As filed with the Securities and Exchange Commission on May 9,
2017.
Registration No. ________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
(Exact name of registrant as specified in its
charter)
Delaware
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8742
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47-1685128
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(State of other jurisdiction of incorporation or
organization)
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(Primary Standard Industrial Classification
Code Number)
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(IRS Employer
Identification No.)
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83 South Street, Suite 101
Freehold, New Jersey 07728
(917) 930-8118
(Address, including zip code, and telephone
number, including area code, of registrant’s principal executive offices)
David Jin, CEO and President
83 South Street, Suite 101
Freehold, New Jersey 07728
(917) 930-8118
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Upon the Effective Date of this Registration
Statement.
(Approximate date of commencement of proposed
sale to the public)
If any
of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 check the following box:
x
If this
Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
o
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.
o
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.
o
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions
of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
o
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Accelerated Filer
o
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Non-accelerated Filer
o
(Do not check if a smaller reporting company)
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Smaller Reporting Company
x
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Emerging Growth Company
x
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If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Calculation of Registration Fee
Title of Each Class of Securities
To Be Registered
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Amount to
be Registered
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Proposed
Maximum
Offering Price
Per Share (2)
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Proposed Maximum
Aggregate Offering
Price
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Amount Of
Registration
Fee (3)
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Offered by the Issuer:
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Common Stock, $0.0001 par value per share (1)
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20,000,000
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$
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0.75
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$
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15,000,000
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$
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1,738.50
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Offered by the Selling Stockholders:
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Common Stock, $0.0001 par value per share (1)
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1,090,500
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$
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0.75
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$
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817,875
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$
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94.79
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$
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1,833.29
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(1)
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Pursuant to Rule 416 of the Securities Act, this registration statement also registers such additional shares of common stock as may become issuable to prevent dilution as a result of stock splits, stock dividends or similar transactions.
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(2)
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The Offering price has been estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) of the Securities Act and is based upon the average of the high and low price of $0.75 per share of the Registrant’s Common Stock on the OTCQB Market on May 8, 2017.
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(3)
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Calculated in accordance with Rule 457(o) under the Securities Act of 1933, as amended.
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The registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment
which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may determine.
The Issuer and the Selling Shareholders
are offering the securities on a self-underwritten, best efforts basis, which is intended to end 180 days from the effective date
of this registration statement, unless earlier terminated by the sale of all 20,000,000 shares or the Board of Directors determines
that it is in the best interest of the Issuer to terminate the offering. The Issuer and Selling Shareholders are making this offering
without the involvement of underwriters or broker-dealers. There are no minimum purchase requirements, and there are no arrangements
to place the funds in an escrow, trust, or similar account. All sales of the securities offered by the Issuer and Selling Shareholders
are final at the time of sale.
The information in this prospectus is not complete and may be changed. The selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the sale is not permitted.
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SUBJECT TO COMPLETION, DATED MAY
9, 2017
PROSPECTUS
This prospectus relates to the issuance and
sale of up to 20,000,000 shares of common stock, $0.0001 par value per share at an offering price of $1.00 per share, of Avalon
GloboCare Corp. (f/k/a Global Technologies Corp.) (“Avalon GloboCare”) and to the resale of up to 1,090,500 shares
of common stock that may be sold by the selling stockholders identified in this prospectus from time to time at prevailing market
prices or as privately negotiated, as applicable; for an aggregate offering of 1,090,500 shares of common stock. These selling
stockholders, together with their transferees, are referred to throughout this prospectus as “selling stockholders.”
We may receive up to $20,000,000 in proceeds from the sale of our common stock in this offering if all 20,000,000 newly issued
shares are purchased by third party investors. The shares purchased in this offering from our company will be subject to a lock-up
whereby 75% of the shares may not be sold or transferred in any way until December 31, 2018. We will not receive any of the proceeds
if the selling stockholders identified in this prospectus sell their shares.
Our stock is quoted on OTCQB under the symbol
“AVCO.” On May 8, 2017, the last reported sale price of shares of our common stock on the OTCQB Marketplace was $0.75.
We will pay all of the expenses incident to
the registration of the shares offered under this prospectus, except for sales commissions and other expenses of selling stockholders
applicable to the sales of their shares. The shares may be offered for sale from time to time by the selling stockholders acting
as principal for their own accounts or in brokerage transactions at prevailing market prices or in transactions at negotiated prices.
No representation is made that any shares will or will not be offered for sale. It is not possible at the present time to determine
the price to the public in any sale of the shares by the selling stockholders and the selling stockholders reserve the right to
accept or reject, in whole or in part, any proposed purchase of shares. Accordingly, the public offering price and the amount of
any applicable underwriting discounts and commissions will be determined at the time of such sale by the selling stockholders. See
“Selling Stockholders” and “Plan of Distribution” in this prospectus.
An investment in our common stock is speculative
and involves a high degree of risk. Investors should carefully consider the risk factors and other uncertainties described in this
prospectus before purchasing our common stock. See “Risk Factors” beginning on page 5.
We are an “emerging growth company”
under the federal securities laws and will be subject to reduced public company reporting requirements. Investing in our
stock involves risks. You should carefully consider the Risk Factors beginning on page 4 of this prospectus.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION
NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL,
ACCURATE, OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is ________________,
2017.
TABLE OF CONTENTS
AVAILABLE INFORMATION
This prospectus constitutes a part of a registration
statement on Form S-1 (together with all amendments and exhibits thereto, the “Registration Statement”) filed by us
with the SEC under the Securities Act of 1933, as amended (the “Securities Act”). As permitted by the rules and regulations
of the SEC, this prospectus omits certain information contained in the Registration Statement, and reference is made to the Registration
Statement and related exhibits for further information with respect to Avalon GloboCare Corp. (f/k/a Global Technologies Corp.)
(“Avalon” or “Avalon GloboCare”) and the securities offered hereby. Any statements contained herein concerning
the provisions of any document filed as an exhibit to the Registration Statement or otherwise filed with the SEC are not necessarily
complete, and in each instance reference is made to the copy of such document so filed. Each such statement is qualified in its
entirety by such reference.
Through and including ________, 2017 all dealers
that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
You should rely only on the information
contained in this prospectus and any free writing prospectus prepared by or on behalf of us that we have referred to you. We and
the selling stockholders have not, authorized anyone to provide you with additional or different information from that contained
in this prospectus. If anyone provides you with additional, different or inconsistent information, you should not rely on it. We
and the selling stockholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions
where offers and sales are permitted.
PROSPECTUS SUMMARY
This summary highlights information contained
elsewhere in this prospectus. Because this is only a summary, it does not contain all of the information that may be important
to you. You should read this entire prospectus and should consider, among other things, the matters set forth under “Risk
Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and
our consolidated financial statements and related notes thereto appearing elsewhere in this prospectus before making your investment
decision.
Unless the context otherwise requires, any
reference to "Avalon GloboCare", "Avalon ", “we,” “us,” or “our” refers
to Avalon GloboCare Corp. and its subsidiaries, a Delaware corporation.
Overview
Avalon GloboCare is dedicated to integrating
and managing global healthcare services and resources, as well as empowering high-impact biomedical innovations and technologies
to accelerate their clinical applications. Operating through twomajor platforms, namely “Avalon Cell”, “and “Avalon
Rehab”, our “Technology + Service” ecosystem covers the areas of regenerative medicine, cell-based immunotherapy,
exosome technology, and rehabilitation medicine. We plan to integrate these services through joint ventures and accretive acquisitions
that bring shareholder value both in the short term, through operational entities as part of Avalon Rehab, and long term, through
biomedical innovation development as part of Avalon Cell.
We currently produce revenue through related
party strategic relationships in the Peoples Republic of China (“China”) that provide consultative services in advanced
areas of immunotherapy and second opinion/referral services. Our services include research studies; executive education; daily
online executive briefings; tailored expert advisory services; and consulting and management services. We typically charge an annual
fee. Through our services we attempt to focus our clients on important problems by providing an analysis of the evolving healthcare
industry and the methods prevalent in the industry to solve those problems through counsel, business planning and support.
The value of the Renminbi ("RMB"),
the main currency used in China, fluctuates and is affected by, among other things, changes in China's political and economic conditions.
The conversion of RMB into foreign currencies such as the U.S. dollar have generally been based on rates set by the People's Bank
of China, which are set daily based on the previous day's interbank foreign exchange market rates and current exchange rates on
the world financial markets.
Corporate History
Avalon was incorporated under the laws of the
State of Delaware on July 28, 2014. On October 18, 2016, the Company changed its name to Avalon GloboCare Corp. and completed a
reverse split of its shares of common stock at a ratio of 1:4. Avalon owns 100% of the capital stock of Avalon Heathcare Systems,
Inc., a Delaware company (“AHS”) which it acquired on October 19, 2016 for the purpose of acquiring U.S. based healthcare
companies. AHS was incorporated on May 18, 2015 under the laws of the State of Delaware. Considering that, following the acquisition,
the AHS shareholders controlled the majority of our outstanding voting common stock and we effectively succeeded our otherwise
minimal operations to those that are theirs, AHS is considered the accounting acquirer in this reverse-acquisition transaction.
A reverse-acquisition transaction is considered, and accounted for as, a capital transaction in substance; it is equivalent
to the issuance of AHS securities for our net monetary assets, which are deminimus, accompanied by a recapitalization. Accordingly,
we have not recognized any goodwill or other intangible assets in connection with this reverse acquisition transaction. AHS is
the surviving and continuing entities and the historical financials following the reverse acquisition transaction will be those
of AHS. We were a "shell company" (as such term is defined in Rule 12b-2 under the Securities Exchange Act
of 1934, as amended) immediately prior to our acquisition of AHS pursuant to the terms of the Share Exchange Agreement. As
a result of such acquisition, our operations shifted to that of AHS. In addition, Avalon owns 100% of the capital stock of Avalon
(Shanghai) Healthcare Technology Co., Ltd. (“Avalon Shanghai”), which is a wholly foreign-owned enterprise organized
under the laws of China. Avalon Shanghai was incorporated on April 29, 2016 and is engaged in medical related consulting services
for customers. On February 7, 2017, Avalon formed Avalon RT 9 Properties, LLC, a New Jersey limited liability company, and on January
23, 2017, Avalon incorporated Avalon (BVI) Ltd, a British Virgin Island company
The Offering
This prospectus relates to an aggregate of
1,090,500 shares of common stock of Avalon GloboCare that may be offered for sale by the persons named in this prospectus under
the heading “Selling Stockholders.” The selling stockholders are third party investors who acquired shares in private
placements of our common stock.
Additionally, this prospectus relates to the
issuance and sale of up to 20,000,000 shares of common stock of Avalon GloboCare at $1.00 per share.
Common Stock Offered by Us
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Up to 20,000,000 shares of common stock being conducted by our executive officers and directors, on as a “direct public offering” basis at $1.00 per share. No escrow account will be set up and all proceeds raised in the offering will be deposited immediately into one of our corporate accounts. The offering conducted by our company will commence when the Securities and Exchange Commission declares this prospectus effective. The offering conducted by our company will terminate upon the earlier of the sale of all the shares of common stock being offered or 180 business days after the date hereof, which may be extended for an additional 90 days in our sole discretion. In the event that all shares are sold under this prospectus by our company, persons who purchase shares will own 20,000,000 shares of common stock out of 84,628,622 shares of common stock outstanding, or 23.6%. However, in the event that only 5,000,000 shares are sold under this prospectus by our company, our investors will own 5,000,000 out of 69,628,622 shares of common stock or 7.2%. There is no minimum number of shares that must be sold in this offering. As a result, we will retain the proceeds from any funds raised and the proceeds will not be returned to the investor. In the event that we only raise a minimum amount under this offering, we will immediately utilize the proceeds. As a result, if you are an initial investor and we fail to raise additional proceeds, your investment will be rendered worthless. For example, if we only sell $1,000,000 (5% of the offering), we will utilize the proceeds in our operations but we will not be able to implement our business plan to any meaningful extent rendering your investment worthless.
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Lock-Up
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75% of the shares offered in the “direct public offering” (the “Lock-Up Shares”) will be subject to a lock-up whereby the purchaser agrees that he, she or it shall not transfer, offer, pledge, sell, contract to sell, grant any options for the sale of, assign or otherwise dispose of, directly or indirectly, any of the Lock-Up Shares through December 31, 2018.
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Offering price per share
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We will offer our shares at a fixed price of $1.00 per share. The selling stockholders may offer and sell their shares from time to time directly and/or through their registered representatives at prevailing market prices or as privately negotiated, if applicable.
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Common Stock Offered by Selling Stockholders
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1,090,500 shares of common stock
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Common Stock Outstanding
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64,628,622 shares of common stock
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Common Stock Outstanding After this Offering
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84,628,622 shares of common stock assuming the full offering
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Use of proceeds
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We will use the proceeds for the implementation of our business plan including mergers and acquisitions, laboratory and clinical trials, general and administrative expenses and working capital.
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Dividend Policy
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We intend to retain all available funds and any future earnings, if any, for use in our business operations. Accordingly, we do not anticipate paying any cash dividends on our common stock in the foreseeable future.
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Market Information
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Our stock is quoted on OTCQB under the symbol “AVCO.” On May 8, 2017, the last reported sale price of shares of our common stock on the OTCQB Marketplace was $0.75.
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Risk Factors
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An investment in our common stock is highly speculative and involves a high degree of risk. Investors should carefully consider the risk factors and other uncertainties described in this prospectus before purchasing our common stock. See “Risk Factors” beginning on page 5.
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The above Offering
Price of $1.00 per share has been arbitrarily determined by our company. It bears no relation to our assets, book value, or any
other customary investment criteria, including our prior operating history. Among factors considered by us in determining the offering
price were our lack of operating history, the proceeds to be raised by the offering, our relative cash requirements, estimates
of our business potential, the limited financial resources of our company, the amount of equity and control desired to be retained
by the present stockholders. There is no minimum number of shares that must be sold in this offering. In
the event that all shares are sold under this prospectus by our company, persons who purchase shares will own 20,000,000 shares
of common stock out of 84,628,622 shares of common stock outstanding, or 23.6%. However, in the event that only 5,000,000
shares are sold under this prospectus by our company, our investors will own 5,000,000 out of 69,628,622 shares of common stock
or 7.2%. There is no minimum number of shares that must be sold in this offering. As a result, we will retain
the proceeds from any funds raised and the proceeds will not be returned to the investor. In the event that we only
raise a minimum amount under this offering, we will immediately utilize the proceeds. As a result, if you are an initial
investor and we fail to raise additional proceeds, your investment will be rendered worthless. For example, if we only
sell $1,000,000 (5% of the offering), we will utilize the proceeds in our operations but we will not be able to implement our business
plan to any meaningful extent rendering your investment worthless.
Selected Financial Data
The following summary financial data should
be read in conjunction with “Management’s Discussion and Analysis” and the Financial Statements and Notes thereto,
included elsewhere in this Prospectus. We have derived the summary consolidated financial data for the year ended December 31,
2016 and as of December 31, 2016 from our audited consolidated financial statements that are included elsewhere in this prospectus.
Consolidated Statement of Operations Data:
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For the Year Ended
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December 31, 2016
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Revenue - related parties
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$
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616,446
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Cost of revenue - related parties
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73,066
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Gross profit
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543,380
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Professional fees
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395,780
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Total operating expenses
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466,447
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Interest income
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575
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Net income
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$
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55,581
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Net income per share - basic and diluted
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$
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0.001
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Weighted average number of shares outstanding - basic and diluted
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51,139,475
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Consolidated Balance Sheet Data:
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December 31, 2016
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Cash and cash equivalents
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$
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2,886,189
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Total assets
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3,706,508
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Total current liabilities
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160,317
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Total liabilities
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160,317
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Total stockholders' equity
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3,546,191
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Total liabilities and stockholders' equity
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$
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3,706,508
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RISK FACTORS
An investment in our common stock involves
a high degree of risk. You should carefully consider the following risk factors in addition to other information in this prospectus,
including the financial statements and the related notes thereto. The risks and uncertainties described below are those that are
currently deemed to be material and specific to our Company and industry. If any of these risks actually occur, our business may
be adversely affected, and you may lose all or part of your investment.
General Operating and Business Risks
Our limited operating history makes it difficult
for us to evaluate our future business prospects and make decisions based on those estimates of our future performance
.
We did not begin operations of our business
through AHS until May 2015. We have a limited operating history and limited revenue. As a consequence, it
is difficult, if not impossible, to forecast our future results based upon our historical data. Reliance on the historical
results may not be representative of the results we will achieve, particularly in our combined form. Because of the uncertainties
related to our lack of historical operations, we may be hindered in our ability to anticipate and timely adapt to increases or
decreases in revenues or expenses. If we make poor budgetary decisions as a result of unreliable historical data, we could
be less profitable or incur losses, which may result in a decline in our stock price.
Our results of operations have not resulted
in profitability and we may not be able to achieve profitability going forward.
We incurred a comprehensive loss amounting
to $38,987 for the year ended December 31, 2016. If we incur additional significant losses, our stock price, may decline,
perhaps significantly. Our management is developing plans to achieve profitability. Our business plan is speculative
and unproven. There is no assurance that we will be successful in executing our business plan or that even if we successfully implement
our business plan, that we will be able to curtail our losses now or in the future. Further, as we are a new enterprise, we expect
that net losses will continue and our working capital deficiency will exacerbate.
We depend upon key personnel and need additional
personnel.
Our success depends on the continuing services
of Wenzhao Lu, David Jin, Meng Li and Luisa Ingargiola, our executive officers and directors. The loss of Mr. Lu, Dr.
Jin, Ms. Li or Ms. Ingariola could have a material and adverse effect on our business operations. Additionally, the success of
the Company’s operations will largely depend upon its ability to successfully attract and maintain competent and qualified
key management personnel. As with any company with limited resources, there can be no guaranty that the Company will be able to
attract such individuals or that the presence of such individuals will necessarily translate into profitability for the Company. Our
inability to attract and retain key personnel may materially and adversely affect our business operations.
We have entered into three consulting agreements
with related parties
.
The loss of such customers could adversely impact our financial condition and results of operations
.
As of December 31, 2016, we recognized an aggregate
of $616,446 in revenue, of which all generated from related parties. Wenzhao Lu, our Chairman and significant shareholder, is the
Chairman of each of the three related parties. We maintain close working relationships with our three customers. The loss of any
one major customer would have a material adverse effect on our financial condition or results of operation, the loss of more than
one such major customer, or our failure to replace such customer with other customers, could have a material adverse effect on
our financial condition and our results of operations.
Our auditors have issued a “going
concern” audit opinion.
Our independent auditors have indicated, in
their report on our December 31, 2016 consolidated financial statements, that there is substantial doubt about our ability to continue
as a going concern. We had an accumulated deficit of $53,369 at December 31, 2016. We have a limited operating history and our
continued growth is dependent upon the continuation of providing medical consulting services to its only three clients who are
related parties; 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 date hereof. These matters raise substantial doubt about our ability to continue as a going concern.
Our ability to continue as a going concern is dependent on our ability to raise additional capital, implement our business plan,
and generate significant revenues. There are no assurances that we 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. Our plan on raising capital
through the sale of equity or debt instruments to implement its business plan. However, there is no assurance these plans will
be realized and that any additional financings will be available to our company on satisfactory terms and conditions, if any.
We must effectively manage the growth of
our operations, or our company will suffer.
To manage our growth, we believe we must continue
to implement and improve our services. We may not have adequately evaluated the costs and risks associated with our planned expansion,
and our systems, procedures, and controls may not be adequate to support our operations. In addition, our management may not be
able to achieve the rapid execution necessary to successfully offer our products and services and implement our business plan on
a profitable basis. The success of our future operating activities will also depend upon our ability to expand our support system
to meet the demands of our growing business. Any failure by our management to effectively anticipate, implement, and manage changes
required to sustain our growth would have a material adverse effect on our business, financial condition, and results of operations.
Our business requires substantial capital,
and if we are unable to maintain adequate financing sources our profitability and financial condition will suffer and jeopardize
our ability to continue operations.
In connection with the strategic development
portion of our business, we will need significant capital in order to implement acquisitions of real estate or technologies. In
addition, we will need a significant amount of capital in order to fully implement our advisory business in order to fully grow
our technology base and employee base. If we are unable to maintain adequate financing or other sources of capital are not available,
we could be forced to suspend, curtail or reduce our operations, which could harm our revenues, profitability, financial condition
and business prospects.
Our revenue and results of operations may
suffer if we are unable to attract new clients, continue to engage existing client, or sell additional products and services.
We presently derive our revenue from annual
consulting fees from our related party clients. Our growth therefore depends on our ability to attract new clients, maintain existing
clients and sell additional products and services to existing clients. This depends on our ability to understand and anticipate
market and pricing trends and our clients’ needs and our ability to deliver consistent, reliable, high-quality services.
If we fail to engage new clients, continue to re-engage with our existing clients or to cross-sell additional services our results
could be materially and adversely affect our operating results.
If we are unable to maintain our reputation
and expand our name recognition, we may have difficulty attracting new business and retaining current members.
Our professional reputation is an important
factor in attracting and retaining our members and in building relationships with the progressive health care and education organizations
that supply many of the best practices we feature in our research. We believe that establishing and maintaining a good reputation
and name recognition are critical for attracting and retaining members. Promotion and enhancement of our reputation will depend
largely on our success in continuing to provide effective solutions. Our brand name and reputation will suffer, and our ability
to attract new members or retain existing members could be adversely affected, if members do not perceive our solutions to be effective
or of high quality or if there are inaccuracies or defects in our solutions.
If we are not able to offer new and valuable
products and services, our business may suffer.
Our success depends on our ability to identify
and develop new products and services that serve specific constituencies, to anticipate changing market trends, and to adapt our
research and analysis to meet the changing needs of our clients. We may not be able to provide helpful and timely research and
analysis of developments and trends in a manner that meets market needs. Any such failure could cause some of our existing products
and services to become obsolete. This environment of rapid and continuous change presents significant challenges to our ability
to provide our clients with timely consulting and management services for issues and topics of importance. As a result, we must
continue to invest resources in development of new services in order to enhance our existing products and services and introduce
new high-quality products and services that will appeal to members and potential members. If we are not able to offer new and valuable
products and services, our business may suffer.
Our prospects will suffer if we are not
able to hire, train, motivate, manage, and retain a significant number of highly skilled employees.
We only recently commenced business and we
presently only have three clients. Wenzhao Lu, our Chairman and significant shareholder, is the Chairman of each of the three clients
that provided the prepayments. Our future success depends upon our ability to hire, train, motivate, manage, and retain a significant
number of highly skilled employees, particularly research analysts, technical experts, and sales and marketing staff. We will experience,
competition for professional personnel from management consulting firms and other healthcare firms. Hiring, training, motivating,
managing, and retaining employees with the skills we need is time consuming and expensive. Any failure by us to address our staffing
needs in an effective manner could hinder our ability to continue to provide high-quality products and services and to grow our
business.
We may experience significant delays in
generating, or an inability to generate, revenue if potential clients take a long time to evaluate our products and services.
