AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|
|
For the Three Months Ended
|
|
|
For the Three Months Ended
|
|
|
|
March 31, 2019
|
|
|
March 31, 2018
|
|
|
|
|
|
|
|
|
REVENUES
|
|
|
|
|
|
|
Real property rental
|
|
$
|
266,626
|
|
|
$
|
296,623
|
|
Medical related consulting services - related party
|
|
|
14,260
|
|
|
|
-
|
|
Development services and sales of developed products
|
|
|
3,278
|
|
|
|
11,290
|
|
Total Revenues
|
|
|
284,164
|
|
|
|
307,913
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES
|
|
|
|
|
|
|
|
|
Real property operating expenses
|
|
|
230,759
|
|
|
|
210,274
|
|
Medical related consulting services - related party
|
|
|
13,091
|
|
|
|
-
|
|
Development services and sales of developed products
|
|
|
30,307
|
|
|
|
16,520
|
|
Total Costs and Expenses
|
|
|
274,157
|
|
|
|
226,794
|
|
|
|
|
|
|
|
|
|
|
REAL PROPERTY OPERATING INCOME
|
|
|
35,867
|
|
|
|
86,349
|
|
GROSS PROFIT FROM MEDICAL RELATED CONSULTING SERVICES
|
|
|
1,169
|
|
|
|
-
|
|
GROSS LOSS FROM DEVELOPMENT SERVICES AND SALES OF DEVELOPED PRODUCTS
|
|
|
(27,029
|
)
|
|
|
(5,230
|
)
|
|
|
|
|
|
|
|
|
|
OTHER OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
Advertising expenses
|
|
|
244,600
|
|
|
|
-
|
|
Compensation and related benefits
|
|
|
2,100,155
|
|
|
|
538,814
|
|
Professional fees
|
|
|
1,468,226
|
|
|
|
571,772
|
|
Research and development expenses
|
|
|
152,460
|
|
|
|
-
|
|
Other general and administrative
|
|
|
509,879
|
|
|
|
285,252
|
|
|
|
|
|
|
|
|
|
|
Total Other Operating Expenses
|
|
|
4,475,320
|
|
|
|
1,395,838
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(4,465,313
|
)
|
|
|
(1,314,719
|
)
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
768
|
|
|
|
408
|
|
Interest expense
|
|
|
(25,697
|
)
|
|
|
(236,986
|
)
|
Interest expense - related party
|
|
|
(1,944
|
)
|
|
|
-
|
|
Loss from equity-method investment
|
|
|
(12,743
|
)
|
|
|
-
|
|
Other income
|
|
|
-
|
|
|
|
328
|
|
|
|
|
|
|
|
|
|
|
Total Other Expense, net
|
|
|
(39,616
|
)
|
|
|
(236,250
|
)
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES
|
|
|
(4,504,929
|
)
|
|
|
(1,550,969
|
)
|
|
|
|
|
|
|
|
|
|
INCOME TAXES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(4,504,929
|
)
|
|
$
|
(1,550,969
|
)
|
|
|
|
|
|
|
|
|
|
LESS: NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST
|
|
|
(99,113
|
)
|
|
|
(69,390
|
)
|
|
|
|
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS
|
|
$
|
(4,405,816
|
)
|
|
$
|
(1,481,579
|
)
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS:
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
|
(4,504,929
|
)
|
|
|
(1,550,969
|
)
|
OTHER COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
Unrealized foreign currency translation gain
|
|
|
43,482
|
|
|
|
52,838
|
|
COMPREHENSIVE LOSS
|
|
$
|
(4,461,447
|
)
|
|
$
|
(1,498,131
|
)
|
LESS: COMPREHENSIVE LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST
|
|
|
(100,311
|
)
|
|
|
(69,230
|
)
|
COMPREHENSIVE LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS
|
|
$
|
(4,361,136
|
)
|
|
$
|
(1,428,901
|
)
|
|
|
|
|
|
|
|
|
|
NET LOSS PER COMMON SHARE ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.06
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
73,690,461
|
|
|
|
69,781,733
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For
the Three Months Ended March 31, 2018 and 2019
|
|
Avalon
GloboCare Corp. Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Additional
|
|
|
Treasury
Stock
|
|
|
|
|
|
|
|
|
Accumulated
Other
|
|
|
Non-
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Number
of
|
|
|
|
|
|
Paid-in
|
|
|
Number of
|
|
|
|
|
|
Accumulated
|
|
|
Statutory
|
|
|
Comprehensive
|
|
|
controlling
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Shares
|
|
|
Amount
|
|
|
Deficit
|
|
|
Reserve
|
|
|
Loss
|
|
|
Interest
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2017
|
|
|
-
|
|
|
$
|
-
|
|
|
|
70,278,622
|
|
|
$
|
7,028
|
|
|
$
|
11,490,285
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
(3,517,654
|
)
|
|
$
|
6,578
|
|
|
$
|
(91,994
|
)
|
|
$
|
(585,394
|
)
|
|
$
|
7,308,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury
stock purchase
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(520,000
|
)
|
|
|
(522,500
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(522,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation and service fees
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
526,348
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
526,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
52,678
|
|
|
|
160
|
|
|
|
52,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the three months ended March 31, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,481,579
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(69,390
|
)
|
|
|
(1,550,969
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
70,278,622
|
|
|
$
|
7,028
|
|
|
$
|
12,016,633
|
|
|
|
(520,000
|
)
|
|
$
|
(522,500
|
)
|
|
$
|
(4,999,233
|
)
|
|
$
|
6,578
|
|
|
$
|
(39,316
|
)
|
|
$
|
(654,624
|
)
|
|
$
|
5,814,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
73,830,751
|
|
|
$
|
7,383
|
|
|
$
|
24,153,378
|
|
|
|
(520,000
|
)
|
|
$
|
(522,500
|
)
|
|
$
|
(11,291,776
|
)
|
|
$
|
6,578
|
|
|
$
|
(236,860
|
)
|
|
$
|
(862,200
|
)
|
|
$
|
11,254,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock upon cashless exercise of stock options
|
|
|
-
|
|
|
|
-
|
|
|
|
350,856
|
|
|
|
35
|
|
|
|
(35
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock upon exercise of warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
158,932
|
|
|
|
16
|
|
|
|
(16
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,272,747
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,272,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
44,680
|
|
|
|
(1,198
|
)
|
|
|
43,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the three months ended March 31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,405,816
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(99,113
|
)
|
|
|
(4,504,929
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
74,340,539
|
|
|
$
|
7,434
|
|
|
$
|
26,426,074
|
|
|
|
(520,000
|
)
|
|
$
|
(522,500
|
)
|
|
$
|
(15,697,592
|
)
|
|
$
|
6,578
|
|
|
$
|
(192,180
|
)
|
|
$
|
(962,511
|
)
|
|
$
|
9,065,303
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
For the
Three Months Ended
|
|
|
For the
Three Months Ended
|
|
|
|
March
31, 2019
|
|
|
March
31, 2018
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(4,504,929
|
)
|
|
$
|
(1,550,969
|
)
|
Adjustments
to reconcile net loss from operations to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
139,131
|
|
|
|
123,379
|
|
Stock-based
compensation expense
|
|
|
2,272,747
|
|
|
|
526,348
|
|
Loss
on equity method investment
|
|
|
12,743
|
|
|
|
-
|
|
Changes
in operating assets and liabilities,
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(1,305
|
)
|
|
|
3,469
|
|
Tenants
receivable
|
|
|
(5,573
|
)
|
|
|
479
|
|
Inventory
|
|
|
(3,947
|
)
|
|
|
(7,372
|
)
|
Prepaid
expenses - related parties
|
|
|
34,814
|
|
|
|
-
|
|
Prepaid
expenses and other current assets
|
|
|
197,829
|
|
|
|
75,693
|
|
Security
deposit
|
|
|
(37
|
)
|
|
|
5,284
|
|
Accounts
payable
|
|
|
34,080
|
|
|
|
(30
|
)
|
Advance
from customer - related party
|
|
|
(15,115
|
)
|
|
|
-
|
|
Accrued
liabilities and other payables
|
|
|
346,694
|
|
|
|
178,136
|
|
Accrued
liabilities and other payables - related parties
|
|
|
34,326
|
|
|
|
(14,498
|
)
|
Deferred
rental income
|
|
|
(11,124
|
)
|
|
|
(5,515
|
)
|
Interest
payable
|
|
|
24,658
|
|
|
|
236,986
|
|
Interest
payable - related party
|
|
|
1,944
|
|
|
|
-
|
|
VAT
and other taxes payable
|
|
|
20,873
|
|
|
|
31,264
|
|
Tenants’
security deposit
|
|
|
(120
|
)
|
|
|
(18,888
|
)
|
|
|
|
|
|
|
|
|
|
NET
CASH USED IN OPERATING ACTIVITIES
|
|
|
(1,422,311
|
)
|
|
|
(416,234
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(76,033
|
)
|
|
|
(7,852
|
)
|
Improvement
of commercial real estate
|
|
|
(11,338
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
NET
CASH USED IN INVESTING ACTIVITIES
|
|
|
(87,371
|
)
|
|
|
(7,852
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds
received from note payable - related party
|
|
|
1,000,000
|
|
|
|
-
|
|
Repurchase
of common stock
|
|
|
-
|
|
|
|
(522,500
|
)
|
|
|
|
|
|
|
|
|
|
NET
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
|
|
1,000,000
|
|
|
|
(522,500
|
)
|
|
|
|
|
|
|
|
|
|
EFFECT
OF EXCHANGE RATE ON CASH
|
|
|
26,686
|
|
|
|
45,209
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH
|
|
|
(482,996
|
)
|
|
|
(901,377
|
)
|
|
|
|
|
|
|
|
|
|
CASH - beginning
of period
|
|
|
2,252,287
|
|
|
|
3,027,033
|
|
|
|
|
|
|
|
|
|
|
CASH - end of period
|
|
$
|
1,769,291
|
|
|
$
|
2,125,656
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash
paid for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
1,039
|
|
|
$
|
-
|
|
Income
taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Property
and equipment acquired on credit as payable
|
|
$
|
84,348
|
|
|
$
|
-
|
|
Acquisition
of equipment by decreasing prepayment for long-term assets
|
|
$
|
-
|
|
|
$
|
110,103
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
1 –
ORGANIZATION AND NATURE OF OPERATIONS
Avalon
GloboCare Corp. (f/k/a Global Technologies Corp.) (the “Company” or “AVCO”) is a Delaware corporation.
