AVALON GLOBOCARE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
|
|
For the
Three Months Ended
September 30,
|
|
|
For the
Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real property rental
|
|
$
|
355,459
|
|
|
$
|
324,982
|
|
|
$
|
925,465
|
|
|
$
|
923,205
|
|
Medical related consulting services - related party
|
|
|
131,305
|
|
|
|
-
|
|
|
|
131,305
|
|
|
|
-
|
|
Total Revenues
|
|
|
486,764
|
|
|
|
324,982
|
|
|
|
1,056,770
|
|
|
|
923,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real property operating expenses
|
|
|
215,622
|
|
|
|
135,821
|
|
|
|
637,663
|
|
|
|
663,086
|
|
Medical related consulting services - related party
|
|
|
102,442
|
|
|
|
-
|
|
|
|
102,442
|
|
|
|
-
|
|
Total Costs and Expenses
|
|
|
318,064
|
|
|
|
135,821
|
|
|
|
740,105
|
|
|
|
663,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real property operating income
|
|
|
139,837
|
|
|
|
189,161
|
|
|
|
287,802
|
|
|
|
260,119
|
|
Gross profit from medical related consulting services
|
|
|
28,863
|
|
|
|
-
|
|
|
|
28,863
|
|
|
|
-
|
|
Total Gross Profit
|
|
|
168,700
|
|
|
|
189,161
|
|
|
|
316,665
|
|
|
|
260,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional fees
|
|
|
1,221,952
|
|
|
|
1,753,182
|
|
|
|
3,960,209
|
|
|
|
4,868,530
|
|
Compensation and related benefits
|
|
|
434,602
|
|
|
|
1,058,570
|
|
|
|
1,544,437
|
|
|
|
3,241,090
|
|
Research and development expenses
|
|
|
224,072
|
|
|
|
238,432
|
|
|
|
676,053
|
|
|
|
674,935
|
|
Other general and administrative
|
|
|
253,045
|
|
|
|
329,535
|
|
|
|
706,805
|
|
|
|
891,141
|
|
Total Other Operating Expenses
|
|
|
2,133,671
|
|
|
|
3,379,719
|
|
|
|
6,887,504
|
|
|
|
9,675,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(1,964,971
|
)
|
|
|
(3,190,558
|
)
|
|
|
(6,570,839
|
)
|
|
|
(9,415,577
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense - related party
|
|
|
(50,248
|
)
|
|
|
(41,531
|
)
|
|
|
(141,528
|
)
|
|
|
(126,169
|
)
|
Loss from equity method investment
|
|
|
(14,203
|
)
|
|
|
(14,966
|
)
|
|
|
(48,135
|
)
|
|
|
(35,382
|
)
|
Other income (expense)
|
|
|
5,203
|
|
|
|
(4,904
|
)
|
|
|
4,255
|
|
|
|
(1,994
|
)
|
Total Other Expense, net
|
|
|
(59,248
|
)
|
|
|
(61,401
|
)
|
|
|
(185,408
|
)
|
|
|
(163,545
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES
|
|
|
(2,024,219
|
)
|
|
|
(3,251,959
|
)
|
|
|
(6,756,247
|
)
|
|
|
(9,579,122
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAXES
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(2,024,219
|
)
|
|
$
|
(3,251,959
|
)
|
|
$
|
(6,756,247
|
)
|
|
$
|
(9,579,122
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LESS: NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS
|
|
$
|
(2,024,219
|
)
|
|
$
|
(3,251,959
|
)
|
|
$
|
(6,756,247
|
)
|
|
$
|
(9,579,122
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(2,024,219
|
)
|
|
$
|
(3,251,959
|
)
|
|
$
|
(6,756,247
|
)
|
|
$
|
(9,579,122
|
)
|
OTHER COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized foreign currency translation gain
|
|
|
1,285
|
|
|
|
39,698
|
|
|
|
13,349
|
|
|
|
20,941
|
|
COMPREHENSIVE LOSS
|
|
|
(2,022,934
|
)
|
|
|
(3,212,261
|
)
|
|
|
(6,742,898
|
)
|
|
|
(9,558,181
|
)
|
LESS: COMPREHENSIVE LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
COMPREHENSIVE LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS
|
|
$
|
(2,022,934
|
)
|
|
$
|
(3,212,261
|
)
|
|
$
|
(6,742,898
|
)
|
|
$
|
(9,558,181
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER COMMON SHARE ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
85,362,416
|
|
|
|
80,622,003
|
|
|
|
84,473,569
|
|
|
|
78,747,345
|
|
See accompanying notes to the condensed consolidated financial statements.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Three and Nine Months Ended September 30, 2021
(Unaudited)
|
|
Avalon
GloboCare Corp. Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
|
|
|
Treasury
Stock
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Number
of
Shares
|
|
|
Amount
|
|
|
Number
of
Shares
|
|
|
Amount
|
|
|
Additional
Paid-in
Capital
|
|
|
Number
of
Shares
|
|
|
Amount
|
|
|
Accumulated
Deficit
|
|
|
Statutory
Reserve
|
|
|
Other
Comprehensive
Loss
|
|
|
Non-controlling
Interest
|
|
|
Total
Equity
|
|
Balance,
January 1, 2021
|
|
|
-
|
|
|
$
|
-
|
|
|
|
82,795,297
|
|
|
$
|
8,279
|
|
|
$
|
46,856,447
|
|
|
|
(520,000
|
)
|
|
$
|
(522,500
|
)
|
|
$
|
(42,041,375
|
)
|
|
$
|
6,578
|
|
|
$
|
(190,510
|
)
|
|
$
|
-
|
|
|
$
|
4,116,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of common stock, net
|
|
|
-
|
|
|
|
-
|
|
|
|
1,848,267
|
|
|
|
185
|
|
|
|
2,337,074
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,337,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for services
|
|
|
-
|
|
|
|
-
|
|
|
|
300,000
|
|
|
|
30
|
|
|
|
359,970
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
360,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
202,505
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
202,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,722
|
)
|
|
|
-
|
|
|
|
(2,722
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the three months ended March 31, 2021
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,367,118
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,367,118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2021
|
|
|
-
|
|
|
|
-
|
|
|
|
84,943,564
|
|
|
|
8,494
|
|
|
|
49,755,996
|
|
|
|
(520,000
|
)
|
|
|
(522,500
|
)
|
|
|
(44,408,493
|
)
|
|
|
6,578
|
|
|
|
(193,232
|
)
|
|
|
-
|
|
|
|
4,646,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for settlement of accrued professional fees
|
|
|
-
|
|
|
|
-
|
|
|
|
167,355
|
|
|
|
17
|
|
|
|
202,483
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
202,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for services
|
|
|
-
|
|
|
|
-
|
|
|
|
490,000
|
|
|
|
49
|
|
|
|
534,251
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
534,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
195,209
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
195,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,786
|
|
|
|
-
|
|
|
|
14,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the three months ended June 30, 2021
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,364,910
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,364,910
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
June 30, 2021
|
|
|
-
|
|
|
|
-
|
|
|
|
85,600,919
|
|
|
|
8,560
|
|
|
|
50,687,939
|
|
|
|
(520,000
|
)
|
|
|
(522,500
|
)
|
|
|
(46,773,403
|
)
|
|
|
6,578
|
|
|
|
(178,446
|
)
|
|
|
-
|
|
|
|
3,228,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of common stock, net
|
|
|
-
|
|
|
|
-
|
|
|
|
35,769
|
|
|
|
4
|
|
|
|
33,789
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
33,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for services
|
|
|
-
|
|
|
|
-
|
|
|
|
415,679
|
|
|
|
41
|
|
|
|
425,146
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
425,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
188,859
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
188,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,285
|
|
|
|
-
|
|
|
|
1,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the three months ended September 30, 2021
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,024,219
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,024,219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2021
|
|
|
-
|
|
|
$
|
-
|
|
|
|
86,052,367
|
|
|
$
|
8,605
|
|
|
$
|
51,335,733
|
|
|
|
(520,000
|
)
|
|
$
|
(522,500
|
)
|
|
$
|
(48,797,622
|
)
|
|
$
|
6,578
|
|
|
$
|
(177,161
|
)
|
|
$
|
-
|
|
|
$
|
1,853,633
