating model and funding alternatives. We are currently focusing on restructuring our product strategy and developing long-term partnerships rather than pursuing short-term sales.

Operating Expenses

For the six months ended July 31, 2024, and 2023, the operating expenses were primarily attributed to professional fees of $95,860 and $160,792, stock-based compensation of $82,433 and $82,432, lease expenses of $107,732 and $136,445, depreciation expenses of $4,979 and $7,531, payroll expenses of $136,686 and $150,169 and general and administrative expenses of $7,803 and $120,815, respectively.

Net Loss

We had a net loss from operations of $435,493 for the six months ended July 31, 2024, and $658,184 for the six months ended July 31, 2023. The decrease in net loss of $222,691 was due to a reduction in operating expenses of $222,691.

Balance Sheet Data

Liquidity and Capital Resources

The following table summarizes our changes in working capital deficiency from July 31, 2024, to January 31, 2024:

		July 31,				January 31,
		2024				2024				Change
Current assets		$	45,250			$	23,627			$	21,623
Current liabilities		$	3,767,583			$	3,487,531			$	280,052
Working capital deficiency		$	(3,722,333	)		$	(3,463,904	)		$	(258,429	)

As of July 31, 2024, and January 31, 2024, current assets were comprised of $5,525 and $13 in cash, $39,725 and $0 in prepaid expenses and $0 and $23,614 in deposits, respectively.

As of July 31, 2024, and January 31, 2024, current liabilities were comprised of $2,411,000 and $2,411,000 in accounts payable - related party, $364,433 and $339,001 in accounts payable and other payables, $218,714 and $218,714 in income tax payable, $0 and $93,334 in operating lease liabilities and $773,436 and $425,482 in advances from related party, respectively.

Our working capital deficiency increased by $258,429, or 7.46%, to $3,722,333 as of July 31, 2024, compared to working capital deficiency of $3,463,904 as of January 31, 2024. The increase was primarily due to an increase in advances from related party and accounts payable and other payables, offset by a decrease in operating lease liabilities and an increase in current assets. Advances paid directly by related parties on behalf of the Company for operating expenses are reflected as operating activities, while cash proceeds received directly from related parties are classified as financing activities.

The income tax payable balance primarily relates to historical tax liabilities, and no current period income tax expense was recorded due to our net operating loss position and full valuation allowance.

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Cash Flow Data

The following table summarizes our cash flows for the six months ended July 31, 2024, and 2023:

		Six Months ended
		July 31,
		2024				2023				Change
Cash used in operating activities		$	(6,444	)		$	(27,752	)		$	21,308
Cash provided by financing activity		$	11,956			$	5,277			$	6,679
Net change in cash		$	5,512			$	(22,475	)		$	27,987

As of July 31, 2024, we had cash of $5,525, compared with cash of $13 at January 31, 2024. The increase of $5,512 was mainly due to cash provided in our financing activities.

We have funded our activities primarily through shareholder advances, which were discretionary and not subject to a written agreement. For the six months ended July 31, 2024, we incurred a net loss of $435,493. We continue to rely on external funding and available cash balances to meet our working-capital needs. Management believes that additional capital will be required to support operations over the next twelve months.

We expect to continue to require additional capital to support operations, research, and regulatory initiatives. Management is exploring potential sources of financing, including private placements of equity or debt securities and strategic partnerships. There is no assurance that additional funding will be available on acceptable terms. If we cannot secure sufficient financing, we may need to delay or scale back parts of our business plan.

We believe our current cash resources will not be sufficient to fund planned operations for the next twelve months without additional capital. The continuation of our business depends on our ability to raise funds and generate future revenue.

Historically, substantially all of our product inventory was sourced from a single, related-party vendor.

Cash Flows from Operating Activities

Net cash used in operating activities of $6,444 for the six months ended July 31, 2024 compared to $27,752 for the six months ended July 31, 2023.

For the six months ended July 31, 2024, net cash used in operating activities was primarily driven by a net loss of $435,493, partially offset by non-cash adjustments, including $82,433 of stock-based compensation, $89,652 of non-cash lease expense, and $4,979 of depreciation expense. Changes in working capital provided a net source of cash of approximately $251,985, primarily due to increases in advances from related parties for operating expenses of $335,998 and increased in accounts payable and other payables of $25,432, partially offset by an increase of prepaid expenses of $39,725 and a decrease in operating lease liabilities of $93,334 following the expiration of the Company's lease.

For the six months ended July 31, 2023, net cash used in operating activities was primarily attributable to a net loss of $658,184, partially offset by non-cash items, including $82,432 of stock-based compensation, $80,912 of non-cash lease expense, and $7,531 of depreciation. Changes in working capital provided a net source of cash of approximately $459,557, primarily driven by a reduction in accounts receivable of $250,000, increases in accounts payable and other payables of $151,389, and advances from related parties for operating expenses of $138,890, partially offset by increases in deposits and other working capital items.

The decrease in net cash used in operating activities for the six months ended July 31, 2024, as compared to the prior year period, was primarily attributable to a reduction in net loss and changes in working capital, including increased reliance on related-party support to fund operating expenses.