Our sales strategy is to market our products
and services directly to health care organizations. If we are unable to sell additional products and services to our existing clients
or engage new clients, our ability to increase our revenue could be materially adversely affected. Generally speaking, the sales
cycle is extensive for our clients. We do not control many of the factors that will influence the decisions of these organizations
regarding the purchase of our products and services. The evaluation process sometimes can be lengthy and involve significant technical
evaluation and commitment of personnel by these organizations. The use of our products and services also may be delayed due to
reluctance to change or modify existing procedures.
Potential liability claims may adversely
affect our business.
Our services, which may include recommendations
and advice to organizations regarding complex business and operational processes, regulatory and compliance issues, and labor practices,
may give rise to liability claims by our clients or by third parties who bring claims against our clients. Healthcare organizations
often are the subject of regulatory scrutiny and litigation, and we also may become the subject of such litigation based on our
advice and services. Any such litigation, whether or not resulting in a judgment against us, may adversely affect our reputation
and could have a material adverse effect on our financial condition and results of operations. We may not have adequate insurance
coverage for claims against us.
In accordance with our strategic development
policy, we may invest in companies for strategic reasons and may not realize a return on our investments.
From time to time, we may make investments
in companies. These investments may be for strategic objectives to support our key business initiatives but may also be stand alone
investments or acquisitions. Such investments or acquisitions could include equity or debt instruments in private companies, many
of which may not be marketable at the time of our initial investment. These companies may range from early-stage companies that
are often still defining their strategic direction to more mature companies with established revenue streams and business models.
The success of these companies may depend on product development, market acceptance, operational efficiency, and other key business
factors. The companies in which we invest may fail because they may not be able to secure additional funding, obtain favorable
investment terms for future financings, or take advantage of liquidity events such as public offerings, mergers, and private sales.
If any of these private companies fails, we could lose all or part of our investment in that company. If we determine that impairment
indicators exist and that there are other-than-temporary declines in the fair value of the investments, we may be required to write
down the investments to their fair value and recognize the related write-down as an investment loss.
Our growing operations in China could expose
us to risks that could have an adverse effect on our costs of operations.
Our client base is presently located in China.
We intend to grow this client base in China as well as the United States. As a result, we expect to continue to add personnel in
China. With a significant focus of our operations in the China, our reliance on a workforce in China exposes us to disruptions
in the business, political, and economic environment in that region. Maintenance of a stable political environment between China
and the United States is important to our operations, and any disruption in this relationship may directly negatively affect our
operations. Our operations in China require us to comply with complex local laws and regulatory requirements and expose us to foreign
currency exchange rate risk. Our operations may also be subject to reduced or inadequate protection of our intellectual property
rights, and security breaches. Further, it may be difficult to transfer funds from our Chinese operations to our US parent company.
Negative developments in any of these areas could increase our costs of operations or otherwise harm our business.
We face intense competition which could
cause us to lose market share.
In the healthcare markets in the United States
and the Peoples Republic of China, we will compete with large healthcare providers who have more significant financial resources,
established market positions, long-standing relationships, and who have more significant name recognition, technical, marketing,
sales, distribution, financial and other resources than we do. The resources available to our competitors to develop new services
and products and introduce them into the marketplace exceed the resources currently available to us. This intense competitive environment
may require us to make changes in our services, products, pricing, licensing, services, distribution, or marketing to develop a
market position.
Our success is heavily dependent on protecting
our intellectual property rights.
We rely on trade secret protections to protect
our proprietary technology. Our success will, in part, depend on our ability to obtain trademarks and patents. We presently do
not hold patents registered with the United States Patent and Trademark Office or China State Intellectual Property Office. Although
we have entered into confidentiality agreements with our employees and consultants, we cannot be certain that others will not gain
access to these trade secrets. Others may independently develop substantially equivalent proprietary information and techniques
or otherwise gain access to our trade secrets.
We may be exposed to liabilities under the
Foreign Corrupt Practices Act, and any determination that we violated the Foreign Corrupt Practices Act or Chinese anti-corruption
law could have a material adverse effect on our business.
We are subject to the Foreign Corrupt Practice
Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and
political parties by U.S. persons and issuers as defined by the statute for the purpose of obtaining or retaining business. Chinese
anti-corruption law also strictly prohibits bribery of government officials. We have operations, agreements with third parties
and make sales in China, where corruption may occur. Our activities in China create the risk of unauthorized payments or offers
of payments by one of the employees, consultants, sales agents or distributors of our company, even though these parties are not
always subject to our control. It is our policy to implement safeguards to prevent these practices by our employees. However, our
existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agents
or distributors of our company may engage in conduct for which we might be held responsible.
Violations of the FCPA or other anti-corruption
laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect
our business, operating results and financial condition. In addition, the United States government may seek to hold our company
liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.
Our status as an emerging growth company
may result in reduced disclosure obligations.
We are an “emerging growth company,”
as defined in the Jumpstart Our Business Startups Act, which we refer to as the “JOBS Act,” and we are eligible to
take advantage of certain exemptions from various reporting and financial disclosure requirements that are applicable to other
public companies, that are not emerging growth companies, including, but not limited to, (1) not being required to comply with
the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), (2)
reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and (3) exemptions
from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute
payments not previously approved. We intend to take advantage of these exemptions. Because of the reduced disclosure and because
our business is conducted in China, investors may find investing in our common shares less attractive as a result, which could
have an adverse effect on our stock price.
In addition, Section 107 of the JOBS Act also
provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of
the Securities Act of 1933, as amended, for complying with new or revised accounting standards. As a result, an emerging growth
company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
We elected to opt out of such extended transition period and acknowledge such election is irrevocable pursuant to Section 107 of
the JOBS Act.
We could remain an emerging growth company
for up to five years, or until the earliest of (1) the last day of the first fiscal year in which our annual gross revenues exceed
$1 billion, (2) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act,
which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last
business day of our most recently completed second fiscal quarter and we have been publicly reporting for at least 12 months, or
(3) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.
Risks Related to Doing Business in China
If we become directly subject to the recent
scrutiny, criticism and negative publicity involving certain U.S.-listed Chinese companies, we may have to expend significant resources
to investigate and resolve the matter which could harm our business operations, stock price and reputation and could result in
a loss of your investment in our stock, especially if such matter cannot be addressed and resolved quickly.
Recently, U.S. public companies that have substantially
all of their operations in China, particularly companies like us which have completed so-called reverse merger transactions, have
been the subject of intense scrutiny, criticism and negative publicity by investors, short sellers, financial commentators and
regulatory agencies, such as the United States Securities and Exchange Commission. Much of the scrutiny, criticism and negative
publicity has centered around financial and accounting irregularities and mistakes, a lack of effective internal controls over
financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of
fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies
has sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder
lawsuits, SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear
what affect this sector-wide scrutiny, criticism and negative publicity will have on our company, our business and our stock price.
If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have
to expend significant resources to investigate such allegations and/or defend our company. This situation could be costly and time
consuming and distract our management from growing our company. If such allegations are not proven to be groundless, our company
and business operations will be severely impacted and your investment in our stock could be rendered worthless.
Adverse changes in political and economic
policies of the Chinese government could impede the overall economic growth of China, which could reduce the demand for our products
and damage our business.
Presently, we generate our revenue in China
although we intend to pursue various opportunities in the United States and our headquarters is based in the United States. Accordingly,
our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal
developments in China. The Chinese economy differs from the economies of most developed countries in many respects, including:
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As the Chinese economy has been transitioning
from a planned economy to a more market-oriented economy, the Chinese government has implemented various measures to encourage
economic growth and guide the allocation of resources. While these measures may benefit the overall Chinese economy, they may also
have a negative effect on us or the healthcare industry in general.
Although the Chinese government has in recent
years implemented measures emphasizing the utilization of market forces for economic reform, the Chinese government continues to
exercise significant control over economic growth in China through the allocation of resources, controlling payment of foreign
currency-denominated obligations, setting monetary policy and imposing policies that impact particular industries or companies
in different ways.
Any adverse change in the economic conditions
or government policies in China could have a material adverse effect on the overall economic growth and the level of new healthcare
investments and expenditures in China, which in turn could lead to a reduction in demand for our services and consequently have
a material adverse effect on our business and prospects.
Uncertainties with respect to the Chinese
legal system could limit the legal protections available to you and us.
We conduct a substantial amount of our business
through our operating subsidiary in China. Our operating subsidiary is generally subject to laws and regulations applicable to
foreign investments in China and, in particular, laws applicable to foreign-invested enterprises. The Chinese legal system is based
on written statutes, and prior court decisions may be cited for reference but have limited precedential value. Since 1979, a series
of new Chinese laws and regulations have significantly enhanced the protections afforded to various forms of foreign investments
in China. However, since the Chinese legal system continues to rapidly evolve, the interpretations of many laws, regulations and
rules are not always uniform and enforcement of these laws, regulations and rules involve uncertainties, which may limit legal
protections available to you and us. In addition, any litigation in China may be protracted and result in substantial costs and
diversion of resources and management attention. In addition, all of our executive officers and almost all of our directors are
residents of China and not of the United States, and substantially all the assets of these persons are located outside the United
States. As a result, it could be difficult for investors to affect service of process in the United States or to enforce a judgment
obtained in the United States against our Chinese operations and subsidiary.
The Chinese government exerts substantial
influence over the manner in which we must conduct our business activities.
The Chinese government has exercised and continues
to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our
ability to operate in China may be harmed by changes in its laws and regulations. We believe that our operations in China are in
material compliance with all applicable legal and regulatory requirements. However, the central or local governments of the jurisdictions
in which we operate may impose new, stricter regulations or interpretations of existing regulations that would require additional
expenditures and efforts on our part to ensure our compliance with such regulations or interpretations.
Accordingly, government actions in the future,
including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or
regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions
in China or particular regions thereof.
We may be unable to complete a business
combination transaction efficiently or on favorable terms due to complicated merger and acquisition regulations implemented on
September 8, 2006.
The recent Regulation on Mergers and Acquisitions
of Domestic Companies by Foreign Investors adopted by the Chinese government also governs the approval process by which a Chinese
company may participate in an acquisition of its assets or its equity interests. Depending on the structure of the transaction,
the new regulation will require the Chinese parties to make a series of applications and supplemental applications to the government
agencies. In some instances, the application process may require the presentation of economic data concerning a transaction, including
appraisals of the target business and evaluations of the acquirer, which are designed to allow the government to assess the transaction.
Government approvals will have expiration dates by which a transaction must be completed and reported to the government agencies.
Compliance with the new regulations is likely to be more time consuming and expensive than in the past and the government can now
exert more control over the combination of two businesses. Accordingly, due to the new regulation, our ability to engage in business
combination transactions is extremely complicated, time consuming and expensive, and we may not be able to negotiate a transaction
that is acceptable to our stockholders or sufficiently protect their interests in a transaction.
The new regulation allows Chinese government
agencies to assess the economic terms of a business combination transaction. Parties to a business combination transaction may
have to submit to MOFCOM and the other government agencies an appraisal report, an evaluation report and the acquisition agreement,
all of which form part of the application for approval, depending on the structure of the transaction. The regulations also prohibit
a transaction at an acquisition price obviously lower than the appraised value of the Chinese business or assets and in certain
transaction structures, require that consideration must be paid within defined periods, generally not in excess of a year. The
regulation also limits our ability to negotiate various terms of the acquisition, including aspects of the initial consideration,
contingent consideration, holdback provisions, indemnification provisions and provisions relating to the assumption and allocation
of assets and liabilities. Transaction structures involving trusts, nominees and similar entities are prohibited. Therefore, such
regulation may impede our ability to negotiate and complete a business combination transaction on financial terms that satisfy
our investors and protect our stockholders’ economic interests.
Under the Current Enterprise Income Tax,
or EIT, Law, we may be classified as a "resident enterprise" of China. Such classification will likely result in unfavorable
tax consequences to us and our non-Chinese stockholders.
We are a holding company incorporated under
the laws of Delaware. We conduct substantially all of our business through our wholly-owned subsidiaries, and we derive all of
our income from these entities. Prior to January 1, 2008, dividends derived by foreign enterprises from business operations in
China were not subject to the Chinese enterprise income tax. However, such tax exemption ceased as of January 1, 2008 and thereafter
with the effectiveness of the new Enterprise Income Tax Law, or EIT Law.
Under the EIT Law, if we are not deemed to
be a “resident enterprise” for Chinese tax purposes, a withholding tax at the rate of 10% would be applicable to any
dividends paid by our Chinese subsidiaries to us. However, if we are deemed to be a “resident enterprise” established
outside of China whose “place of effective management” is located in China, we would be classified as a resident enterprise
for Chinese tax purposes and thus would be subject to an enterprise income tax rate of 25% on all of our income on a worldwide
basis.
The regulations promulgated pursuant to the
EIT Law define the term “place of effective management” as “establishments that carry out substantial and overall
management and control over the manufacturing and business operations, personnel, accounting, properties, etc. of an enterprise.”
The State Administration of Taxation issued a SAT Circular 82 on April 22, 2009, which provides that the “place of effective
management” of a Chinese-controlled overseas-incorporated enterprise is located in China if the following requirements are
satisfied: (i) the senior management and core management departments in charge of its daily operations function are mainly located
in China; (ii) its financial and human resources decisions are subject to determination or approval by persons or bodies located
in China; (iii) its major assets, accounting books, company seals, and minutes and files of its board and shareholders’ meetings
are located or kept in China; and (iv) no less than half of the enterprise’s directors or senior management with voting rights
reside in China. SAT Circular 82 applies only to overseas registered enterprises controlled by Chinese enterprises, not to those
controlled by Chinese individuals. If the Company’s non-Chinese incorporated entities are deemed Chinese tax residents, such
entities would be subject to China tax under the EIT Law.
We have analyzed the applicability of the EIT
Law and related regulations, and for each of the applicable periods presented, we have not accrued for Chinese tax on such basis.
In addition, although under the EIT Law and the related regulations dividends paid to us by our Chinese subsidiaries would qualify
as “tax-exempted income,” we cannot assure you that such dividends will not be subject to a 10% withholding tax, as
the Chinese foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect
to the processing of outbound remittances to entities that are treated as resident enterprises for Chinese enterprise income tax
purposes. As a result of such changes, our historical operating results will not be indicative of our operating results for future
periods and the value of our shares of common stock may be adversely affected. We are actively monitoring the possibility of “resident
enterprise” treatment and are evaluating appropriate organizational changes to avoid this treatment, to the extent possible.
We may be subject to fines and legal sanctions
if we or our Chinese employees fail to comply with Chinese regulations relating to employee stock options granted by overseas listed
companies to Chinese citizens.
On December 25, 2006, the People’s Bank
of China issued the Administration Measures on Individual Foreign Exchange Control, and its Implementation Rules were issued by
the State Administration of Foreign Exchange (“SAFE”) on January 5, 2007. Both took effect on February 1, 2007. Under
these regulations, all foreign exchange matters involved in an employee stock holding plan, stock option plan or similar plan in
which Chinese citizens’ participation requires approval from the SAFE or its authorized branch. On March 28, 2007, the SAFE
issued the Application Procedure for Foreign Exchange Administration for Domestic Individuals Participating in Employee Stock Holding
Plans or Stock Option Plans of Overseas Listed Companies, or Notice 78. Under Notice 78, Chinese individuals who participate in
an employee stock option holding plan or a stock option plan of an overseas listed company are required, through a Chinese domestic
agent or Chinese subsidiary of the overseas listed company, to register with the SAFE and complete certain other procedures. If
we and our Chinese employees are granted shares or stock options pursuant to our share incentive plan they would be subject to
Notice 78. However, in practice, there are significant uncertainties with regard to the interpretation and implementation of Notice
78. We are committed to complying with the requirements of Notice 78. However, we cannot provide any assurance that we or our Chinese
employees will be able to qualify for or obtain any registration required by Notice 78. In particular, if we and/or our Chinese
employees fail to comply with the provisions of Notice 78, we and/or our Chinese employees may be subject to fines and legal sanctions
imposed by the SAFE or other Chinese government authorities, as a result of which our business operations and employee option plans
could be materially and adversely affected.
The new M&A Rules establish more complex
procedures for some acquisitions of Chinese companies by foreign investor which could make it more difficult for us to pursue growth
through acquisitions in China.
The New M&A Rules that became effective
on September 8, 2006 established additional procedures and requirements that could make merger and acquisition activities by foreign
investors more time-consuming and complex, including requirements in some instances that the Ministry of Commerce be notified in
advance of any change-of-control transaction in which a foreign investor takes control of a Chinese domestic enterprise. Complying
with the requirements of the M&A Rules to complete such transactions could be time-consuming, and any required approval processes,
including obtaining approval from the Ministry of Commerce, may delay or inhibit our ability to complete such transactions, which
could materially adversely affect our ability to grow our business through acquisitions in China.
Risks Relating to our Securities
We may not be able to attract the attention
of brokerage firms because we became a public company by means of a reverse acquisition.
Because we became public through a “reverse
acquisition,” securities analysts of brokerage firms may not provide coverage of us since there is little incentive to brokerage
firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct any secondary
offerings on behalf of the Company in the future.
Applicable regulatory requirements, including
those contained in and issued under the Sarbanes-Oxley Act of 2002, may make it difficult for our company to retain or attract
qualified officers and directors, which could adversely affect the management of its business and its ability to obtain or retain
listing of its common stock.
We may be unable to attract and retain those
qualified officers, directors and members of board committees required to provide for effective management because of the rules
and regulations that govern publicly held companies, including, but not limited to, certifications by principal executive officers.
The enactment of the Sarbanes-Oxley Act has resulted in the issuance of a series of related rules and regulations and the strengthening
of existing rules and regulations by the SEC, as well as the adoption of new and more stringent rules by the stock exchanges. The
perceived increased personal risk associated with these changes may deter qualified individuals from accepting roles as directors
and executive officers.
Further, some of these changes heighten the
requirements for board or committee membership, particularly with respect to an individual’s independence from the corporation
and level of experience in finance and accounting matters. We may have difficulty attracting and retaining directors with the requisite
qualifications. If we are unable to attract and retain qualified officers and directors, the management of its business and its
ability to obtain or retain listing of our shares of common stock on any stock exchange (assuming we elect to seek and are successful
in obtaining such listing) could be adversely affected.
If we fail to maintain an effective system
of internal controls, it may not be able to accurately report its financial results or detect fraud. Consequently, investors could
lose confidence in our company’s financial reporting and this may decrease the trading price of its stock.
We must maintain effective internal controls
to provide reliable financial reports and detect fraud. We have been assessing its internal controls to identify areas that need
improvement. It is in the process of implementing changes to internal controls, but has not yet completed implementing these changes.
Failure to implement these changes to our company’s internal controls or any others that it identifies as necessary to maintain
an effective system of internal controls could harm its operating results and cause investors to lose confidence in our reported
financial information. Any such loss of confidence would have a negative effect on the trading price of our stock.
Voting power of our shareholders is highly
concentrated by insiders.
Our officers and directors and affiliates
own approximately 80.1% of our outstanding common shares. Such concentrated control of our company may adversely affect the value
of our common shares. If you acquire our common shares, you may have no effective voice in our management. Sales by our insiders
or affiliates, along with any other market transactions, could affect the value of our common shares.
Our articles of incorporation allow for
our board to create new series of preferred stock without further approval by our stockholders, which could adversely affect the
rights of the holders of our Common Stock.
Our Board of Directors has the authority to
fix and determine the relative rights and preferences of preferred stock. Our Board of Directors have the authority to issue up
to 10,000,000 shares of our preferred stock terms of which may be determined by the Board without further stockholder approval.
As a result, our Board of Directors could authorize the issuance of a series of preferred stock that would grant to holders the
preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the
holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our
common stock. In addition, our Board of Directors could authorize the issuance of a series of preferred stock that has greater
voting power than our common stock or that is convertible into our common stock, which could decrease the relative voting power
of our common stock or result in dilution to our existing stockholders. Although we have no present intention to issue any additional
shares of preferred stock or to create any additional series of preferred stock, we may issue such shares in the future.
You may experience dilution of your ownership
interests because of the future issuance of additional common shares.
In the future, we may issue additional authorized
but previously unissued equity securities, resulting in the dilution of the ownership interests of our shareholders. We may also
issue additional shares of our securities that are convertible into or exercisable for common shares, as the case may be, in connection
with hiring or retaining employees, future acquisitions, future sales of its securities for capital raising purposes, or for other
business purposes. The future issuance of any such additional shares may create downward pressure on the value of our securities.
There can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in
the future in conjunction with any capital raising efforts, including at a price (or exercise prices) below the price at which
our shares may be valued or are trading in a public market.
We have not paid dividends in the past and
do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock
We have never paid cash dividends on our common
stock and do not anticipate paying cash dividends in the foreseeable future. The payment of dividends on our common stock will
depend on earnings, financial condition and other business and economic factors affecting it at such time as the board of directors
may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will
only occur if its stock price appreciates.
Our stock price and trading volume may be
volatile, which could result in substantial losses for our stockholders.
The equity trading markets may experience periods
of volatility, which could result in highly variable and unpredictable pricing of equity securities. The market price of our common
stock could change in ways that may or may not be related to our business, our industry or our operating performance and financial
condition. In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur. We
have experienced significant volatility in the price of our stock over the past few years. We cannot assure you that the market
price of our common stock will not fluctuate or decline significantly in the future. In addition, the stock markets in general
can experience considerable price and volume fluctuations.
We have not voluntary implemented various
corporate governance measures, in the absence of which, shareholders may have more limited protections against interested director
transactions, conflict of interest and similar matters.
Recent Federal legislation, including the Sarbanes-Oxley
Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate
management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have
been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or the NASDAQ Stock
Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national
securities exchanges are those that address board of directors' independence, audit committee oversight, and the adoption of a
code of ethics. While we intend to adopt certain corporate governance measures such as a code of ethics and established an audit
committee, Nominating and Corporate Governance Committee, and Compensation Committee of our board of directors, we presently do
not have any independent directors. We intend to expand our board membership in future periods to include independent directors.
It is possible that if we were to have independent directors on our board, stockholders would benefit from somewhat greater assurances
that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible
conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent
directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees
may be made by directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in
mind our current lack of both corporate governance measures and independent directors in formulating their investment decisions.
If a public market for our common stock
develops, trading will be limited under the SEC’s penny stock regulations, which will adversely affect the liquidity of our
common stock.
The trading price of our common stock is less
than $5.00 per share and, as a result, our common stock is considered a "penny stock," and trading in our common stock
would be subject to the requirements of Rule 15g-9 under the Exchange Act. Under this rule, broker/dealers who recommend low-priced
securities to persons other than established customers and accredited investors must satisfy special sales practice requirements.
Generally, the broker/dealer must make an individualized written suitability determination for the purchaser and receive the purchaser's
written consent prior to the transaction.
SEC regulations also require additional disclosure
in connection with any trades involving a "penny stock," including the delivery, prior to any penny stock transaction,
of a disclosure schedule explaining the penny stock market and its associated risks. These requirements severely limit the liquidity
of securities in the secondary market because few broker or dealers are likely to undertake these compliance activities. In addition
to the applicability of the penny stock rules, other risks associated with trading in penny stocks could also be price fluctuations
and the lack of a liquid market. An active and liquid market in our common stock may never develop due to these factors.