|
|
See accompanying notes to the condensed consolidated financial statements.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Three and Nine Months Ended September 30, 2020
(Unaudited)
|
|
Avalon
GloboCare Corp. Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
|
|
|
Treasury
Stock
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Number
of
Shares
|
|
|
Amount
|
|
|
Number
of
Shares
|
|
|
Amount
|
|
|
Additional
Paid-in
Capital
|
|
|
Number
of
Shares
|
|
|
Amount
|
|
|
Accumulated
Deficit
|
|
|
Statutory
Reserve
|
|
|
Other
Comprehensive
Loss
|
|
|
Non-controlling
Interest
|
|
|
Total
Equity
|
|
Balance,
January 1, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
76,730,802
|
|
|
$
|
7,673
|
|
|
$
|
34,593,006
|
|
|
|
(520,000
|
)
|
|
$
|
(522,500
|
)
|
|
$
|
(29,361,937
|
)
|
|
$
|
6,578
|
|
|
$
|
(257,747
|
)
|
|
$
|
-
|
|
|
$
|
4,465,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of common stock, net
|
|
|
-
|
|
|
|
-
|
|
|
|
980,358
|
|
|
|
98
|
|
|
|
1,539,153
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,539,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for services
|
|
|
-
|
|
|
|
-
|
|
|
|
222,577
|
|
|
|
22
|
|
|
|
213,278
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
213,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
785,350
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
785,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(22,066
|
)
|
|
|
-
|
|
|
|
(22,066
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the three months ended March 31, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,270,781
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,270,781
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
77,933,737
|
|
|
|
7,793
|
|
|
|
37,130,787
|
|
|
|
(520,000
|
)
|
|
|
(522,500
|
)
|
|
|
(32,632,718
|
)
|
|
|
6,578
|
|
|
|
(279,813
|
)
|
|
|
-
|
|
|
|
3,710,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of common stock, net
|
|
|
-
|
|
|
|
-
|
|
|
|
1,795,150
|
|
|
|
180
|
|
|
|
2,959,687
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,959,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for services
|
|
|
-
|
|
|
|
-
|
|
|
|
380,000
|
|
|
|
38
|
|
|
|
398,692
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
398,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
726,600
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
726,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,309
|
|
|
|
-
|
|
|
|
3,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the three months ended June 30, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,056,382
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,056,382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
June 30, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
80,108,887
|
|
|
|
8,011
|
|
|
|
41,215,766
|
|
|
|
(520,000
|
)
|
|
|
(522,500
|
)
|
|
|
(35,689,100
|
)
|
|
|
6,578
|
|
|
|
(276,504
|
)
|
|
|
-
|
|
|
|
4,742,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of common stock, net
|
|
|
-
|
|
|
|
-
|
|
|
|
1,337,968
|
|
|
|
134
|
|
|
|
2,376,503
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,376,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for services
|
|
|
-
|
|
|
|
-
|
|
|
|
430,000
|
|
|
|
43
|
|
|
|
697,407
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
697,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
739,362
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
739,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
39,698
|
|
|
|
-
|
|
|
|
39,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the three months ended September 30, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,251,959
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,251,959
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
81,876,855
|
|
|
$
|
8,188
|
|
|
$
|
45,029,038
|
|
|
|
(520,000
|
)
|
|
$
|
(522,500
|
)
|
|
$
|
(38,941,059
|
)
|
|
$
|
6,578
|
|
|
$
|
(236,806
|
)
|
|
$
|
-
|
|
|
$
|
5,343,439
|
|
See accompanying notes to the condensed consolidated financial statements.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For the
Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(6,756,247
|
)
|
|
$
|
(9,579,122
|
)
|
Adjustments to reconcile net loss to net cash used
in operating activities:
|
|
|
|
|
|
|
|
|
Bad debt provision
|
|
|
6,252
|
|
|
|
4,689
|
|
Depreciation
|
|
|
226,735
|
|
|
|
232,772
|
|
Change in straight-line rent receivable
|
|
|
(59,117
|
)
|
|
|
(15,947
|
)
|
Amortization of right-of-use asset
|
|
|
93,342
|
|
|
|
-
|
|
Stock-based compensation and service expense
|
|
|
1,621,452
|
|
|
|
3,965,164
|
|
Loss on equity method investment
|
|
|
48,135
|
|
|
|
35,382
|
|
Loss on fixed assets disposal
|
|
|
-
|
|
|
|
2,643
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable - related party
|
|
|
-
|
|
|
|
214,454
|
|
Rent receivable
|
|
|
1,802
|
|
|
|
(94,349
|
)
|
Rent receivable - related party
|
|
|
(21,000
|
)
|
|
|
-
|
|
Security deposit
|
|
|
6,826
|
|
|
|
-
|
|
Deferred leasing costs
|
|
|
13,348
|
|
|
|
-
|
|
Prepaid expenses and other assets
|
|
|
21,218
|
|
|
|
(352,526
|
)
|
Accrued liabilities and other payables
|
|
|
1,435,548
|
|
|
|
(679,815
|
)
|
Accrued liabilities and other payables - related parties
|
|
|
141,528
|
|
|
|
75,457
|
|
Operating lease obligation
|
|
|
(87,342
|
)
|
|
|
6,000
|
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
|
(3,307,520
|
)
|
|
|
(6,185,198
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(17,449
|
)
|
|
|
-
|
|
Improvement of commercial real estate
|
|
|
(10,332
|
)
|
|
|
-
|
|
Additional investment in equity method investment
|
|
|
(40,179
|
)
|
|
|
(28,594
|
)
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(67,960
|
)
|
|
|
(28,594
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Repayments of note payable - related party
|
|
|
-
|
|
|
|
(200,000
|
)
|
Proceeds received from loan payable - related party
|
|
|
763,189
|
|
|
|
300,000
|
|
Proceeds received from equity offering
|
|
|
2,518,708
|
|
|
|
7,233,678
|
|
Disbursements for equity offering costs
|
|
|
(103,561
|
)
|
|
|
(491,895
|
)
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
3,178,336
|
|
|
|
6,841,783
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE ON CASH
|
|
|
2,818
|
|
|
|
2,628
|
|
|
|
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH
|
|
|
(194,326
|
)
|
|
|
630,619
|
|
CASH - beginning of period
|
|
|
726,577
|
|
|
|
764,891
|
|
CASH - end of period
|
|
$
|
532,251
|
|
|
$
|
1,395,510
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
50,000
|
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Common stock issued for future services
|
|
$
|
258,655
|
|
|
$
|
25,996
|
|
Common stock issued for accrued liabilities
|
|
$
|
276,032
|
|
|
$
|
-
|
|
Deferred financing costs in accrued liabilities
|
|
$
|
165,024
|
|
|
$
|
13,390
|
|
Accrued professional fees relieved for shares issued
|
|
$
|
202,500
|
|
|
$
|
-
|
|
Improvement of commercial real estate acquired on credit as payable
|
|
$
|
-
|
|
|
$
|
38,400
|
|
See accompanying notes to the condensed consolidated financial statements.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
1 – ORGANIZATION AND NATURE OF OPERATIONS
Avalon
GloboCare 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 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 were accredited investors (“AHS
Shareholders”) pursuant to which we acquired 100% of the outstanding securities of AHS in exchange for 50,000,000 shares of the
Company’s common stock (the “AHS Acquisition”). AHS was incorporated on May 18, 2015 under the laws of the State of
Delaware.