The Company was incorporated under the laws of the State of Delaware on July 28, 2014. On October 18, 2016, the Company changed
its name to Avalon GloboCare Corp. and completed a reverse split its shares of common stock at a ratio of 1:4. On October 19,
2016, the Company entered into and closed a Share Exchange Agreement with the shareholders of Avalon Healthcare System, Inc.,
a Delaware corporation (“AHS”), each of which are accredited investors (“AHS Shareholders”) pursuant to
which we acquired 100% of the outstanding securities of AHS in exchange for 50,000,000 shares of our common stock (the “AHS
Acquisition”). AHS was incorporated on May 18, 2015 under the laws of the State of Delaware. As a result of such acquisition,
the Company’s operations now are focused on integrating and managing global healthcare services and resources, as well as
empowering high-impact biomedical innovations and technologies to accelerate their clinical applications. We are dedicated to
advancing cell-based technologies and therapeutics, as well as empowering high-impact biomedical innovations to accelerate their
clinical applications. Our ecosystem covers the areas of exosome technology (including liquid biopsy and regenerative therapeutics)
and cellular immunotherapy. We plan to integrate technologies and services through joint venture and subsidiary structures that
bring shareholder value both in the short term, through operational entities and long term, through biomedical innovation development,
such as our recent joint venture for the advancement of exosome isolation systems and related products. AHS owns 100% of the capital
stock of Avalon (Shanghai) Healthcare Technology Co., Ltd. (“Avalon Shanghai”), which is a wholly foreign-owned enterprise
organized under the laws of the People’s Republic of China (“PRC”). Avalon Shanghai was incorporated on April
29, 2016 and is engaged in medical related consulting services for customers
.
For
accounting purposes, AHS was the surviving entity. The transaction was accounted for as a recapitalization of AHS pursuant to
which AHS was treated as the accounting acquirer, surviving and continuing entity although the Company is the legal acquirer.
The Company did not recognize goodwill or any intangible assets in connection with this transaction. Accordingly, the Company’s
historical financial statements are those of AHS and its wholly-owned subsidiary, Avalon Shanghai immediately following the consummation
of this reverse merger transaction
.
On
January 23, 2017, the Company incorporated Avalon (BVI) Ltd., a British Virgin Island company. There was no activity for the subsidiary
since its incorporation through March 31, 2019. Avalon (BVI) Ltd. is dormant and is in process of being dissolved
.
On
February 7, 2017, the Company formed Avalon RT 9 Properties, LLC (“Avalon RT 9”), a New Jersey limited liability company.
On May 5, 2017, Avalon RT 9 purchased a real property located in Township of Freehold, County of Monmouth, State of New Jersey,
having a street address of 4400 Route 9 South, Freehold, NJ 07728. This property was purchased to serve as the Company’s
world-wide headquarters for all corporate administration and operation. In addition, the property generates rental income. Avalon
RT 9 owns this office building. Currently, Avalon RT 9’s business consists of the ownership and operation of the income-producing
real estate property in New Jersey
.
On
July 31, 2017, the Company formed GenExosome Technologies Inc. (“GenExosome”) in Nevada.
On
October 25, 2017, GenExosome and the Company entered into a Securities Purchase Agreement pursuant to which the Company acquired
600 shares of GenExosome in consideration of $1,326,087 in cash and 500,000 shares of common stock of the Company.
On
October 25, 2017, GenExosome entered into and closed an Asset Purchase Agreement with Yu Zhou, MD, PhD, pursuant to which the
Company acquired all assets, including all intellectual property, held by Dr. Zhou pertaining to the business of researching,
developing and commercializing exosome technologies including, but not limited to, patent application number CN 2016 1 0675107.5
(application of an Exosomal MicroRNA in plasma as biomaker to diagnosis liver cancer), patent application number CN 2016 1 0675110.7
(clinical application of circulating exosome carried miRNA-33b in the diagnosis of liver cancer), patent application number CN
2017 1 0330847.X (saliva exosome based methods and composition for the diagnosis, staging and prognosis of oral cancer) and patent
application number CN 2017 1 0330835.7 (a novel exosome-based therapeutics against proliferative oral diseases). In consideration
of the assets, GenExosome agreed to pay Dr. Zhou $876,087 in cash, transfer 500,000 shares of common stock of the Company to Dr.
Zhou and issue Dr. Zhou 400 shares of common stock of GenExosome.
As
a result of the above transactions, effective October 25, 2017, the Company holds 60% of GenExosome and Dr. Zhou holds 40% of
GenExosome. GenExosome is engaged in developing proprietary diagnostic and therapeutic products leveraging its exosome technology
and marketing and distributing its proprietary Exosome Isolation Systems.
On
October 25, 2017, GenExosome entered into and closed a Stock Purchase Agreement with Beijing Jieteng (GenExosome) Biotech Co.
Ltd., a corporation incorporated in the People’s Republic of China on August 7, 2015 (“Beijing GenExosome”)
and Dr. Zhou, the sole shareholder of Beijing GenExosome, pursuant to which GenExosome acquired all of the issued and outstanding
securities of Beijing GenExosome in consideration of a cash payment in the amount of $450,000.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
1 –
ORGANIZATION AND NATURE OF OPERATIONS (continued)
Beijing
GenExosome is engaged in the development of exosome technology to improve diagnosis and management of diseases. Exosomes are tiny,
subcellular, membrane-bound vesicles in diameter of 30-150 nm that are released by almost all cell types and that can carry membrane
and cellular proteins, as well as genetic materials that are representative of the cell of origin. Profiling various bio-molecules
in exosomes may serve as useful biomarkers for a wide variety of diseases. Beijing GenExosome’s research kits are designed
to be used by researchers for biomarker discovery and clinical diagnostic development, and the advancement of targeted therapies.
Currently, research kits and service are available to isolate exosomes or extract exosomal RNA/protein from serum/plasma, urine
and saliva samples. Beijing GenExosome is seeking to decode proteomic and genomic alterations underlying a wide-range of pathologies,
thus allowing for the introduction of novel non-invasive “liquid biopsies”. Its mission is focused toward diagnostic
advancements in the fields of oncology, infectious diseases and fibrotic diseases, and discovery of disease-specific exosomes
to provide disease origin insight necessary to enable personalized clinical management.
On
July 18, 2018, the Company formed a wholly owned subsidiary, Avactis Biosciences Inc., a Nevada corporation, which will be focused
on accelerating commercial activities related to cellular therapies, including regenerative medicine with stem/progenitor cells
as well as cellular immunotherapy including CAR-T, CAR-NK, TCR-T and others. The subsidiary is designed to integrate and optimize
our global scientific and clinical resources to further advance the use of cellular therapies to treat certain cancers. There
was no activity for the subsidiary since its incorporation through March 31, 2019
.
Details
of the Company’s subsidiaries which are included in these consolidated financial statements as of March 31, 2019 are as
follows:
Name of Subsidiaries
|
|
Place and date of Incorporation
|
|
Percentage of Ownership
|
|
Principal Activities
|
Avalon Healthcare System, Inc.
(“AHS”)
|
|
Delaware
May 18, 2015
|
|
100% held by AVCO
|
|
Provides medical related consulting services and developing Avalon Cell and Avalon Rehab in United States of America (“USA”)
|
|
|
|
|
|
|
|
Avalon (BVI) Ltd.
(“Avalon BVI”)
|
|
British Virgin Island
January 23, 2017
|
|
100% held by AVCO
|
|
Dormant,
is in process of being dissolved
|
|
|
|
|
|
|
|
Avalon RT 9 Properties LLC
(“Avalon RT 9”)
|
|
New Jersey
February 7, 2017
|
|
100% held by AVCO
|
|
Owns and operates an income-producing real property and holds and manages the corporate headquarters
|
|
|
|
|
|
|
|
Avalon (Shanghai) Healthcare Technology Co., Ltd.
(“Avalon Shanghai”)
|
|
PRC
April 29, 2016
|
|
100% held by AHS
|
|
Provides medical related consulting services and developing Avalon Cell and Avalon Rehab in China
|
|
|
|
|
|
|
|
GenExosome Technologies Inc.
(“GenExosome”)
|
|
Nevada
July 31, 2017
|
|
60% held by AVCO
|
|
Develops proprietary diagnostic and therapeutic products leveraging exosome technology and markets and distributes proprietary Exosome Isolation Systems in USA
|
|
|
|
|
|
|
|
Beijing Jieteng (GenExosome) Biotech Co., Ltd.
(“Beijing GenExosome”)
|
|
PRC
August 7, 2015
|
|
100% held by GenExosome
|
|
Provides development services for hospitals and other customers and sells developed items to hospitals and other customers in China
|
|
|
|
|
|
|
|
Avactis Biosciences Inc.
(“Avactis”)
|
|
Nevada
July 18, 2018
|
|
100% held by AVCO
|
|
Integrate and optimize global scientific and clinical resources to further advance cellular therapies, including regenerative medicine with stem/progenitor cells as well as cellular immunotherapy including CAR-T, CAR-NK, TCR-T and others to treat certain cancers
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
2 –
BASIS OF PRESENTATION
These
interim condensed consolidated financial statements
of the Company and its subsidiaries are unaudited. In the opinion of management, all adjustments (consisting of normal recurring
accruals) and disclosures necessary for a fair presentation of these interim condensed consolidated financial statements have
been included. The results reported in the unaudited condensed consolidated financial statements for any interim periods are not
necessarily indicative of the results that may be reported for the entire year. The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission
and do not include all information and footnotes necessary for a complete presentation of financial statements in conformity with
accounting principles generally accepted in the United States (“U.S. GAAP”). The Company’s unaudited condensed
consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation
.
Certain
information and footnote disclosures normally
included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.
These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated
financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December
31, 2018 filed with the Securities and Exchange Commission on March 26, 2019
.
NOTE
3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use
of Estimates
The
preparation of the unaudited condensed consolidated financial statements in conformity with generally accepted accounting principles
in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates
during the three months ended March 31, 2019 and 2018 include the allowance for doubtful accounts, reserve for obsolete inventory,
the useful life of property and equipment and investment in real estate and intangible assets, assumptions used in assessing impairment
of long-term assets, valuation of deferred tax assets and the associated valuation allowances, and valuation of stock-based compensation.