Risks Related to this Offering
There is no minimum raise required in this
offering and all funds raised in this offering will be deposited directly into our corporate account and will not be held in escrow
and, as a result, if we sell less than 10% of our shares of common stock in this offering we will not have the required funds to
implement our business plan, you may lose your entire investment.
No escrow account will be set up and all proceeds
raised in the offering will be deposited immediately into our corporate account to be utilized for working capital in the priority
set by management of our company. There is no minimum number of shares that must be sold in this offering. As
a result, we will retain the proceeds from any funds raised and the proceeds will not be returned to the investor. In
the event that we only raise a minimum amount under this offering, we will immediately utilize the proceeds. As a result,
if you are an initial investor and we fail to raise additional proceeds, your investment will be rendered worthless. For
example, if we only sell $2,000,000 (10% of the offering) in securities, we will utilize the proceeds in our operations but we
will not be able to implement our business plan to any meaningful extent rendering your investment worthless. We cannot
guarantee that we will be able to raise adequate funds in this offering to implement its business plan. In the event that we do
not raise adequate funds and the subscriber has invested in our company, then the subscriber’s investment may be lost entirely.
Since this is a direct public offering and
there is no underwriter, we may not be able to sell any shares ourselves.
We have not retained an underwriter to sell
these shares. We will conduct this offering as a direct public offering, meaning there is no guarantee as to how much money we
will be able to raise through the sale of our stock. If we fail to sell all the shares we are trying to sell, our ability to expand
and complete our business plan will be materially affected, and you may lose all or substantially all of your investment.
You will not receive dividend income from
an investment in the shares and as a result, you may never see a return on your investment.
We have never declared or paid a cash dividend
on our shares nor will we in the foreseeable future. We currently intend to retain any future earnings, if any, to finance the
operation and expansion of our business. Accordingly, investors who anticipate the need for immediate income from their investments
by way of cash dividends should refrain from purchasing any of the securities offered by our company. As we do not intend to declare
dividends in the future you may never see a return on your investment and you indeed may lose your entire investment.
We have arbitrarily determined the initial
public offering price and this may not be the market price of the shares after the offering.
The offering price of the shares has been arbitrarily
determined by us based on what we believe purchasers of such speculative issues would be willing to pay for the shares of our company
and does not necessarily bear any material relationship to book value, par value, or any other established criterion of value.
As a result, it may be difficult for you to resell your shares at or above the offering price. You may also lose your entire investment
if the price of the shares being sold is too high.
You may not be able to resell any shares
you purchased in this offering.
There has been an extremely limited trading
market for our common stock to date. There is no assurance that a significant trading market will ever develop or, if such a market
does develop, that it will continue. This means that it may be hard or impossible for you to find a willing buyer for your stock
should you decide to sell it in the future or to resell the shares at or above the offering price.
Our issuance of further shares and the eligibility
of issued shares for resale will dilute our common stock and could lower the price a willing buyer would pay for our common stock.
The shares, if all are sold, being offered
in this prospectus (excluding the shares held by the selling stock holder) represent approximately 23.6% of our total issued and
outstanding shares on a fully-diluted basis. Present shareholders acquired their shares of common stock at prices substantially
below the offering price, upon completion of the Offering, there will be an immediate substantial dilution to subscribers in the
book value of each common share, and the present management will realize an immediate increase thereon (See “Dilution”).
We calculate net tangible book value per share by subtracting from our total assets all intangible assets and total liabilities,
and dividing the result by the number of outstanding shares of common stock. Furthermore, we may issue additional shares, options
and warrants and we may grant stock options to our employees, officers, directors and consultants under our future stock option
plans, all of which may further dilute our net tangible book value. The dilution of our shares could lower the price a willing
buyer would pay for our shares based on the fact our net asset value per share and/or our earnings ratio per share would be reduced.
Future sales of restricted shares could
decrease the price a willing buyer would pay for shares of our common stock and impair our ability to raise capital.
The 64,628,622 shares of common stock presently
issued and outstanding as of the date hereof are “restricted securities” as that term is defined under the Securities
Act of 1933, as amended, (the “Securities Act”) and in the future may be sold in compliance with Rule 144 of the Securities
Act, or pursuant to a Registration Statement filed under the Securities Act. Rule 144 provides, in essence, that a person
holding restricted securities for a period of six months may sell those securities. However, as we were a former shell company,
Rule 144 is not available until October 2017. With respect to affiliates, Rule 144 provides, in essence, that an affiliate holding
restricted securities for a period of six months may sell those securities in unsolicited brokerage transactions or in transactions
with a registered broker dealer, in an amount equal to one percent of our outstanding common stock every three months. Additionally,
Rule 144 requires that an issuer of securities make available adequate current public information with respect to the issuer. Such
information is deemed available if the issuer satisfies the reporting requirements of sections 13 or 15(d) of the Securities and
Exchange Act of 1934 (the “Securities Exchange Act”) or of Rule 15c2-11 there under. Any sales may have a depressive
effect on the market price of our securities in any market which may develop for such shares.
State securities laws may limit secondary
trading, which may restrict the states in which and conditions under which you can sell the shares offered by this prospectus.
Secondary trading in common stock sold in this
offering will not be possible in any state until the common stock is qualified for sale under the applicable securities laws of
the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for
secondary trading in the state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading
of, the common stock in any particular state, the common stock could not be offered or sold to, or purchased by, a resident of
that state. In the event that a significant number of states refuse to permit secondary trading in our common stock, the liquidity
for the common stock could be significantly impacted thus causing you to realize a loss on your investment.
We may issue shares of preferred stock in
the future that may adversely impact your rights as holders of our common stock.
Our articles of incorporation authorize us
to issue up to 10,000,000 shares of "blank check" preferred stock. Accordingly, our board of directors will have the
authority to fix and determine the relative rights and preferences of preferred shares, as well as the authority to issue such
shares, without further stockholder approval. As a result, our board of directors could authorize the issuance of a series of preferred
stock that would grant to holders preferred rights to our assets upon liquidation, the right to receive dividends before dividends
are declared to holders of our common stock, and the right to the redemption of such preferred shares, together with a premium,
prior to the redemption of the common stock. To the extent that we do issue such additional shares of preferred stock, your rights
as holders of common stock could be impaired thereby, including, without limitation, dilution of your ownership interests in us.
In addition, shares of preferred stock could be issued with terms calculated to delay or prevent a change in control or make removal
of management more difficult, which may not be in your interest as holders of common stock.
Our common stock is subject to the "penny
stock" rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome
and may reduce the value of an investment in our stock.
The SEC has adopted Rule
3a51-1 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that
has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions.
For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires:
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that a broker or dealer approve a person's account for transactions in penny stocks; and
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the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
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In order to approve a
person's account for transactions in penny stocks, the broker or dealer must:
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obtain financial information and investment experience objectives of the person; and
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make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
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The broker or dealer must
also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock
market, which, in highlight form:
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sets forth the basis on which the broker or dealer made the suitability determination; and
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that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
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Disclosure also has to
be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions
payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies
available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing
recent price information for the penny stock held in the account and information on the limited market in penny stocks.
Generally, brokers may be less willing to execute
transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose
of our common stock and cause a decline in the market value of our stock.
MARKET AND OTHER DATA
The industry and market data contained in this
prospectus are based on independent industry publications, reports by market research firms or other published independent sources
and, in each case, are believed by us to be reliable and accurate. However, industry and market data is subject to change and cannot
always be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature
of the data gathering process and other limitations and uncertainties inherent in any statistical survey. In addition, consumption
patterns and customer preferences can and do change. The industry and market data sources upon which we relied are publicly available
and were not prepared for our benefit or paid for by us.
FORWARD LOOKING STATEMENTS
Some of the statements contained in this prospectus
that are not historical facts are "forward-looking statements" which can be identified by the use of terminology such
as "estimates," "projects," "plans," "believes," "expects," "anticipates,"
"intends," or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We
urge you to be cautious of the forward-looking statements, that such statements, which are contained in this prospectus, reflect
our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting
our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future
results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions
underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance
or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without
limitation:
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Our ability to attract and retain management;
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Our ability to raise capital when needed and on acceptable terms and conditions;
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The intensity of competition;
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General economic conditions;
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Changes in regulations;
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Whether the market for healthcare services continues to grow, and, if it does, the pace at which it may grow; and
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Our ability to compete against large competitors in a rapidly changing market.
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All written and oral forward-looking statements
made in connection with this prospectus that are attributable to us or persons acting on our behalf are expressly qualified in
their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to
place undue reliance on such forward-looking statements. Our Plan of Operation should be read in conjunction with our financial
statements included herein.
USE OF PROCEEDS
Our offering is being made on a self-underwritten,
best-efforts basis: no minimum number of shares must be sold in order for the offering to proceed. The offering price per share
is $1.00. If all of the shares of common stock contained in this offering are sold, we will raise gross proceeds of $20,000,000.
The following table sets forth the uses of proceeds assuming sales less than the maximum securities offered for sale by the Company.
Each individual use of proceeds is disclosed in the order of priority in which any such proceeds will be used. The offering scenarios
presented are for illustrative purposes only, the actual amount of proceeds, if any, may differ. There is no assurance that we
will be successful in our efforts.
Amounts Raised as a Percentage of Total Offering
|
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100
%
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75
%
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50%
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25
%
|
|
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10
%
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|
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3
%
|
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Gross Proceeds
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$
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20,000,000
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|
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$
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15,000,000
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|
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$
|
10,000,000
|
|
|
$
|
5,000,000
|
|
|
$
|
2,000,000
|
|
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$
|
600,000
|
|
Registration Costs
|
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$
|
50,000
|
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
Net Proceeds
|
|
$
|
19,950,000
|
|
|
$
|
14,950,000
|
|
|
$
|
9,950,000
|
|
|
$
|
4,950,000
|
|
|
$
|
1,950,000
|
|
|
$
|
550,000
|
|
Use of Proceeds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mergers and Acquisitions
|
|
$
|
12,000,000
|
|
|
$
|
10,000,000
|
|
|
$
|
6,000,000
|
|
|
$
|
2,000,000
|
|
|
|
0
|
|
|
|
0
|
|
Laboratory & Clinical Trials
|
|
$
|
4,000,000
|
|
|
$
|
3,000,000
|
|
|
$
|
2,000,000
|
|
|
$
|
1,000,000
|
|
|
|
0
|
|
|
|
0
|
|
General & Administrative Expenses
|
|
$
|
2,000,000
|
|
|
$
|
1,000,000
|
|
|
$
|
1,000,000
|
|
|
$
|
1,000,000
|
|
|
$
|
1,000,000
|
|
|
|
100,000
|
|
Working Capital
|
|
$
|
1,950,000
|
|
|
$
|
950,000
|
|
|
$
|
950,000
|
|
|
$
|
950,000
|
|
|
$
|
950,000
|
|
|
$
|
450,000
|
|
The above figures represent only
estimated costs. All proceeds will be deposited into our corporate bank account. No proceeds from this offering will be used
to repay the founders of the Company for their investments in the Company. We anticipate that we will require a minimum
funding of approximately $2,000,000 for a minimum period of one year including costs associated with this offering and
maintaining a reporting status with the SEC. If adequate funds are not raised, we expect that our founders will invest
further or loan money to the Company, although there are no such contractual commitments.
The effectiveness of the registration with
respect to the shares of common stock offered by this prospectus that are being registered for the account of the selling stockholders
named in this prospectus, we will not receive any proceeds from the sale of the common stock offered through this prospectus by
the selling stockholders. We will pay all of the expenses incident to the registration of the shares pursuant to this prospectus
except for sales commissions and other expenses of selling stockholders named herein.
We will not receive any proceeds from the sale
of the common stock by the selling stockholders.
DETERMINATION OF OFFERING PRICE
The offering price of the shares has been determined
arbitrarily by us. The price does not bear any relationship to our assets, book value, earnings, or other established criteria
for valuing a privately held company. In determining the number of shares to be offered and the offering price, we took into consideration
our cash on hand and the amount of money we would need to implement our business plan. Accordingly, the offering price should not
be considered an indication of the actual value of the securities.
DILUTION OF THE PRICE YOU PAY FOR YOUR SHARES
Dilution represents the difference between
the offering price and the net tangible book value per share immediately after completion of this offering. Net tangible book value
is the amount that results from subtracting total liabilities and intangible assets from total assets. Dilution arises mainly as
a result of our arbitrary determination of the offering price of the shares being offered. Dilution of the value of the shares
you purchase is also a result of the lower book value of the shares held by our existing stockholders.
Investors who purchase our common stock will
be diluted to the extent of the difference between the public offering price per share of our common stock and the pro forma as
adjusted net tangible book value per share of our common stock immediately after this offering. Net tangible book value per share
is determined by dividing our total tangible assets less total liabilities by the number of outstanding shares of our common stock.
As of December 31, 2016, we had a net tangible book value of $3,546,191 or approximately $0.05 per share of common stock.
Dilution in net tangible book value per share
represents the difference between the assumed offering price per share of common stock of $1.00 and the pro forma as adjusted net
tangible book value per share of common stock immediately after the sale of the 20,000,000 shares of common stock being registered
for resale in accordance with this Offering. Therefore, after giving effect to our assumed receipt of $20,000,000 in estimated
net proceeds from the issuance of 20,000,000 shares of common stock under this Offering and registered in this offering (assuming
a purchase price of $1.00 per share, 100% of the closing price of the common stock and assuming such sale was made on December
31, 2016, and after deducting estimated offering commissions and expenses payable by us), our pro forma as adjusted net tangible
book value as of December 31, 2016 would have been $23,546,191, or $0.28 per share. This would represent an immediate increase
in the net tangible book value of $0.23 per share to existing shareholders attributable to this offering. The following table illustrates
this per share dilution to new investors:
Assumed offering price per share of common stock
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|
|
|
|
|
$
|
1.00
|
|
Net tangible book value per share as of December 31, 2016
|
|
$
|
0.05
|
|
|
|
|
|
Increase in as adjusted net tangible book value per share attributable to the sale of shares under the Purchase Agreement
|
|
$
|
0.23
|
|
|
|
|
|
Pro forma net tangible book value per share after the sale of shares under the Purchase Agreement
|
|
|
|
|
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$
|
0.28
|
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Dilution per share to new investors
|
|
|
|
|
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$
|
0.72
|
|
To the extent that we sell more or less than
$20,000,000 worth of shares under this Offering, or to the extent that some or all sales are made at prices lower than or in excess
of the assumed price per share of $1.00, then the dilution reflected in the table above will differ. The above table is based on
64,628,622 shares of our common stock outstanding as of the date of this Prospectus adjusted for the assumed sale of 20,000,000
shares of common stock for gross proceeds of $20,000,000 (at the assumed purchase price described above and after deducting estimated
offering commissions and expenses payable by us). Assuming no adjustments in the offering price per share of common stock of $1.00,
new investors will be diluted by $0.77 per share, $0.82 per share, and $0.88 per share in the event 75%, 50%, or 25% of the offering
is sold, respectively. In the event we only sell 3% of our offering, resulting in gross proceeds of $600,000, new shareholders
will be diluted by $0.94 per share.
To the extent that we issue additional shares
of common stock in the future, there may be further dilution to investors participating in this offering. In addition, we may choose
to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient
funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt
securities, the issuance of these securities could result in further dilution to our shareholders.
TERMS OF THE OFFERING
We have 64,628,622 shares of common stock issued
and outstanding as of the date of this prospectus of which 1,090,500 of the shares will be registered on behalf of selling stockholders.
The Company is registering an additional 20,000,000 shares of its common stock for sale at the price of $1.00 per share for direct
placement by the Company, i.e., without the use of a broker-dealer or other third-party statutory underwriter. There is no arrangement
to address the possible effect of the offering on the price of the stock.
In connection with the Company’s selling
efforts in the offering, our executive officers will not register as a broker-dealer pursuant to Section 15 of the Exchange Act,
but rather will rely upon the “safe harbor” provisions of SEC Rule 3a4-1, promulgated under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). Generally speaking, Rule 3a4-1 provides an exemption from the broker-dealer
registration requirements of the Exchange Act for persons associated with an issuer that participate in an offering of the issuer’s
securities. Our executive officers are not subject to any statutory disqualification, as that term is defined in Section 3(a)(39)
of the Exchange Act. Mr. Jin and Ms. Li will not be compensated in connection with his participation in the offering by the payment
of commissions or other remuneration based either directly or indirectly on transactions in our securities. Mr. Jin and Ms. Li
are not, nor have been within the past 12 months, a broker or dealer, and they are not, nor has been within the past 12 months,
an associated person of a broker or dealer. At the end of the offering, Mr. Jin and Ms. Li will continue to primarily perform substantial
duties for our company or on its behalf otherwise than in connection with transactions in securities. Mr. Jin and Ms. Li will not
participate in selling an offering of securities for any issuer more than once every 12 months other than in reliance on Exchange
Act Rule 3a4-1(a)(4)(i) or (iii).
We will receive all proceeds from the sale
of the 20,000,000 shares being offered. The price per share is fixed at $1.00 for the duration of this offering. Our stock is quoted
on OTCQB under the symbol “AVCO.” On May 8, 2017, the last reported sale price of shares of our common stock on the
OTCQB Marketplace was $0.75.
The Company’s shares may be sold to purchasers
directly by and subject to our discretion. Further, we will not offer its shares for sale through underwriters, dealers, agents,
or anyone who may receive compensation in the form of underwriting discounts, concessions, or commissions from our company and/or
the purchasers of the shares for whom they may act as agents. The shares of common stock sold by our company may be occasionally
sold in one or more transactions; all shares sold under this prospectus will be sold at a fixed price of $1.00 per share.
Our management has a substantial network of
individuals and financial institutions that they have developed over the course of their many decades of participation in the healthcare
industry. Many of these people are currently aware of the business operations of our company and will be made aware of the effectiveness
of this registration statement. In addition, the public at large is and will become familiar with our operational business activities
in the healthcare industry through business relationships and operational press releases. These relationships, positive press,
and word-of-mouth will be relied upon to attract interest in the offering. Accordingly, we expect to be solicited by prospective
investors to participate in the offering.
In order to comply with the applicable securities
laws of certain States, the securities will be offered or sold in those States only if they have been registered or qualified for
sale or if an exemption from such registration or qualification requirement is available and with which the Company has complied.
In addition, and without limiting the foregoing,
we will be subject to applicable provisions, rules and regulations under the Exchange Act with regard to security transactions
during the period of time when this Registration Statement is effective.
Our shares of common stock are subject to the
“penny stock” rules of the Securities and Exchange Commission. The SEC has adopted rules that regulate broker-dealer
practices in connection with transactions in "penny stocks”. Penny stocks generally are equity securities with a price
of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided
that current price and volume information with respect to transactions in such securities is provided by the exchange or system).
Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver
a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and
significance of risks of the penny stock market. A broker-dealer must also provide the customer with bid and offer quotations for
the penny stock, the compensation of the broker-dealer, and sales person in the transaction, and monthly account statements indicating
the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that, prior to
a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the trading activity in the secondary market for stock that becomes
subject to those penny stock rules. If a trading market for our common stock develops, our common stock will probably become subject
to the penny stock rules, and shareholders may have difficulty in selling their shares.
We will pay all expenses incidental to the
registration of the shares, which we expect to be approximately $50,000.
Offering Period and Expiration Date
This offering will start on the date that this
registration statement is declared effective by the SEC and continue for a period of one hundred and eighty (180) days. The offering
shall terminate on the earlier of (i) the date when the sale of all 20,000,000 shares is completed, (ii) when the Board of Directors
decides that it is in the best interest of the Company to terminate the offering prior the completion of the sale of all 20,000,000
shares registered under the Registration Statement of which this Prospectus is part or (iii) the 181st day after the effective
date of this prospectus. We will not accept any money until this registration statement is declared effective by the SEC.
Procedures for Subscribing
If you decide to subscribe for any shares in
this offering, you must
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·
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execute and deliver a subscription agreement; and
|
|
·
|
deliver a check, certified funds or wire to us for acceptance or rejection.
|
All checks for subscriptions must be made payable
to “Avalon GloboCare Corp.” We will deliver stock certificates attributable to shares of common stock purchased directly
to the purchasers within ninety (90) days of the close of the offering.
Once you submit the subscription agreement
and it is accepted, you may not revoke or change your subscription or request a refund of monies paid. All accepted subscriptions
are irrevocable, even if you subsequently learn information about us that you consider to be materially unfavorable.
Right to Reject Subscriptions
We have the right to accept or reject subscriptions
in whole or in part, for any reason or for no reason. All monies from rejected subscriptions will be returned immediately by us
to the subscriber, without interest or deductions. Subscriptions for securities will be accepted or rejected within 48 hours after
we receive them.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should
be read in conjunction with our consolidated financial statements and related notes in this prospectus. In addition to historical
information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors,
including but not limited to those set forth under “Risk Factors,” “Forward-Looking Statements,” and in
other parts of this prospectus.
Overview
Avalon GloboCare is dedicated to integrating
and managing global healthcare services and resources, as well as empowering high-impact biomedical innovations and technologies
to accelerate their clinical applications. Operating through twomajor platforms, namely “Avalon Cell”, and “Avalon
Rehab”, our “Technology + Service” ecosystem covers the areas of regenerative medicine, cell-based immunotherapy,
exosome technology, telemedicine with medical second opinion/referral services, as well as fertility and rehabilitation medicine.
We plan to integrate these services through joint ventures and accretive acquisitions that bring shareholder value both in the
short term, through operational entities as part of Avalon Rehab, and long term, through biomedical innovation development as part
of Avalon Cell.
We currently produce revenue through related
party strategic relationships in the Peoples Republic of China (“China”) that provide consultative services in advanced
areas of immunotherapy and second opinion/referral services. Our services include research studies; executive education; daily
online executive briefings; tailored expert advisory services; and consulting and management services. We typically charge an annual
fee. Through our services we attempt to focus our clients on important problems by providing an analysis of the evolving healthcare
industry and the methods prevalent in the industry to solve those problems through counsel, business planning and support.
The value of the Renminbi ("RMB"),
the main currency used in China, fluctuates and is affected by, among other things, changes in China's political and economic conditions.
The conversion of RMB into foreign currencies such as the U.S. dollar have generally been based on rates set by the People's Bank
of China, which are set daily based on the previous day's interbank foreign exchange market rates and current exchange rates on
the world financial markets.
Going Concern
We have a limited
operating history and our continued growth is dependent upon the continuation of providing medical consulting services to our only
three clients who are our related parties; hence generating revenues, and obtaining additional financing to fund future obligations
and pay liabilities arising from normal business operations. We had an accumulated deficit of $53,369 at December 31, 2016. The
report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2016 contained
an explanatory paragraph regarding our ability to continue as a going concern based upon cash used in operating activities and
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 factors, among others, raised substantial doubt about our ability to continue as a going concern. Our financial
statements appearing elsewhere in this report do not include any adjustments that might result from the outcome of this uncertainty.