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) Healthcare Technology Co., Ltd. (“Avalon Shanghai”)
immediately following the consummation of this reverse merger transaction. AHS owns 100% of the capital stock of 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.
The
Company is a clinical-stage, vertically integrated, leading CellTech bio-developer dedicated to advancing and empowering innovative,
transformative immune effector cell therapy, exosome technology, as well as COVID-19 related diagnostics and therapeutics. The company
also provides strategic advisory and outsourcing services to facilitate and enhance its clients’ growth and development, as well
as competitiveness in healthcare and CellTech industry markets. Through its subsidiary structure with unique integration of verticals
from innovative research and development (“R&D”) to automated bioproduction and accelerated clinical development, the
Company is establishing a leading role in the fields of cellular immunotherapy (including CAR-T/NK), exosome technology (ACTEX™),
and regenerative therapeutics.
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 September 30, 2021. 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 operations. 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.
As of September 30, 2021, the occupancy rate of the building is 89.4%.
On
July 31, 2017, the Company formed Genexosome Technologies Inc. (“Genexosome”) in Nevada. Genexosome was engaged in developing
proprietary diagnostic and therapeutic products using exosomes. Genexosome owns 100% of the capital stock of Beijing Jieteng (Genexosome)
Biotech Co., Ltd., a corporation incorporated in the People’s Republic of China on August 7, 2015 (“Beijing Genexosome”),
and the Company holds 60% of Genexosome and Dr. Yu Zhou holds 40% of Genexosome. The Company had not been able to realize the financial
projections provided by Dr. Zhou at the time of the acquisition and has decided to impair the intangible asset associated with this acquisition
to zero. Dr. Zhou was terminated as Co-CEO of Genexosome on August 14, 2019. Since the fourth quarter of 2019, the non-controlling interest
has remained inactive.
On
July 18, 2018, the Company formed a wholly owned subsidiary, Avactis Biosciences Inc., a Nevada corporation, which will focus 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.
On
June 13, 2019, the Company formed a wholly owned subsidiary, International Exosome Association LLC, a Delaware company. There was no
activity for the subsidiary since its incorporation through September 30, 2021.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
1 – ORGANIZATION AND NATURE OF OPERATIONS (continued)
Details
of the Company’s subsidiaries which are included in these condensed consolidated financial statements as of September 30, 2021
are as follows:
Name
of Subsidiary
|
|
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
|
|
Dormant
|
|
|
|
|
|
|
|
Beijing
Jieteng (Genexosome) Biotech Co., Ltd.
(“Beijing
Genexosome”)
|
|
PRC
August
7, 2015
|
|
100% held by Genexosome
|
|
Dormant
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
International
Exosome Association LLC
(“Exosome”)
|
|
Delaware
June
13, 2019
|
|
100% held by AVCO
|
|
Promotes standardization related to exosome industry
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
2 – BASIS OF PRESENTATION AND GOING CONCERN CONDITION
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 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 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 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 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,
2020 filed with the Securities and Exchange Commission on March 30, 2021.
Going
Concern
The
Company is a clinical-stage, vertically integrated, leading CellTech bio-developer dedicated to advancing and empowering innovative,
transformative immune effector cell therapy, exosome technology, as well as COVID-19 related diagnostics and therapeutics. The company
also provides strategic advisory and outsourcing services to facilitate and enhance its clients’ growth and development, as well
as competitiveness in healthcare and CellTech industry markets. Through its subsidiary structure with unique integration of verticals
from innovative research and development (“R&D”) to automated bioproduction and accelerated clinical development, the
Company is establishing a leading role in the fields of cellular immunotherapy (including CAR-T/NK), exosome technology (ACTEX™),
and regenerative therapeutics.
In
addition, the Company owns commercial real estate that houses its headquarters in Freehold, New Jersey and provides outsourced, customized
international healthcare services to the rapidly changing health care industry primarily focused in the People’s Republic of China.
These condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which
contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business.
As
reflected in the accompanying condensed consolidated financial statements, the Company had working capital deficit of $3,277,946 as of
September 30, 2021 and has incurred recurring net loss and generated negative cash flow from operating activities of $6,756,247 and $3,307,520
for the nine months ended September 30, 2021, respectively. The Company has a limited operating history and its continued growth is dependent
upon the continuation of providing medical consulting services to its only few clients who are related parties and generating rental
revenue from its income-producing real estate property in New Jersey; hence generating revenues, and obtaining additional financing to
fund future obligations and pay liabilities arising from normal business operations. In addition, the current cash balance cannot be
projected to cover the operating expenses for the next twelve months from the release date of this report. These matters raise substantial
doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is
dependent on the Company’s ability to raise additional capital, implement its business plan, and generate significant revenues.
There are no assurances that the Company will be successful in its efforts to generate significant revenues, maintain sufficient cash
balance or report profitable operations or to continue as a going concern. The Company plans on raising capital through the sale of equity
to implement its business plan. However, there is no assurance these plans will be realized and that any additional financings will be
available to the Company on satisfactory terms and conditions, if any.
The
occurrence of an uncontrollable event such as the COVID-19 pandemic had negatively impact on the Company’s operations. Our general
development operations have continued during the COVID-19 pandemic and we have not had significant disruption. However, we are uncertain
if the COVID-19 pandemic will impact future operations at our laboratory, or our ability to collaborate with other laboratories and universities.
In addition, we are unsure if the COVID-19 pandemic will impact future clinical trials. Given the dynamic nature of these circumstances,
the duration of business disruption and reduced traffic, the related financial effect cannot be reasonably estimated at this time but
is expected to adversely impact the Company’s business for the rest of 2021.
The
accompanying condensed consolidated financial statements do not include any adjustments related to the recoverability or classification
of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as
a going concern.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use
of Estimates
The
preparation of the condensed consolidated financial statements in conformity with U.S. GAAP 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 and nine months ended September 30, 2021 and 2020 include the useful life
of property and equipment and investment in real estate, 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
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value
Measurement,” approximates the carrying amounts represented in the accompanying condensed consolidated financial statements, primarily
due to their short-term nature.
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
and Cash Equivalents
At
September 30, 2021 and December 31, 2020, the Company’s cash balances by geographic area were as follows:
Country:
|
|
September 30, 2021
|
|
|
December 31, 2020
|
|
United States
|
|
$
|
428,984
|
|
|
|
80.6
|
%
|
|
$
|
559,711
|
|
|
|
77.0
|
%
|
China
|
|
|
103,267
|
|
|
|
19.4
|
%
|
|
|
166,866
|
|
|
|
23.0
|
%
|
Total cash
|
|
$
|
532,251
|
|
|
|
100.0
|
%
|
|
$
|
726,577
|
|
|
|
100.0
|
%
|
For
purposes of the condensed consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity
of three months or less when purchased and money market accounts to be cash equivalents. The Company had no cash equivalents at September
30, 2021 and December 31, 2020.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Credit
Risk and Uncertainties
A
portion of the Company’s cash is maintained with state-owned banks within the PRC. Balances at state-owned banks within the PRC
are covered by insurance up to RMB 500,000 (approximately $78,000) per bank. Any balance over RMB 500,000 per bank in PRC will not be
covered. At September 30, 2021, cash balances held in the PRC are RMB 665,725 (approximately $103,000), of which, RMB 139,695 (approximately
$22,000) was not covered by such limited 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.