Fair
Value of Financial Instruments and Fair Value Measurements
The
Company adopted the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies
the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify
the inputs used in measuring fair value as follows:
|
●
|
Level
1-Inputs are unadjusted quoted prices in active
markets for identical assets or liabilities available at the measurement date
.
|
|
●
|
Level
2-Inputs are unadjusted quoted prices for similar
assets and liabilities in active markets, quoted prices for identical or similar assets
and liabilities in markets that are not active, inputs other than quoted prices that
are observable, and inputs derived from or corroborated by observable market data
.
|
|
●
|
Level
3-Inputs are unobservable inputs which reflect
the reporting entity’s own assumptions on what assumptions the market participants
would use in pricing the asset or liability based on the best available information
.
|
The
carrying amounts reported in the unaudited condensed consolidated balance sheets for cash, accounts receivable, tenants receivable,
security deposit, inventory, prepaid expenses and other current assets, accounts payable, accrued liabilities and other payables,
accrued liabilities and other payables – related parties, deferred rental income, loan payable, interest payable, interest
payable – related party, Value Added Tax (“VAT”) and other taxes payable, tenants’ security deposit, and
due to related party, approximate their fair market value based on the short-term maturity of these instruments.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair
Value of Financial Instruments and Fair Value Measurements (continued)
At
March 31, 2019 and December 31, 2018, intangible assets were measured at fair value on a nonrecurring basis as shown in the following
tables.
|
|
Quoted Price in Active Markets for Identical Assets (Level 1)
|
|
|
Significant Other Observable Inputs (Level 2)
|
|
|
Significant Unobservable Inputs
(Level 3)
|
|
|
Balance at
March 31, 2019
|
|
|
Impairment
Loss
|
|
Patents and other technologies
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,173,796
|
|
|
$
|
1,173,796
|
|
|
$
|
-
|
|
|
|
Quoted Price in Active Markets for Identical Assets (Level 1)
|
|
|
Significant Other Observable Inputs (Level 2)
|
|
|
Significant Unobservable Inputs
(Level 3)
|
|
|
Balance at December 31,
2018
|
|
|
Impairment
Loss
|
|
Patents and other technologies
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,255,689
|
|
|
$
|
1,255,689
|
|
|
$
|
-
|
|
ASC
825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities
at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable,
unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that
instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value
option to any outstanding instruments.
Cash
Cash
consists of cash on hand and cash in banks. The Company maintains cash with various financial institutions in the PRC and United
States. At March 31, 2019 and December 31, 2018, cash balances in PRC are $814,166 and $1,216,485, respectively, are uninsured.
At March 31, 2019 and December 31, 2018, cash balances in United States are $955,125 and $1,035,802, respectively. The Company
has not experienced any losses in bank accounts and believes it is not exposed to any risks on its cash in bank accounts.
Concentrations
of Credit Risk
Currently,
a portion of the Company’s operations are carried out in PRC. Accordingly, the Company’s business, financial condition
and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state
of the PRC’s economy. The Company’s operations in PRC are subject to specific considerations and significant risks
not typically associated with companies in North America. The Company’s results may be adversely affected by changes in
governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad,
and rates and methods of taxation, among other things.
Financial
instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, trade accounts
receivable and tenants receivable. A portion of the Company’s cash is maintained with state-owned banks within the PRC,
and none of these deposits are covered by insurance. The Company has not experienced any losses in such accounts and believes
it is not exposed to any risks on its cash in bank accounts. A portion of the Company’s sales are credit sales which is
to the customer whose ability to pay is dependent upon the industry economics prevailing in these areas; however, concentrations
of credit risk with respect to trade accounts receivable and tenants receivable is limited due to generally short payment terms.
The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentrations
of Credit Risk (continued)
At
March 31, 2019 and December 31, 2018, the Company’s cash balances by geographic area were as follows:
Country:
|
|
March 31, 2019
|
|
|
December 31, 2018
|
|
United States
|
|
$
|
955,125
|
|
|
|
54.0
|
%
|
|
$
|
1,035,802
|
|
|
|
46.0
|
%
|
China
|
|
|
814,166
|
|
|
|
46.0
|
%
|
|
|
1,216,485
|
|
|
|
54.0
|
%
|
Total cash
|
|
$
|
1,769,291
|
|
|
|
100.0
|
%
|
|
$
|
2,252,287
|
|
|
|
100.0
|
%
|
Accounts
Receivable and Allowance for Doubtful Accounts
Accounts
receivable are presented net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for
estimated losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when
there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances,
the Company considers many factors, including the age of the balance, a customer’s historical payment history, its current
credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection.
Management
believes that the accounts receivable are fully collectable. Therefore, no allowance for doubtful accounts is deemed to be required
on its accounts receivable at March 31, 2019 and December 31, 2018. The Company historically has not experienced uncollectible
accounts from customers granted with credit sales.
Tenants
Receivable and Allowance for Doubtful Accounts
Tenants
receivable are presented net of an allowance for doubtful accounts. Tenants receivable balance consist of base rents, tenant reimbursements
and receivables arising from straight-lining of rents primarily represent amounts accrued and unpaid from tenants in accordance
with the terms of the respective leases, subject to the Company’s revenue recognition policy. An allowance for the uncollectible
portion of tenant receivable is determined based upon an analysis of the tenant’s payment history, the financial condition
of the tenant, business conditions in the industry in which the tenant operates and economic conditions in Freehold, New Jersey
in which the property is located.
Management
believes that the tenants receivable are fully collectable. Therefore, no allowance for doubtful accounts is deemed to be required
on its tenants receivable at March 31, 2019 and December 31, 2018.
Inventory
Inventory
is stated at the lower of cost and net realizable value. Cost is determined using the first-in, first-out (FIFO) method. A reserve
is established when management determines that certain inventory may not be saleable. If inventory costs exceed expected market
value due to obsolescence or quantities in excess of expected demand, the Company will record a write down in inventory for the
difference between the cost and the lower of cost or estimated net realizable value. The reserve and write down are recorded based
on estimates. The Company did not record any inventory reserve and or write down at March 31, 2019 and December 31, 2018.
Property
and Equipment
Property
and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets.
The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets
are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses
are included in income in the period of disposition. The Company examines the possibility of decreases in the value of fixed assets
when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Investment
in Real Estate and Depreciation
Investment
in real estate is carried at cost less accumulated depreciation and consists of building and improvement. The Company depreciates
real estate building and improvement on a straight-line basis over estimated useful life. Expenditures for ordinary repair and
maintenance costs are charged to expense as incurred. Expenditure for improvements, renovations, and replacements of real estate
asset is capitalized and depreciated over its estimated useful life if the expenditure qualifies as betterment. Real estate depreciation
expense was $39,961 and $31,805 for the three months ended March 31, 2019 and 2018, respectively.
Intangible
Assets
Intangible
assets consist of patents and other technologies. Patents and other technologies are being amortized on a straight-line method
over the estimated useful life of 5 years.
Investment
in Unconsolidated Company – Epicon Biotech Co., Ltd.
The
Company uses the equity method of accounting for its investment in, and earning or loss of, company that it does not control but
over which it does exert significant influence. The Company considers whether the fair value of its equity method investment has
declined below its carrying value whenever adverse events or changes in circumstances indicate that recorded value may not be
recoverable. If the Company considers any decline to be other than temporary (based on various factors, including historical financial
results and the overall health of the investee), then a write-down would be recorded to estimated fair value. See Note 9 for discussion
of equity method investment.
Impairment
of Long-lived Assets
In
accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an
impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount
of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did
not record any impairment charge for the three months ended March 31, 2019 and 2018 as there was no impairment indicator noted
as of the filing date of this report.
Deferred
Rental Income
Deferred
rental income represents rental income collected but not earned as of the reporting date. The Company defers the revenue related
to lease payments received from tenants in advance of their due dates. As of March 31, 2019 and December 31, 2018, deferred rental
income totaled $3,012 and $14,136, respectively.
Value
Added Tax
Avalon
Shanghai and Beijing GenExosome are subject to a value added tax (“VAT”) for providing medical related consulting
services and performing development services and sales of developed products. The amount of VAT liability is determined by applying
the applicable tax rates to the invoiced amount of medical related consulting services provided and the invoiced amount of development
services provided and sales of developed products (output VAT) less VAT paid on purchases made with the relevant supporting invoices
(input VAT). The Company reports revenue net of PRC’s value added tax for all the periods presented in the consolidated
statements of operations.
Revenue
Recognition
Effective
January 1, 2018, the Company began recognizing revenue under Accounting Standards Codification (“ASC”) Topic 606,
Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective transition method. The impact
of adopting the new revenue standard was not material to the Company’s consolidated financial statements and there was no
adjustment to beginning accumulated deficit on January 1, 2018. The core principle of this new revenue standard is that a company
should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve
that core principle:
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue
Recognition (continued)
|
●
|
Step
1: Identify the contract with the customer
|
|
●
|
Step
2: Identify the performance obligations in the contract
|
|
●
|
Step
3: Determine the transaction price
|
|
●
|
Step
4: Allocate the transaction price to the performance obligations in the contract
|
|
●
|
Step
5: Recognize revenue when the company satisfies a performance obligation
|
In
order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services
in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition
of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:
|
●
|
The
customer can benefit from the good or service either on its own or together with other
resources that are readily available to the customer (i.e., the good or service is capable
of being distinct).
|
|
●
|
The
entity’s promise to transfer the good or service to the customer is separately
identifiable from other promises in the contract (i.e., the promise to transfer the good
or service is distinct within the context of the contract).
|
If
a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods
or services is identified that is distinct.
The
transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised
goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration
promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration is included
in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue
recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
The
transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price
allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over
time as appropriate.
Types
of revenue:
|
●
|
Rental
revenue from leasing commercial property under operating leases with terms of generally
three years or more.
|
|
●
|
Service
fees under consulting agreements with related parties to provide medical related consulting
services to its clients. The Company is paid for its services by its clients pursuant
to the terms of the written consulting agreements. Each contract calls for a fixed payment.
|
|
●
|
Service
fees under agreements to perform development services for hospitals and other customers.