There are no assurances we will be successful in our efforts to generate significant revenues or report profitable operations or
to continue as a going concern, in which event investors would lose their entire investment in our company.
Our ability to continue
as a going concern is dependent upon our ability to carry out our business plan, achieve profitable operations, obtain additional
working capital funds from our significant shareholders, and or through debt and equity financings. However, there can be no assurance
that any additional financings will be available to us on satisfactory terms and conditions, if any.
The accompanying 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.
Critical Accounting
Policies and Estimates
Our discussion and
analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated
financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues
and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those
related to bad debts, recovery of long-lived assets, income taxes and the valuation of equity transactions.
We base our estimates
on historical experience and on various other assumptions that we believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. Any future changes to these estimates and assumptions could cause a material change to our reported amounts
of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation
of the consolidated financial statements.
Revenue Recognition
We recognize revenue
when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the purchase price is
fixed or determinable and collectability is reasonably assured.
We provide medical
related consulting services to our clients. We are paid fees for our services by our clients under written consulting agreements.
Each contract calls for a fixed payment in a fixed period of time. We recognize revenue by providing medical related consulting
services under written service contracts with our customers. Revenue related to our service offerings is recognized as the services
are performed and amounts are earned, using the straight-line method over the term of the related services agreement. Prepayments,
if any, received from customers prior to the services being performed are recorded as advance from customers. In these cases, when
the services are performed, the amount recorded as advance from customers is recognized as revenue.
Income Taxes
We are governed by
the income tax laws of China and the United States. Income taxes are accounted for pursuant to ASC 740 “Accounting for Income
Taxes,” which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been recognized in our financial statements or tax returns. The charge
for taxes is based on the results for the period as adjusted for items, which are non-assessable or disallowed. It is calculated
using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is accounted
for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying
amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable
tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets
are recognized to the extent that it is probably that taxable profit will be available against which deductible temporary differences
can be utilized.
Deferred tax is calculated
using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is
charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which
case the deferred tax is changed to equity. Deferred tax assets and liabilities are offset when they related to income taxes levied
by the same taxation authority and we intend to settle its current tax assets and liabilities on a net basis.
Stock-based Compensation
Stock based compensation is accounted for based
on the requirements of the Share-Based Payment topic of Accounting Standards Codification (“ASC”) 718 which requires
recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity
instruments over the period the employee or director is required to perform the services in exchange for the award. The Accounting
Standards Codification also requires measurement of the cost of employee and director services received in exchange for an award
based on the grant-date fair value of the award.
Pursuant to ASC Topic 505-50, for share-based
payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The
expense is recognized over the period of services or the vesting period, whichever is applicable. Until the measurement date is
reached, the total amount of compensation expense remains uncertain. We record compensation expense based on the fair value of
the award at the reporting date. The awards to consultants and other third-parties are then revalued, or the total compensation
is recalculated based on the then current fair value, at each subsequent reporting date.
Recent Accounting Pronouncements
In August 2016, the
Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-15, Statement
of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU addresses the classification of
certain specific cash flow issues including debt prepayment or extinguishment costs, settlement of certain debt instruments, contingent
consideration payments made after a business combination, proceeds from the settlement of certain insurance claims and distributions
received from equity method investees. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods
within those fiscal years, with early adoption permitted. An entity that elects early adoption must adopt all of the amendments
in the same period. We are currently evaluating the impact it may have on our 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 our consolidated financial statements upon adoption. We do not discuss recent pronouncements that are not anticipated
to have an impact on or are unrelated to our consolidated financial condition, results of operations, cash flows or disclosures.
RESULTS OF OPERATIONS
Comparison of Results of Operations for
the Year Ended December 31, 2016 and for the Period from May 18, 2015 (Date of Inception) through December 31, 2015
Revenue
We generated revenue
commencing on July 2016. For the year ended December 31, 2016, we had revenues from related parties of $616,446. We did not generate
any revenue for the period from May 18, 2015 (date of inception) through December 31, 2015.
Cost of Revenue
Cost of revenue includes
the cost of internal labor and related benefits, travel expenses related to consulting services, subcontractor costs, other related
consulting costs, and other overhead costs.
For the year ended
December 31, 2016, cost of revenues was $73,066. Since we started generating revenue during the third quarter of 2016, we had neither
revenue nor cost of revenue in the period from May 18, 2015 (date of inception) through December 31, 2015.
Gross Profit
and Gross Margin
Our gross profit was
$543,380 for the year ended December 31, 2016, representing gross margin of 88.1%.
Operating Expenses
For the year ended
December 31, 2016 and for the period from May 18, 2015 (date of inception) through December 31, 2015, operating expenses consisted
of the following:
|
|
For the Year
Ended
December 31,
2016
|
|
|
For the Period
from May 18, 2015
(Date of Inception)
through
December 31, 2015
|
|
Selling expense
|
|
$
|
6,894
|
|
|
$
|
-
|
|
Professional fees
|
|
|
395,780
|
|
|
|
83,900
|
|
Other general and administrative
|
|
|
63,773
|
|
|
|
18,480
|
|
|
|
$
|
466,447
|
|
|
$
|
102,380
|
|
|
·
|
Our selling expense mainly includes our marketing and sales staff’s salaries and related benefits, and travel and entertainment costs incurred by our sales department. Selling expense totaled $6,894 for the year ended December 31, 2016, while, we did not incur any selling expense during the period from May 18, 2015 (date of inception) through December 31, 2015. Selling expense as a percentage of revenue for the year ended December 31, 2016 was 1.1%.
|
|
|
|
|
·
|
Professional fees primarily consisted of accounting fees, legal service fees, consulting fees, investor relations service charges and other fees incurred for service related to becoming and being a public company. For the year ended December 31, 2016 and for the period from May 18, 2015 (date of inception) through December 31, 2015, professional fees amounted to $395,780 and $83,900, respectively, an increase of $311,880 or 371.7%. The increase was mainly attributable to an increase in accounting fees of approximately $16,000 incurred for services performed by our financial consultant, an increase in audit fees incurred of approximately $87,000, an increase in investor relations service charges of approximately $127,000, an increase in legal services fees of approximately $96,000, and an increase in other miscellaneous items of approximately $26,000 resulting from our business expansion, offset by a decrease in due diligence service fees of approximately $40,000. We expect professional fees to increase as we incur significant costs associated with our public company reporting requirements, and costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission.
|
|
·
|
Other general and administrative expenses mainly consisted of compensation and related benefits, travel and entertainment, office supplies, rent, OTC markets application and listing fee, bank service charge and other miscellaneous items. Other general and administrative expenses totaled $63,773 for the year ended December 31, 2016, as compared to $18,480 for the period from May 18, 2015 (date of inception) through December 31, 2015, an increase of $45,293, or 245.1%. The increase was primarily attributable to an increase in compensation and related benefits of approximately $10,000, an increase in travel and entertainment of approximately $15,000, an increase in OTC markets application and listing fee of approximately $4,000, an increase in office rent of approximately $2,000, and an increase in other miscellaneous items of approximately $14,000, resulting from our business expansion.
|
Income (Loss) from Operations
As a result of the foregoing, for the year
ended December 31, 2016, income from operations amounted to $76,933, as compared to loss from operations of $(102,380) for the
period from May 18, 2015 (date of inception) through December 31, 2015.
Other Income
Other income includes
interest income from bank deposits, which amounted to $575 and $8, for the year ended December 31, 2016 and for the period from
May 18, 2015 (date of inception) through December 31, 2015, respectively.
Income Taxes
Income taxes expense
was $21,927 for the year ended December 31, 2016, which was attributable to the taxable income generated by our China operating
entity. We did not have any income taxes expense for the period from May 18, 2015 (date of inception) through December 31, 2015
since we incurred a loss in the period.
Net Income (Loss)
As a result of the
factors described above, our net income was $55,581, or $0.001 per share (basic and diluted), for the year ended December 31, 2016.
Our net loss was $102,372, or $(0.002) per share (basic and diluted), for the period from May 18, 2015 (date of inception) through
December 31, 2015.
Foreign Currency
Translation Adjustment
Our reporting currency
is the U.S. dollar. The functional currency of our parent company and our wholly-owned U.S. subsidiary, Avalon Healthcare System
Inc. is the U.S. dollar and the functional currency of our wholly-owned Chinese subsidiary, Avalon (Shanghai) Healthcare Technology
Co., Ltd. which is incorporated in China, is the Chinese Renminbi (“RMB”). The financial statements of our subsidiary
whose functional currency is the RMB are translated to U.S. dollars using period end rates of exchange for assets and liabilities,
and average rates of exchange (for the period) for revenue, costs, and expenses. Net gains and losses resulting from foreign exchange
transactions are included in the results of operations. As a result of foreign currency translations, which are a non-cash adjustment,
we reported a foreign currency translation loss of $94,568 and $0 for the year ended December 31, 2016 and for the period from
May 18, 2015 (date of inception) through December 31, 2015, respectively. This non-cash loss had the effect of increasing our reported
comprehensive loss.
Comprehensive
Loss
As a result of our
foreign currency translation adjustment, we had comprehensive loss for the year ended December 31, 2016 of $38,987, compared to
comprehensive loss of $102,372 for the period from May 18, 2015 (date of inception) through December 31, 2015.
Liquidity and Capital
Resources
Liquidity is the ability
of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an
ongoing basis. At December 31, 2016 and 2015, we had cash balance of approximately $2,886,000 and $110,000, respectively. These
funds are kept in financial institutions located as follows:
Country:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
United States
|
|
$
|
360,559
|
|
|
|
12.5
|
%
|
|
$
|
109,586
|
|
|
|
100.0
|
%
|
China
|
|
|
2,525,630
|
|
|
|
87.5
|
%
|
|
|
-
|
|
|
|
-
|
|
Total cash
|
|
$
|
2,886,189
|
|
|
|
100.0
|
%
|
|
$
|
109,586
|
|
|
|
100.0
|
%
|
The following table sets forth a summary of
changes in our working capital from December 31, 2015 to December 31, 2016:
|
|
|
|
|
|
|
|
December 31, 2015 to
December 31, 2016
|
|
|
|
December 31,
2016
|
|
|
December 31,
2015
|
|
|
Change
|
|
|
Percentage
Change
|
|
Working capital (deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
3,706,213
|
|
|
$
|
109,586
|
|
|
$
|
3,596,627
|
|
|
|
3,282.0
|
%
|
Total current liabilities
|
|
|
160,317
|
|
|
|
122,958
|
|
|
|
37,359
|
|
|
|
30.4
|
%
|
Working capital (deficit):
|
|
$
|
3,545,896
|
|
|
$
|
(13,372
|
)
|
|
$
|
3,559,268
|
|
|
|
(26,617.3
|
)%
|
Our working capital
increased by approximately $3,559,000 to working capital of approximately $3,546,000 at December 31, 2016 from working capital
deficit (current liabilities exceeded current assets) of approximately $13,000 at December 31, 2015. The increase in working capital
was primarily attributable to an significant increase in cash of approximately $2,777,000 mainly resulting from the proceeds received
from sale of common stock of approximately $3,635,000 in year 2016, an increase in accounts receivable – related party, net
of allowance for doubtful accounts, of approximately $70,000, an increase in prepaid expenses and other current assets of approximately
$750,000 mainly due to the prepayment made for acquisition of real property of approximately $700,000 during the year ended December
31, 2016, and a decrease in accounts payable and accrued liabilities – related parties of approximately $10,000, offset by
an increase in accounts payable and accrued liabilities of approximately $6,000, an increase in income taxes payable of approximately
$21,000, an increase in VAT and other taxes payable of approximately $11,000, and an increase in due to related parties of approximately
$9,000.
Because the exchange
rate conversion is different for the consolidated balance sheets and the consolidated statements of cash flows, the changes in
assets and liabilities reflected on the consolidated statements of cash flows are not necessarily identical with the comparable
changes reflected on the consolidated balance sheets.
Cash Flows for
the Year Ended December 31, 2016 Compared to the Period from May 18, 2015 (Date of Inception) through December 31, 2015
The following summarizes
the key components of our cash flows for the year ended December 31, 2016 and the period from May 18, 2015 (date of inception)
through December 31, 2015:
|
|
Year Ended
December 31,
2016
|
|
|
Period from May
18, 2015
(Date of Inception)
through
December 31, 2015
|
|
Net cash provided by (used in) operating activities
|
|
$
|
13,984
|
|
|
$
|
(67,564
|
)
|
Net cash used in investing activities
|
|
|
(930,334
|
)
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
3,785,000
|
|
|
|
177,150
|
|
Effect of exchange rate on cash
|
|
|
(92,047
|
)
|
|
|
-
|
|
Net increase in cash
|
|
$
|
2,776,603
|
|
|
$
|
109,586
|
|
Net cash flow provided
by operating activities for the year ended December 31, 2016 was approximately $14,000, which primarily reflected our net income
of approximately $56,000, and the add-back of non-cash items mainly consisting of stock-based professional fees of approximately
$53,000, and changes in operating assets and liabilities consisting of an increase in accounts payable and accrued liabilities
of approximately $6,000, an increase in income taxes payable of approximately $22,000, and an increase in VAT and other taxes payable
of approximately $12,000, offset by changes in operating assets and liabilities consisting of an increase in accounts receivable
– related party of approximately $73,000, an increase in prepaid expenses and other of approximately $51,000, and a decrease
in accounts payable and accrued liabilities – related parties of approximately $10,000.
Net cash flow used
in operating activities for the period from May 18, 2015 (date of inception) through December 31, 2015 reflected our net loss of
approximately $102,000, offset by changes in operating assets and liabilities consisting of an increase accounts payable and accrued
liabilities of approximately $17,000, and an increase in accounts payable and accrued liabilities – related parties of approximately
$18,000.
Net cash flow used
in investing activities reflects the prepayments made for acquisition of real property of $700,000, the purchase of the Company’s
shares of $230,000 made by AHS, and the purchase of property, plant and equipment of $334 for the year ended December 31, 2016.
We did not incur any investing activity during the period from May 18, 2015 (date of inception) through December 31, 2015.
Net cash flow provided
by financing activities was $3,785,000 for the year ended December 31, 2016. During the year ended December 31, 2016, we received
proceeds from related parties’ advance of $9,000, and received proceeds from founders’ contribution of $141,000, and
received proceeds from sale of common stock of $3,635,000, in funding our operations. Net cash flow provided by financing activities
was $177,150 for the period from May 18, 2015 (date of inception) through December 31, 2015. During the period from May 18, 2015
(date of inception) through December 31, 2015, we received advance from related parties of $88,150 and received founders’
contribution of $89,000, in funding our operations.
Our capital requirements
for the next twelve months primarily relate to purchasing certain real property located in the Township of Freehold, County of
Monmouth, State of New Jersey, having a street address of 4400 Route 9, Freehold, NJ 07798, which we closed on May 5, 2017. In
addition, we expect to use cash to pay salaries and fees related to third parties’ professional services. All funds received
have been expended in the furtherance of growing the business. The following trends are reasonably likely to result or have resulted
in a material decrease in our liquidity over the near to long term:
|
·
|
Purchase
price of $7.6 million paid for the property located in Township of Freehold, County of Monmouth, State of New Jersey;
|
|
·
|
An
increase in working capital requirements to finance our current business;
|
|
·
|
Addition
of administrative and sales personnel as the business grows; and
|
|
·
|
The
cost of being a public company.
|
We will need to raise
additional funds, particularly if we are unable to generate positive cash flow as a result of our operations. We estimate that
based on current plans and assumptions, that our available cash will be insufficient to satisfy our cash requirements under our
present operating expectations. Other than working capital and advance received from related parties and funds received pursuant
to securities purchase agreements, we presently have no other significant alternative source of working capital. We have used these
funds to fund our operating expenses, pay our obligations and grow our company. We will need to raise significant additional capital
to fund our operations and to provide working capital for our ongoing operations and obligations. Therefore, our future operation
is dependent on our ability to secure additional financing. Financing transactions may include the issuance of equity or debt securities,
obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a downturn in the
U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities.
Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses or experience
unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt
securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges
senior to those of existing holders of our common stock. The inability to obtain additional capital may restrict our ability to
grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we
will be required to cease our operations. To date, we have not considered this alternative, nor do we view it as a likely occurrence.
Contractual Obligations and Off-Balance
Sheet Arrangements
Contractual Obligations
We have certain fixed
contractual obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions,
and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing
and amounts of payments. We have presented below a summary of the most significant assumptions used in our determination of amounts
presented in the tables, in order to assist in the review of this information within the context of our consolidated financial
position, results of operations, and cash flows. The following tables summarize our contractual obligations as of December 31,
2016, and the effect these obligations are expected to have on our liquidity and cash flows in future periods.
|
|
Payments Due by Period
|
|
Contractual obligations:
|
|
Total
|
|
|
Less than 1
year
|
|
|
1-3 years
|
|
|
3-5 years
|
|
|
5
+
years
|
|
Capital market consulting service contract
|
|
$
|
114,000
|
|
|
$
|
114,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Financial consulting service contract
|
|
|
46,400
|
|
|
|
46,400
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
160,400
|
|
|
$
|
160,400
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Off-balance Sheet Arrangements
We presently do not have off-balance sheet
arrangements.
Foreign Currency Exchange Rate Risk
Our primary operations are in China. Thus,
most of our revenue and operating results may be impacted by exchange rate fluctuations between RMB and US dollars. For the year
ended December 31, 2016 and for the period from May 18, 2015 (date of inception) through December 31, 2015, we had unrealized foreign
currency translation loss of approximately $95,000 and $0, respectively, because of changes in the exchange rate.
Inflation
The effect of inflation on our revenue and
operating results was not significant.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Previous independent registered public accounting
firm
On October 20, 2016 (the “Dismissal Date”),
we advised
Weinberg & Baer LLC
(the “Former Auditor”) that
it was dismissed as our independent registered public accounting firm. The decision to dismiss the Former Auditor as our independent
registered public accounting firm was approved by our Board of Directors.
During the years ended December 31, 2015 and
2014 and through the Dismissal Date, we have not had any disagreements with the Former Auditor on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the Former
Auditor’s satisfaction, would have caused them to make reference thereto in their reports on the Company’s financial
statements for such years.
Except as set forth below, during the years
ended December 31, 2015 and 2014 and through the Dismissal Date, the reports of the Former Auditor on our financial statements
did not contain any adverse opinion or disclaimer of opinion, and such reports were not qualified or modified as to uncertainty,
audit scope, or accounting principle, except that the report contained a paragraph stating there was substantial doubt about our
ability to continue as a going concern.
New independent registered public accounting
firm
On October 20, 2016 (the “Engagement
Date”), we engaged RBSM LLP (“New Auditor”) as its independent registered public accounting firm for our fiscal
year ended December 31, 2016. The decision to engage the New Auditor as our independent registered public accounting firm was approved
by our Board of Directors.
During the two most recent fiscal years and
through the Engagement Date, we have not consulted with the New Auditor regarding either:
|
1.
|
application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report was provided to the Company nor oral advice was provided that the New Auditor concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or
|
|
2.
|
any matter that was either the subject of a disagreement (as defined in Regulation S-K, Item 304(a)(1)(iv) and the related instructions) or reportable event (as defined in Regulation S-K, Item 304(a)(1)(v)).
|
BUSINESS AND PROPERTIES
General
Unless the context otherwise requires, in this
report, the terms “Avalon GloboCare” or “Company”, "we", or "our", or “Avalon”
refers to, a Avalon GloboCare Corp. (f/k/a Global Technologies Corp.) a Delaware corporation. Avalon GloboCare’s principal
office is located at 83 South Street, Suite 101, Freehold, New Jersey 07728. The Company's telephone number is (917) 930-8118.
Avalon GloboCare reports its operations using a calendar year ending December 31 and the operations reported are presented on a
consolidated basis.
The Company files Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, registration statements and other items with the Securities and Exchange
Commission (“SEC”). Avalon GloboCare provides access free of charge to all of these SEC filings, as soon as reasonably
practicable after filing, on its internet site located at www.avalon-globocare.com. In this report on Form 10-K, the language “this
fiscal year" or "current fiscal year” refers to the 12-month period ended December 31, 2016.
In addition, the public may read and copy any
materials Avalon files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C.
20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC maintains an internet site (
www.sec.gov
) that contains reports, proxy and information statements regarding issuers,
like Avalon GloboCare, that file electronically with the SEC.
Business Development
Avalon was incorporated under the laws of the
State of Delaware on July 28, 2014. On October 18, 2016, the Company changed its name to Avalon GloboCare Corp. and completed a
reverse split of its shares of common stock at a ratio of 1:4.
Avalon GloboCare is a conglomerate which owns
100% of the capital stock of Avalon Heathcare Systems, Inc., a Delaware company (“AHS”) which it acquired on October
19, 2016 for the purpose of acquiring U.S. based healthcare companies. AHS was incorporated on May 18, 2015 under the laws of the
State of Delaware. In addition, Avalon GloboCare owns 100% of the capital stock of Avalon (Shanghai) Healthcare Technology Co.,
Ltd. (“Avalon Shanghai”), which is a wholly foreign-owned enterprise organized under the laws of the People’s
Republic of China (“PRC” or “China”). Avalon Shanghai was incorporated on April 29, 2016 and is engaged
in medical related consulting services for customers. On February 7, 2017, Avalon formed Avalon RT 9 Properties, LLC, a New Jersey
limited liability company, and on January 23, 2017, Avalon incorporated Avalon (BVI) Ltd, a British Virgin Island company.
Our Markets
Avalon GloboCare is dedicated to integrating
and managing global healthcare services and resources, as well as empowering high-impact biomedical innovations and technologies
to accelerate their clinical applications. Operating through two major platforms, namely “Avalon Cell”,” and
“Avalon Rehab”, our “Technology + Service” ecosystem covers the areas of regenerative medicine, cell-based
immunotherapy, exosome technology, and rehabilitation medicine. We plan to integrate these services through joint ventures and
accretive acquisitions that bring shareholder value both in the short term, through operational entities as part of Avalon Rehab
and long term, through biomedical innovation development as part of Avalon Cell.
Sales and Marketing
We seek to develop new business through relationships
driven by our senior management, which have extensive contacts throughout the healthcare system. Our senior management will be
seeking opportunities for joint ventures, strategic relationships and acquisitions in consulting, biomedical innovations, and rehabilitation
centers.
Services
We currently produce revenue through related
party strategic relationships through Avalon Shanghai that provide consultative services in advanced areas of immunotherapy and
second opinion/referral services. Our services include research studies; executive education; daily online executive briefings;
tailored expert advisory services; and consulting and management services. We typically charge an annual fee. Through our services
we attempt to focus our clients on important problems by providing an analysis of the evolving healthcare industry and the methods
prevalent in the industry to solve those problems through counsel, business planning and support. We plan to expand our business
services throughout the United States via our two major “Technology + Service” platforms, “Avalon Cell”,
and “Avalon Rehab”.