The
Company maintains a portion of its cash in bank and financial institution deposits within U.S. that at times may exceed federally-insured
limits of $250,000. The Company manages this credit risk by concentrating its cash balances in high quality financial institutions and
by periodically evaluating the credit quality of the primary financial institutions holding such deposits. The Company has not experienced
any losses in such bank accounts and believes it is not exposed to any risks on its cash in bank accounts. At September 30, 2021, there
were no balances in excess of the federally-insured limits.
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 trade accounts receivable.
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 is limited due
to short-term payment terms. The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk.
Investment
in Unconsolidated Company – Epicon Biosciences 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 5 for discussion of equity method
investment.
Revenue
Recognition
The
Company recognizes revenue under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers
(“ASC 606”). The core principle of the 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:
|
●
|
Step 1: Identify the contract
with the customer
|
|
●
|
Step 2: Identify the performance
obligations in the contract
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue
Recognition (continued)
|
●
|
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 goods or service that is distinct. A performance obligation meets ASC 606’s definition
of a “distinct” goods or service (or bundle of goods or services) if both of the following criteria are met:
|
●
|
The customer can benefit
from the goods or service either on its own or together with other resources that are readily available to the customer (i.e., the
goods or service is capable of being distinct).
|
|
●
|
The entity’s promise
to transfer the goods or service to the customer is separately identifiable from other promises in the contract (i.e., the promise
to transfer the goods or service is distinct within the context of the contract).
|
If
a goods or service is not distinct, the goods 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.
The
Company’s revenues are derived from providing medial related consulting services for its’ related parties. Revenues related
to its service offerings are recognized at a point in time when service is rendered. Any payments received in advance of the performance
of services are recorded as deferred revenue until such time as the services are performed.
The
Company has determined that the ASC 606 does not apply to rental contracts, which are within the scope of other revenue recognition accounting
standards.
Rental
income from operating leases is recognized on a straight-line basis under the guidance of ASC 842. Lease payments under tenant leases
are recognized on a straight-line basis over the term of the related leases. The cumulative difference between lease revenue recognized
under the straight-line method and contractual lease payments are included in rent receivable on the condensed consolidated balance sheets.
The
Company does not offer promotional payments, customer coupons, rebates or other cash redemption offers to its customers.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 is 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. For the three and nine
months ended September 30, 2021 and 2020, potentially dilutive common shares consist of the common shares issuable upon the exercise
of common stock options (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 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
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Stock options
|
|
|
7,720,000
|
|
|
|
7,020,000
|
|
|
|
7,720,000
|
|
|
|
7,020,000
|
|
Potentially dilutive securities
|
|
|
7,720,000
|
|
|
|
7,020,000
|
|
|
|
7,720,000
|
|
|
|
7,020,000
|
|
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 previously had three reportable business segments: real property operating segment, medical related consulting services segment,
and development services and sales of developed products segment. Due to the winding down of the development services and sales of developed
products segment in 2020, the Company no longer has any material revenues or expenses in this segment. As a result, commencing from
the first quarter of 2021, the Company’s chief operating decision maker no longer reviews development services and sales of developed
products operating results and the Company no longer reports in three segments.
During
the three and nine months ended September 30, 2021, the Company operates through two business segments: real property operating segment
and medical related consulting services 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.
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.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent
Accounting Standards
In
June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (“Topic 326”). The ASU introduces
a new accounting model, the Current Expected Credit Losses model (“CECL”), which requires earlier recognition of credit losses
and additional disclosures related to credit risk. The CECL model utilizes a lifetime expected credit loss measurement objective for
the recognition of credit losses at the time the financial asset is originated or acquired. ASU 2016-13 is effective for annual period
beginning after December 15, 2022, including interim reporting periods within those annual reporting periods. The Company expects that
the adoption will not have a material impact on the Company’s consolidated financial statements.
In
December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, as part of its Simplification Initiative
to reduce the cost and complexity in accounting for income taxes. This standard removes certain exceptions related to the approach for
intra period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities
for outside basis differences. It also amends other aspects of the guidance to help simplify and promote consistent application of GAAP.
The guidance is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The adoption
of ASU 2019 – 12 did not have a material impact on the Company’s consolidated financial statements.
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 – PREPAID EXPENSES AND OTHER CURRENT ASSETS
At
September 30, 2021 and December 31, 2020, prepaid expenses and other current assets consisted of the following:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Prepaid directors and officers liability insurance premium
|
|
$
|
53,383
|
|
|
$
|
64,929
|
|
Recoverable VAT
|
|
|
25,237
|
|
|
|
40,446
|
|
Deferred leasing costs
|
|
|
31,422
|
|
|
|
18,220
|
|
Prepaid research and development fees
|
|
|
-
|
|
|
|
60,610
|
|
Other
|
|
|
41,007
|
|
|
|
39,380
|
|
Total
|
|
$
|
151,049
|
|
|
$
|
223,585
|
|
NOTE
5 – EQUITY METHOD INVESTMENT
As
of September 30, 2021 and December 31, 2020, the equity method investment amounted to $520,569 and $521,758, 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.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
5 – EQUITY METHOD INVESTMENT (continued)
For
the three months ended September 30, 2021 and 2020, the Company’s share of Epicon’s net loss was $14,203 and $14,966, respectively,
which was included in loss from equity method investment in the accompanying condensed consolidated statements of operations and comprehensive
loss. For the nine months ended September 30, 2021 and 2020, the Company’s share of Epicon’s net loss was $48,135 and $35,382,
respectively, which was included in loss from equity method investment in the accompanying condensed consolidated statements of operations
and comprehensive loss. In the nine months ended September 30, 2021, activity recorded for the Company’s equity method investment in
Epicon is summarized in the following table:
Equity investment carrying amount at January 1, 2021
|
|
$
|
521,758
|
|
Payment made for equity method investment
|
|
|
40,179
|
|
Epicon’s net loss attributable to the Company
|
|
|
(48,135
|
)
|
Foreign currency fluctuation
|
|
|
6,767
|
|
Equity investment carrying amount at September 30, 2021
|
|
$
|
520,569
|
|
The
tables below present the summarized financial information, as provided to the Company by the investee, for the unconsolidated company:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Current assets
|
|
$
|
6,063
|
|
|
$
|
13,023
|
|
Noncurrent assets
|
|
|
229,105
|
|
|
|
264,390
|
|
Current liabilities
|
|
|
41,306
|
|
|
|
6,615
|
|
Noncurrent liabilities
|
|
|
-
|
|
|
|
-
|
|
Equity
|
|
|
193,862
|
|
|
|
270,798
|
|
|
|
For the
Three Months Ended
September 30,
|
|
|
For the
Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Net revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Gross profit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Loss from operation
|
|
|
35,509
|
|
|
|
37,418
|
|
|
|
120,338
|
|
|
|
88,587
|
|
Net loss
|
|
|
35,509
|
|
|
|
37,417
|
|
|
|
120,338
|
|
|
|
88,456
|
|
NOTE
6 – OTHER NONCURRENT ASSETS
At
September 30, 2021 and December 31, 2020, other noncurrent assets consisted of the following:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Deferred financing costs
|
|
$
|
171,535
|
|
|
$
|
-
|
|
Security deposit
|
|
|
19,986
|
|
|
|
-
|
|
Total
|
|
$
|
191,521
|
|
|
$
|
-
|
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
7 – ACCRUED LIABILITIES AND OTHER PAYABLES
At
September 30, 2021 and December 31, 2020, accrued liabilities and other payables consisted of the following:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Accrued tenants’ improvement reimbursement
|
|
$
|
43,500
|
|
|
$
|
81,900
|
|
Tenants’ security deposit
|
|
|
73,733
|
|
|
|
69,634
|
|
Accounts payable
|
|
|
51,689
|
|
|
|
87,190
|
|
Accrued utilities
|
|
|
48,310
|
|
|
|
14,911
|
|
Taxes payable
|
|
|
21,277
|
|
|
|
15,790
|
|
Deferred rental income
|
|
|
8,133
|
|
|
|
23,510
|
|
Other
|
|
|
92,906
|
|
|
|
74,476
|
|
Total
|
|
$
|
339,548
|
|
|
$
|
367,411
|
|
NOTE
8 – RELATED PARTY TRANSACTIONS
Accrued
Liabilities and Other Payables – Related Parties
The
Company acquired Beijing Genexosome for a cash payment of $450,000. As of September 30, 2021 and December 31, 2020, the unpaid acquisition
consideration of $100,000, was payable to Dr. Yu Zhou, former director and former co-chief executive officer and 40% owner of Genexosome,
and has been included in accrued liabilities and other payables – related parties on the accompanying condensed consolidated balance
sheets.
