| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES Basis of Presentation and
Consolidation The accompanying
consolidated financial statements (“CFS”) are prepared in conformity with U.S. Generally Accepted Accounting Principles (“US
GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim
financial reporting. The functional currency of Bio Essence is U.S. dollars (“$’’). The accompanying financial statements
are presented in U.S. dollars (“$”). The consolidated financial statements for the nine and three months ended September
30, 2024, include the financial statements of the Company and its subsidiaries, BEH (up to disposal date), and McBE (up to dissolution
date). All significant inter-company transactions and balances were eliminated in consolidation. Reclassification Certain
prior period accounts have been reclassified in conformity with the current period’s presentation. These reclassifications had
no impact on the reported results of operations and cash flows. Going Concern The Company
incurred net loss of $1,281,233 and $778,192 for the nine months ended September 30, 2024 and 2023, respectively. The Company
incurred net losses of $1,199,493 and $314,842 for the three months ended 30,
2024 and 2023, respectively. The Company also had an accumulated deficit of $10,421,707 as of September 30, 2024. These conditions
raise substantial doubt about the Company’s ability to continue as a going concern. The Company disposed non-profitable subsidiaries
BEH and BEP, and is actively seeking other business opportunities including expanding OEM business and looking for potential acquisition
targets. Management also intends to raise funds by way of a private or public offering, or by obtaining loans from banks or others. While
the Company believes in the viability of its strategy to generate sufficient revenue and in its ability to raise additional funds on
reasonable terms and conditions, there can be no assurances to that effect. The ability of the Company to continue as a going concern
is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability
to raise additional funds by way of a public or private offering. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty. Use of Estimates In preparing
financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. Significant
estimates, required by management, include the recoverability of long-lived assets, allowance for doubtful accounts, and the reserve
for obsolete and slow-moving inventories. Actual results could differ from those estimates. Leases The Company
follows ASC 842 and determines if an arrangement is a lease or contains a lease at inception. Operating leases are included in operating
lease right-of-use (“ROU”) assets, and operating lease liabilities (current and non-current) in the Company’s consolidated
balance sheets. Finance leases are included in property and equipment, and finance lease liabilities (current and non-current) in the
Company’s consolidated balance sheets. ROU assets
represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments
arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of
lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company generally uses
the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease
payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The
Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will
exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company
elected the package of practical expedients permitted under the transition guidance to combine the lease and non-lease components as
a single lease component for operating leases associated with the Company’s office space lease, and to keep leases with an initial
term of 12 months or less off the balance sheet and recognize the associated lease payments in the consolidated statements of income
on a straight-line basis over the lease term. ROU assets
are reviewed for impairment when indicators of impairment are present. ROU assets from operating and finance leases are subject to the
impairment guidance in ASC 360, Property, Plant, and Equipment, as ROU assets are long-lived nonfinancial assets. The Company recognized
$1,050,940 impairment loss of ROU assets during the nine and three months ended September 30, 2024. Cash and Cash Equivalents For financial
statement purposes, the Company considers all highly liquid investments with an original maturity of three months or less to be cash
equivalents. Credit Losses On January1,
2023, the Company adopted Accounting Standards Update 2016-13 “Financial Instruments — Credit Losses
(Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the incurred loss methodology with an
expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The adoption of the
credit loss accounting standard has no material impact on the Company’s consolidated financial statements as of January 1,
2023. The Company’s
account receivables and other receivables in the balance sheet are within the scope of ASC Topic 326. As the Company has limited
customers and debtors, the Company uses the loss-rate method to evaluates the expected credit losses on an individual basis. When
establishing the loss rate, the Company makes the assessment on various factors, including historical experience, credit-worthiness of
customers and debtors, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors
that may affect its ability to collect from the customers and debtors. The Company also provides specific provisions for allowance when
facts and circumstances indicate that the receivable is unlikely to be collected. Expected
credit losses are recorded as allowance for credit losses on the consolidated statements of operations. After all attempts to collect
a receivable have failed, the receivable is written off against the allowance. In the event the Company recovers amount that is previously
reserved for, the Company will reduce the specific allowance for credit losses. Accounts Receivable Net The Company’s
policy is to maintain an allowance for potential credit losses on accounts receivable. Management reviews the composition of accounts
receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes
in customer payment patterns to evaluate the adequacy of these reserves. As of September 30, 2024 and December 31, 2023, there was no
bad debt allowance. As of December 31, 2023, the bad debt allowance from discontinued operation (BEH) was $2,252. Inventory Inventories
are stated at the lower of cost or net realizable value with cost determined on a weighted-average basis. Management compares the cost
of inventories with the net realizable value and an allowance is made for writing down their inventories to net realizable value, if
lower. Property and Equipment Property
and equipment are stated at cost, less accumulated depreciation, and impairment losses, if any. Major repairs and betterments that significantly
extend original useful lives or improve productivity are capitalized and depreciated over the period benefited. Maintenance and repairs
are expensed as incurred. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation
are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment
is provided using the straight-line method for substantially all assets as follows:
Leasehold improvements 7-10 years
Office furniture 5 years Impairment of Long-Lived
Assets Long-lived
assets, which include property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability
of long-lived assets to be held and used is measured by comparing of the carrying amount of an asset to the estimated undiscounted future
cash flows expected to be generated by it. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an
impairment charge is recognized by the amount by which the carrying amount of the asset exceeds its fair value (“FV”). FV
is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. Based
on its review, the Company believes that, as of September 30, 2024 and December 31, 2023, there was no significant impairments of its
long-lived assets. Income Taxes Income
taxes are accounted for using an asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income
Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current
period and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s
financial statements or tax returns. Deferred tax assets also include the prior years’ net operating losses carried forward. 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. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred
tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or
all of the deferred tax assets will not be realized. The Company
follows ASC Topic 740, which prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on recognition of income tax assets and
liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated
with tax positions, accounting for income taxes in interim periods, and income tax disclosures. Under the
provisions of ASC Topic 740, when tax returns are filed, it is likely that some positions taken would be sustained upon examination by
the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position
that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which,
based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination,
including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.
Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more
than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with
tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in
the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon
examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties are classified in selling,
general and administrative expenses in the statement of income. At September
30, 2024 and December 31, 2023, the Company did not take any uncertain positions that would necessitate recording a tax related liability.
The Company files a U.S. income tax return. With few exceptions, the Company’s U.S. income tax return filed for the years ending
on December 31, 2019 and thereafter are subject to examination by the relevant taxing authorities. The Company
accounts for income taxes in interim periods in accordance with FASB ASC 740-270, “Interim Reporting.” The Company has determined
an estimated annual effective tax rate. The rate will be revised, if necessary, as of the end of each successive interim period during
the Company’s fiscal year to its best current estimate. The estimated annual effective tax rate is applied to the year-to-date
ordinary income (or loss) at the end of the interim period. Revenue Recognition The Company
recognizes revenues following the five-step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the
performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance
obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation. Revenue
is measured at the amount of consideration we expect to receive in exchange for the sale of our product, which occurs at a point in time,
typically upon delivery to the customer. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected
amortization period of the asset that it would have recognized is one year or less or the amount is immaterial. Revenues
from sales of goods are measured at net of reserves established for applicable discounts and allowances that are offered within contracts
with the Company’s customers, and are recognized when the goods are delivered to the customers. Product
revenue reserves, which are classified as a reduction in product revenues, are generally characterized in the following categories: discounts,
returns and rebates. These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are classified
as reductions of accounts receivable as the amount is payable to the Company’s customers. Revenues
from manufacture or OEM services are recognized when the manufacture process is completed pursuant to the customers’ requirement
and the manufactured goods were delivered to the customers. The Company’s
return policy allows for the return of damaged or defective products and shipment errors. A notice of damage or wrong items should make
within five days from receiving the goods, and actual return of the products must be completed within 30 days from the date of receiving
the goods. Delayed notification for damaged or wrong products will not be accepted for return or exchange. Custom formulas and capsules
are not returnable. The amount for return of products was immaterial for the nine and three months ended September 30, 2024 and 2023. Cost of Revenue Cost of
goods sold (“COGS”) consists primarily of finished goods purchased from other manufacturers, material costs, labor costs
and related overhead that are directly attributable to the production of the products. Write-down of inventory to lower of cost or net
realizable value is also recorded in COGS. Cost of
manufacture service/OEM consists primarily of direct labor costs and related overhead that are directly attributable to the manufacture
process. Shipping and Handling Costs Shipping
and handling costs related to delivery of finished goods are included in selling expenses. During the nine months ended September
30, 2024 and 2023, shipping and handling costs from continuing operations were $1,286 and $ nil nil During
the nine months ended September 30, 2024 and 2023, shipping and handling costs from discontinued operations were $8,009 and $32,596,
respectively. During the three months ended September 30, 2024 and 2023, shipping and handling costs from discontinued operations were
$ nil Advertising Advertising
expenses consist primarily of costs of promotion and marketing for the Company’s image and products, and costs of direct advertising,
and are included in selling expenses. The Company expenses all advertising costs as incurred. During the nine and three months ended
September 30, 2024 and 2023, advertising expenses from continuing operations were $ nil nil nil nil During
the nine months ended September 30, 2024 and 2023, advertising expenses from discontinued operations were $1,228 and $63,912, respectively.