Strategic Partnerships
We are in negotiation in our areas of focus
with respect to potential acquisitions and strategic partnerships. There is no guarantee that we will be able to successfully sign
a definitive agreement, close or implement such business arrangement. We are currently in negotiation to form a strategic partnership
in the U.S. with a leading research group in the area of Exosome technology, which are small extracellular vesicles that we believe
may be used as a vehicle for drug delivery for the treatment of various diseases and biomarkers for early stage diagnosis.
Markets
The Company will focus on the following markets
in developing its core business:
Platform “Avalon Cell”
Regarded as the future of medicine, cell-based
therapeutics will replace pharmaceuticals as a more effective and functional modality in disease treatment. Avalon is actively
engaging in this revolutionary trend and positioning to take a leading role in cell-based technology and therapeutics. The business
model for our “Avalon Cell” platform is based on stringent criteria in selection and evaluation of candidate projects
at different stages of their developmental cycle. We particularly focus on projects with strong intellectual property and distinctive
innovation, translational, application-driven, as well as commercialization-ready. Our technology-based platform, “Avalon
Cell”, comprises four programs:
|
·
|
Endothelial
cell, namely therapeutics involving the cells that line blood vessels and regulate exchanges between the bloodstream and surrounding
tissue. These programs will occur with our collaborative sites at Weill Cornell Medical College Department of Pathology and Ansary
Stem Cell Institute, focusing on standardization of EC banking and therapeutics;
|
|
·
|
Exosome
technology, small extracellular vesicles that have great potential to be used as a vehicle for drug delivery for the treatment
of various diseases and biomarkers for early stage diagnosis. The Company has commenced developing collaborative sites
at Weill Cornell Medical College and Memorial Sloan-Kettering Cancer Center, focused on exosome-based diagnostics, therapeutics,
bio-banking, as well as “Exosomics Big Data”, in the unmet areas of oral cancer, ovary cancer and liver fibrosis);
|
|
·
|
Cell-based
immunotherapy (including cells such as NK, DC-CIK, CAR-T…etc).
|
Platform Rehab
A growing trend in China is in the sector of
rehabilitation medicine. With our strong capability in integrating global technology and resources in physical medicine and rehabilitation,
Avalon will position to take a leading role in this area through our “Avalon Rehab” platform: a turnkey, full suite
of rehab services including PT, OT, robotic engineering, cybernectics, and clinical nutrition. Avalon will also engage in strategic
partnership with our institutional clients, building the leading and most authoritative network of integrated physical medicine
and rehabilitation, particularly for cancer rehab patients. Our initial flagship clinical bases for Avalon Rehab include: Hebei
Yanda Lu Daopei Hospital, Beijing Lu Daopei Hospital, and Beijing Daopei Hematology Hospital, with participating strategic partners
MD Anderson Cancer Center and Kessler Rehabilitation Institute. Michael Skuhersky from MIT will provide cybernectic support. Focus
will be on accretive acquisitions and joint venture strategic partnerships that are in revenue generating, cash flow positive positions
to support biomedical innovation development while providing immediate shareholder value.
Services
Our services are targeted at serving our clients
and using our insights and deep expertise to produce tangible and significant results. Our services include research studies; executive
education; daily online executive briefings; tailored expert advisory services; and consulting and management services. We typically
charge an annual fee. Through our services we attempt to focus our clients on important problems by providing an analysis of the
evolving healthcare industry and the methods prevalent in the industry to solve those problems. We target these solutions to the
clients specific strategic challenges, operational issues, and management concerns. As part of this, we provide personnel support
for each client that will provide counsel, business planning and support.
Annual Fee
We generally charge a fixed annual fee to be
retained for our services which can vary depending on the work required.
Strategic Development
We intend to focus on three components. The
initial component will be focused on acquiring and/or managing fixed assets including healthcare real estate as well as stem cell
banks. In addition, we intend to pursue the acquisition and development of healthcare related technologies through acquisition,
licensing or joint ventures. We will also consider a third avenue of investing in certain technologies.
Intellectual Property
We have not applied for or received patent
protection in the US or any other country, and, as a result, there is a distinct risk that we will not be able to adequately protect
our intellectual property rights in these countries. We own and control a variety of trade secrets, confidential information, trademarks,
trade names, copyrights, and other intellectual property rights that, in the aggregate, are of material importance to our business.
We consider our trademarks, service marks, and other intellectual property to be proprietary, and rely on a combination of copyright,
trademark, trade secret, non-disclosure, and contractual safeguards to protect our intellectual property rights.
Competition
In our current consulting business in China,
we compete with a number of advisory firm offering similar service including consulting and strategy firms; market research, data,
benchmarking, and forecasting providers; technology vendors and services firms; health care information technology firms; technology
advisory firms; outsourcing firms; and specialized providers of educational and training services. Other organizations, such as
state and national trade associations, group purchasing organizations, non-profit think-tanks, and database companies, also may
offer research, consulting, tools, and education services to health care and education organizations.
We believe that the principal competitive factors
in our market include quality and timeliness of our services, strength and depth of relationships with our clients, ability to
meet the changing needs of current and prospective clients, measurable returns on customer investment, and service and affordability.
As our business develops and we expand through
joint ventures, acquisitions and strategic partnerships in the U.S and China, we will have competition with other direct service
providers, emerging technologies and medical communication platforms. Avalon will seek to maintain a competitive advantage through
intellectual property, superior quality management and cutting edge technology.
Legal Proceedings
From time to time, we are subject to ordinary
routine litigation incidental to our normal business operations. We are not currently a party to, and our property is not subject
to, any material legal proceedings.
Properties
Our principal offices are located at 83 South
Street, Suite 101, Freehold, New Jersey 07728, which includes general office space. We pay $1,000 per month in rent. Our lease
will expire on October 31, 2017.
On December 22, 2016, we entered into an Agreement
of Sale (the "Purchase Agreement") with Freehold Craig Road Partnership (“Seller”), a New Jersey partnership,
to purchase certain real property located in the Township of Freehold, County of Monmouth, State of New Jersey, having a street
address of 4400 Route 9, Freehold, NJ 07798 (the "Property"). All rights under the Purchase Agreement were assigned by
us to Avalon RT9 Properties, LLC, the Company’s wholly owned subsidiary (“Avalon Properties”). Avalon Properties
closed on the purchase of the Property on May 5, 2017. The purchase price including adjustments paid for the Property was $7.65
million in cash. The Seller also assigned all lease agreements for all tenants on the Property to Avalon Properties.
We believe that our current office space is
adequate for our current and immediately foreseeable operating needs. We do not have any policies regarding investments in real
estate, securities or other forms of property.
Employees
As of May 8, 2017, we employed four
employees, three of which served as our executive officers. None of our employees are represented by a collective bargaining arrangement.
Government Regulation
The health care industry in China and U.S.
is highly regulated and subject to changing political, legislative, regulatory, and other influences. Further, the healthcare industry
is currently undergoing rapid change. We are uncertain how, when or in what context these new changes will be adopted or implemented.
These new regulations could create unexpected liabilities for us, could cause us or our members to incur additional costs and could
restrict our or our clients’ operations. Many of the laws are complex and their application to us, our clients, or the specific
services and relationships we have with our members are not always clear. Our failure to anticipate accurately the application
of these laws and regulations, or our other failure to comply, could create liability for us, result in adverse publicity, and
otherwise negatively affect our business.
Despite efforts to develop its legal system
over the past several decades, including but not limited to legislation dealing with economic matters such as foreign investment,
corporate organization and governance, commerce, taxation and trade, China continues to lack a comprehensive system of laws. Further,
the laws that do exist in China are often vague, ambiguous and difficult to enforce, which could negatively affect our ability
to do business in China and compete with other companies in our segments.
In September 2006, the Ministry of Commerce
("MOFCOM") promulgated the Regulations on Foreign Investors' Mergers and Acquisitions of Domestic Enterprises (“M&A
Regulations”) in an effort to better regulate foreign investment in China. The M&A Regulations were adopted in part as
a needed codification of certain joint venture formation and operating practices, and also in response to the government's increasing
concern about protecting domestic companies in perceived key industries and those associated with national security, as well as
the outflow of well-known trademarks, including traditional Chinese brands.
As a U.S. based company doing business in China,
we seek to comply with all Chinese laws, rules and regulations and pronouncements, and endeavor to obtain all necessary approvals
from applicable Chinese regulatory agencies such as the MOFCOM, the State Assets Supervision and Administration Commission, the
State Administration for Taxation, the State Administration for Industry and Commerce, the China Securities Regulatory Commission,
and the State Administration of Foreign Exchange ("SAFE").
Company History
On October 19, 2016, we entered into and closed
a Share Exchange Agreement with the shareholders of Avalon Healthcare System, Inc., a Delaware corporation (“AHS”),
each of which are accredited investors (“AHS Shareholders”) pursuant to which we acquired 100% of the outstanding securities
of AHS in exchange for 50,000,000 shares of our common stock (the “AHS Acquisition”). Considering that, following the
acquisition, the AHS Shareholders control the majority of our outstanding voting common stock and we effectively succeeded our
otherwise minimal operations to those that are theirs, AHS is considered the accounting acquirer in this reverse-acquisition transaction.
A reverse-acquisition transaction is considered, and accounted for as, a capital transaction in substance; it is equivalent
to the issuance of AHS securities for our net monetary assets, which are deminimus, accompanied by a recapitalization. Accordingly,
we have not recognized any goodwill or other intangible assets in connection with this reverse acquisition transaction. AHS is
the surviving and continuing entities and the historical financials following the reverse acquisition transaction will be those
of AHS. We were a "shell company" (as such term is defined in Rule 12b-2 under the Securities Exchange Act
of 1934, as amended) immediately prior to our acquisition of AHS pursuant to the terms of the Share Exchange Agreement. As
a result of such acquisition, our operations now are focused on providing outsourced, customized international healthcare services
to the rapidly changing health care industry primarily focused in the Peoples Republic of China. We are also pursuing the provision
of these services in the United States as well as certain strategic partnerships and property ownership and management. AHS owns
100% of the capital stock of Avalon (Shanghai) Healthcare Technology Co., Ltd. (“Avalon Shanghai”), which is a wholly
foreign-owned enterprise organized under the laws of China. Avalon Shanghai was incorporated on April 29, 2016 and is engaged in
medical related consulting services for customers. Consequently, we believe that acquisition has caused us to cease to be a shell
company as we no longer have nominal operations.
On September 29, 2016, effective October 18,
2016, the Company filed a Certificate of Amendment of Certificate of Incorporation (the “Certificate”) with the State
of Delaware to (i) effect a reverse stock split of its outstanding and authorized shares of common stock at a ratio of 1 for 4
(the “Reverse Stock Split”) and (ii) effectuate a name change ("Name Change"). Fractional shares that resulted
from the Reverse Stock Split will be rounded up to the next highest number. As a result of the Name Change, the Company's name
changed from "Global Technologies Corp." to "Avalon GloboCare Corp.". The Certificate was approved by the majority
of the Company's shareholders and by the Board of Directors of the Company. The effective date of the Reverse Stock Split and the
Name Change was October 18, 2016.
In connection with the above, the Company filed
an Issuer Company-Related Action Notification Form with the Financial Industry Regulatory Authority. The Reverse Stock Split and
the Name Change were implemented by FINRA on October 18, 2016. Our symbol on the OTCQB was GTHCD for 20 business days from October
18, 2016 (the “Notification Period”). Following the Notification Period, our symbol was changed to “AVCO”.
Our new CUSIP number is 05344R 104.
MARKET FOR OUR COMMON STOCK AND OTHER RELATED
STOCKHOLDER MATTERS
Market Information
The Company’s common stock is traded
on OTC Markets on the OTCQB under the stock symbol “AVCO”. Prior to October 18, 2016, the stock symbol was GTHC. The
following table sets forth the high and low bid prices of its Common Stock, as reported by the OTCQB for the last fiscal year commencing
February 22, 2016 (the were no bid or ask prices prior to February 22, 2016). The quotations set forth below reflect inter-dealer
prices, without retail mark-up, markdown or commission and may not represent actual transactions.
|
|
Year Ended December 31, 2016
|
|
|
|
High
|
|
|
Low
|
|
First Quarter
|
|
$
|
0.16
|
|
|
$
|
0.16
|
|
Second Quarter
|
|
$
|
0.16
|
|
|
$
|
0.04
|
|
Third Quarter
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
Fourth Quarter
|
|
$
|
3.00
|
|
|
$
|
0.04
|
|
As of May 8, 2017, there were approximately
65 holders of record of our common stock, and 64,628,622 shares outstanding.
Dividends
We have never declared or paid any cash or
stock dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business.
As a result, we do not anticipate paying any cash dividends in the foreseeable future.
Securities Authorized for Issuance Under Equity Compensation
Plans
We presently do not have an equity compensation plan.
Recent Sales of Unregistered Securities
On October 19, 2016, we entered into and closed
a Share Exchange Agreement with the shareholders of Avalon Healthcare System, Inc., a Delaware corporation (“AHS”),
each of which are accredited investors (“AHS Shareholders”) pursuant to which we acquired 100% of the outstanding securities
of AHS in exchange for 50,000,000 shares of our common stock (the “AHS Acquisition”).
On October 19, 2016, we issued 1,056,122 shares
of common stock to a third party for legal services rendered.
On October 19, 2016, pursuant to a consulting
service agreement, the Company issued 1,552,500 shares of its common stock to a third party for consulting services rendered in
the areas of capital markets advisory.
We entered into and closed Subscription Agreements
with several accredited investors (the "December 2016 Accredited Investors") pursuant to which the December 2016 Accredited
Investors purchased an aggregate of 7,270,000 shares of the Company’s common stock (the “2016 Subscription Shares”)
for an aggregate purchase price of $3,635,000. The closing occurred on December 19, 2016.
On February 21, 2017, Ms. Ingariola and the
Company entered into an Executive Retention Agreement effective February 9, 2017 pursuant to which Ms. Ingariola agreed to serve
as Chief Financial Officer. As partial compensation, the Company granted Ms. Ingariola a Stock Option to acquire 2,000,000 shares
of common stock at an exercise price of $0.50 per share for a period of ten years. The Stock Options vest in 36 equal tranches
commencing on the grant date.
We entered into and closed a Subscription
Agreement with an accredited investor (the "March 2017 Accredited Investor") pursuant to which the March 2017 Accredited
Investor purchased 3,000,000 shares of common stock (“March 2017 Shares”) for a purchase price of $3,000,000 (the
“Purchase Price”). The closing occurred on March 3, 2017. Avalon (Shanghai) Healthcare Technology Co., Ltd. (“Avalon
Shanghai”), Beijing DOING Biomedical Technology Co., Ltd. (“DOING”), the March 2017 Accredited Investor and
our company entered into a Share Subscription Agreement whereby the parties acknowledged, among other things, that DOING agreed
to transfer the Purchase Price to Avalon Shanghai on behalf of the March 2017 Investor and the March 2017 Accredited Investor
agreed to transfer the March 2017 Shares to DOING upon DOING completing the registration of the acquisition of the March 2017
Shares with the Beijing Commerce Commission (“BCC”) and obtaining an Enterprise Overseas Investment Certificate (the
“Investment Certificate”) from BCC. If DOING fails to complete the registration and acquire the Investment Certificate
within one year of the closing then Avalon Shanghai shall transfer $3,000,000 with interest of 20% to DOING upon the request of
DOING (the “BCC Repayment Obligation”). As of the date hereof, the Company is obligated to DOING in the principal
amount of $3,000,000. The BCC Repayment Obligation is a debt obligation arising other than in the ordinary course of
business, which constitutes a direct financial obligation of our company. Further, Wenzhao Lu, a director and shareholder of our
company, and DOING entered into a Warranty Agreement. Pursuant to the Warranty Agreement, Mr. Wenzhao Lu agreed to (i) cause us
to be liable to DOING in the event the March 2017 Accredited Investor defaults in its obligations to DOING, (ii) cause the March
2017 Accredited Investor to transfer the March 2017 Shares to DOING upon DOING’s receipt of the Investment Certificate from
BCC, (iii) within three years from the date of the Warranty Agreement, DOING may require Mr. Wenzhao Lu to acquire the March 2017
Shares at $1.20 per share upon three months notice, and (iv) in the event Mr. Wenzhao Lu does not acquire the March 2017 Shares
within the three month period, interest of 15% per annum will be added to the purchase price.
The offers, sales, and issuances of the securities
described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities
Act of 1933 or Regulation D promulgated thereunder as transactions by an issuer not involving a public offering. The recipients
of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the
recipients of securities in these transactions was an accredited or sophisticated person and had adequate access, through employment,
business or other relationships, to information about us.
MANAGEMENT
Executive Officers and Directors
Name
|
|
Age
|
|
Position
|
Wenzhao Lu
|
|
57
|
|
Chairman of the Board of Directors of the Company and AHS
|
|
|
|
|
|
David Jin, MD, PhD
|
|
48
|
|
Chief Executive Officer, President and Director of the Company and AHS
|
|
|
|
|
|
Meng Li
|
|
38
|
|
Chief Operating Officer, Secretary and Director of the Company and AHS and the sole executive officer and director of Avalon Shanghai
|
|
|
|
|
|
Luisa Ingargiola
|
|
49
|
|
Chief Financial Officer
|
|
|
|
|
|
Steven P. Sukel
|
|
54
|
|
Director
|
|
|
|
|
|
Yancen Lu
|
|
42
|
|
Director
|
Background of Executive Officers and Directors
Wenzhao Lu, Chairman of the Board of Directors
of the Company and AHS
Mr. Wenzhao Lu is Chairman of the Board of
the Company and AHS. He is a seasoned healthcare entrepreneur with extensive operation in China. He has been serving as Chairman
of the Board for the DaoPei Medical Group (“DPMG”) since 2010. Under his leadership, DPMG has recently expanded its
clinical network involving a state-of-the-art stem cell bank at Wuhan Biolake, three top-ranked private hospitals (located in Beijing,
Shanghai, and Hebei), specialty hematology laboratories, as well as a hematology research institute, with more than 100 partnering
and collaborating hospitals in China. DPMG was founded by Professor Daopei Lu, a renowned hematologist pioneering in hematopoietic
stem cell transplant and member of the Academy of Engineering in China. Mr. Wenzhao Lu received a Bachelor of Arts from Temple
University Tyler School of Arts in 1988 and subsequently worked as senior Art Director at Ogilvy & Mather Advertising Company.
Prior to joining DPMG, Mr. Lu served as Chief Operating Officer for BioTime Asia Limited which is a subsidiary of BioTime, Inc.
(NYSE/AMEX: BTX) in 2009.
David Jin, Chief Executive Officer, President
and Director of the Company and AHS
Dr. David Jin, MD, PhD, a director and Chief
Executive Officer of the Company and AHS. From 2009 to 2016, Dr. Jin has served as the Chief Medical Officer of BioTime,
Inc. (NYSE MKT: BTX), a clinical stage regenerative medicine company with a focus on pluripotent stem cell technology. Dr.
Jin also acts as a senior translational clinician-scientist at the Howard Hughes Medical Institute and the Ansary Stem Cell Center
at Weill Cornell Medical College of Cornell University. Prior to his current endeavors, Dr. Jin was Chief Consultant/Advisor
for various biotech/pharmaceutical companies regarding hematology, oncology, immunotherapy and stem cell-based technology development.
Dr. Jin has been Principle Investigator in more than 15 pre-clinical and clinical trials, as well as author/co-author of over 80
peer-reviewed scientific abstracts, articles, reviews, and book chapters. Dr. Jin studied medicine at SUNY Downstate College of
Medicine in Brooklyn, NY. He received his clinical training and subsequent faculty tenure at the New York-Presbyterian
Hospital (the teaching hospital for both Cornell and Columbia Universities) in the areas of internal medicine, hematology, and
clinical oncology. Dr. Jin was honored as Top Chief Medical Officer by ExecRank in 2012, as well as recognized as Leading
Physicians of the World in 2015.
Meng Li, Chief Operating Officer, Secretary
and Director of the Company and AHS and the sole executive officer and director of Avalon Shanghai
Ms. Meng Li is Chief Operating Officer, Secretary
and a member of the Board of Directors. Ms. Li has over 15 years of executive experience in international marketing, branding,
communication, and media investment consultancy. Ms. Li served as Managing Director at Maxus/GroupM (a WPP Group company) where
she was responsible for business P&L and corporate management from 2006 to 2015. Prior to joining Maxus/Group M, Ms. Li worked
for Zenithmedia (a Publicis Group company) from 2000-2006 as Senior Manager. Ms. Li received a Bachelor of Arts in International
Economic Law from University of Dalian Maritime University, China.
Luisa Ingargiola, Chief Financial Officer
Luisa Ingargiola graduated in 1989 from
Boston University with a Bachelor Degree in Business Administration and a concentration in Finance. In 1996, she received her MBA
in Health Administration from the University of South Florida. In 1990, Ms. Ingargiola joined Boston Capital Partners as an Investment
Advisor in their Real Estate Limited Partnership Division. In this capacity, she worked with investors and partners to report investment
results, file tax forms, and recommend investments. In 1992, Ms. Ingargiola joined MetLife Insurance Company as a Budget and Expense
Manager. In this capacity she managed a $30 million dollar annual budget. Her responsibilities included budget implementation,
expense and variance analysis and financial reporting. From 2007 through 2016, Ms. Ingargiola served as the Chief Financial Officer
at MagneGas Corporation (Nasdaq: MNGA) and continues to serve as a director. Ms. Ingargiola serves as the Audit Committee Chair
for COPsync, Inc. (Nasdaq: COYN) and FTE Networks, Inc. (OTC: FTNW) and serves as a directorand The JBF Foundation Worldwide, a
501c3 non-profit.
Officers are elected annually by the Board
of Directors (subject to the terms of any employment agreement), at its annual meeting, to hold such office until an officer’s
successor has been duly appointed and qualified, unless an officer sooner dies, resigns or is removed by the Board.
Steven P. Sukel, Director
Steven P. Sukel is a licensed as an attorney
in New Jersey who currently analyzes real estate investment opportunities and operates and manages commercial properties. Mr.
Sukel has extensive business experience and was formerly associated with Ernst & Young prior to establishing his own law practice.
Mr. Sukel has focused on New Jersey, multi-state and local taxation and real estate law since 1990 in both public and private
practice. Mr. Sukel was with Ernst & Young’s State & Local Tax practice, served as the New Jersey Liaison between
the New Jersey Bar Association Taxation Section and the New Jersey CPA Society, was a Past Chair of the New Jersey Bar Association
Taxation Section and served two terms on the New Jersey Supreme Court Committee on the Tax Court. Mr. Sukel received his BA from
the University of Scranton and J.D from Quinnipiac University School of Law.
Yancen Lu, Director
Yancen Lu has more than 19 years experience
in investment banking and equity investment management. He is Managing Director of FountainVest Partners. Besides his professionalism
in securities, investment and capital management, Mr Lu has special focus and comprehensive understanding of the global medical
and healthcare industry, he is Director of leading healthcare corporations including Sino Hospital Investment Corporation (Hong
Kong), Chang’an Hospital (the largest private hospital in Northwest China), and DIH Medical Technologies. Mr. Lu received
Bachelor and Master degrees of Engineering Economics from Tianjin University.