The Company does not perform contracts that are contingent upon successful results.
|
|
●
|
Sales
of developed products to hospitals and other customers.
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue
Recognition (continued)
Revenue
recognition criteria:
|
●
|
The
Company recognizes rental revenue from its commercial leases on a straight-line basis
over the life of the lease including rent holidays, if any. Straight-line rent receivable
consists of the difference between the tenants’ rents calculated on a straight-line
basis from the date of lease commencement over the remaining terms of the related leases
and the tenants’ actual rents due under the lease agreements and is included in
tenants receivable in the accompanying consolidated balance sheets. Revenues associated
with operating expense recoveries are recognized in the period in which the expenses
are incurred.
|
|
●
|
The
Company recognizes revenue by providing medical related consulting services under written
service contracts with its customers. Revenue related to its service offerings is recognized
as the services are performed.
|
|
●
|
Revenue
from development services performed under written contracts is recognized as services
are provided.
|
|
●
|
Revenue
from sales of developed items to hospitals and other customers is recognized when items
are shipped to customers and titles are transferred.
|
The
Company does not offer promotional payments, customer coupons, rebates or other cash redemption offers to its customers.
Office
Lease
When
a lease contains “rent holidays”,
the Company records rental expense on a straight-line basis over the term of the lease and the difference between the average
rental amount charged to expense and the amount payable under the lease is recorded as prepaid expenses in the consolidated balance
sheets. The Company begins recording rent expense on the lease possession date
.
Real
Property Operating Expenses
Real
property operating expenses consist of property management fees, property insurance, real estate taxes, depreciation, repairs
and maintenance fees, utilities and other expenses related to the Company’s rental properties.
Medical
Related Consulting Services Costs
Costs
of medical related consulting services includes the cost of internal labor and related benefits, travel expenses related to consulting
services, subcontractor costs, other related consulting costs, and other overhead costs. Subcontractor costs were costs related
to medical related consulting services incurred by our subcontractor, such as medical professional’s compensation and travel
costs.
Development
Services and Sales of Developed Products Costs
Costs
of development services and sales of developed items includes inventory costs, materials and supplies costs, depreciation, internal
labor and related benefits, other overhead costs and shipping and handling costs incurred.
Shipping
and Handling Costs
Shipping
and handling costs are expensed as incurred and are included in cost of sales. For the three months ended March 31, 2019 and 2018,
shipping and handling costs amounted to $0 and $25, respectively.
Research
and Development
Expenditures
for research and product development costs are expensed as incurred. The Company incurred research and development expense in
the amount of $152,460 related to the development of proprietary diagnostic and therapeutic products leveraging exosome technology
and optimization of Exosome Isolation Systems, and the develop of standardization of clinical-grade exosome bio-production and
study of tissue-specific exosomes from various human cell types in the three months ended March 31, 2019. The Company did not
incur any research and development costs during the three months ended March 31, 2018.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Advertising
Costs
All
costs related to advertising are expensed as incurred. For the three months ended March 31, 2019, advertising costs amounted to
$244,600. We did not incur any advertising expense during the three months ended March 31, 2018.
Stock-based
Compensation
Stock-based
compensation is accounted for based on the requirements of the Share-Based Payment topic of Accounting Standards Codification
(“ASC”) 718 which requires recognition in the financial statements of the cost of employee and director services received
in exchange for an award of equity instruments over the period the employee or director is required to perform the services in
exchange for the award. The Accounting Standards Codification also requires measurement of the cost of employee and director services
received in exchange for an award based on the grant-date fair value of the award.
Pursuant
to ASC Topic 505-50, for share-based payments to consultants and other third-parties, compensation expense is recognized over
the period of services or the vesting period, whichever is applicable. Until the measurement date is reached, the total amount
of compensation expense remains uncertain. The Company’s compensation expense for unvested options to non-employees is re-measured
at each balance sheet date and is being amortized over the vesting period of the options.
Income
Taxes
The
Company accounts for income taxes using the asset/liability method prescribed by ASC 740, “Income Taxes.” Under this
method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases
of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to
reverse. The Company records a valuation allowance to offset deferred tax assets if, based on the weight of available evidence,
it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred
taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.
The
Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”.
Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not
the position will be sustained upon examination by the tax authorities. As of March 31, 2019 and December 31, 2018, the Company
had no significant uncertain tax positions that qualify for either recognition or disclosure in the financial statements. Tax
year that remains subject to examination is the years ended December 31, 2019, 2018 and 2017. The Company recognizes interest
and penalties related to significant uncertain income tax positions in other expense. However, no such interest and penalties
were recorded as of March 31, 2019 and December 31, 2018.
In
December 2017, the United States Government passed new tax legislation that, among other provisions, lowered the corporate tax
rate from 35% to 21%. In addition to applying the new lower corporate tax rate in 2018 and thereafter to any taxable income the
Company may have, the legislation affects the way the Company can use and carryforward net operating losses previously accumulated
and results in a revaluation of deferred tax assets and liabilities recorded on the balance sheet. Given that current deferred
tax assets are offset by a full valuation allowance, these changes will have no net impact on the balance sheet. However, when
the Company becomes profitable, the Company will receive a reduced benefit from such deferred tax assets.
Foreign
Currency Translation
The
reporting currency of the Company is the U.S. dollar. The functional currency of the parent company, AHS, Avalon RT 9, GenExosome,
and Avactis, is the U.S. dollar and the functional currency of Avalon Shanghai and Beijing GenExosome, is the Chinese Renminbi
(“RMB”). For the subsidiaries whose functional currency is the RMB, result of operations and cash flows are translated
at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of
the period, and equity is translated at historical exchange rates. As a result, amounts relating to assets and liabilities reported
on the statements of cash flows may not necessarily agree with the changes in the corresponding balances on the balance sheets.
Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are
included in determining comprehensive income/loss. Transactions denominated in foreign currencies are translated into the functional
currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies are
translated into the functional currency at the exchange rates prevailing at the balance sheet date with any transaction gains
and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency
are included in the results of operations as incurred.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign
Currency Translation (continued)
All
of the Company’s revenue transactions are transacted in the functional currency of the operating subsidiaries. The Company
does not enter into any material transaction in foreign currencies. Transaction gains or losses have not had, and are not expected
to have, a material effect on the results of operations of the Company.
Asset
and liability accounts at March 31, 2019 and December 31, 2018 were translated at 6.7121 RMB to $1.00 and at 6.8785 RMB to $1.00,
respectively, which were the exchange rates on the balance sheet dates. Equity accounts were stated at their historical rates.
The average translation rates applied to the statements of operations for the three months ended March 31, 2019 and 2018 were
6.7481 RMB and 6.3577 RMB to $1.00, respectively. Cash flows from the Company’s operations are calculated based upon the
local currencies using the average translation rate.
Comprehensive
Loss
Comprehensive
loss is comprised of net loss and all changes to the statements of equity, except those due to investments by stockholders, changes
in paid-in capital and distributions to stockholders. For the Company, comprehensive loss for the three months ended March 31,
2019 and 2018 consisted of net loss and unrealized gain from foreign currency translation adjustment.
Per
Share Data
ASC
Topic 260 “Earnings per Share,” requires presentation of both basic and diluted earnings per share (“EPS”)
with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted
EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity.
Basic
net loss per share are computed by dividing net loss available to common stockholders by the weighted average number of shares
of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average
number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.
Potentially dilutive common shares consist of the common shares issuable upon the exercise of common stock options and warrants
(using the treasury stock method). Common stock equivalents are not included in the calculation of diluted net loss per share
if their effect would be anti-dilutive. In a period in which the Company has a net loss, all potentially dilutive securities are
excluded from the computation of diluted shares outstanding as they would have had an anti-dilutive impact.
The
following table presents a reconciliation of basic and diluted net loss per share:
|
|
Three Months Ended
March 31, 2019
|
|
|
Three Months Ended
March 31, 2018
|
|
Net loss available to Avalon GloboCare Corp. common shareholders for basic and diluted net loss per share of common stock
|
|
$
|
(4,405,816
|
)
|
|
$
|
(1,481,579
|
)
|
Weighted average common stock outstanding - basic and diluted
|
|
|
73,690,461
|
|
|
|
69,781,733
|
|
Net loss per common share attributable to Avalon GloboCare Corp. common shareholders - basic and diluted
|
|
$
|
(0.06
|
)
|
|
$
|
(0.02
|
)
|
The
following table summarizes the securities that were excluded from the diluted per share calculation because the effect of including
these potential shares was antidilutive:
|
|
Three Months Ended
March 31, 2019
|
|
|
Three Months Ended
March 31, 2018
|
|
Stock options
|
|
|
5,040,000
|
|
|
|
2,410,000
|
|
Warrants
|
|
|
578,891
|
|
|
|
-
|
|
Potentially dilutive securities
|
|
|
5,618,891
|
|
|
|
2,410,000
|
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Business
Acquisition
The
Company accounts for business acquisition in accordance with ASC No. 805, Business Combinations. The assets acquired and liabilities
assumed from the acquired business are recorded at fair value, with the residual of the purchase price recorded as goodwill. The
result of operations of the acquired business is included in the Company’s operating result from the date of acquisition.
Non-controlling
Interest
As
of March 31, 2019, Dr. Yu Zhou, director and Co-Chief Executive Officer of GenExosome, who owned 40% of the equity interests of
GenExosome, which is not under the Company’s control.
Segment
Reporting
The
Company uses “the management approach” in determining reportable operating segments. The management approach considers
the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions
and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating
decision maker is the chief executive officer (“CEO”) and president of the Company, who reviews operating results
to make decisions about allocating resources and assessing performance for the entire Company. The Company has determined that
it has three reportable business segments: real property operating segment, medical related consulting services segment, and development
services and sales of developed products segment. These reportable segments offer different types of services and products, have
different types of revenue, and are managed separately as each requires different operating strategies and management expertise
.
Related
Parties
Parties
are considered to be related to the Company if
the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control
with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families
of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls
or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties
might be prevented from fully pursuing its own separate interests. The Company discloses all significant related party transactions
.
Reclassification
Certain
prior period amounts have been reclassified to conform to the current period presentation. These reclassifications have no effect
on the previously reported financial position, results of operations and cash flows.