During the three months ended September 30, 2024 and 2023, advertising expenses from discontinued operations were $ nil Fair Value (“FV”)
of Financial Instruments Certain
of the Company’s financial instruments, including cash and equivalents, accrued liabilities and accounts payable, carrying amounts
approximate their FV due to their short maturities. FASB ASC Topic 825, “Financial Instruments,” requires disclosure of the
FV of financial instruments held by the Company. The carrying amounts reported in the balance sheets for current liabilities each qualify
as financial instruments and are a reasonable estimate of their FV because of the short period of time between the origination of such
instruments and their expected realization and the current market rate of interest. Fair Value Measurements and
Disclosures ASC Topic
820, “Fair Value Measurements and Disclosures,” defines FV, and establishes a three-level valuation hierarchy for disclosures
of FV measurement that enhances disclosure requirements for FV measures. The three levels are defined as follow:
● Level 1 inputs to the valuation
methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
● Level 2 inputs to the valuation
methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset
or liability, either directly or indirectly, for substantially the full term of the financial instrument.
● Level 3 inputs to the valuation
methodology are unobservable and significant to the FV measurement. As of September
30, 2024 and December 31, 2023, the Company did not identify any assets and liabilities that are required to be presented on the balance
sheet at FV. The carrying value of cash, accounts receivable, prepaid expenses, advances to suppliers, accounts payable, taxes payable,
other payables and accrued liabilities approximate estimated fair values because of their short maturities. Share-based Compensation The Company
accounts for share-based compensation awards in accordance with ASC 718, “Compensation – Stock Compensation”. The cost
of services received from employees and non-employees in exchange for awards of equity instruments is recognized in the consolidated
statement of operations based on the estimated fair value of those awards on the grant date and amortized on a straight-line basis over
the requisite service period or vesting period. The Company records forfeitures as they occur. Earnings (Loss) per Share
(EPS) Basic EPS
is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS is computed
similar to basic net income per share except that the denominator is increased to include the number of additional common shares that
would have been outstanding if all the potential common shares pertaining to warrants, stock options, and similar instruments had been
issued and if the additional common shares were dilutive. Diluted EPS are based on the assumption that all dilutive convertible shares
and stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method for the outstanding
unvested restricted stock, options and warrants, and the if-converted method for the outstanding convertible instruments. Under the treasury
stock method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later)
and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted
method, outstanding convertible instruments are assumed to be converted into common stock at the beginning of the period (or at the time
of issuance, if later). There were no potentially dilutive securities outstanding (options and warrants) for the nine and three months
ended September 30, 2024 and 2023. Concentration of Credit Risk Financial
instruments that potentially subject the Company to credit risk consist primarily of accounts and other receivables. The Company does
not require collateral or other security to support these receivables. The Company conducts periodic reviews of the financial condition
and payment practices of its customers to minimize collection risk on accounts receivable. For the
nine months ended September 30, 2024, the Company had three major customers accounted for 22.65%, 17.91%, and 10.92%, respectively,
of the Company’s total sales. For the nine months ended September 30, 2023, one major customer accounted for 22% of the Company’s
total sales. For the
three months ended September 30, 2024, three major customers accounted for 30%, 16% and 14%, respectively, of the Company’s total
sales. For the three months ended September 30, 2023, no customers accounted for more than 10% of the Company’s total sales. For the
nine and three months ended September 30, 2024, the Company had one major vendor accounted for 100% of the Company’s
total purchases. The Company
had four major vendors accounted for 29%, 15%, 12% and 10%, respectively, of total purchases during the nine months
ended September 30, 2023. The Company
had four major vendors accounted for 23%, 15%, 14%, 14%, respectively, of total purchases during the three
months ended September 30, 2023. Segment Reporting ASC Topic
280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management
approach model is based on the way a company’s chief operating decision maker organizes segments within the Company for making
operating decisions assessing performance and allocating resources. Reportable segments are based on products and services, geography,
legal structure, management structure, or any other manner in which management disaggregates a company. Management
determined the Company’s operations constitute a single reportable segment in accordance with ASC 280. The Company operates exclusively
in one business and industry segment: manufacture and sale of health supplement products. New Accounting Pronouncements In November
2023, the FASB issued ASU 2023-07, the amendments in the ASU are intended to improve reportable segment disclosure requirements, primarily
through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker and
included within each reported measure of segment profit or loss. In addition, the amendments enhance interim disclosure requirements,
clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements
for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable
“investors to better understand an entity’s overall performance” and assess “potential future cash flows.”
The amendments in ASU 2023-07 are effective for all public entities for fiscal years beginning after December 15, 2023, and interim periods
within fiscal years beginning after December 15, 2024. The Company’s management does not believe the adoption of ASU 2023-09 will
have a material impact on its financial statements and disclosures. In December
2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure
of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure
requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s
management does not believe the adoption of ASU 2023-09 will have a material impact on its financial statements and disclosures. The Company
does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect
on the Company’s consolidated financial position, statements of comprehensive income and cash flows. |