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Cash Flows from Investing Activities

We had no investing activities during the six months ended July 31, 2024, and 2023.

Cash Flows from Financing Activities

We had financing inflow of $11,956 from advances from related parties in the six months ended July 31, 2024.

We had financing inflow of $5,277 from advances from related parties in the six months ended July 31, 2023.

We expect to continue to rely on equity financing and, where available, strategic partnerships or grants to meet our capital needs. Our ability to raise additional capital will depend on market conditions, investor interest, and our progress in commercializing our stem-cell and biomedical technologies.

Capital Requirements and Liquidity Outlook

We have incurred losses and negative cash flow from operations. We believe that our current cash resources are not sufficient to fund our operations for the next twelve months without additional financing. To meet our capital needs, we plan to seek additional equity or debt financing and may also pursue strategic partnerships or licensing opportunities. There is no assurance that such financing will be available on favorable terms or at all. If we cannot obtain adequate funding, we may need to delay, scale back, or discontinue some of our business activities.

Going Concern

We evaluate our ability to continue as a going concern in accordance with ASC 205-40, Presentation of Financial Statements - Going Concern. This evaluation requires us to assess whether conditions or events raise substantial doubt about our ability to meet our obligations as they become due during the twelve months following the issuance of these financial statements.

Our financial statements have been prepared assuming we will continue as a going concern. As disclosed in Note 2 to our financial statements, as of July 31, 2024, we had an accumulated deficit of $4,942,074, a working capital deficiency of $3,722,333, and negative operating cash flow of $6,444, which is due to our limited operations. These factors raise substantial doubt about our ability to continue as a going concern within one year from the issuance of these financial statements. Our ability to continue as a going concern depends upon our ability to obtain additional funding, restructuring related-party obligations, and implement a business plan that generates sustainable revenues. There can be no assurance that we will be successful in these efforts.

Off-Balance Sheet Arrangements

As of July 31, 2024, we did not have any off-balance sheet arrangements.

Plan of Operation and Funding

We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business.

While existing working capital and anticipated financing sources may provide limited support for our operations, our current cash resources are not sufficient to fund our operations over the next twelve months without additional financing. We will require additional capital to continue operations and execute our business plan. There can be no assurance that such financing will be available on acceptable terms, or at all. If we are unable to obtain adequate funding, we may be required to delay, scale back, or discontinue certain or all of our operations.

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Critical Accounting Policies and Estimates

Use of Estimates

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The preparation of financial statements requires management to make estimates and assumptions, including, but not limited to, stock-based compensation, lease liabilities, and going concern assessment. Our significant accounting policies are described in Note 3 to the financial statements. We consider the following policies and estimates to be critical because they involve significant judgments and assumptions and could materially affect our financial condition and results of operations. Critical estimates are those estimates that in accordance with U.S. GAAP, involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial statements. Management has determined that our most critical accounting estimates are those relating to stock-based compensation, lease accounting, and going concern assessment.

Significant estimates and assumptions reflected in the financial statements for the quarter ended July 31, 2024, include, but are not limited to:

Allowance for Credit Losses

We evaluate financial assets measured at amortized cost, including accounts receivable, for expected credit losses under ASC 326. The estimate incorporates historical loss experience, current economic conditions, and reasonable and supportable forecasts. Changes in these factors could materially affect the allowance recorded.

Lease Accounting

Under ASC 842, we recognize right-of-use assets and lease liabilities for operating leases. When the implicit rate in a lease is not readily determinable, we estimate an incremental borrowing rate based on available market information and our credit profile. Changes in assumptions regarding discount rates could impact lease liabilities and related expense.

Deferred Tax Assets

We recognize deferred tax assets and liabilities for temporary differences between financial statement carrying amounts and tax bases. We evaluate the realizability of deferred tax assets and record a valuation allowance when it is more likely than not that some or all of the deferred tax assets will not be realized. This assessment requires significant judgment regarding future taxable income.

Stock-Based Compensation

We account for equity-based awards under ASC 718. The fair value of equity awards is measured at the grant date and recognized over the requisite service period. The determination of fair value may require management to make assumptions regarding expected term, volatility, and other valuation inputs, as applicable.

Going Concern Assessment

In accordance with ASC 205-40, we evaluate whether conditions or events raise substantial doubt about our ability to continue as a going concern within one year from the issuance date of the financial statements. This assessment requires management to evaluate liquidity, forecasted cash flows, and the availability of financing or related-party support.

Because these estimates require management judgment, actual results could differ materially from those estimates.

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Income Taxes and Deferred Tax Assets

We account for income taxes using the liability method under ASC 740. Deferred tax assets are recognized for temporary differences between financial statement and tax bases of assets and liabilities. A valuation allowance is established when it is more likely than not that all or part of a deferred tax asset will not be realized. Determining the amount of valuation allowance requires significant judgment in estimating future taxable income, applicable tax strategies, and the expected timing of reversals of temporary differences.

Material Commitments

None.

Purchase of Significant Equipment

We do not intend to purchase any significant equipment during the next twelve months.