Reverse
Stock Split
The
Company effected a one-for-four reverse stock
split of its common stock on October 18, 2016. All share and per share information has been retroactively adjusted to reflect
this reverse stock split
.
Fiscal
Year End
The
Company has adopted a fiscal year end of December 31st.
Recent
Accounting Pronouncements
In
February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2016-02, “Leases”, (“ASU 842”) which amended the existing accounting standards for lease accounting, including
requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 842 is
effective for public companies during interim and annual reporting periods beginning after December 15, 2018, with early adoption
permitted. In July 2018, the FASB issued ASU No. 2018-11, which permits entities to record the right-of-use asset and lease liability
on the date of adoption, with no requirement to recast comparative periods.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent
Accounting Pronouncements (continued)
The
Company adopted ASU 842 effective January 1, 2019 using the optional transition method of recognizing a cumulative-effect adjustment
to the opening balance of accumulated deficit on January 1, 2019. Therefore, comparative financial information was not adjusted
and continues to be reported under the prior lease accounting guidance in ASU 840. The Company elected the transition relief package
of practical expedients, and as a result, the Company did not assess 1) whether existing or expired contracts contain embedded
leases, 2) lease classification for any existing or expired leases, and 3) whether lease origination costs qualified as initial
direct costs. The Company elected the short-term lease practical expedient by establishing an accounting policy to exclude leases
with a term of 12 months or less, as well as the land easement practical expedient for maintaining its current accounting policy
for existing or expired land easements.
In
August 2018, the FASB issued ASU No. 2018-13,
Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure
Requirements for Fair Value Measurement
. The objective of ASU 2018-13 is to improve the effectiveness of disclosures in the
notes to the financial statements by removing, modifying, and adding certain fair value disclosure requirements to facilitate
clear communication of the information required by generally accepted accounting principles. The amendments are effective for
all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 with early adoption
permitted upon issuance of this ASU. The Company is currently evaluating the potential impact of this new guidance.
Other
accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected
to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements
that are not anticipated to have an impact on or are unrelated to its consolidated financial condition, results of operations,
cash flows or disclosures.
NOTE
4 –
INVENTORY
At
March 31, 2019 and December 31, 2018, inventory consisted of the following:
|
|
March 31, 2019
|
|
|
December 31, 2018
|
|
Raw material
|
|
$
|
17,079
|
|
|
$
|
12,953
|
|
Finished goods
|
|
|
42
|
|
|
|
41
|
|
|
|
|
17,121
|
|
|
|
12,994
|
|
Less: reserve for obsolete inventory
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
17,121
|
|
|
$
|
12,994
|
|
NOTE
5 –
PREPAID EXPENSES AND OTHER CURRENT ASSETS
At
March 31, 2019 and December 31, 2018, prepaid expenses and other current assets consisted of the following:
|
|
March 31, 2019
|
|
|
December 31, 2018
|
|
Prepaid professional fees
|
|
$
|
397,125
|
|
|
$
|
607,833
|
|
Prepaid research and development service fees
|
|
|
400,000
|
|
|
|
300,000
|
|
Prepaid insurance expense
|
|
|
37,336
|
|
|
|
72,352
|
|
Prepaid listing fee
|
|
|
56,250
|
|
|
|
-
|
|
Prepaid dues and subscriptions
|
|
|
18,750
|
|
|
|
70,000
|
|
Other
|
|
|
40,212
|
|
|
|
96,290
|
|
|
|
$
|
949,673
|
|
|
$
|
1,146,475
|
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
6 –
PROPERTY AND EQUIPMENT
At
March 31, 2019 and December 31, 2018, property and equipment consisted of the following:
|
|
Useful life
|
|
March 31, 2019
|
|
|
December 31, 2018
|
|
Laboratory equipment
|
|
5 Years
|
|
$
|
424,368
|
|
|
$
|
258,345
|
|
Office equipment and furniture
|
|
3 – 10 Years
|
|
|
37,089
|
|
|
|
35,627
|
|
Leasehold improvement
|
|
Shorter of useful life or lease term
|
|
|
-
|
|
|
|
24,446
|
|
|
|
|
|
|
461,457
|
|
|
|
318,418
|
|
Less: accumulated depreciation
|
|
|
|
|
(62,760
|
)
|
|
|
(68,863
|
)
|
|
|
|
|
$
|
398,697
|
|
|
$
|
249,555
|
|
For
the three months ended March 31, 2019 and 2018, depreciation expense of property and equipment amounted to $17,277 and $9,681,
respectively, of which, $819 and $819 was included in real property operating expenses, $13,175 and $3,768 was included in costs
of development services and sales of developed products, and $3,283 and $5,094 was included in other operating expenses, respectively.
NOTE
7 –
INVESTMENT IN REAL ESTATE
At
March 31, 2019 and December 31, 2018, investment in real estate consisted of the following:
|
|
Useful life
|
|
March 31, 2019
|
|
|
December 31, 2018
|
|
Commercial real property building
|
|
39 Years
|
|
$
|
7,708,571
|
|
|
$
|
7,708,571
|
|
Improvement
|
|
12 Years
|
|
|
402,844
|
|
|
|
391,506
|
|
|
|
|
|
|
8,111,415
|
|
|
|
8,100,077
|
|
Less: accumulated depreciation
|
|
|
|
|
(260,153
|
)
|
|
|
(220,192
|
)
|
|
|
|
|
$
|
7,851,262
|
|
|
$
|
7,879,885
|
|
For
the three months ended March 31, 2019 and 2018, depreciation expense of this commercial real property amounted to $39,961 and
$31,805, which was included in real property operating expenses.
NOTE
8 –
INTANGIBLE ASSETS
At
March 31, 2019 and December 31, 2018, intangible assets consisted of the following:
|
|
Useful Life
|
|
March 31, 2019
|
|
|
December 31, 2018
|
|
Patents and other technologies
|
|
5 Years
|
|
$
|
1,583,260
|
|
|
$
|
1,583,260
|
|
Less: accumulated amortization
|
|
|
|
|
(409,464
|
)
|
|
|
(327,571
|
)
|
|
|
|
|
$
|
1,173,796
|
|
|
$
|
1,255,689
|
|
For
the three months ended March 31, 2019 and 2018, amortization expense amounted to $81,893.
Amortization
of intangible assets attributable to future periods is as follows:
Year ending March 31:
|
|
Amortization amount
|
|
2020
|
|
$
|
327,571
|
|
2021
|
|
|
327,571
|
|
2022
|
|
|
327,571
|
|
2023
|
|
|
191,083
|
|
|
|
$
|
1,173,796
|
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
9 –
EQUITY METHOD INVESTMENT
As
of March 31, 2019 and December 31, 2018, equity method investment amounted to $381,899 and $385,162, respectively. The investment
represents the Company’s subsidiary, Avalon Shanghai’s interest in Epicon Biotech Co., Ltd. (“Epicon”).
Epicon was incorporated on August 14, 2018 in PRC. Avalon Shanghai and the other unrelated company, Jiangsu Unicorn Biological
Technology Co., Ltd. (“Unicorn”), accounted for 40% and 60% of the total ownership, respectively. Epicon is focused
on cell preparation, third party testing, biological sample repository for commercial and scientific research purposes and the
clinical transformation of scientific achievements.
The
Company treats the equity investment in the consolidated financial statements under the equity method. Under the equity method,
the investment is initially recorded at cost, adjusted for any excess of the Company’s share of the incorporated-date fair
values of the investee’s identifiable net assets over the cost of the investment (if any). Thereafter, the investment is
adjusted for the post incorporation change in the Company’s share of the investee’s net assets and any impairment
loss relating to the investment. For the three months ended March 31, 2019, the Company’s share of Epicon’s net loss
was $12,743, which was included in loss from equity-method investment in the accompanying consolidated statements of operations
and comprehensive loss.
The
tables below present the summarized financial information, as provided to the Company by the investee, for the unconsolidated
company:
|
|
March 31, 2019
|
|
|
December 31, 2018
|
|
Current assets
|
|
$
|
227,165
|
|
|
$
|
301,714
|
|
Noncurrent assets
|
|
|
64,572
|
|
|
|
7,015
|
|
Current liabilities
|
|
|
7,420
|
|
|
|
38
|
|
Noncurrent liabilities
|
|
|
-
|
|
|
|
-
|
|
Equity
|
|
|
284,317
|
|
|
|
308,691
|
|
|
|
For the Three Months Ended March 31, 2019
|
|
Net revenue
|
|
$
|
-
|
|
Gross profit
|
|
|
-
|
|
Loss from operation
|
|
|
31,856
|
|
Net loss
|
|
|
31,856
|
|
NOTE
10 –
ACCRUED LIABILITIES AND OTHER PAYABLES
At
March 31, 2019 and December 31, 2018, accrued liabilities and other payables consisted of the following:
|
|
March 31, 2019
|
|
|
December 31, 2018
|
|
Accrued payroll liability
|
|
$
|
635,065
|
|
|
$
|
529,472
|
|
Accrued professional fees
|
|
|
431,947
|
|
|
|
166,077
|
|
Lab equipment purchase payable
|
|
|
84,348
|
|
|
|
-
|
|
Insurance payable
|
|
|
22,690
|
|
|
|
45,088
|
|
Accrued dues and subscriptions
|
|
|
50,000
|
|
|
|
42,500
|
|
Other
|
|
|
67,028
|
|
|
|
76,213
|
|
|
|
$
|
1,291,078
|
|
|
$
|
859,350
|
|
NOTE
11 –
LOAN PAYABLE
On
April 19, 2017, the Company entered into a loan
agreement, providing for the issuance of a loan in the principal amount of $2,100,000. The term of the loan is one year. On May
3, 2018, the Company signed an extension agreement with the maturity date of March 31, 2019. On August 3, 2018, the Company signed
an extension agreement for the loan with the maturity date of March 31, 2020. The annual interest rate for the loan is 10%. The
loan is guaranteed by the Company’s Chairman, Mr. Wenzhao Lu. The Company repaid principal of $600,000, $500,000 and $1,000,000
in November 2017, April 2018 and April 2019, respectively
.