Board Leadership Structure and Role in Risk Oversight
Our Board of Directors (“Board”)
is primarily responsible for overseeing our risk management processes on behalf of our company. The Board receives and
reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s
assessment of risks. In addition, the Board focuses on the most significant risks facing our company and our company’s general
risk management strategy, and also ensures that risks undertaken by our company are consistent with the board’s appetite
for risk. While the Board oversees our company’s risk management, management is responsible for day-to-day risk management
processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company
and that our board leadership structure supports this approach.
Involvement in Certain Legal Proceedings
To our knowledge, our directors and executive officers have not
been involved in any of the following events during the past ten years:
|
1.
|
any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
|
|
2.
|
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
|
|
3.
|
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities;
|
|
4.
|
being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
|
|
5.
|
being subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
|
|
6.
|
being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
|
Code of Ethics
We have a code of ethics that applies to all
of our employees, including its principal executive officer, principal financial officer and principal accounting officer, and
the Board. A copy of this code is available in the Employee Handbook. We intend to disclose any changes in or waivers from its
code of ethics by posting such information on its website or by filing a Form 8-K.
Nominating Committee
We have not adopted any procedures by which
security holders may recommend nominees to our Board of Directors.
Audit Committee
The Board of Directors acts as the Audit Committee
and the Board has no separate committees. We have no qualified financial expert at this time because it has not been able to hire
a qualified candidate. Further, the Company believes that it has inadequate financial resources at this time to hire such an expert.
Indemnification of Directors and Officers
Our directors and executive officers are indemnified
as provided by the Delaware law and our Bylaws. These provisions state that our directors may cause us to indemnify a director
or former director against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment,
actually and reasonably incurred by him as a result of him acting as a director. The indemnification of costs can include an amount
paid to settle an action or satisfy a judgment. Such indemnification is at the discretion of our board of directors and is subject
to the Securities and Exchange Commission’s policy regarding indemnification.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons
controlling us pursuant to the foregoing provisions, or otherwise. We have been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.
EXECUTIVE COMPENSATION
Executive Officers’ Compensation
The following table sets forth information
concerning the annual and long-term compensation earned by or paid to our Chief Executive Officer and to other persons who served
as executive officers as at and/or during the fiscal year ended December 31, 2016 or who earned compensation exceeding $100,000
during fiscal year 2016 (the “named executive officers”), for services as executive officers for the last two fiscal
years.
Summary Compensation Table
Name and
Principal
Position
|
|
Fiscal
Year
|
|
Salary
|
|
|
Stock
Award
|
|
|
Option
Awards
|
|
|
Non-Equity
Incentive Plan
Compensation
|
|
|
Change in
Pension Value
and Non-
Qualified
Deferred
Compensation
Earnings
|
|
|
All Other
Compensation
|
|
|
Total
|
|
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Dr. David Jin
|
|
2015
|
|
|
-
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
-
|
|
CEO
|
|
2016
|
|
|
16,667
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,667
|
|
Meng Li
|
|
2015
|
|
|
-
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
-
|
|
COO and Secretary
|
|
2016
|
|
|
8,655
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,655
|
|
Outstanding Equity Awards at Fiscal Year-End Table
We did not issue equity awards during the year ended December 31,
2016.
Employment Agreements
David Jin
On December 1, 2016, we entered into an Executive
Employment Agreement with David Jin, our CEO and President. Pursuant to the agreement, Mr. Jin will be employed as President and
Chief Executive Officer of the Company until November 30, 2017 unless earlier terminated pursuant to the terms of the agreement.
During the term of the agreement, Mr. Jin will be entitled to a base salary at the annualized rate of $200,000 and will be eligible
for a discretionary performance bonus, equity awards and to participate in employee benefits plans as the Company may institute
from time to time at the discretion of the Company’s Board of Directors. Pursuant to the agreement, Mr. Jin may be terminated
for “cause” as defined and Mr. Jin may resign for “good reason” as defined. In the event Mr. Jin is terminated
without cause or resigns for good reason, the Company will be required to pay Mr. Jin all accrued salary and bonuses, reimbursement
for all business expenses and Mr. Jin’s salary for one year. In the event Mr. Jin is terminated with cause, resigns without
good reason, dies or is disabled, the Company will be required to pay Mr. Jin all accrued salary and bonuses and reimbursement
for all business expenses. Under the agreement Mr. Jin is subject to confidentiality, non-compete and non-solicitation restrictions.
Meng Li
On January 11, 2017, Avalon Shanghai entered
into an Executive Employment Agreement with Meng Li, our COO and Secretary. Pursuant to the agreement, Ms. Li will be employed
as Chief Operating Officer and President of Avalon Shanghai through November 30, 2019, unless earlier terminated pursuant to the
terms of the agreement. During the term of the agreement, Ms. Li will be entitled to a base salary at the annualized rate of $100,000
and will be eligible for a discretionary performance bonus, equity awards and to participate in employee benefits plans as the
Avalon Shanghai may institute from time to time at the discretion of its Board of Directors. Pursuant to the agreement, Ms. Li
may be terminated for “cause” as defined and Ms. Li may resign for “good reason” as defined. In the event
Ms. Li is terminated without cause or resigns for good reason, Avalon Shanghai will be required to pay Ms. Li all accrued salary
and bonuses, reimbursement for all business expenses and Ms. Li’s salary for one year. In the event Ms. Li is terminated
with cause, resigns without good reason, dies or is disabled, Avalon Shanghai will be required to pay Ms. Li all accrued salary
and bonuses and reimbursement for all business expenses. Under the agreement Ms. Li is subject to confidentiality, non-compete
and non-solicitation restrictions.
Luisa Ingariola
On February 21, 2017, we entered into an Executive
Retention Agreement with Ms. Ingariola effective February 9, 2017 pursuant to which Ms. Ingargiola agreed to serve as Chief Financial
Officer in consideration of an annual salary of $200,000 to be increased to $225,000 on the 60 day anniversary. We agreed to provide
a bonus of 50% of her base salary upon our timely filing its annual report on Form 10-K for the year ended December 31, 2017 and
raising gross proceeds of $20 million in debt and/or equity capital and a bonus of 100% of her base salary upon the Company achieving
(i) any merger or sale of our company or our assets, (ii) our achieving adjusted EBITDA of $10 million in a fiscal year, (iii)
our achieving a listing on a national exchange and then or subsequently raising gross proceeds in the amount of $10 million. We
also granted Ms. Ingariola a Stock Option to acquire two million shares of common stock of at an exercise price of $0.50 per share
for a period of ten years. The Stock Options vest in 36 equal tranches commencing on the grant date. We also entered into an Indemnification
Agreement with Ms. Ingargiola.
The employment of
Ms. Ingargiola is at will and may be terminated at any time, with or without formal cause. Pursuant to the terms of executive retention
agreement with Ms. Ingargiola, we have agreed to provide specified severance and bonus amounts and to accelerate the vesting on
their equity awards upon termination upon a change of control or an involuntary termination, as each term is defined in the agreements.
In the event of a termination upon a change
of control, Ms. Ingargiola is entitled to receive an amount equal to 12 months of her base salary and the target bonus then
in effect for the executive officer for the year in which such termination occurs, such bonus payment to be pro-rated to reflect
the full number of months the executive remained in the Company’s employ. In addition, the vesting on any stock option held
by the executive officer will be accelerated in full. At the election of the executive officer, the Company will also continue
to provide health related employee insurance coverage for twelve months, at the Company’s expense.
In the event of an involuntary termination,
Ms. Ingargiola is entitled to receive an amount equal to six months of her base salary and the target bonus then in effect
for the executive officer for the six months in which such termination occurs, such bonus payment to be pro-rated to reflect the
full number of months the executive remained in the Company’s employ. Such payment will be increased to 12 months upon the
one year anniversary of the retention agreement. In addition, the vesting on any stock option held by the executive officer will
be accelerated in full. At the election of the executive officer, the Company will also continue to provide health related employee
insurance coverage for twelve months, at the Company’s expense.
Grants of Plan Based Awards
We did not make any plan based equity or non-equity
awards grants to named executives during the years ended December 31, 2016 and 2015.
Option Exercises
There were no options exercised by our named
officers during the years ended December 31, 2016 and 2015.
Compensation of Directors
Our directors did not earn compensation for
the years ended December 31, 2016 and 2015.
On April 28, 2017, Steven P. Sukel and Yancen
Lu were appointed to the Board of Directors of our company to serve as directors. Mr. Sukel and Mr. Yancen Lu both entered into
agreements pursuant to which they will serve as directors. The director agreements provide that they will receive options to receive
40,000 shares of common stock per year at an exercise price equal to the closing price on December 31st of the prior year. The
options shall vest in equal amounts quarterly and shall be exercisable for a period of five years. The options for 2017 have been
pro-rated. As result, each director shall receive a stock option to acquire 30,000 shares of common stock for a term of five years
vesting 10,000 shares at the beginning of each quarter commencing April 1, 2017. The exercise price for the initial grant for
2017 was set at $1.49 per share.
Pension, Retirement or Similar Benefit
Plans
There are no arrangements or plans in which
we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing
plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock
options may be granted at the discretion of the board of directors or a committee thereof.
CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
Revenue from related parties and accounts
receivable – related party
During the year ended December 31, 2016 and
the period from May 18, 2015 (date of inception) through December 31, 2015, revenue from related parties was as follows:
|
|
Year Ended
December 31,
2016
|
|
|
Period from May 18,
2015
(Date of Inception)
through
December 31, 2015
|
|
Medical related consulting services provided to:
|
|
|
|
|
|
|
|
|
Shanghai Daopei (1)
|
|
$
|
313,946
|
|
|
$
|
-
|
|
Beijing Nanshan (2)
|
|
|
162,500
|
|
|
|
-
|
|
Hebei Yanda (3)
|
|
|
140,000
|
|
|
|
-
|
|
|
|
$
|
616,446
|
|
|
$
|
-
|
|
|
(1)
|
Shanghai Daopei is a subsidiary of a company whose chairman is Wenzhao Lu, the major shareholder and Chairman of our company.
|
|
(2)
|
Beijing Nanshan is a subsidiary of a company whose chairman is Wenzhao Lu, the major shareholder and Chairman of our company.
|
|
(3)
|
Hebei Yanda is a subsidiary of a company whose chairman is Wenzhao Lu, the major shareholder and Chairman of our company.
|
Accounts receivable
– related party, net of allowance for doubtful accounts, at December 31, 2016 and 2015 amounted to $70,228 and $0, respectively,
and were related to consulting services provided to Shanghai Daopei, a Chinese entity whose chairman is Wenzhao Lu, the major shareholder
and Chairman of our company. Management believes that the accounts receivable are fully collectable. Therefore, no allowance for
doubtful accounts is deemed to be required on its accounts receivable – related party at December 31, 2016.
Accounts payable and accrued liabilities
– related parties
At December 31, 2016 and 2015, we owed David
Jin, a shareholder, chief executive officer, president and board member, of $6,278 and $18,208, respectively, for travel reimbursements
which have been included in accounts payable and accrued liabilities – related parties on the accompanying consolidated balance
sheets.
At December 31, 2016 and 2015, we owed Meng
Li, its shareholder, chief operating officer and board member, of $309 and $0, respectively, for travel and other miscellaneous
reimbursements which have been included in accounts payable and accrued liabilities – related parties on the accompanying
consolidated balance sheets.
On October 17, 2016,
we entered into a lease for office space in New Jersey with a party affiliated with Wenzhao Lu (the “Office Lease”).
Pursuant to the Office Lease, the monthly rent is $1,000. The term of the Office Lease is one year commencing on November 1, 2016
and will expire on October 31, 2017. As of December 31, 2016, the accrued and unpaid rent expense related to this Office Lease
amounted to $2,000 which was included in accounts payable and accrued liabilities – related parties on the accompanying consolidated
balance sheets.
Due to related parties
From time to time,
David Jin, a shareholder, chief executive officer, president and board member of our company, provided advances to our company
to supplement its working capital needs. Those advances are short-term in nature, non-interest bearing, unsecured and payable on
demand. The working capital advance of $500 at December 31, 2016 and 2015 was reflected as due to related parties on the accompanying
consolidated balance sheets.
From time to time,
Meng Li, a shareholder, chief operating officer and board member of our company, provided advances to our company to supplement
its working capital needs. Those advances are short-term in nature, non-interest bearing, unsecured and payable on demand. The
working capital advance of $87,650 at December 31, 2016 and 2015 was reflected as due to related parties on the accompanying consolidated
balance sheets.
From time to time,
Wenzhao Lu, a major shareholder and chairman of the Board of Directors, provided advances to our company to supplement its working
capital needs. Those advances are short-term in nature, non-interest bearing, unsecured and payable on demand. The working capital
advance of $9,000 and $0 at December 31, 2016 and 2015, respectively, was reflected as due to related parties on the accompanying
consolidated balance sheets.
Distribution to AHS’s founders
On September 14, 2016, AHS
entered into a stock purchase agreement (the "September Agreement") to acquire 1,500,000 shares of restricted common
stock (the “Control Shares”) of our company, for a purchase price of $230,000. Upon purchase of the Control Shares,
AHS beneficially owned shares of common stock representing control of our company. AHS subsequently assigned the Control Shares
to its three founders resulting in Wenzhao Lu receiving 900,000 shares, David Jin receiving 450,000 shares and Meng Li receiving
150,000 shares. AHS recorded the assignment as a distribution to founders/owners with a corresponding debit to additional paid-in
capital of $230,000, which was treated as a return of capital in the equity accounts and was recorded as a reduction in additional
paid-in capital.
Warranty Agreement
We entered into and closed a Subscription
Agreement with an accredited investor (the "March 2017 Accredited Investor") pursuant to which the March 2017 Accredited
Investor purchased 3,000,000 shares of common stock (“March 2017 Shares”) for a purchase price of $3,000,000 (the
“Purchase Price”). The closing occurred on March 3, 2017. Avalon (Shanghai) Healthcare Technology Co., Ltd. (“Avalon
Shanghai”), Beijing DOING Biomedical Technology Co., Ltd. (“DOING”), the March 2017 Accredited Investor and
our company entered into a Share Subscription Agreement whereby the parties acknowledged, among other things, that DOING agreed
to transfer the Purchase Price to Avalon Shanghai on behalf of the March 2017 Investor and the March 2017 Accredited Investor
agreed to transfer the March 2017 Shares to DOING upon DOING completing the registration of the acquisition of the March 2017
Shares with the Beijing Commerce Commission (“BCC”) and obtaining an Enterprise Overseas Investment Certificate (the
“Investment Certificate”) from BCC. If DOING fails to complete the registration and acquire the Investment Certificate
within one year of the closing then Avalon Shanghai shall transfer $3,000,000 with interest of 20% to DOING upon the request of
DOING (the “BCC Repayment Obligation”). As of the date hereof, the Company is obligated to DOING in the principal
amount of $3,000,000. The BCC Repayment Obligation is a debt obligation arising other than in the ordinary course of
business, which constitutes a direct financial obligation of our company. Further, Wenzhao Lu, a director and shareholder of our
company, and DOING entered into a Warranty Agreement. Pursuant to the Warranty Agreement, Mr. Wenzhao Lu agreed to (i) cause us
to be liable to DOING in the event the March 2017 Accredited Investor defaults in its obligations to DOING, (ii) cause the March
2017 Accredited Investor to transfer the March 2017 Shares to DOING upon DOING’s receipt of the Investment Certificate from
BCC, (iii) within three years from the date of the Warranty Agreement, DOING may require Mr. Wenzhao Lu to acquire the March 2017
Shares at $1.20 per share upon three months notice, and (iv) in the event Mr. Wenzhao Lu does not acquire the March 2017 Shares
within the three month period, interest of 15% per annum will be added to the purchase price.
On April
20, 2017, Wenzhao Lu sold 5,000,000 shares of common stock of Avalon in a private transaction to Yancen Lu in consideration of
$2,500,000. The two parties are not related. Both parties serve as directors of our company.
Director Independence
Our Board of Directors has undertaken a review
of its composition and the independence of each director. Based on the review of each director's background, employment and affiliations,
including family relationships, the Board of Directors has determined that there are no “independent directors” under
the rules and regulations of the SEC.
Stockholder Communications with the Board
We have not implemented a formal policy or
procedure by which our stockholders can communicate directly with our Board of Directors. Nevertheless, every effort has been made
to ensure that the views of stockholders are heard by the Board of Directors or individual directors, as applicable, and that appropriate
responses are provided to stockholders in a timely manner. We believe that we are responsive to stockholder communications, and
therefore have not considered it necessary to adopt a formal process for stockholder communications with our Board. Our Board continually
monitors the appropriateness of adopting additional processes.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information,
as of May 8, 2017 with respect to the beneficial ownership of the outstanding common stock by (i) any holder of more than five
(5%) percent; (ii) each of the Company’s executive officers and directors; and (iii) the Company’s directors and executive
officers as a group. The numbers below reflect a 1:4 reverse stock split implemented on October 18, 2016. Except as otherwise indicated,
each of the stockholders listed below has sole voting and investment power over the shares beneficially owned.
Name of Beneficial Owner (1)
|
|
Common Stock
Beneficially
Owned
|
|
|
Percentage of
Common Stock
(2)
|
|
Wenzhao Lu *
|
|
|
25,900,000
|
|
|
|
39.9
|
%
|
David Jin, MD, PhD *
|
|
|
15,450,000
|
|
|
|
23.8
|
%
|
Meng Li *
|
|
|
5,150,000
|
|
|
|
7.9
|
%
|
Luisa Ingargiola* (3)
|
|
|
277,776
|
|
|
|
**
|
|
Yancen Lu* (4)
|
|
|
5,020,000
|
|
|
|
7.7
|
%
|
Steven P. Sukel*(5)
|
|
|
220,000
|
|
|
|
**
|
|
All officers and directors as a group (4 persons)
|
|
|
52,017,776
|
|
|
|
80.1
|
%
|
* Officer and/or director of the Company
** Less than 1%.
|
(1)
|
Except as otherwise indicated, the address of each beneficial owner is c/o Avalon GloboCare Corp., 83 South Street, Suite 101, Freehold, New Jersey 07728.
|
|
(2)
|
Applicable percentage ownership is based on 64,628,622 shares of common stock outstanding as of May 8, 2017, together with securities exercisable or convertible into shares of common stock within 60 days of May 8, 2017 for each stockholder. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock that are currently exercisable or exercisable within 60 days of May 8, 2017 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
|
|
(3)
|
Represents a Stock Option to acquire 277,776 shares of common stock of our company at an exercise price of
$0.50 per share for a period of ten years , which included 55,556 shares to be vested within 60 days of May 8, 2017.
|
|
|
|
|
(4)
|
Yancen Lu holds (i) 5,000,000 shares of common stock through EmeraldVest LLC of which he is the sole owner and manager and (ii) 30,000 options that are exercisable for a term of five years at an exercise price of $1.49 per share of which 10,000 shares have vested and an additional 10,000 shares shall vest within 60 days of May 8, 2017.
|
|
|
|
|
(5)
|
Steven P. Sukel holds (i) 200,000 shares of common stock and (ii) 30,000 options that are exercisable for a term of five years at an exercise price of $1.49 per share of which 10,000 shares have vested and an additional 10,000 shares shall vest within 60 days of May 8, 2017.
|
No Director, executive officer, affiliate or
any owner of record or beneficial owner of more than 5% of any class of voting securities of our company is a party adverse to
the Company or has a material interest adverse to the Company.
SELLING STOCKHOLDERS
This prospectus relates to the resale by the
selling stockholders named below from time to time of up to a total of 1,090,500 shares of our common stock that were issued to
the selling stockholders pursuant to transactions exempt from registration under the Securities Act. All of the common stock offered
by this prospectus is being offered by the selling stockholders and is being offered for their own accounts.
We entered into and closed Subscription Agreements
with several accredited investors (the "December 2016 Accredited Investors") pursuant to which the December 2016 Accredited
Investors purchased an aggregate of 7,270,000 shares of common stock (the “2016 Subscription Shares”) for an aggregate
purchase price of $3,635,000. The closing occurred on December 19, 2016. We agreed to register 15% of the shares sold or 1,090,500
shares of common stock.
The table below sets forth information concerning
the resale of the shares of common stock by the selling stockholders. We will not receive any proceeds from the resale of the common
stock by the selling stockholders. None of the selling stockholders is a registered broker-dealer.
The following table also sets forth the name
of each person who is offering the resale of shares of common stock by this prospectus, the number of shares of common stock beneficially
owned by each person, the number of shares of common stock that may be sold in this offering and the percentage each person will
own after the offering, assuming they sell all of the shares offered.
Name of Selling
Stockholder
|
|
Total Number of
Shares of Common
Stock Beneficially
Owned Prior to
Offering (1)
|
|
|
Total Number of
Shares to be Offered
for Selling
Stockholders
Account
|
|
|
Total Shares to be Owned and Percent
of Total Outstanding After Completion
of this Offering (1), (2)
|
|
Zhang Haoran
|
|
|
750,000
|
|
|
|
112,500
|
|
|
|
637,500
|
*
|
Zhang Yupu
|
|
|
750,000
|
|
|
|
112,500
|
|
|
|
637,500
|
*
|
Wang Yue
|
|
|
450,000
|
|
|
|
67,500
|
|
|
|
382,500
|
*
|
Wang Zhe
|
|
|
450,000
|
|
|
|
67,500
|
|
|
|
382,500
|
*
|
Liu Yongsheng
|
|
|
300,000
|
|
|
|
45,000
|
|
|
|
255,000
|
*
|
Yang Haiyan
|
|
|
300,000
|
|
|
|
45,000
|
|
|
|
255,000
|
*
|
Zhang Jiajia
|
|
|
200,000
|
|
|
|
30,000
|
|
|
|
170,000
|
*
|
Leng Zhu
|
|
|
200,000
|
|
|
|
30,000
|
|
|
|
170,000
|
*
|
Wang Xinshuang
|
|
|
150,000
|
|
|
|
22,500
|
|
|
|
127,500
|
*
|
Hu Yingzhi
|
|
|
90,000
|
|
|
|
13,500
|
|
|
|
76,500
|
*
|
Zhang Yuejin
|
|
|
250,000
|
|
|
|
37,500
|
|
|
|
212,500
|
*
|
Zhai Changhai
|
|
|
150,000
|
|
|
|
22,500
|
|
|
|
127,500
|
*
|
Shang Erli
|
|
|
60,000
|
|
|
|
9,000
|
|
|
|
51,000
|
*
|
Zhang Jianan
|
|
|
400,000
|
|
|
|
60,000
|
|
|
|
340,000
|
*
|
Lu Lei
|
|
|
450,000
|
|
|
|
67,500
|
|
|
|
382,500
|
*
|
Jin Shoufeng
|
|
|
150,000
|
|
|
|
22,500
|
|
|
|
127,500
|
*
|
Ma Chenguang
|
|
|
200,000
|
|
|
|
30,000
|
|
|
|
170,000
|
*
|
Guo Yaxian
|
|
|
30,000
|
|
|
|
4,500
|
|
|
|
25,500
|
*
|
Lu Minggang
|
|
|
450,000
|
|
|
|
67,500
|
|
|
|
382,500
|
*
|
Wang Xiaowei
|
|
|
450,000
|
|
|
|
67,500
|
|
|
|
382,500
|
*
|
Song Wei
|
|
|
60,000
|
|
|
|
9,000
|
|
|
|
51,000
|
*
|
Luan Shaoyi
|
|
|
300,000
|
|
|
|
45,000
|
|
|
|
255,000
|
*
|
Wang Fang
|
|
|
180,000
|
|
|
|
27,000
|
|
|
|
153,000
|
*
|
Wang Xiaomeng
|
|
|
100,000
|
|
|
|
15,000
|
|
|
|
85,000
|
*
|
Zhao Huijun
|
|
|
100,000
|
|
|
|
15,000
|
|
|
|
85,000
|
*
|
Hou Jianchun
|
|
|
100,000
|
|
|
|
15,000
|
|
|
|
85,000
|
*
|
Steven Sukel
|
|
|
200,000
|
|
|
|
30,000
|
|
|
|
170,000
|
*
|
* Less than 1%.