As
of September 30, 2021 and December 31, 2020, the accrued and unpaid interest related to borrowings from Wenzhao Lu, the Company’s
largest shareholder and chairman of the Board of Directors, amounted to $309,484 and $167,956, respectively, and have been included in
accrued liabilities and other payables – related parties on the accompanying condensed consolidated balance sheets.
Borrowings
from Related Party
Promissory
Note
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. The Company repaid principal of $410,000 and
$200,000 in the third quarter of 2019 and second quarter of 2020, respectively. As of both September 30, 2021 and December 31, 2020,
the outstanding principal balance was $390,000.
Line
of Credit
On
August 29, 2019, the Company entered into a Line of Credit Agreement (the “Line of Credit Agreement”) providing the Company
with a $20 million line of credit (the “Line of Credit”) from Wenzhao Lu (the “Lender”), the largest shareholder
and Chairman of the Board of Directors of the Company. The Line of Credit allows the Company to request loans thereunder and to use the
proceeds of such loans for working capital and operating expense purposes until the facility matures on December 31, 2024. The loans
are unsecured and are not convertible into equity of the Company. Loans drawn under the Line of Credit bears interest at an annual rate
of 5% and each individual loan will be payable three years from the date of issuance. The Company has a right to draw down on the line
of credit and not at the discretion of the related party Lender. The Company may, at its option, prepay any borrowings under the Line
of Credit, in whole or in part at any time prior to maturity, without premium or penalty. The Line of Credit Agreement includes customary
events of default. If any such event of default occurs, the Lender may declare all outstanding loans under the Line of Credit to be due
and payable immediately. As of September 30, 2021 and December 31, 2020, $3,963,189 and $3,200,000 was outstanding under the Line of
Credit, respectively.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
8 – RELATED PARTY TRANSACTIONS (continued)
Borrowings
from Related Party (continued)
For
the three months ended September 30, 2021 and 2020, the interest expense related to above borrowings amounted to $50,248 and $41,531,
respectively, and has been included in interest expense – related party on the accompanying condensed consolidated statements of
operations and comprehensive loss. For the nine months ended September 30, 2021 and 2020, the interest expense related to above borrowings
amounted to $141,528 and $126,169, respectively, and has been included in interest expense – related party on the accompanying
condensed consolidated statements of operations and comprehensive loss.
As
of September 30, 2021 and December 31, 2020, the related accrued and unpaid interest for above borrowings was $309,484 and $167,956,
respectively, and has been included in accrued liabilities and other payables – related parties on the accompanying condensed consolidated
balance sheets.
Rental
Revenue from Related Party
Commencing
from year 2021, the Company leases space of its commercial real property located in New Jersey to a company, which is controlled by Wenzhao
Lu, the Company’s largest shareholder and chairman of the Board of Directors. For both the three and nine months ended September
30, 2021, the related party rental revenue amounted to $21,000, and has been included in real property rental on the accompanying condensed
consolidated statements of operations and comprehensive loss.
As
of September 30, 2021, the related party rent receivable totaled $21,000, which was included in rent receivable – related party
on the accompanying condensed consolidated balance sheets.
NOTE
9 – EQUITY
2020
Incentive Stock Plan
The
Company held its annual meeting on August 4, 2020. During its annual meeting, the Company approved 2020 Incentive Stock Plan and reserved
5,000,000 shares of common stock for issuance thereunder.
Common
Shares Sold for Cash
On
December 13, 2019, the Company entered into an Open Market Sale AgreementSM (the “Sales Agreement”) with
Jefferies LLC, as sales agent (“Jefferies”), pursuant to which the Company may offer and sell, from time to time, through
Jefferies, shares of its common stock. During the nine months ended September 30, 2021, Jefferies sold an aggregate of 1,884,036 shares
of common stock at an average price of $1.34 per share to investors. The Company recorded net proceeds of $2,371,052, net of commission
and other offering costs of $147,656.
Common
Shares Issued for Services
During
the nine months ended September 30, 2021, the Company issued a total of 1,205,679 shares of its common stock for services rendered and
to be rendered. These shares were valued at $1,319,487, the fair market values on the grant dates using the reported closing share prices
on the dates of grant, and the Company recorded stock-based compensation expense of $784,800 for the nine months ended September 30,
2021 and reduced accrued liabilities of $276,032 and recorded prepaid expense of $258,655 as of September 30, 2021 which will be amortized
over the rest of corresponding service periods.
Common
Shares Issued for Settlement of Accrued Professional Fees
In
June 2021, the Company issued 167,355 shares of its common stock to settle accrued and unpaid professional fees of $202,500.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
9 – EQUITY (continued)
Options
The
following table summarizes the shares of the Company’s common stock issuable upon exercise of options outstanding at September
30, 2021:
Options Outstanding
|
|
|
Options Exercisable
|
|
Range of
Exercise
Price
|
|
|
Number
Outstanding at
September 30,
2021
|
|
|
Weighted Average
Remaining
Contractual Life
(Years)
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
Exercisable at
September 30,
2021
|
|
|
Weighted
Average
Exercise
Price
|
|
$
|
0.50
|
|
|
|
2,000,000
|
|
|
|
5.36
|
|
|
$
|
0.50
|
|
|
|
2,000,000
|
|
|
$
|
0.50
|
|
|
1.00 – 1.93
|
|
|
|
2,950,000
|
|
|
|
4.87
|
|
|
|
1.39
|
|
|
|
2,723,334
|
|
|
|
1.41
|
|
|
2.00 – 2.80
|
|
|
|
2,740,000
|
|
|
|
2.02
|
|
|
|
2.17
|
|
|
|
2,740,000
|
|
|
|
2.17
|
|
|
4.76
|
|
|
|
30,000
|
|
|
|
2.51
|
|
|
|
4.76
|
|
|
|
30,000
|
|
|
|
4.76
|
|
$
|
0.50 – 4.76
|
|
|
|
7,720,000
|
|
|
|
3.97
|
|
|
$
|
1.45
|
|
|
|
7,493,334
|
|
|
$
|
1.46
|
|
Stock
option activities for the nine months ended September 30, 2021 were as follows:
|
|
Number of
Options
|
|
|
Weighted Average
Exercise Price
|
|
Outstanding at January 1, 2021
|
|
|
7,140,000
|
|
|
$
|
1.48
|
|
Granted
|
|
|
660,000
|
|
|
|
1.10
|
|
Expired
|
|
|
(80,000
|
)
|
|
|
(1.00
|
)
|
Outstanding at September 30, 2021
|
|
|
7,720,000
|
|
|
$
|
1.45
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at September 30, 2021
|
|
|
7,493,334
|
|
|
$
|
1.46
|
|
Options expected to vest
|
|
|
226,666
|
|
|
$
|
1.09
|
|
The
aggregate intrinsic value of both stock options outstanding and stock options exercisable at September 30, 2021 was $776,000.