As
of March 31, 2019, the outstanding principal
balance of the loan and related accrued and unpaid interest for the loan was $1,000,000 and $100,000, respectively
.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
12 –
VAT AND OTHER TAXES PAYABLE
At
March 31, 2019 and December 31, 2018, VAT and other taxes payable consisted of the following:
|
|
March 31, 2019
|
|
|
December 31, 2018
|
|
VAT payable
|
|
$
|
-
|
|
|
$
|
1,108
|
|
Other taxes payable
|
|
|
25,638
|
|
|
|
3,560
|
|
|
|
$
|
25,638
|
|
|
$
|
4,668
|
|
NOTE
13 –
RELATED PARTY TRANSACTIONS
Medical
Related Consulting Services Revenue from Related Party
During
the three months ended March 31, 2019 and 2018, medical related consulting services revenue from related parties was as follows:
|
|
Three Months Ended
March 31, 2019
|
|
|
Three Months Ended
March 31,
2018
|
|
Medical related consulting services provided to:
|
|
|
|
|
|
|
Beijing Daopei (1)
|
|
$
|
14,260
|
|
|
$
|
-
|
|
|
|
$
|
14,260
|
|
|
$
|
-
|
|
(1)
|
Beijing
Daopei is a subsidiary of an entity whose chairman is Wenzhao Lu, the largest shareholder
of the Company.
|
Prepaid
Expenses – Related Parties
As
of March 31, 2019 and December 31, 2018, the Company made prepayment of $0 and $1,897, respectively, to David Jin, its shareholder,
chief executive officer, president and board member, for business travel reimbursement, which have been included in prepaid expenses
– related parties on the accompanying consolidated balance sheets.
As
of March 31, 2019 and December 31, 2018, the Company made prepayment of $0 and $32,293, respectively, to Meng Li, its shareholder
and chief operating officer, for business travel reimbursement, which have been included in prepaid expenses – related parties
on the accompanying consolidated balance sheets.
Advance
from Customer – Related Party
At
March 31, 2019 and December 31, 2018, advance from customer – related party amounted to $0 and $14,829, respectively, which
represents prepayment received from our related party, Beijing Daopei, for medical related consulting services. When the services
are performed, the amount recorded as advance from customer – related party is recognized as revenue.
Accrued
Liabilities and Other Payables – Related Parties
At
March 31, 2019 and December 31, 2018, the Company owed David Jin, its shareholder, chief executive officer, president and board
member, of $14,424 and $0, respectively, for travel and other miscellaneous reimbursements, which have been included in accrued
liabilities and other payables – related parties on the accompanying consolidated balance sheets.
At
March 31, 2019 and December 31, 2018, the Company owed Yu Zhou, co-chief executive officer of GenExosome, of $5,319 and $0, respectively,
for travel and other miscellaneous reimbursements, which have been included in accrued liabilities and other payables –
related parties on the accompanying consolidated balance sheets.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
13 –
RELATED PARTY TRANSACTIONS (continued)
Accrued
Liabilities and Other Payables – Related Parties (continued)
At
March 31, 2019 and December 31, 2018, the Company owed Luisa Ingargiola, its chief financial officer, of $7,253 and $0, respectively,
for travel and other miscellaneous reimbursements, which have been included in accrued liabilities and other payables –
related parties on the accompanying consolidated balance sheets.
At
March 31, 2019 and December 31, 2018, the Company owed Epicon of $7,382 and $0, respectively, for expenses paid on behalf of the
Company, which have been included in accrued liabilities and other payables – related parties on the accompanying consolidated
balance sheets.
Due
to Related Party
In
connection with the acquisition discussed elsewhere in this report, the Company acquired Beijing GenExosome in cash payment of
$450,000. On October 25, 2017, Dr. Yu Zhou, the former sole shareholder of Beijing GenExosome, was appointed to the board of directors
of GenExosome and served as co-chief executive officer of GenExosome. As of March 31, 2019 and December 31, 2018, the unpaid acquisition
consideration of $100,000, was payable to Dr. Yu Zhou, co-chief executive officer and board member of GenExosome, and reflected
as due to related party on the accompanying consolidated balance sheets.
Real
Property Management Agreement
The
Company pays a company, which is controlled by Wenzhao Lu, the Company’s largest shareholder and chairman of the Board of
Directors, for the management of its commercial real property located in New Jersey. The property management agreement commenced
on May 5, 2017 and expired in March 2019. For the three months ended March 31, 2019 and 2018, the management fee related to the
property management agreement amounted to $23,334 and $16,251, respectively.
Note
Payable – Related Party
On
March 18, 2019, the Company issued Wenzhao Lu, the Company’s largest shareholder and chairman of the Board of Directors,
a Promissory Note in the principal amount of $1,000,000 (“Promissory Note”) in consideration of cash in the amount
of $1,000,000. The Promissory Note accrues interest at the rate of 5% per annum and matures March 19, 2022.
As
of March 31, 2019, the outstanding principal
balance of the note and related accrued and unpaid interest for the note was $1,000,000 and $1,944, respectively
.
Office
Space from Related Party
Beijing
GenExosome uses office space of a related party, free of rent, which is considered immaterial.
NOTE
14 –
EQUITY
Shares
Authorized
The
Company is authorized to issue 10,000,000 shares of preferred stock and 490,000,000 shares of common shares with a par value of
$0.0001 per share.
There
are no shares of its preferred stock issued and outstanding as of March 31, 2019 and December 31, 2018.
There
are 74,340,539 and 73,830,751 shares of its common stock issued as of March 31, 2019 and December 31, 2018, respectively
There
are 73,820,539 and 73,310,751 shares of its common stock outstanding as of March 31, 2019 and December 31, 2018, respectively.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
14 –
EQUITY (continued)
Common
Shares Issued for Warrant Exercise
On
January 9, 2019, the Company issued 350,856 shares of its common stock upon cashless exercise of warrants to purchase 578,891
shares of common stock.
Common
Shares Issued for Option Exercise
On
February 27, 2019, the Company issued 158,932 shares of its common stock upon cashless exercise of options to purchase 200,000
shares of common stock.
Options
The
following table summarizes the shares of the Company’s common stock issuable upon exercise of options outstanding at March
31, 2019:
Options Outstanding
|
|
|
Options Exercisable
|
|
Range of Exercise Price
|
|
|
Number Outstanding at March 31,
2019
|
|
|
Range of Weighted Average Remaining Contractual Life (Years)
|
|
|
Weighted Average Exercise Price
|
|
|
Number Exercisable at March 31, 2019
|
|
|
Weighted Average Exercise
Price
|
|
$
|
0.50
|
|
|
|
2,000,000
|
|
|
|
7.87
|
|
|
$
|
0.50
|
|
|
|
1,444,444
|
|
|
$
|
0.50
|
|
|
1.49
|
|
|
|
60,000
|
|
|
|
3.08
|
|
|
|
1.49
|
|
|
|
60,000
|
|
|
|
1.49
|
|
|
1.00
|
|
|
|
50,000
|
|
|
|
3.59
|
|
|
|
1.00
|
|
|
|
50,000
|
|
|
|
1.00
|
|
|
1.00
|
|
|
|
80,000
|
|
|
|
1.59
|
|
|
|
1.00
|
|
|
|
80,000
|
|
|
|
1.00
|
|
|
2.50
|
|
|
|
110,000
|
|
|
|
3.76
|
|
|
|
2.50
|
|
|
|
110,000
|
|
|
|
2.50
|
|
|
1.00
|
|
|
|
80,000
|
|
|
|
2.08
|
|
|
|
1.00
|
|
|
|
80,000
|
|
|
|
1.00
|
|
|
2.30
|
|
|
|
20,000
|
|
|
|
4.18
|
|
|
|
2.30
|
|
|
|
20,000
|
|
|
|
2.30
|
|
|
2.30
|
|
|
|
20,000
|
|
|
|
4.26
|
|
|
|
2.30
|
|
|
|
20,000
|
|
|
|
2.30
|
|
|
2.80
|
|
|
|
20,000
|
|
|
|
4.33
|
|
|
|
2.80
|
|
|
|
20,000
|
|
|
|
2.80
|
|
|
2.80
|
|
|
|
20,000
|
|
|
|
4.37
|
|
|
|
2.80
|
|
|
|
13,334
|
|
|
|
2.80
|
|
|
1.00
|
|
|
|
180,000
|
|
|
|
2.59
|
|
|
|
1.00
|
|
|
|
90,000
|
|
|
|
1.00
|
|
|
2.75
|
|
|
|
250,000
|
|
|
|
4.76
|
|
|
|
2.75
|
|
|
|
62,500
|
|
|
|
2.75
|
|
|
2.00
|
|
|
|
1,950,000
|
|
|
|
4.76
|
|
|
|
2.00
|
|
|
|
487,500
|
|
|
|
2.00
|
|
$
|
0.50–2.80
|
|
|
|
4,840,000
|
|
|
|
5.80
|
|
|
$
|
1.35
|
|
|
|
2,537,778
|
|
|
$
|
1.07
|
|
Stock
options granted to employee and director
Employee
and director stock option activities for the three months ended March 31, 2019 were as follows:
|
|
Number of Options
|
|
|
Weighted Average Exercise Price
|
|
Outstanding at December 31, 2018
|
|
|
2,280,000
|
|
|
$
|
0.69
|
|
Granted
|
|
|
2,200,000
|
|
|
|
2.09
|
|
Terminated / Exercised
|
|
|
-
|
|
|
|
-
|
|
Outstanding at March 31, 2019
|
|
|
4,480,000
|
|
|
$
|
1.37
|
|
Options exercisable at March 31, 2019
|
|
|
2,274,444
|
|
|
$
|
1.07
|
|
Options expected to vest
|
|
|
2,205,556
|
|
|
$
|
1.69
|
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
14 –
EQUITY (continued)
Options
(continued)
Stock
options granted to employee and director (continued)
The
fair values of options granted to employee and director during the three months ended March 31, 2019 and 2018, respectively, were
estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:
|
|
Three Months Ended
March 31,
2019
|
|
|
Three Months Ended
March 31, 2018
|
|
Dividend rate
|
|
|
0
|
|
|
|
0
|
|
Terms (in years)
|
|
|
5.0
|
|
|
|
5.0
|
|
Volatility
|
|
|
150.61
|
%
|
|
|
185.28
|
%
|
Risk-free interest rate
|
|
|
2.37% - 2.49%
|
|
|
|
2.25
|
%
|
The
aggregate fair value of the options granted to employee and director during the three months ended March 31, 2019 was $5,723,438,
of which, $1,430,860 for the three months ended March 31, 2019 has been reflected as compensation and related benefits on the
accompanying unaudited condensed consolidated statements of operations because the options were fully earned and non-cancellable.