(1)
|
The number of shares listed in these columns include all shares beneficially owned by the selling stockholder. The ownership percentages listed in these columns include only shares beneficially owned by the listed selling stockholder. Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included the shares the person has the right to acquire within 60 days of the date above. The shares that a stockholder has the right to acquire within 60 days, however, are not included in the computation of the percentage ownership of any other stockholder. The ownership percentages are calculated assuming that 84,628,622 shares of common stock immediately following the sale of the 20,000,000 shares included in this offering.
|
|
|
(2)
|
Under the rules adopted by the SEC, a person is deemed to be a beneficial owner of securities with respect to which the person has or shares: (a) voting power, which includes the power to vote or direct the vote of the security, or (b) investment power, which includes the power to dispose of or to direct the disposition of the security. Unless otherwise indicated, the persons named in the table above have sole voting and investment power with respect to all shares beneficially owned. Assumes that all the securities listed hereunder have been sold.
|
PLAN OF DISTRIBUTION
The selling stockholders and any of their respective
pledgees, donees, assignees, and other successors-in-interest may, from time to time, sell any or all of their shares of common
stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions.
We have agreed, subject to certain limits,
to bear all costs, expenses, and fees of registration of the shares of our common stock offered by the selling stockholders for
resale. However, any brokerage commissions, discounts, concessions, or other fees, if any, payable to broker-dealers
in connection with any sale of shares of common stock will be borne by the selling stockholders selling those shares or by the
purchasers of those shares.
On our being notified by a selling stockholder
that any material arrangement has been entered into with a broker-dealer for the sale of shares through a block trade, special
offering, exchange distribution, or secondary distribution, or a purchase by a broker or dealer, a supplement to this prospectus
will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing the following:
|
·
|
the name of each such selling stockholder and of any participating broker-dealer;
|
|
·
|
the number of securities involved;
|
|
·
|
the price at which such securities were sold;
|
|
·
|
the commissions paid or discounts or concessions allowed to any broker-dealer, where applicable; and
|
|
·
|
other facts material to the transaction.
|
The selling stockholders may use any one or
more of the following methods when selling shares:
|
·
|
directly as principals;
|
|
·
|
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
|
|
·
|
block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
|
|
·
|
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
|
|
·
|
an exchange distribution in accordance with the rules of the applicable exchange;
|
|
·
|
privately negotiated transactions;
|
|
·
|
short sales that are in compliance with the applicable laws and regulations of any state or the United States;
|
|
·
|
broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; or
|
|
·
|
a combination of any such methods of sale.
|
The selling stockholders may also sell shares
under Rule 144 under the Securities Act, if available, rather than under this prospectus.
Any sales of the shares may be effected through
the OTC Markets, in private transactions or otherwise, and the shares may be sold at market prices prevailing at the time of sale,
at prices related to prevailing market prices.
The selling stockholders may pledge their shares
to their brokers under the margin provisions of customer agreements. If a selling stockholder defaults on a margin loan, the broker
may, from time to time, offer and sell the pledged shares. We believe that the selling stockholders have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding sale of their shares other than ordinary course
brokerage arrangements, nor is there an underwriter or coordinating broker acting in connection with the proposed sale of shares
by the selling stockholders.
Broker-dealers engaged by the selling stockholders
may arrange for other brokers-dealers to participate in sales. If the selling stockholders effect sales through underwriters,
brokers, dealers or agents, such firms may receive compensation in the form of discounts, concessions or commissions from the selling
stockholders or the purchasers of the shares for whom they may act as agent, principal or both in amounts to be negotiated. Those
persons who act as broker-dealers or underwriters in connection with the sale of the shares may be selected by the selling stockholders
and may have other business relationships with, and perform services for, us. The selling stockholders do not expect these commissions
and discounts to exceed what is customary in the types of transactions involved.
Any selling stockholder or broker-dealer who
participates in the sale of the shares may be deemed to be an “underwriter” within the meaning of section 2(11) of
the Securities Act. Any commissions received by any underwriter or broker-dealer and any profit on any sale of the shares as principal
may be deemed to be underwriting discounts and commissions under the Securities Act.
The anti-manipulation provisions of Rules 101
through 104 of Regulation M promulgated under the Exchange Act may apply to purchases and sales of shares of common stock by the
selling stockholders. In addition, there are restrictions on market-making activities by persons engaged in the distribution
of the common stock.
Under the securities laws of certain states,
the shares may be sold in those states only through registered or licensed brokers or dealers. In addition, in certain states the
shares may not be able to be sold unless our common stock has been registered or qualified for sale in that state or an exemption
from registration or qualification is available and is complied with.
We are required to pay expenses incident to
the registration, offering, and sale of the shares under this offering.
DESCRIPTION OF SECURITIES TO BE REGISTERED
General
Our Certificate of Incorporation authorize
common stock and preferred stock. In particular, the Certificate of Incorporation authorize the issuance of 490,000,000 shares
of common stock and 10,000,000 shares of Preferred Stock. The rights and privileges of the common stock and preferred
stock are summarized below. As of May 8, 2017, there were 64,628,622 shares of our common stock outstanding and no shares of Preferred
Stock outstanding. The Company does not have any outstanding debt securities.
Capital Stock
We are authorized by our Certificate of Incorporation
to issue an aggregate of 500,000,000 shares of capital stock, of which 490,000,000 are shares of Common Stock and 10,000,000 are
shares of Preferred Stock. As of May 8, 2017 we had 64,628,622 shares of Common Stock and no shares of Preferred Stock issued and
outstanding.
Common Stock
All outstanding shares of Common Stock are
of the same class and have equal rights and attributes. The holders of Common Stock are entitled to one vote per share on all matters
submitted to a vote of stockholders of the Company. All stockholders are entitled to share equally in dividends, if any, as may
be declared from time to time by the Board of Directors out of funds legally available. In the event of liquidation, the holders
of Common Stock are entitled to share ratably in all assets remaining after payment of all liabilities. The stockholders do not
have cumulative or preemptive rights.
Preferred Stock
Our Certificate of Incorporation authorizes
the issuance of up to 10,000,000 shares of Preferred Stock with designations, rights and preferences determined from time to time
by our Board of Directors. Accordingly, our Board of Directors is empowered, without stockholder approval, to issue Preferred
Stock with dividend, liquidation, conversion, voting, or other rights which could adversely affect the voting power or other rights
of the holders of the Common Stock. In the event of issuance, the Preferred Stock could be utilized, under certain circumstances,
as a method of discouraging, delaying or preventing a change in control of our company, which is sometimes referred to in corporate
parlance as a “poison pill”.
The description
of certain matters relating to the securities of the Company is a summary and is qualified in its entirety by the provisions of
the Company's Certificate of Incorporation and By-Laws, copies of which have been filed as exhibits to this Form S-1.
Anti-Takeover Provisions of Our Certificate
of Incorporation and Bylaws
None.
Options
We have not issued
and do not have any outstanding options to purchase shares of our common stock.
Transfer Agent
The stock transfer agent for our securities
is Vstock Transfer, LLC, 18 Lafayette Place, Woodmere, NY 11598,
(212) 828-8436
.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, our shares trade on
the OTCQB under the symbol AVCO but the market has been limited and a significant public market for our common stock may not develop
or be sustained after this offering. Future sales of significant amounts of our capital stock, including shares of our outstanding
stock and shares of our stock issued upon exercise of outstanding options, in the public market after this offering, or the perception
that such sales could occur, could adversely affect any prevailing market price of our common stock and could impair our future
ability to raise capital through the sale of our equity securities.
Shares Covered by this Prospectus
As of May 8, 2017, we have 64,628,622 shares
of common stock outstanding. Of these outstanding shares, 1,090,500 shares being registered in this offering may be sold without
restriction or further registration under the Securities Act, except for any shares purchased by our “affiliates,”
as that term is defined in Rule 144 under the Securities Act, whose sales may be made only in compliance with the limitations of
Rule 144 described below.
The remaining shares outstanding after this
offering are deemed “restricted securities” under Rule 144. Restricted securities may be sold in the public market
only if registered or if they qualify for an exemption under the Securities Act, such as Rule 144, which is summarized below.
Rule 144
Certain outstanding shares of our common stock
which are not included in this prospectus are eligible for sale in the public market under Rule 144. In general, under Rule 144
as currently in effect, a person who has beneficially owned restricted shares of our common stock for at least six months would
be entitled to sell their securities provided that (1) such person is not deemed to have been one of our affiliates at the time
of, or at any time during the three months preceding, a sale, (2) we are subject to the reporting requirements of the Exchange
Act for at least 90 days before the sale and (3) if the sale occurs prior to satisfaction of a one-year holding period, we provide
current information at the time of sale. In the event that the registration statement of which this prospectus is a part lapses
for any reason, all currently outstanding shares of common stock will be subject to resale pursuant to Rule 144, subject to the
limitations described herein.
Persons who have beneficially owned restricted
shares of our common stock for at least six months but who are our affiliates at the time of, or at any time during the three months
preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month
period only a number of securities that does not exceed the greater of:
|
·
|
1% of the total number of securities of the same class then outstanding: or
|
|
·
|
the average weekly trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.
|
provided
, that, in each case, that
we are subject to the periodic reporting requirements of the Exchange Act for at least three months before the sale. As we were
a former shell company, our shareholder may not take advantage of Rule 144 until October 19, 2017, which is the one year anniversary
of the filing of our Super 8K in connection with the acquisition of AHS.
However, since our common stock is quoted on
the OTCQB, which is not an “automated quotation system,” our stockholders will not be able to rely on the market-based
volume limitation described in the second bullet above. If, in the future, our securities are listed on an exchange or quoted on
NASDAQ, then our stockholders would be able to rely on the market-based volume limitation. Unless and until our stock is so listed
or quoted, our stockholders can only rely on the percentage based volume limitation described in the first bullet above.
Such sales by affiliates must also comply with
the manner of sale, current public information and notice provisions of Rule 144. The selling stockholders will not be governed
by the foregoing restrictions when selling their shares pursuant to this prospect.
LEGAL MATTERS
The validity of the shares of common stock
offered under this prospectus is being passed upon for us by Fleming PLLC.
EXPERTS
The financial statements for Avalon GloboCare
as of December 31, 2016 and 2015 and the related statements of operations, changes in stockholders' deficit and cash flows for
the year ended December 31, 2016 and for the period from May 18, 2015 (date of inception) through December 31, 2015, included in
this prospectus and elsewhere in the registration statement, have been audited by RBSM LLP, an independent registered public accounting
firm, to the extent and for the periods indicated in their report appearing elsewhere herein, and are included in reliance upon
such report and upon the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement
on Form S-1 under the Securities Act with respect to the common stock offered by this prospectus. This prospectus, which is part
of the registration statement, omits certain information, exhibits, schedules and undertakings set forth in the registration statement.
For further information pertaining to us and our common stock, reference is made to the registration statement and the exhibits
and schedules to the registration statement. Statements contained in this prospectus as to the contents or provisions of any documents
referred to in this prospectus are not necessarily complete, and in each instance where a copy of the document has been filed as
an exhibit to the registration statement, reference is made to the exhibit for a more complete description of the matters involved.
You may read and copy all or any portion of
the registration statement without charge at the public reference room of the SEC at 100 F Street, N. E., Washington, D. C. 20549.
Copies of the registration statement may be obtained from the SEC at prescribed rates from the public reference room of the SEC
at such address. You may obtain information regarding the operation of the public reference room by calling 1-800-SEC-0330. In
addition, registration statements and certain other filings made with the SEC electronically are publicly available through the
SEC’s web site at http://www.sec.gov. The registration statement, including all exhibits and amendments thereto, has been
filed electronically with the SEC.
We are subject to the information and periodic
reporting requirements of the Exchange Act and, accordingly, we file annual reports containing financial statements audited by
an independent registered public accounting firm, quarterly reports containing unaudited financial data, current reports and other
reports and information with the SEC. You may inspect and copy each of our periodic reports, proxy statements and other information
at the SEC’s public reference room, and at the web site of the SEC referred to above.
Financial Statements
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
CONTENTS
Report of Independent Registered Public Accounting Firm
|
F-2
|
|
|
Consolidated Financial Statements:
|
|
|
|
Consolidated Balance Sheets - As of December 31, 2016 and 2015
|
F-3
|
|
|
Consolidated Statements of Operations and Comprehensive Loss -
For the Year Ended December 31, 2016 and for the Period from May 18, 2015 (Date of Inception) through December 31, 2015
|
F-4
|
|
|
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) -
For the Year Ended December 31, 2016 and for the Period from May 18, 2015 (Date of Inception) through December 31, 2015
|
F-5
|
|
|
Consolidated Statements of Cash Flows –
For the Year Ended December 31, 2016 and for the Period from May 18, 2015 (Date of Inception) through December 31, 2015
|
F-6
|
|
|
Notes to Consolidated Financial Statements
|
F-7 to F-20
|
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Stockholders
of
Avalon GloboCare Corp.
We have audited the accompanying consolidated
balance sheets of Avalon GloboCare Corp. and subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the
related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity (deficit), and cash
flows for the year ended December 31, 2016 and for the period from May 18, 2015 (date of inception) through December 31, 2015.
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the consolidated financial position of Avalon GloboCare
Corp. and subsidiaries as of December 31, 2016 and 2015, and the consolidated results of their operations and their cash flows
for the year ended December 31, 2016 and for the period from May 18, 2015 (date of inception) through December 31, 2015 in conformity
with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated
financial statements, the Company has a limited operating history and generated an accumulated deficit. These conditions raise
substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are
also described in Note 2 to the consolidated financial statements. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
New York, New York
March 27, 2017
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
2,886,189
|
|
|
$
|
109,586
|
|
Accounts receivable - related party, net of allowance for doubtful accounts
|
|
|
70,228
|
|
|
|
-
|
|
Prepaid expenses and other
|
|
|
749,796
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
3,706,213
|
|
|
|
109,586
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
295
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
3,706,508
|
|
|
$
|
109,586
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
22,334
|
|
|
$
|
16,600
|
|
Accounts payable and accrued liabilities - related parties
|
|
|
8,587
|
|
|
|
18,208
|
|
Income taxes payable
|
|
|
20,976
|
|
|
|
-
|
|
VAT and other taxes payable
|
|
|
11,270
|
|
|
|
-
|
|
Due to related parties
|
|
|
97,150
|
|
|
|
88,150
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
160,317
|
|
|
|
122,958
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies - (Note 12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY (DEFICIT):
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding at December 31, 2016 and 2015
|
|
|
-
|
|
|
|
-
|
|
Common stock, $0.0001 par value; 490,000,000 shares authorized; 61,628,622 and 50,000,000 shares issued and outstanding at December 31, 2016 and 2015, respectively
|
|
|
6,163
|
|
|
|
5,000
|
|
Additional paid-in capital
|
|
|
3,681,387
|
|
|
|
84,000
|
|
Accumulated deficit
|
|
|
(53,369
|
)
|
|
|
(102,372
|
)
|
Statutory reserve
|
|
|
6,578
|
|
|
|
-
|
|
Accumulated other comprehensive loss - foreign currency translation adjustment
|
|
|
(94,568
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders' Equity (Deficit)
|
|
|
3,546,191
|
|
|
|
(13,372
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity (Deficit)
|
|
$
|
3,706,508
|
|
|
$
|
109,586
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
|
|
For the Year
|
|
|
For the Period from
|
|
|
|
Ended
|
|
|
May 18, 2015 (Date of Inception) through
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
REVENUE
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
Revenue - related parties
|
|
|
616,446
|
|
|
|
-
|
|
Total Revenue
|
|
|
616,446
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUE
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
-
|
|
|
|
-
|
|
Cost of revenue - related parties
|
|
|
73,066
|
|
|
|
-
|
|
Total Cost of Revenue
|
|
|
73,066
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
543,380
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
Selling expense
|
|
|
6,894
|
|
|
|
-
|
|
Professional fees
|
|
|
395,780
|
|
|
|
83,900
|
|
Other general and administrative
|
|
|
63,773
|
|
|
|
18,480
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
466,447
|
|
|
|
102,380
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM OPERATIONS
|
|
|
76,933
|
|
|
|
(102,380
|
)
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
|
|
|
|
|
|
|
|
|
Interest Income
|
|
|
575
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
Total Other Income
|
|
|
575
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES
|
|
|
77,508
|
|
|
|
(102,372
|
)
|
|
|
|
|
|
|
|
|
|
INCOME TAXES
|
|
|
21,927
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
$
|
55,581
|
|
|
$
|
(102,372
|
)
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
|
55,581
|
|
|
|
(102,372
|
)
|
OTHER COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|
Unrealized foreign currency translation loss
|
|
|
(94,568
|
)
|
|
|
-
|
|
COMPREHENSIVE LOSS
|
|
$
|
(38,987
|
)
|
|
$
|
(102,372
|
)
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) PER COMMON SHARES:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
0.001
|
|
|
$
|
(0.002
|
)
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
51,139,475
|
|
|
|
50,000,000
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
EQUITY (DEFICIT)
For the Period from May 18, 2015 (Date of
Inception) through December 31, 2015 and the Year Ended December 31, 2016
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Total
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Statutory
|
|
|
Other
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Reserve
|
|
|
Comprehensive
Loss
|
|
|
Equity
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, May 18, 2015 (date of inception)
|
|
|
-
|
|
|
$
|
-
|
|
|
|
50,000,000
|
|
|
$
|
5,000
|
|
|
$
|
(5,000
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AHS founders' contribution
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
89,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
89,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from May 18, 2015 (date of inception)
through December 31, 2015
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(102,372
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(102,372
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000,000
|
|
|
|
5,000
|
|
|
|
84,000
|
|
|
|
(102,372
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,372
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganization of company
|
|
|
-
|
|
|
|
-
|
|
|
|
1,750,000
|
|
|
|
175
|
|
|
|
(175
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
2,608,622
|
|
|
|
261
|
|
|
|
52,289
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
52,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares sold for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
7,270,000
|
|
|
|
727
|
|
|
|
3,634,273
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,635,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AHS founders' contribution
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
141,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
141,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution of Avalon GloboCare Corp.'s shares
to AHS's founders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(230,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(230,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appropriation to statutory reserve
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,578
|
)
|
|
|
6,578
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(94,568
|
)
|
|
|
(94,568
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
55,581
|
|
|
|
-
|
|
|
|
-
|
|
|
|
55,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2016
|
|
|
-
|
|
|
$
|
-
|
|
|
|
61,628,622
|
|
|
$
|
6,163
|
|
|
$
|
3,681,387
|
|
|
$
|
(53,369
|
)
|
|
$
|
6,578
|
|
|
$
|
(94,568
|
)
|
|
$
|
3,546,191
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
For the Year
|
|
|
For the Period from
|
|
|
|
Ended
|
|
|
May 18, 2015 (Date of Inception) through
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
55,581
|
|
|
$
|
(102,372
|
)
|
Adjustments to reconcile net income (loss) from operations to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
|
26
|
|
|
|
-
|
|
Stock-based professional fees
|
|
|
52,550
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable - related party
|
|
|
(73,413
|
)
|
|
|
-
|
|
Prepaid expense and other
|
|
|
(50,619
|
)
|
|
|
-
|
|
Accounts payable and accrued liabilities
|
|
|
5,758
|
|
|
|
16,600
|
|
Accounts payable and accrued liabilities - related parties
|
|
|
(9,607
|
)
|
|
|
18,208
|
|
Income taxes payable
|
|
|
21,927
|
|
|
|
-
|
|
VAT and other taxes payable
|
|
|
11,781
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
|
|
13,984
|
|
|
|
(67,564
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Prepayment made for acquisition of real property
|
|
|
(700,000
|
)
|
|
|
-
|
|
Purchase of Avalon GloboCare Corp.'s shares by AHS
|
|
|
(230,000
|
)
|
|
|
-
|
|
Purchase of property, plant and equipment
|
|
|
(334
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(930,334
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds received from related parties' advance
|
|
|
9,000
|
|
|
|
88,150
|
|
Proceeds received from founders' contribution
|
|
|
141,000
|
|
|
|
89,000
|
|
Proceeds from sale of common stock
|
|
|
3,635,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
3,785,000
|
|
|
|
177,150
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE ON CASH
|
|
|
(92,047
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH
|
|
|
2,776,603
|
|
|
|
109,586
|
|
|
|
|
|
|
|
|
|
|
CASH - beginning of period
|
|
|
109,586
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH - end of year
|
|
$
|
2,886,189
|
|
|
$
|
109,586
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Distribution of Avalon GloboCare Corp.'s shares to founders
|
|
$
|
230,000
|
|
|
$
|
-
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE 1 –
ORGANIZATION AND NATURE
OF OPERATIONS
Avalon
GloboCare Corp. (f/k/a Global Technologies Corp.) (the “Company”) is a Delaware corporation. The Company was incorporated
under the laws of the State of Delaware on July 28, 2014. On October 18, 2016, the Company changed its name to Avalon GloboCare
Corp. and completed a reverse split its shares of common stock at a ratio of 1:4. On October 19, 2016, the Company entered into
and closed a Share Exchange Agreement with the shareholders of Avalon Healthcare System, Inc., a Delaware corporation (“AHS”),
each of which are accredited investors (“AHS Shareholders”) pursuant to which we acquired 100% of the outstanding securities
of AHS in exchange for 50,000,000 shares of our common stock (the “AHS Acquisition”). AHS was incorporated
on May 18, 2015 under the laws of the State of Delaware. As a result of such acquisition, the Company’s operations now are
focused on
integrating and managing global healthcare services and resources, as well as empowering high-impact biomedical
innovations and technologies to accelerate their clinical applications. Operating through three major platforms, namely “Avalon
Cell”, “Avalon Telemedicine” and “Avalon Rehab”, our “technology + service” ecosystem
covers the areas of regenerative medicine, cell-based immunotherapy, exosome technology, telemedicine with medical second opinion/referral
services, as well as fertility and rehabilitation medicine. We plan to integrate these services through joint ventures and acquisitions
that bring shareholder value both in the short term, through operational entities as part of Avalon Rehab and Avalon Telemedicine,
and long term, through biomedical innovations as part of Avalon Cell.