The
fair values of options granted during the nine months ended September 30, 2021 were estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions: volatility of 121.52% - 128.42%, risk-free rate of 0.33% - 0.80%, annual dividend
yield of 0% and expected life of 3.00 - 5.00 years. The aggregate fair value of the options granted during the nine months ended September
30, 2021 was $594,401.
The
fair values of options granted during the nine months ended September 30, 2020 were estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions: volatility of 134.32% - 139.58%, risk-free rate of 0.25% - 1.67%, annual dividend
yield of 0% and expected life of 3.00 – 10.00 years. The aggregate fair value of the options granted during the nine months ended
September 30, 2020 was $2,702,401.
For
the three months ended September 30, 2021 and 2020, stock-based compensation expense associated with stock options granted amounted to
$188,859 and $739,362, respectively, of which, $134,833 and $605,555 was recorded as compensation and related benefits, $37,596 and $110,970
was recorded as professional fees, and $16,430 and $22,837 was recorded as research and development expenses, respectively.
For
the nine months ended September 30, 2021 and 2020, stock-based compensation expense associated with stock options granted amounted to
$586,573 and $2,251,312, respectively, of which, $410,732 and $1,975,245 was recorded as compensation and related benefits, $120,584
and $240,162 was recorded as professional fees, and $55,257 and $35,905 was recorded as research and development expenses, respectively.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
9 – EQUITY (continued)
Options
(continued)
A
summary of the status of the Company’s nonvested stock options granted as of September 30, 2021 and changes during the nine months
ended September 30, 2021 is presented below:
|
|
Number of
Options
|
|
|
Weighted Average
Exercise Price
|
|
Nonvested at January 1, 2021
|
|
|
218,334
|
|
|
$
|
1.18
|
|
Granted
|
|
|
660,000
|
|
|
|
1.10
|
|
Vested
|
|
|
(651,668
|
)
|
|
|
(1.13
|
)
|
Nonvested at September 30, 2021
|
|
|
226,666
|
|
|
$
|
1.09
|
|
NOTE
10 – 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 nine months ended September 30, 2021 and 2020 as they incurred net losses in these periods.
NOTE
11 – 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 September 30, 2021 and December 31, 2020 did not exceed 25% of the Company’s
consolidated net assets. Accordingly, the Parent Company’s condensed consolidated 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
12 – 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
and nine months ended September 30, 2021 and 2020.
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
Customer
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
A (Hebei Daopei, a related party)
|
|
|
27
|
%
|
|
|
|
*
|
|
|
12
|
%
|
|
|
|
*
|
B
|
|
|
28
|
%
|
|
|
28
|
%
|
|
|
29
|
%
|
|
|
29
|
%
|
C
|
|
|
12
|
%
|
|
|
18
|
%
|
|
|
16
|
%
|
|
|
18
|
%
|
D
|
|
|
|
*
|
|
|
14
|
%
|
|
|
11
|
%
|
|
|
14
|
%
|
One
customer, whose outstanding receivable accounted for 10% or more of the Company’s total outstanding accounts receivable, accounts
receivable – related party, and rent receivable at September 30, 2021, accounted for 71.2% of the Company’s total outstanding
accounts receivable, accounts receivable – related party, and rent receivable at September 30, 2021.
Two
customers, whose outstanding receivable accounted for 10% or more of the Company’s total outstanding accounts receivable, accounts
receivable – related party, and rent receivable at December 31, 2020, accounted for 78.3% of the Company’s total outstanding
accounts receivable, accounts receivable – related party, and rent receivable at December 31, 2020.
Suppliers
No
supplier accounted for 10% or more of the Company’s purchase during the three and nine months ended September 30, 2021 and 2020.
One
supplier, whose outstanding payable accounted for 10% or more of the Company’s total outstanding accounts payable at September
30, 2021, accounted for 100.0% of the Company’s total outstanding accounts payable at September 30, 2021.
One
supplier, whose outstanding payable accounted for 10% or more of the Company’s total outstanding accounts payable at December 31,
2020, accounted for 93.6% of the Company’s total outstanding accounts payable at December 31, 2020.
NOTE
13 – SEGMENT INFORMATION
For
the three and nine months ended September 30, 2020, 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.
Due
to the winding down of the development services and sales of developed products segment in 2020, the Company no longer has any material
revenues or expenses in this segment. As a result, commencing from the first quarter of 2021, the Company’s chief operating
decision maker no longer reviews development services and sales of developed products operating results.