The
aggregate fair value of the options granted to employee and director during the three months ended March 31, 2018 was $289,150,
of which, $72,287 has been reflected as compensation and related benefits on the accompanying unaudited condensed consolidated
statements of operations because the options were fully earned and non-cancellable.
As
of March 31, 2019, the aggregate value of nonvested employee and director options was $4,987,024, which will be amortized as stock-based
compensation expense as the options are vesting, over the remaining 0.83 years.
The
aggregate intrinsic values of the employee and director stock options outstanding and the employee and director stock options
exercisable at March 31, 2019 was $18,042,100 and $9,850,501, respectively.
A
summary of the status of the Company’s nonvested employee and director stock options granted as of March 31, 2019 and changes
during the three months ended March 31, 2019 is presented below:
|
|
Number of Options
|
|
|
Weighted Average Exercise Price
|
|
|
Grant Date Fair Value
|
|
Nonvested at December 31, 2018
|
|
|
722,222
|
|
|
$
|
0.50
|
|
|
$
|
902,779
|
|
Granted
|
|
|
2,200,000
|
|
|
|
2.09
|
|
|
|
5,723,438
|
|
Vested
|
|
|
(716,666
|
)
|
|
|
(1.72
|
)
|
|
|
(1,639,193
|
)
|
Nonvested at March 31, 2019
|
|
|
2,205,556
|
|
|
$
|
1.69
|
|
|
$
|
4,987,024
|
|
Stock
Options Granted to Non-employee
Non-employee
stock option activities for the three months ended March 31, 2019 were as follows:
|
|
Number of Options
|
|
|
Weighted Average Exercise Price
|
|
Outstanding at December 31, 2018
|
|
|
560,000
|
|
|
$
|
1.06
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(200,000
|
)
|
|
|
1.00
|
|
Outstanding at March 31, 2019
|
|
|
360,000
|
|
|
|
1.10
|
|
Options exercisable at March 31, 2019
|
|
|
263,334
|
|
|
$
|
1.09
|
|
Options expected to vest
|
|
|
96,666
|
|
|
$
|
1.12
|
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
14 –
EQUITY (continued)
Options
(continued)
Stock
Options Granted to Non-employee (continued)
The
fair values of these non-employee options vested in three months ended March 31, 2019 and 2018, and nonvested non-employee options
as of March 31, 2019 and 2018, respectively, were estimated using the Black-Scholes option-pricing model with the following assumptions:
|
|
Three Months Ended
March 31,
2019
|
|
|
Three Months Ended
March 31,
2018
|
|
Dividend rate
|
|
|
0
|
|
|
|
0
|
|
Terms (in years)
|
|
|
2.59 – 4.50
|
|
|
|
3.0
|
|
Volatility
|
|
|
150.38% – 154.33
|
%
|
|
|
183.23% - 188.29
|
%
|
Risk-free interest rate
|
|
|
2.21% - 2.53
|
%
|
|
|
2.29% - 2.37
|
%
|
Stock-based
compensation expense associated with stock options granted to non-employee is recognized as the stock options vest. The stock-based
compensation expense related to non-employee will fluctuate as the fair value of the Company’s common stock fluctuates.
Stock-based compensation expense associated with stock options granted to non-employee amounted to $633,554 and $210,737 for the
three months ended March 31, 2019 and 2018, respectively.
As
of March 31, 2019, the aggregate value of vested and nonvested non-employee options was $177,507, which will be amortized as stock-based
compensation expense over the remaining 0.38 years.
The
aggregate intrinsic values of the non-employee stock options outstanding and the non-employee stock options exercisable at March
31, 2019 was $1,548,000 and $1,134,668, respectively.
A
summary of the status of the Company’s nonvested non-employee stock options granted as of March 31, 2019 and changes during
the three months ended March 31, 2019 is presented below:
|
|
Number of Options
|
|
|
Weighted Average Exercise Price
|
|
|
Fair Value at
March 31, 2019
|
|
Nonvested at December 31, 2018
|
|
|
193,333
|
|
|
$
|
1.12
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Vested
|
|
|
(96,667
|
)
|
|
|
(1.12
|
)
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Nonvested at March 31, 2019
|
|
|
96,666
|
|
|
$
|
1.12
|
|
|
$
|
177,507
|
|
Warrants
Stock
warrants activities during the three months ended March 31, 2019 were as follows:
|
|
Number of Warrants
|
|
|
Weighted Average Exercise Price
|
|
Outstanding at December 31, 2018
|
|
|
578,891
|
|
|
$
|
1.28
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(578,891
|
)
|
|
|
(1.28
|
)
|
Outstanding and exercisable at March 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
15 -
STATUTORY RESERVE
Avalon
Shanghai and Beijing GenExosome operate in the
PRC, are required to reserve 10% of their net profit after income tax, as determined in accordance with the PRC accounting rules
and regulations. Appropriation to the statutory reserve by the Company is based on profit arrived at under PRC accounting standards
for business enterprises for each year.
The
profit arrived at must be set off against any
accumulated losses sustained by the Company in prior years, before allocation is made to the statutory reserve. Appropriation
to the statutory reserve must be made before distribution of dividends to shareholders. The appropriation is required until the
statutory reserve reaches 50% of the registered capital. This statutory reserve is not distributable in the form of cash dividends.
The Company did not make any appropriation to statutory reserve for Avalon Shanghai and Beijing GenExosome during the three months
ended March 31, 2019 as they incurred net losses in the period.
NOTE
16 –
NONCONTROLLING INTEREST
As
of March 31, 2019, Dr. Yu Zhou, director and
Co-Chief Executive Officer of GenExsome, who owned 40% of the equity interests of GenExosome, which is not under the Company’s
control. The following is a summary of noncontrolling interest activities in the three months ended March 31, 2019
.
|
|
Amount
|
|
Noncontrolling interest at December 31, 2018
|
|
$
|
(862,200
|
)
|
Net loss attributable to noncontrolling interest
|
|
|
(99,113
|
)
|
Foreign currency translation adjustment attributable to noncontrolling interest
|
|
|
(1,198
|
)
|
Noncontrolling interest at March 31, 2019
|
|
$
|
(962,511
|
)
|
NOTE
17 –
RESTRICTED NET ASSETS
A
portion of the Company’s operations are conducted through its PRC subsidiaries, which can only pay dividends out of their
retained earnings determined in accordance with the accounting standards and regulations in the PRC and after they have met the
PRC requirements for appropriation to statutory reserve. In addition, a portion of the Company’s businesses and assets are
denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either
through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted
by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory
institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed
contracts. These currency exchange control procedures imposed by the PRC government authorities may restrict the ability of the
Company’s PRC subsidiaries to transfer their net assets to the Parent Company through loans, advances or cash dividends.
Schedule
I of Article 5-04 of Regulation S-X requires the condensed financial information of the parent company to be filed when the restricted
net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed
fiscal year. For purposes of this test, restricted net assets of consolidated subsidiaries shall mean that amount of the registrant’s
proportionate share of net assets of its consolidated subsidiaries (after intercompany eliminations) which as of the end of the
most recent fiscal year may not be transferred to the parent company in the form of loans, advances or cash dividends without
the consent of a third party.
The
Company’s PRC subsidiaries’ net assets as of March 31, 2019 and December 31, 2018 did not exceed 25% of the Company’s
consolidated net assets. Accordingly, Parent Company’s condensed financial statements have not been required in accordance
with Rule 5-04 and Rule 12-04 of SEC Regulation S-X.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
18 –
COMMITMENTS AND CONTINCENGIES
Operating
Leases
Beijing
GenExosome Beijing Office Lease
In
March 2019, Beijing GenExosome signed an agreement to lease its office space under operating lease. Pursuant to the signed lease,
the annual rent is RMB 7,000 (approximately $1,000). The term of this lease is one year commencing on March 15, 2019 and expires
on March 14, 2020. For the three months ended March 31, 2019, rent expense related to the lease amounted to $43.
Future
minimum rental payment required under this operating lease is as follows:
Year Ending March 31:
|
|
Amount
|
|
2020
|
|
$
|
999
|
|
Total
|
|
$
|
999
|
|
Avalon
Shanghai Office Lease
On
January 19, 2017, Avalon Shanghai entered into a lease for office space in Beijing, China, with a third party (the “Beijing
Office Lease”). Pursuant to the Beijing Office Lease, the monthly rent is RMB 50,586 (approximately $7,500) with a required
security deposit of RMB 164,764 (approximately $24,500). In addition, Avalon Shanghai needs to pay monthly maintenance fees of
RMB 4,336 (approximately $600). The term of the Beijing Office Lease is 26 months commencing on January 1, 2017 and expired on
February 28, 2019 with two months of free rent in the months of December 2017 and February 2019. On December 27, 2018, Avalon
Shanghai signed an extension for the lease with expiration date of February 29, 2020. For the three months ended March 31, 2019
and 2018, rent expense and maintenance fees related to the Beijing Office Lease amounted to approximately $22,000 and $26,000,
respectively.
Future
minimum rental payment required under the Beijing Office Lease is as follows:
Year Ending March 31:
|
|
Amount
|
|
2020
|
|
$
|
90,007
|
|
Total
|
|
$
|
90,007
|
|
Insurance
Premium Financing Agreement
On
July 18, 2018, the Company entered into a financing agreement, providing for the issuance of a loan in the principal amount of
$108,528. The term of the loan is for a period of 10 months from the execution of the agreement. The annual interest rate for
the loan is 6.9%. All of financed amount is used to pay for Directors & Officers Insurance premium. At March 31, 2019 and
December 31, 2018, the outstanding principal balance of the loan and related unpaid interest was $22,690 and $45,088, respectively,
which was included in the accrued liabilities and other payables on the accompanying consolidated balance sheets.
