ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of operations relates to the operations and financial condition reported in the unaudited condensed financial statements of the Company for the three and nine months ended September 30, 2022 and 2021 should be read in conjunction with such financial statements and related notes included in this report. Except for the historical information contained herein, the following discussion, as well as other information in this report, contain “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the “safe harbor” created by those sections. Actual results and the timing of the events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the “Forward-Looking Statements” set forth elsewhere in this Quarterly Report on Form 10-Q.
Overview
Yong Bai Chao New Retail Corporation f/k/a Environmental Control Corp. (“we,” “us,” the “Company” or like terms) was incorporated in the State of Nevada on February 17, 2004 under the name Boss Minerals, Inc. to pursue the exploration and development of mining claims located in British Columbia, Canada.
During the quarter ended June 30, 2004, the Company filed a registration statement on Form SB-2 with the Securities and Exchange Commission (“SEC”) to register shares of common stock for public resale by certain stockholders identified in the registration statement. Upon the effective date of the registration statement, the Company became subject to the reporting requirements of Section 12(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and commenced filing reports under the Exchange Act through the quarter ended June 30, 2012.
In March 2006, the Company acquired the assets of Environmental Control Corporation, which developed vehicle emission control devices and filed a certificate of amendment to its articles of incorporation in April 2013 to change its name to Environmental Control Corp. The Company filed reports under the Exchange Act through the quarter ended June 30, 2012.
On May 2, 2016, the Eight Judicial District Court of Nevada entered an order appointing Bryan Glass as custodian of the Company, authorizing and directing him to, among other things, take any action reasonable, prudent and for the benefit of the Company, including reinstating the Company under Nevada law, appointing officers and convening an annual meeting of stockholders (the “Order”). Mr. Glass was a shareholder of the Company on the date that he applied to serve as a custodian of the Company. From time to time, Mr. Glass submits applications to the courts of the state of Nevada to be appointed as the custodian of corporations in which he already is a shareholder that have forfeited their right to exist as a corporation for reasons such as failure to file annual reports or to pay required fees, and such applications may or may not be successful. If the court approves the application, Mr. Glass is appointed to serve as the custodian of such corporations. In the past, he either has contributed assets or sold them to third parties. Thereafter, the board of directors and Mr. Glass, in his role as custodian, appointed himself to serve as the President of the Company.
On May 5, 2016, the Company filed a Certificate of Reinstatement with the state of Nevada to reestablish the Company’s existence.
On May 9, 2016, the board of directors and Bryan Glass, in the exercise of his power as the court-appointed custodian of the Company, appointed Bryan Glass as our President, Secretary and Treasurer and authorized the issuance of 60,000,000 shares of stock to Mr. Glass for an aggregate price of $60,000, which sum was paid by the performance of services to the Company and the reimbursement of expenses incurred by Mr. Glass on the Company’s behalf in the amount of $6,685. The expenses incurred by Mr. Glass included $5,160 to the state of Nevada for fees in connection with reinstating the Company and other filings to bring the Company current under the requirements of Nevada corporate law; $1,250 to the transfer agent for outstanding fees; and $275 to the state of Nevada as a filing fee in connection with the amendment to the articles of incorporation.
On June 15, 2016, the Company held a stockholders’ meeting at which the stockholders adopted Amended and Restated Articles of Incorporation of the Company under which the Company increased the total number of shares it is authorized to issue to 190 million shares consisting of 180 million shares of common stock and 10 million shares of blank check preferred stock.
In December 2018, Mr. Glass sold 60 million shares of common stock, representing all of the shares he owned in the Company, and equal to 56.83% of the total number of outstanding shares of the Company’s common stock, to Lili Xin for the sum of $90,000. Ms. Chang became acquainted with Mr. Glass through a mutual associate and they subsequently negotiated a deal for his control block of shares in the Company. Concurrent with the sale of his shares, the board of directors appointed Ms. Chang as the President and as a director of the Company and Mr. Glass resigned from all positions he held with the Company.
On May 22, 2019, the Company filed a Form 15 with the SEC terminating the registration of its class of common stock under Section 12(g) of the Exchange Act and its duty to file periodic and other reports with the SEC.
In December 12, 2019, the Company filed a registration statement on Form 10 to register its class of common stock under the Exchange Act, and the registration statement automatically became effective in February 2020.
On June 29, 2021, Lili Xin, our former Chief Executive Officer, Chief Financial Officer, director and principal stockholder of the Company (“Ms. Xin”), and Fei Wang (“Mr. Wang”), entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) pursuant to which Ms. Xin agreed to sell to Mr. Wang 80,000,000 shares of Common Stock registered in her name (the “Shares”), representing 59% of the outstanding shares of common stock in the Company, at a purchase price of Three Hundred Fifty Thousand Dollars ($350,000). The seller relied on the exemption from registration pursuant to Section 4(2) of, and Regulation D and/or Regulation S promulgated under the Act in selling the Company’s securities to Mr. Wang. The funds came from the personal funds of Mr. Wang, and was not the result of a loan. The closing occurred August 10, 2021.
In connection with such sale, Lili Xin, the then CEO, President and CFO resigned from all of her positions associated with the Company. Concurrently therewith, Mr. Wang was appointed to serve as the sole executive officer and director of the Company.