For
the three and nine months ended September 30, 2021, the Company operated in two reportable business segments - (1) the real property
operating segment, and (2) the medical related consulting services segment.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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
and nine months ended September 30, 2021 and 2020 was as follows:
NOTE
13 – SEGMENT INFORMATION (continued)
|
|
Three
Months Ended
September 30,
|
|
|
Nine
Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
property operations
|
|
$
|
355,459
|
|
|
$
|
324,982
|
|
|
$
|
925,465
|
|
|
$
|
923,205
|
|
Medical
related consulting services
|
|
|
131,305
|
|
|
|
-
|
|
|
|
131,305
|
|
|
|
-
|
|
Total
|
|
|
486,764
|
|
|
|
324,982
|
|
|
|
1,056,770
|
|
|
|
923,205
|
|
Costs
and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
property operations
|
|
|
215,622
|
|
|
|
135,821
|
|
|
|
637,663
|
|
|
|
663,086
|
|
Medical
related consulting services
|
|
|
102,442
|
|
|
|
-
|
|
|
|
102,442
|
|
|
|
-
|
|
Total
|
|
|
318,064
|
|
|
|
135,821
|
|
|
|
740,105
|
|
|
|
663,086
|
|
Gross
profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
property operations
|
|
|
139,837
|
|
|
|
189,161
|
|
|
|
287,802
|
|
|
|
260,119
|
|
Medical
related consulting services
|
|
|
28,863
|
|
|
|
-
|
|
|
|
28,863
|
|
|
|
-
|
|
Total
|
|
|
168,700
|
|
|
|
189,161
|
|
|
|
316,665
|
|
|
|
260,119
|
|
Other
operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
property operations
|
|
|
76,422
|
|
|
|
77,852
|
|
|
|
256,675
|
|
|
|
291,886
|
|
Medical
related consulting services
|
|
|
32,239
|
|
|
|
160,557
|
|
|
|
361,067
|
|
|
|
491,683
|
|
Development
services and sales of developed products
|
|
|
-
|
|
|
|
28,002
|
|
|
|
-
|
|
|
|
94,241
|
|
Corporate/Other
|
|
|
2,025,010
|
|
|
|
3,113,308
|
|
|
|
6,269,762
|
|
|
|
8,797,886
|
|
Total
|
|
|
2,133,671
|
|
|
|
3,379,719
|
|
|
|
6,887,504
|
|
|
|
9,675,696
|
|
Other
(expense) income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate/Other
|
|
|
(50,248
|
)
|
|
|
(41,531
|
)
|
|
|
(141,528
|
)
|
|
|
(126,169
|
)
|
Total
|
|
|
(50,248
|
)
|
|
|
(41,531
|
)
|
|
|
(141,528
|
)
|
|
|
(126,169
|
)
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
property operations
|
|
|
3
|
|
|
|
4
|
|
|
|
111
|
|
|
|
(927
|
)
|
Medical
related consulting services
|
|
|
(14,173
|
)
|
|
|
(20,095
|
)
|
|
|
(49,162
|
)
|
|
|
(36,673
|
)
|
Development
services and sales of developed products
|
|
|
-
|
|
|
|
221
|
|
|
|
-
|
|
|
|
224
|
|
Corporate/Other
|
|
|
5,170
|
|
|
|
-
|
|
|
|
5,171
|
|
|
|
-
|
|
Total
|
|
|
(9,000
|
)
|
|
|
(19,870
|
)
|
|
|
(43,880
|
)
|
|
|
(37,376
|
)
|
Total
other expense, net
|
|
|
(59,248
|
)
|
|
|
(61,401
|
)
|
|
|
(185,408
|
)
|
|
|
(163,545
|
)
|
Net
income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
property operations
|
|
|
63,418
|
|
|
|
111,313
|
|
|
|
31,238
|
|
|
|
(32,694
|
)
|
Medical
related consulting services
|
|
|
(17,549
|
)
|
|
|
(180,652
|
)
|
|
|
(381,366
|
)
|
|
|
(528,356
|
)
|
Development
services and sales of developed products
|
|
|
-
|
|
|
|
(27,781
|
)
|
|
|
-
|
|
|
|
(94,017
|
)
|
Corporate/Other
|
|
|
(2,070,088
|
)
|
|
|
(3,154,839
|
)
|
|
|
(6,406,119
|
)
|
|
|
(8,924,055
|
)
|
Total
|
|
$
|
(2,024,219
|
)
|
|
$
|
(3,251,959
|
)
|
|
$
|
(6,756,247
|
)
|
|
$
|
(9,579,122
|
)
|
Identifiable long-lived tangible assets at September 30, 2021 and December 31, 2020
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Real property operations
|
|
$
|
7,580,270
|
|
|
$
|
7,697,473
|
|
Medical related consulting services
|
|
|
951
|
|
|
|
223,459
|
|
Development services and sales of developed products
|
|
|
-
|
|
|
|
243,869
|
|
Corporate/Other
|
|
|
389,584
|
|
|
|
-
|
|
Total
|
|
$
|
7,970,805
|
|
|
$
|
8,164,801
|
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
13 – SEGMENT INFORMATION (continued)
Identifiable long-lived tangible assets at September 30, 2021 and December 31, 2020
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
United States
|
|
$
|
7,632,088
|
|
|
$
|
7,764,947
|
|
China
|
|
|
338,717
|
|
|
|
399,854
|
|
Total
|
|
$
|
7,970,805
|
|
|
$
|
8,164,801
|
|
NOTE
14 – COMMITMENTS AND CONTINGENCIES
Litigation
From
time to time, the Company is subject to ordinary routine litigation incidental to its normal business operations. The Company is not
currently a party to, and its property is not subject to, any material legal proceedings, except as set forth below.
On
October 25, 2017, Genexosome entered into and closed a Stock Purchase Agreement with Beijing Genexosome and Yu Zhou, MD, PhD, 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, of which $100,000 is still owed. Further, on October 25, 2017,
Genexosome entered into and closed an Asset Purchase Agreement with Dr. Zhou, pursuant to which the Company acquired all assets, including
all intellectual property and exosome separation systems, held by Dr. Zhou pertaining to the business of researching, developing and
commercializing exosome technologies. In consideration of the assets, Genexosome paid Dr. Zhou $876,087 in cash, transferred 500,000
shares of common stock of the Company to Dr. Zhou and issued Dr. Zhou 400 shares of common stock of Genexosome. Further, the Company
had not been able to realize the financial projections provided by Dr. Zhou at the time of the acquisition and has decided to impair
the intangible asset associated with this acquisition to zero on September 30, 2019. Dr. Zhou was terminated as Co-CEO of Genexosome
on August 14, 2019. Further, on October 28, 2019, Research Institute at Nationwide Children’s Hospital (“Research Institute”)
filed a Complaint in the United States District Court for the Southern District of Ohio Eastern Division against Dr. Zhou, Li Chen, the
Company and Genexosome with various claims against the Company and Genexosome including misappropriation of trade secrets in violation
of the Defend Trade Secrets Act of 2016 and violation of Ohio Uniform Trade Secrets Act. Research Institute is seeking monetary damages,
injunctive relief, exemplary damages, injunctive relief and other equitable relief. The Company intends to vigorously defend against
this action and pursue all available legal remedies. The criminal proceedings against Dr. Zhou and Li Chen have been concluded, and the
civil litigation continues. While there can be no assurances, the Company believes it has substantial legal and factual defenses to the
Research Institute’s claims and the likelihood of any findings of liability for the Company cannot be assessed at this time.
Operating
Leases Commitment
The
Company is a party to leases for office space. Rent expense under all operating leases amounted to approximately $108,000 and $117,000
for the nine months ended September 30, 2021 and 2020, respectively.
Supplemental
cash flow information related to leases for the nine months ended September 30, 2021 and 2020 is as follows:
|
|
Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
Operating cash flows paid for operating lease
|
|
$
|
94,456
|
|
|
$
|
48,000
|
|
Right-of-use assets obtained in exchange for lease obligation:
|
|
|
|
|
|
|
|
|
Operating lease
|
|
$
|
133,473
|
|
|
$
|
201,028
|
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
14 – COMMITMENTS AND CONTINCENGIES (continued)
Operating
Leases Commitment
(continued)
The
following table summarizes the lease term and discount rate for the Company’s operating lease as of September 30, 2021:
|
|
Operating Lease
|
|
Weighted average remaining lease term (in years)
|
|
|
1.33
|
|
Weighted average discount rate
|
|
|
4.88
|
%
|
The
following table summarizes the maturity of lease liabilities under operating lease as of September 30, 2021:
For the Twelve-month Period Ending September 30:
|
|
Operating Lease
|
|
2022
|
|
$
|
153,949
|
|
2023
|
|
|
41,316
|
|
2024 and thereafter
|
|
|
-
|
|
Total lease payments
|
|
|
195,265
|
|
Amount of lease payments representing interest
|
|
|
(5,459
|
)
|
Total present value of operating lease liabilities
|
|
$
|
189,806
|
|
|
|
|
|
|
Current portion
|
|
$
|
148,749
|
|
Long-term portion
|
|
|
41,057
|
|
Total
|
|
$
|
189,806
|
|
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 five 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 $1.6 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 September 30, 2021, Avalon Shanghai
has contributed RMB 4,760,000 (approximately $0.7 million) that was included in equity method investment on the accompanying condensed
consolidated balance sheets. The Company intends to use its present working capital together with borrowings from related party and equity
raises to fund the project cost.