Equity
Investment Commitment
On
May 29, 2018, Avalon Shanghai entered into a Joint Venture Agreement with Jiangsu Unicorn Biological Technology Co., Ltd. (“Unicorn”),
pursuant to which a company named Epicon Biotech Co., Ltd. (“Epicon”) was formed on August 14, 2018. Epicon is owned
60% by Unicorn and 40% by Avalon Shanghai. Within two years of execution of the Joint Venture Agreement, Unicorn shall invest
cash into Epicon in an amount not less than RMB 8,000,000 (approximately $1.2 million) and the premises of the laboratories of
Nanjing Hospital of Chinese Medicine for exclusive use by Epicon, and Avalon Shanghai shall invest cash into Epicon in an amount
not less than RMB 10,000,000 (approximately $1.5 million). Epicon is focused on cell preparation, third party testing, biological
sample repository for commercial and scientific research purposes and the clinical transformation of scientific achievements.
As of March 31, 2019, Avalon Shanghai has contributed RMB 3,000,000 (approximately $0.4 million) that was included in equity method
investment on the accompanying consolidated balance sheets. Avalon Shanghai intends to use its present working capital together
with loans/borrowings/equity raise to fund the project cost.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
18 –
COMMITMENTS AND CONTINCENGIES (continued)
Joint
Venture – AVAR BioTherapeutics (China) Co. Ltd.
On
October 23, 2018, Avactis Biosciences, Inc. (“Avactis”), a wholly-owned subsidiary of the Company, and Arbele Limited
(“Arbele”) agreed to the establishment of AVAR BioTherapeutics (China) Co. Ltd. (“AVAR”), a Sino-foreign
equity joint venture, pursuant to an Equity Joint Venture Agreement (the “AVAR Agreement”), which will be owned 60%
by Avactis and 40% by Arbele. The purpose and business scope of the Joint Venture is to research, develop, produce, sell, distribute
and generally commercialize CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy in China. Avactis is required to contribute USD
$10 million (or equivalent in RMB) in cash and/or services, which shall be contributed in tranches based on milestones to be determined
jointly by AVAR and Avactis in writing subject to Avactis’ cash reserves. Within 30 days, Arbele shall make contribution
of USD $6.66 million in the form of entering into a License Agreement with AVAR granting AVAR with an exclusive right and license
in China to its technology and intellectual property pertaining to CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy technology
and any additional technology developed in the future with terms and conditions to be mutually agreed upon Avactis and AVAR and
services.
In
addition, Avactis is responsible for:
|
●
|
Contributing
registered capital of RMB 5,000,000 (approximately $700,000) for working capital purposes
as required by local regulation, which is not required to be contributed immediately
and will be contributed subject to Avactis’ discretion;
|
|
●
|
assist
AVAR in setting up its business operations and obtaining all required permits and licenses
from the Chinese government;
|
|
●
|
assisting
AVAR in recruiting, hiring and retaining personnel;
|
|
●
|
providing
AVAR with access to various hospital networks in China to assist in the testing and commercialization
of the CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy technology in China;
|
|
●
|
assisting
AVAR in managing the Good Manufacturing Practices (GMP) facility and clinic to be developed
by AVAR;
|
|
●
|
providing
AVAR with advice pertaining to conducting clinicals in China; and
|
|
●
|
Within
6 days of signing the AVAR Agreement, Avactis is required to pay to Arbele $300,000 as
a research and development fee with an additional two payments of $300,000 (for a total
of $900,000) to be paid upon mutually agreed upon milestones.
|
Under
AVAR Agreement, Arbele shall be responsible for the following:
|
●
|
Entering
into a License Agreement with AVAR; and
|
|
●
|
Providing
AVAR with research and development expertise pertaining to clinical laboratory medicine
when hired by AVAR.
|
As
of the date of this report, Avactis has paid $600,000 to Arbele as research and development fee, AVAR is in process of being established
and the License Agreement has not been finalized.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
19 –
SEGMENT INFORMATION
For
the three months ended March 31, 2019 and 2018, the Company operated in three reportable business segments - (1) the real property
operating segment, (2) the medical related consulting services segment, and (3) the performing development services for hospitals
and other customers and sales of developed products to hospitals and other customers segment. The Company’s reportable segments
are strategic business units that offer different services and products. They are managed separately based on the fundamental
differences in their operations. Information with respect to these reportable business segments for the three months ended March
31, 2019 and 2018 was as follows:
|
|
Three Months Ended
|
|
|
Three Months Ended
|
|
|
|
March 31, 2019
|
|
|
March 31, 2018
|
|
Revenues
|
|
|
|
|
|
|
Real property operating
|
|
$
|
266,626
|
|
|
$
|
296,623
|
|
Medical related consulting services – related party
|
|
|
14,260
|
|
|
|
-
|
|
Development services and sales of developed products
|
|
|
3,278
|
|
|
|
11,290
|
|
|
|
|
284,164
|
|
|
|
307,913
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
Real property operating
|
|
|
40,781
|
|
|
|
32,624
|
|
Medical related consulting services
|
|
|
2,940
|
|
|
|
4,006
|
|
Development services and sales of developed products
|
|
|
95,410
|
|
|
|
86,749
|
|
|
|
|
139,131
|
|
|
|
123,379
|
|
Interest expense
|
|
|
|
|
|
|
|
|
Real property operating
|
|
|
24,658
|
|
|
|
236,986
|
|
Medical related consulting services
|
|
|
-
|
|
|
|
-
|
|
Development services and sales of developed products
|
|
|
-
|
|
|
|
-
|
|
Other (a)
|
|
|
2,983
|
|
|
|
-
|
|
|
|
|
27,641
|
|
|
|
236,986
|
|
Net loss
|
|
|
|
|
|
|
|
|
Real property operating
|
|
|
98,689
|
|
|
|
237,700
|
|
Medical related consulting services
|
|
|
190,070
|
|
|
|
100,132
|
|
Development services and sales of developed products
|
|
|
247,782
|
|
|
|
173,474
|
|
Other (a)
|
|
|
3,968,388
|
|
|
|
1,039,663
|
|
|
|
$
|
4,504,929
|
|
|
$
|
1,550,969
|
|
Identifiable long-lived tangible assets at March 31, 2019 and December 31, 2018
|
|
March 31, 2019
|
|
|
December 31, 2018
|
|
Real property operating
|
|
$
|
7,868,781
|
|
|
$
|
7,898,224
|
|
Medical related consulting services
|
|
|
4,066
|
|
|
|
6,852
|
|
Development services and sales of developed products
|
|
|
377,112
|
|
|
|
224,364
|
|
|
|
$
|
8,249,959
|
|
|
$
|
8,129,440
|
|
Identifiable long-lived tangible assets at March 31, 2019 and December 31, 2018
|
|
March 31, 2019
|
|
|
December 31, 2018
|
|
United States
|
|
$
|
7,953,632
|
|
|
$
|
7,898,806
|
|
China
|
|
|
296,327
|
|
|
|
230,634
|
|
|
|
$
|
8,249,959
|
|
|
$
|
8,129,440
|
|
(a)
|
The
Company does not allocate any interest expense and general and administrative expense
of its being a public company activities to its reportable segments as these activities
are managed at a corporate level.
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
20 -
CONCENTRATIONS
Customers
The
following table sets forth information as to
each customer that accounted for 10% or more of the Company’s revenues for the three months ended March 31, 2019 and 2018.
Customer
|
|
Three Months Ended
March 31, 2019
|
|
|
Three Months Ended
March 31, 2018
|
|
A
|
|
|
29
|
%
|
|
|
27
|
%
|
B
|
|
|
19
|
%
|
|
|
18
|
%
|
C
|
|
|
15
|
%
|
|
|
14
|
%
|
*
Less than 10%
Two
customers, whose outstanding receivable accounted for 10% or more of the Company’s total outstanding accounts receivable
and accounts receivable – related party and tenants receivable at March 31, 2019, accounted for 46.6% of the Company’s
total outstanding accounts receivable and accounts receivable – related party and tenants receivable at March 31, 2019.
Two
customers, whose outstanding receivable accounted for 10% or more of the Company’s total outstanding accounts receivable
and accounts receivable – related party and tenants receivable at December 31, 2018, accounted for 56.0% of the Company’s
total outstanding accounts receivable and accounts receivable – related party and tenants receivable at December 31, 2018.
Suppliers
No
supplier accounted for 10% or more of the Company’s purchase during the three months ended March 31, 2019 and 2018.
Three
suppliers, whose outstanding payable accounted for 10% or more of the Company’s total outstanding accounts payable at March
31, 2019, accounted for 91.9% of the Company’s total outstanding accounts payable at March 31, 2019.
One
supplier, whose outstanding payable accounted for 10% or more of the Company’s total outstanding accounts payable at December
31, 2018, accounted for 95.5% of the Company’s total outstanding accounts payable at December 31, 2018.
Concentrations
of Credit Risk
At
March 31, 2019 and December 31, 2018, cash balances in the PRC are $814,166 and $1,216,485, respectively, are uninsured. The Company
has not experienced any losses in PRC bank accounts and believes it is not exposed to any risks on its cash in PRC bank accounts.
The
Company maintains its cash in United States bank and financial institution deposits that at times may exceed federally insured
limits. At March 31, 2019 and December 31, 2018, the Company’s cash balances in United States bank accounts had approximately
$374,000 and $239,000 in excess of the federally-insured limits, respectively. The Company has not experienced any losses in its
United States bank accounts through and as of the date of this report.
NOTE
21 –
SUBSEQUENT EVENTS
Common
Shares Issued for Services
On
April 1, 2019, pursuant to service agreements, the Company issued an aggregate of 120,812 shares of common stock for professional
services rendered. These shares were valued at $313,800, the fair market values on the grant dates using the reported closing
share prices on the dates of grant, and the Company reduced accrued liabilities of $313,800.
Appointment
of Officers
On
April 5, 2019, Yue “Charles” Li and Meng Li were appointed to the Board of Directors of the Company to serve as directors
of the Company.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019
NOTE
21 –
SUBSEQUENT EVENTS (continued)
Units
Sold for Cash
In
April 2019, the Company entered into a purchase agreement with several institutional investors for the purchase of 1,714,288 units
in a registered direct offering, for gross proceeds of approximately $6 million before placement agent fees and other offering
expenses payable by the Company. Each unit was sold at a public offering price of $3.50 and consists of one share of common stock
and a warrant to purchase one share of common stock at an exercise price of $3.50. The warrants are exercisable at any time for
a five-year period. The Company received net cash proceeds of approximately $5.1 million, net of cash paid for placement agent
fees and other offering expenses.
Repayment
for Loan Payable
On
April 30, 2019, the Company repaid loan payable in the principal amount of $1,000,000.