On September 14, 2021, the Company entered into a Company Acquisition Agreement (the “Acquisition Agreement”) with Yong Bai Chao New Retail (Shenzhen) Co. Ltd. (“YBC”). Pursuant to the terms of the Acquisition Agreement, the Company agreed to acquire all of the issued and outstanding securities of YBC in exchange for 50 million shares of our common stock. After the consummation of the acquisition, the Company is obligated to change its name to Yong Bai Chao New Retail Corp. Fei Wang, our sole executive officer and director, also serves as the Chief Executive Officer and Director of YBC. This transaction has not yet consummated, and the closing of this transaction is subject to certain terms and conditions described in the Acquisition Agreement. In effectuating the transaction contemplated in the Acquisition Agreement, the Company intends to rely on the exemption from registration pursuant to Section 4(2) of, and Regulation D and/or Regulation S promulgated under the Securities Act of 1933, as amended.
Effective October 28, 2021, the Company’s name changed to Yong Bai Chao New Retail Corporation.
Currently, the Company only possesses minimal liabilities with no substantial business operations. There were no revenue or positive cash flows from operating activities for the nine months ended September 30, 2022. The Company’s management efforts are focused on seeking out a new and profitable operating business with strong growth potential. Unless and until the Company’s successful acquisition of an operating business, we expect our expenses to primarily consist of accounting fee, legal service fee, and filing fee related to maintaining itself as a public company.
Critical Accounting Policies and Significant Judgments and Estimates
The Securities and Exchange Commission (“SEC”) issued disclosure guidance for “critical accounting policies.” The SEC defines “critical accounting policies” as those that require the application of management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.
Our significant accounting policies are described in the Notes to these unaudited condensed financial statements. Currently, based on the Company’s limited activity, we do not believe that there are any accounting policies that require the application of difficult, subjective or complex judgments.
Results of Operations
Three and Nine Months Ended September 30, 2022 Compared to the Three and Nine Months Ended September 30, 2021
Revenue. We did not generate any revenue during the three and nine months ended September 30, 2022 and 2021.
Operating Expenses. Our operating expenses primarily consisted of fees and expenses related to complying with our ongoing SEC reporting requirements, which have mainly consisted of accounting fee, legal service fee, and filing fee.
For the three months ended September 30, 2022, total operating expenses amounted to $41,233 as compared to $7,156 for the three months ended September 30, 2021, representing an increase of $34,077 or 476.2%. The increase was due to an increase in legal service fee of approximately of $30,000 and an increase in other miscellaneous items of approximately $4,000.
For the nine months ended September 30, 2022, total operating expenses amounted to $73,073 as compared to $770,006 for the nine months ended September 30, 2021, reflecting a decrease of $696,933 or 90.5%. The decrease was due to a decrease in stock issued for services of $753,000, offset by an increase in professional fees of approximately $56,000 resulting from an increase in legal service fee of approximately $30,000 and an increase in accounting fee of approximately $26,000.
Other Expense. Other expense includes interest expense.
For the three months ended September 30, 2022, interest expense amounted to $1,667, as compared to $6,250 for the three months ended September 30, 2021, a decrease of $4,583 or 73.3%. For the nine months ended September 30, 2022, interest expense amounted to $14,167, as compared to $20,002 for the nine months ended September 30, 2021, a decrease of $5,835 or 29.2%. The decrease was driven by the reduction in debt.
Net Loss. As a result of the factors described above, we had net loss of $42,900 and $13,406, respectively, for the three months ended September 30, 2022 and 2021. As a result of the factors described above, we had net loss of $87,240 and $790,008, respectively, for the nine months ended September 30, 2022 and 2021,
Liquidity and Capital Resources
At September 30, 2022, we did not have any cash, while, we had liabilities of $35,669, and had a working capital deficit of $35,669. We expect to incur continued losses during the remainder of 2022, possibly even longer.
Net cash flow used in operating activities was $53,551 for the nine months ended September 30, 2022. These included our net loss of approximately $87,000, offset by the changes in operating assets and liabilities totaling approximately $34,000.
Net cash flow used in operating activities was $0 for the nine months ended September 30, 2021. These included net loss of approximately $790,000, offset by the non-cash item adjustment consisting of stock-based service fees of $753,000 and changes in operating assets and liabilities totaling approximately $37,000.
Net cash flow provided by financing activities was $53,551 for the nine months ended September 30, 2022. During the nine months ended September 30, 2022, we received proceeds from sale of common stock of approximately $54,000.
There was no financing activity during the nine months ended September 30, 2021.
We expect to require working capital of approximately $40,000 over the next 12 months to meet our financial obligations.
We are a shell company with no revenue generating activities. We anticipate that our operating activities will generate negative net cash flow during the remaining year of 2022. The success of our business plan is dependent upon the availability of additional capital resources on terms satisfactory to management as we are not generating sufficient revenues from our business operations. Our sources of capital in the past have included the sale of equity securities, which include common stock sold in private transactions and stockholder advances. There can be no assurance that we can raise such additional capital resources on satisfactory terms. We believe that our current cash and other sources of liquidity discussed above are adequate to support operations for at least the next 12 months. We anticipate continuing to rely on equity sales of our common shares and shareholder advances in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our plan of operations.
Off-Balance Sheet Arrangements
As of September 30, 2022, we did not have any transactions, agreements or other contractual arrangements that constitute off-balance sheet arrangements.