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 $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 a contribution of $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.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
14 – COMMITMENTS AND CONTINCENGIES (continued)
Joint
Venture – AVAR BioTherapeutics (China) Co. Ltd.
(continued)
In
addition, Avactis is responsible for:
|
●
|
Contributing
registered capital of RMB 5,000,000 (approximately $0.8 million) 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.
|
As
of September 30, 2021, Avactis has paid the $900,000 to Arbele as research and development fee.
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 September 30, 2021, License Agreement has not been finalized.
Line
of Credit Agreement
On
August 29, 2019, the Company entered into a Line of Credit Agreement (the “Line of Credit Agreement”) providing the Company
with a $20 million line of credit (the “Line of Credit”) from Wenzhao Lu (the “Lender”), a significant shareholder
and director of the Company. The Line of Credit allows the Company to request loans thereunder and to use the proceeds of such loans
for working capital and operating expense purposes until the facility matures on December 31, 2024. The loans are unsecured and are not
convertible into equity of the Company. Loans drawn under the Line of Credit bears interest at an annual rate of 5% and each individual
loan will be payable three years from the date of issuance. The Company has a right to draw down on the line of credit and not at the
discretion of the related party Lender. The Company may, at its option, prepay any borrowings under the Line of Credit, in whole or in
part at any time prior to maturity, without premium or penalty. The Line of Credit Agreement includes customary events of default. If
any such event of default occurs, the Lender may declare all outstanding loans under the Line of Credit to be due and payable immediately.
As of September 30, 2021, $3,963,189 was outstanding under the Line of Credit.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
15 – SUBSEQUENT EVENTS
Acquisition
and Equity Financing
On June 13, 2021, the Company entered into a Share
Purchase Agreement (the “Purchase Agreement”), by and among the Company, Lonlon Biotech Ltd., a company incorporated in the
British Virgin Islands (“BVI”) (“Sen Lang BVI”), the holders of the share capital of Sen Lang BVI (the “Sen
Lang BVI Shareholders”), the ultimate beneficial owners of the Sen Lang BVI Shareholders (the “Sen Lang BVI Beneficial Shareholders”
and, together with the Sen Lang BVI Shareholders, the “Sen Lang BVI Owners”) and a representative of the Sen Lang BVI Owners
(the “Sen Lang BVI Representative”). Pursuant to the Purchase Agreement, subject to the satisfaction of the conditions to
closing therein, including approval by the Avalon stockholders pursuant to the rules of the Nasdaq Stock Market (“Nasdaq”),
the Company agreed to purchase (the “Acquisition”) all of the issued and outstanding share capital of Sen Lang BVI (the “Sen
Lang BVI Shares”).
Sen
Lang BVI, through a “variable interest entity” structure (“VIE Structure”) of contractual rights held by its
wholly-owned subsidiary Beijing Langlang Runfeng Biotechnology Co., Ltd., a wholly foreign owned enterprise with limited liability organized
and existing under the laws of the People’s Republic of China (the “PRC Subsidiary”), has full economic benefit and
management control over, and is consolidated for accounting purposes with, Senlang Biotechnology Co. Ltd., a PRC domestic company with
limited liability organized and existing under the laws of the PRC (the “OpCo” or “SenlangBio”). SenlangBio is
mainly engaged in the business of research and development in relation to CAR-T cell therapy, immune cell therapy and related drug development.
SenlangBio is owned 100% by certain of the Sen Lang BVI Beneficial Shareholders. A wholly-owned subsidiary of SenlangBio, Shijiazhuang
Senlang Medical Laboratory Co., Ltd., a company with limited liability organized and existing under the laws of the PRC (“SenlangBio
Clinical Laboratory”) is engaged in the business of testing of immunology, serology and molecular genetics specialties for patients,
including hematology-tumor diagnostics and testing prior to clinical trials for cell therapy.
The purchase price being paid by the Company to the
Sen Lang BVI Shareholders under the Purchase Agreement for the Sen Lang BVI Shares is an aggregate of 81 million shares (the “Acquisition
Shares”) of the common stock of the Company (the “Avalon Common Stock”). Ten percent (10%), or 8.1 million, of such
shares will be held in escrow for 12 months following the closing to satisfy any indemnification obligations of the Sen Lang BVI Shareholders
under the Share Purchase Agreement. In addition, at the closing of the Acquisition, it is expected that Dr. Jianqiang Li, scientific founder
and CSO of SenlangBio, will join the board of the Company, and Dr. Li will also be appointed as Chief Technology Officer of the Company.
The Acquisition Shares will not be registered under the Securities Act of 1933, as amended (the “Securities Act”) and,
therefore, will be restricted securities under Rule 144 under the Securities Act for six months or longer after the
closing of the Acquisition, subject to “affiliate” status with the Company under the Securities Act.
In
connection with the Acquisition, on June 13, 2021, an institutional investor (the “Investor”) entered into an agreement,
as amended on June 24, 2021, with SenlangBio related to the purchase of registered capital of SenlangBio (the “OpCo Capital Increase
Agreement”) pursuant to which the Investor will acquire an aggregate of up to 13.5% of the equity ownership of SenlangBio for an
aggregate purchase price (the “Subscription Amount) of approximately US$30,000,000 (represented by an actual investment of RMB200,000,000)
(the “Equity Financing”), which funds will be invested in SenlangBio in three equal installments of approximately US$10,000,000,
at a fixed price, the first to be upon the closing of the Acquisition, the second to be within three months after the closing and the
third to be within six months after the closing. In addition, pursuant to a Securities Exchange Agreement, as amended on June 24, 2021
(the “Exchange Agreement”), by and among the Company, Sen Lang BVI, SenlangBio and the Investor, dated June 13, 2021, the
Investor shall have the right, exercisable between the six-month and five year-anniversaries of the respective initial closing and installment
closings, to elect to exchange, from time to time, all or part of its then-owned equity ownership of SenlangBio for shares (the “Exchange
Shares”) of Avalon Common Stock at a fixed exchange price of US$1.21 per share of Avalon Common Stock, which was the market price
of the Avalon Common Stock as of the date of the Exchange Agreement under Nasdaq rules. In addition, the Exchange Agreement provides
that the Investor may only exchange up to 10% of its total investment amount in any 30 day period.
Common
Shares Issued for Services
In
October 2021, the Company issued 200,000 shares of its common stock to a consultant for services rendered. These shares were valued at
$188,000, the fair market value on the grant date using the reported closing share price on the date of grant.
Common
Shares Sold for Cash
On December 13, 2019, the Company entered into
an Open Market Sale AgreementSM with Jefferies LLC, as sales agent (“Jefferies”). From October 1, 2021 to November
15, 2021, Jefferies sold an aggregate of 268,561 shares of common stock at an average price of $1.06 per share to investors. The Company
received net cash proceeds of $276,022, net of commission paid to sales agent of $8,537.
Line of Credit
As of November 4, 2021, the Company drew down an additional
aggregate of $1,000,000 from its credit facility under that certain credit line agreement with Wenzhao “Daniel”
Lu (the “Lender”), a significant shareholder and director of the Company, which provides the Company with a $20 million line
of credit (together with related documentation, the “Line of Credit”). The draw down aggregating $1,000,000 is intended
to provide working capital for the Company to use on a temporary basis for certain obligations in connection with the Company’s
business. As a result of these draw downs, the Company has approximately $15.3 million remaining available under the Line of
Credit. This draw down increased the total principal amount outstanding under the Line of Credit to $4.7 million.