AHS owns 100% of the
capital stock of Avalon (Shanghai) Healthcare Technology Co., Ltd. (“Avalon Shanghai”), which is a wholly foreign-owned
enterprise organized under the laws of the China. Avalon Shanghai was incorporated on April 29, 2016 and is engaged in medical
related consulting services for customers.
For
accounting purposes, AHS was the surviving entity. The transaction was accounted for as a recapitalization of AHS pursuant to which
AHS was treated as the accounting acquirer, surviving and continuing entity although the Company is the legal acquirer rather than
a reverse acquisition. The Company did not recognize goodwill or any intangible assets in connection with this transaction. Accordingly,
the Company’s historical financial statements are those of AHS and its wholly-owned subsidiary, Avalon Shanghai immediately
following the consummation of this reverse merger transaction.
NOTE
2 –
BASIS OF PRESENTATION AND GOING CONCERN
Basis of presentation
The
accompanying consolidated financial statements and related notes have been prepared in accordance with accounting principles generally
accepted in the United States of America (U.S. GAAP) and with the rules and regulations of the U.S. Securities and Exchange Commission
for financial information.
The
Company’s consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Avalon
Healthcare System, Inc. and Avalon (Shanghai) Healthcare Technology Co., Ltd. All intercompany accounts and transactions have been
eliminated in consolidation.
Going concern
The Company currently
has limited operations. The Company’s operations now are focused on providing outsourced, customized international healthcare
services to the rapidly changing health care industry primarily focused in the People’s Republic of China. The Company is
also pursuing the provision of these services in the United States as well as certain strategic partnerships and property ownership
and management.
These 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 consolidated financial statements, the Company had an accumulated deficit of $53,369 at December 31, 2016. The
Company has a limited operating history and its continued growth is dependent upon the continuation of providing medical consulting
services to its only three clients who are related parties; 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 or debt instruments 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.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE
2 –
BASIS OF PRESENTATION AND GOING CONCERN (continued)
Going concern
(continued)
The accompanying
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.
NOTE 3 –
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Use of estimates
The
preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates during the year
ended December 31, 2016 and the period from May 18, 2015 (date of inception) through December 31, 2015 include the allowance for
doubtful accounts, the useful life of property and equipment, assumptions used in assessing impairment of long-term assets, valuation
of deferred tax assets, accruals for taxes due, and the value of stock-based professional fees.
Fair value of financial instruments
and fair value measurements
The Company adopted
the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition
of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used
in measuring fair value as follows:
|
·
|
Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
|
|
·
|
Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
|
|
·
|
Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.
|
The carrying amounts
reported in the consolidated balance sheets for cash, accounts receivable – related party, prepaid expenses and other, accounts
payable and accrued liabilities, accounts payable and accrued liabilities – related parties, income taxes payable, VAT and
other taxes payable, and due to related parties approximate their fair market value based on the short-term maturity of these instruments.
The Company did not have any non-financial assets or liabilities that are measured at fair value on a recurring basis as of December
31, 2016 and 2015.
ASC 825-10 “Financial
Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair
value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election
date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported
in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.
Cash
Cash
consists of cash on hand and cash in banks. The Company maintains cash with various financial institutions in the PRC and United
States. At December 31, 2016 and 2015, cash balances in the PRC are $2,525,630 and $0, respectively, are uninsured. At December
31, 2016 and 2015, cash balances in United States are $360,559 and $109,586, respectively. The Company has not experienced any
losses in bank accounts and believes it is not exposed to any risks on its cash in bank accounts.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE 3 –
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
Concentrations of credit risk
Currently,
a significant portion of the Company’s operations are carried out in the 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 the PRC are subject to specific considerations
and significant risks not typically associated with companies in North America. The Company’s results may be adversely affected
by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance
abroad, and rates and methods of taxation, among other things
.
Financial
instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts
receivable. A portion of the Company’s cash is maintained with state-owned banks within the PRC, and none of these deposits
are covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks
on its cash in bank accounts. A small 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 receivables is limited due to generally short payment terms. The Company also performs ongoing credit evaluations
of its customers to help further reduce credit risk
.
At
December 31, 2016 and 2015, the Company’s cash balances by geographic area were as follows:
Country:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
United States
|
|
$
|
360,559
|
|
|
|
12.5
|
%
|
|
$
|
109,586
|
|
|
|
100.0
|
%
|
China
|
|
|
2,525,630
|
|
|
|
87.5
|
%
|
|
|
-
|
|
|
|
-
|
|
Total cash
|
|
$
|
2,886,189
|
|
|
|
100.0
|
%
|
|
$
|
109,586
|
|
|
|
100.0
|
%
|
Accounts receivable
– related party and allowance for doubtful accounts
Accounts
receivable – related party are presented net of an allowance for doubtful accounts. The Company maintains allowances for
doubtful accounts for estimated losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific
allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual
receivable balances, the Company considers many factors, including the age of the balance, a customer’s historical payment
history, its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection.
Management
believes that the accounts receivable are fully collectable. Therefore, no allowance for doubtful accounts is deemed to be required
on its accounts receivable – related party at December 31, 2016. The Company historically has not experienced uncollectible
accounts from customers granted with credit sales.
Property, plant and equipment
Property,
plant and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets.
The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are
retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses
are included in income in the year of disposition. The Company examines the possibility of decreases in the value of fixed assets
when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.
Impairment of long-lived assets
In
accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment
loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment
is measured as the difference between the asset’s estimated fair value and its book value. The Company did not
record any impairment charge for the year ended December 31, 2016 and the period from May 18, 2015 (date of inception) through
December 31, 2015.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE 3 –
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
Value added
tax
The Company is
subject to a value added tax (“
VAT
”) of 6% for providing consulting service. The amount of
VAT
liability
is determined by applying the applicable tax rate to the invoiced amount of consulting services provided (output
VAT
)
less
VAT
paid on purchases made with the relevant supporting invoices (input
VAT
). The Company reports
revenue net of PRC’s value added tax for all the periods presented in the consolidated statements of operations and comprehensive
loss.
Revenue recognition
Pursuant to the
guidance of ASC Topic 605, the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred
or services have been provided, the purchase price is fixed or determinable and collectability is reasonably assured.
The Company provides
medical related consulting services to its clients. The Company is paid fees for its services by its clients under written consulting
agreements. Each contract calls for a fixed payment in a fixed period of time. The Company recognizes revenue by providing medical
related consulting services under written service contracts with its customers. Revenue related to its service offerings is recognized
as the services are performed and amounts are earned, using the straight-line method over the term of the related services agreement.
Prepayments, if any, received from customers prior to the services being performed are recorded as advance from customers. In these
cases, when the services are performed, the amount recorded as advance from customers is recognized as revenue.
Cost of revenue
Cost of consulting
services includes internal labor and related benefits, travel expenses related to consulting services, subcontractor costs, other
related consulting costs, and other overhead costs.
Stock-based compensation
Stock-based
compensation is accounted for based on the requirements of the Share-Based Payment topic of ASC Topic 718 which requires recognition
in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments
over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting
period). The Financial Accounting Standards Board (“FASB”) also requires measurement of the cost of employee and director
services received in exchange for an award based on the grant-date fair value of the award
.
Pursuant
to ASC Topic 505-50, for share-based payments to consultants and other third-parties, compensation expense is determined at the
“measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached,
the total amount of compensation expense remains uncertain. The Company records compensation expense based on the fair value of
the award at the reporting date. The awards to consultants and other third-parties are then revalued, or the total compensation
is recalculated, based on the then current fair value, at each subsequent reporting date
.
Research and
development
Expenditures for
research and product development costs are expensed as incurred. The Company did not incur any research and development costs during
the year ended December 31, 2016 and the period from May 18, 2015 (date of inception) through December 31, 2015.
Advertising
All costs related
to advertising are expensed as incurred. The Company did not incur any advertising expenses during the year ended December 31,
2016 and the period from May 18, 2015 (date of inception) through December 31, 2015.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE 3 –
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
Income taxes
The Company accounts
for income taxes using the asset/liability method prescribed by ASC 740, “Income Taxes.” Under this method, deferred
tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities
using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records
a valuation allowance to offset deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that
some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is
recognized as income or loss in the period that includes the enactment date.
The
Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”.
Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not
the position will be sustained upon examination by the tax authorities. As of December 31, 2016 and 2015, the Company had no uncertain
tax positions that qualify for either recognition or disclosure in the financial statements. Tax year that remains subject to examination
is the years ended December 31, 2016 and 2015. The Company recognizes interest and penalties related to uncertain income tax positions
in other expense. However, no such interest and penalties were recorded as of December 31, 2016 and 2015.
Foreign currency translation
The reporting
currency of the Company is the U.S. dollar. The functional currency of the parent company and its wholly-owned U.S. subsidiary,
Avalon Healthcare System Inc. is the U.S. dollar and the functional currency of the Company’s its wholly-owned PRC subsidiary,
Avalon (Shanghai) Healthcare Technology Co., Ltd., is the Chinese Renminbi (“RMB”). For the subsidiary whose functional
currency is the RMB, result of operations and cash flows are translated at average exchange rates during the period, assets and
liabilities are translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange
rates. As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree
with the changes in the corresponding balances on the balance sheets. Translation adjustments resulting from the process of translating
the local currency financial statements into U.S. dollars are included in determining comprehensive income/loss. Transactions denominated
in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. Assets
and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing
at the balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated
in a currency other than the functional currency are included in the results of operations as incurred.
All
of the Company’s revenue transactions are transacted in the functional currency of the operating subsidiaries. The Company
does not enter into any material transaction in foreign currencies. Transaction gains or losses have not had, and are not expected
to have, a material effect on the results of operations of the Company.
Asset
and liability accounts at December 31, 2016 were translated at 6.9448 RMB to $1.00, which was the exchange rate on the balance
sheet date. Equity accounts were stated at their historical rates. The average translation rate applied to the statements of
operations
and comprehensive loss
for the year ended December 31, 2016 was 6.6435 RMB to $1.00.
Cash flows from the Company’s operations are calculated based upon the local currencies using the average translation rate.
Comprehensive
loss
Comprehensive
loss is comprised of net income (loss) and all changes to the statements of stockholders’ equity (deficit), except those
due to investments by stockholders, changes in paid-in capital and distributions to stockholders. For the Company, comprehensive
loss for the year ended December 31, 2016 consisted of net income (loss) and unrealized loss from foreign currency translation
adjustment.
Earnings (loss)
per share
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.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE 3 –
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
Earnings (loss)
per share (continued)
Basic
earnings per share are computed by dividing net income (loss) available to common stockholders by the weighted average number of
shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss)
by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding
during each period. Common stock equivalents are not included in the calculation of diluted earnings 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 Company did not have
any common stock equivalents and potentially dilutive common stock outstanding during the year ended December 31, 2016 and during
the period from May 18, 2015 (date of inception) through December 31, 2015.The following table presents a reconciliation of basic
and diluted net income (loss) per share:
|
|
Year Ended
December 31,
2016
|
|
|
Period from May 18,
2015 (Date of
Inception) through
December 31, 2015
|
|
Net income (loss) for basic and diluted net income (loss) per share of common stock
|
|
$
|
55,581
|
|
|
$
|
(102,372
|
)
|
Weighted average common stock outstanding - basic and diluted
|
|
|
51,139,475
|
|
|
|
50,000,000
|
|
Net income (loss) per common share - basic and diluted
|
|
$
|
0.001
|
|
|
$
|
(0.002
|
)
|
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. All of the Company's operations are considered
by the chief operating decision maker to be aggregated in one reportable operating segment. Currently, all of the Company’s
customers are in the People’s Republic of China and all income is derived from consulting services.
Related parties
Parties
are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control,
are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company,
its management, members of the immediate families of principal owners of the Company and its management and other parties with
which the Company may deal with if one party controls or can significantly influence the management or operating policies of the
other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company
discloses all significant related party transactions.
Reverse stock
split
The Company effected
an one-for-four reverse stock split of its common stock on October 18, 2016. All share and per share information has been retroactively
adjusted to reflect this reverse stock split.
Fiscal year end
The Company has
adopted a fiscal year end of December 31st.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE 3 –
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
Recent accounting
pronouncements
In
August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU addresses the
classification of certain specific cash flow issues including debt prepayment or extinguishment costs, settlement of certain debt
instruments, contingent consideration payments made after a business combination, proceeds from the settlement of certain insurance
claims and distributions received from equity method investees. This ASU is effective for fiscal years beginning after December
15, 2017, and interim periods within those fiscal years, with early adoption permitted. An entity that elects early adoption must
adopt all of the amendments in the same period. The Company is currently evaluating the impact it may have on its 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
At December 31, 2016 and 2015, prepaid
expenses and other consisted of the following:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Prepayment for acquisition of real property (see note 12 Real property purchase agreement)
|
|
$
|
700,000
|
|
|
$
|
-
|
|
Other
|
|
|
49,796
|
|
|
|
-
|
|
|
|
$
|
749,796
|
|
|
$
|
-
|
|
NOTE 5 –
PROPERTY, PLANT AND
EQUIPMENT
At December 31, 2016 and 2015, property,
plant and equipment consisted of the following:
|
|
Useful life
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Office equipment
|
|
3 Years
|
|
$
|
320
|
|
|
$
|
-
|
|
Less: accumulated depreciation
|
|
|
|
|
(25
|
)
|
|
|
-
|
|
|
|
|
|
$
|
295
|
|
|
$
|
-
|
|
For
the year ended December 31, 2016 and the period from May 18, 2015 (date of inception) through December 31, 2015, depreciation expense
amounted to $26 and $0, respectively, which was included in operating expenses.
NOTE 6 –
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
At December 31, 2016 and 2015, accounts payable and accrued
liabilities consisted of the following:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Accrued professional fees
|
|
$
|
14,080
|
|
|
$
|
16,600
|
|
Other
|
|
|
8,254
|
|
|
|
-
|
|
|
|
$
|
22,334
|
|
|
$
|
16,600
|
|
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE 7 –
VAT AND OTHER TAXES
PAYABLE
At December 31, 2016 and 2015, VAT and
other taxes payable consisted of the following:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
VAT tax payable
|
|
$
|
8,768
|
|
|
$
|
-
|
|
Other taxes payable
|
|
|
2,502
|
|
|
|
-
|
|
|
|
$
|
11,270
|
|
|
$
|
-
|
|
NOTE 8 –
RELATED PARTY
TRANSACTIONS
Revenue from related parties and accounts
receivable – related party
During the year ended December 31, 2016
and the period from May 18, 2015 (date of inception) through December 31, 2015, revenue from related parties was as follows:
|
|
Year Ended
December 31, 2016
|
|
|
Period from May 18, 2015 (Date of
Inception) through December 31, 2015
|
|
Medical related consulting services provided to:
|
|
|
|
|
|
|
|
|
Shanghai Daopei (1)
|
|
$
|
313,946
|
|
|
$
|
-
|
|
Beijing Nanshan (2)
|
|
|
162,500
|
|
|
|
-
|
|
Hebei Yanda (3)
|
|
|
140,000
|
|
|
|
-
|
|
|
|
$
|
616,446
|
|
|
$
|
-
|
|
|
(1)
|
Shanghai Daopei is a subsidiary of a company whose chairman is Wenzhao Lu, the major shareholder
of the Company.
|
|
(2)
|
Beijing Nanshan is a subsidiary of a company whose chairman is Wenzhao Lu, the major shareholder
of the Company.
|
|
(3)
|
Hebei Yanda is a subsidiary of a company whose chairman is Wenzhao Lu, the major shareholder of
the Company.
|
Accounts receivable
– related party, net of allowance for doubtful accounts, at December 31, 2016 and 2015 amounted to $70,228 and $0, respectively,
and were related to consulting services provided to Shanghai Daopei, a Chinese entity whose chairman is Wenzhao Lu, the major shareholder
of the Company.
Management believes that the accounts receivable are fully collectable. Therefore,
no allowance for doubtful accounts is deemed to be required on its accounts receivable – related party at December 31, 2016.
Accounts payable and accrued liabilities
– related parties
At
December 31, 2016 and 2015, the Company owed David Jin, its shareholder, chief executive officer, president and board member, of
$6,278 and $18,208, respectively, for travel reimbursements which have been included in accounts payable and accrued liabilities
– related parties on the accompanying consolidated balance sheets.
At
December 31, 2016 and 2015, the Company owed Meng Li, its shareholder, chief operating officer and board member, of $309 and $0,
respectively, for travel and other miscellaneous reimbursements which have been included in accounts payable and accrued liabilities
– related parties on the accompanying consolidated balance sheets.
On
October 17, 2016, the Company entered into a lease for office space in New Jersey with a related party (the “Office Lease”).
Pursuant to the Office Lease, the monthly rent is $1,000. The term of the Office Lease is one year commencing on November 1, 2016
and will expire on October 31, 2017. As of December 31, 2016, the accrued and unpaid rent expense related to this Office Lease
amounted to $2,000 which was included in accounts payable and accrued liabilities – related parties on the accompanying consolidated
balance sheets.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE 8 –
RELATED PARTY
TRANSACTIONS (continued)
Due to related parties
From time to time,
David Jin, shareholder, chief executive officer, president and board member of the Company, provided advances to the Company to
supplement its working capital needs. Those advances are short-term in nature, non-interest bearing, unsecured and payable on demand.
The working capital advance of $500 at December 31, 2016 and 2015 was reflected as due to related parties on the accompanying consolidated
balance sheets.
From time to time,
Meng Li, shareholder, chief operating officer and board member of the Company, provided advances to the Company to supplement its
working capital needs. Those advances are short-term in nature, non-interest bearing, unsecured and payable on demand. The working
capital advance of $87,650 at December 31, 2016 and 2015 was reflected as due to related parties on the accompanying consolidated
balance sheets.
From time to time,
Wenzhao Lu, major shareholder, chairman of the Board of Directors and board member of the Company, provided advances to the Company
to supplement its working capital needs. Those advances are short-term in nature, non-interest bearing, unsecured and payable on
demand. The working capital advance of $9,000 and $0 at December 31, 2016 and 2015, respectively, was reflected as due to related
parties on the accompanying consolidated balance sheets.
Distribution
to AHS’s founders
On
September 14, 2016, AHS entered into a stock purchase agreement (the "September Agreement") to acquire 1,500,000
shares of restricted common stock (the “Control Shares”) of Global Technologies Corp., which subsequently changed its
name on October 18, 2016 to Avalon GloboCare Corp., for a purchase price of $230,000. Upon purchase of the Control Shares, AHS
beneficially owned shares of common stock representing control of Global Technologies Corp.. AHS subsequently assigned the Control
Shares to its three founders resulting in Wenzhao Lu receiving 900,000 shares, David Jin receiving 450,000 shares and Meng Li receiving
150,000 shares. AHS recorded the assignment as a distribution to founders/owners with a corresponding debit to additional paid-in
capital of $230,000, which was treated as a return of capital in the equity accounts and was recorded as a reduction in additional
paid-in capital.
Operating lease
On
October 17, 2016, the Company entered into a lease for office space in New Jersey with a related party (the “Office Lease”).
Pursuant to the Office Lease, the monthly rent is $1,000. The term of the Office Lease is one year commencing on November 1, 2016
and will expire on October 31, 2017. For the year ended December 31, 2016, rent expense related to the Office Lease amounted to
$2,000.
Future
minimum rental payment required under the Office Lease is as follows:
Year Ending December 31:
|
|
Amount
|
|
2017
|
|
$
|
10,000
|
|
NOTE 9 –
INCOME TAXES
The Company is
governed by the Income Tax Law of the PRC and the U.S. Internal Revenue Code of 1986, as amended. Under the Income Tax Laws of
PRC, Chinese companies are generally subject to an income tax at an effective rate of 25% on income reported in the statutory financial
statements after appropriate tax adjustments. The Company’s subsidiary, Avalon Shanghai, is subject to the statutory rate.
The
Company has cumulative undistributed earnings from its foreign subsidiary of approximately $59,000 as of December 31, 2016, which
is included in the consolidated accumulated deficit and will continue to be indefinitely reinvested in the Company’s PRC
operations. Accordingly, no provision has been made for any deferred taxes related to future repatriation of these earnings, nor
is it practicable to estimate the amount of income taxes that would have to be provided if we concluded that such earnings will
be remitted in the future.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE 9 –
INCOME TAXES
(continued)
As
of December 31, 2016, the Company has incurred an aggregate net operating loss of approximately $113,000 for income taxes purposes.
The net operating loss carries forward for United States income taxes and may be available to reduce future years’ taxable
income. These carry forwards will expire, if not utilized, through 2036. Management believes that it appears more likely than not
that the Company will not realize these tax benefits due to the Company’s limited operating history and continuing losses
for United States income taxes purposes. Accordingly, the Company has provided a 100% valuation allowance on the deferred tax asset
benefit related to the U.S. net operating loss carry forward to reduce the asset to zero. Management will review this valuation
allowance periodically and make adjustments as necessary.
The table below
summarizes the Company’s income taxes provision:
Income taxes provision:
|
|
Year Ended
December 31, 2016
|
|
|
Period from May 18, 2015 (Date of
Inception) through December 31, 2015
|
|
Current
|
|
$
|
21,927
|
|
|
$
|
-
|
|
Deferred
|
|
|
-
|
|
|
|
-
|
|
Total provision for income taxes
|
|
$
|
21,927
|
|
|
$
|
-
|
|
The table below summarizes the differences
between the U.S. statutory rate and the Company’s effective tax rate for the year ended December 31, 2016 and the period
from May 18, 2015 (date of inception) through December 31, 2015:
|
|
Year Ended
December 31, 2016
|
|
|
Period from May 18, 2015 (Date of
Inception) through December 31, 2015
|
|
U.S. statutory rate
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
Delaware state rate
|
|
|
5.0
|
%
|
|
|
5.0
|
%
|
U.S. effective rate in excess of China tax rate
|
|
|
(15.8
|
)%
|
|
|
-
|
|
U.S. valuation allowance
|
|
|
5.1
|
%
|
|
|
(39.0
|
)%
|
Total provision for income taxes
|
|
|
28.3
|
%
|
|
|
-
|
|
For the year ended
December 31, 2016, income taxes expense related to our operations in the PRC amounted to $21,927.
The Company’s approximate net
deferred tax assets as of December 31, 2016 and 2015 were as follows:
Deferred tax assets:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Net U.S. operating loss carryforward
|
|
$
|
43,904
|
|
|
$
|
39,925
|
|
Valuation allowance
|
|
|
(43,904
|
)
|
|
|
(39,925
|
)
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
At
December 31, 2016 and 2015, the valuation allowance was $43,904 and $39,925 related to the U.S. net operating loss carryforward,
respectively. During the year ended December 31, 2016, the valuation allowance increased by approximately $4,000.
The
Company provided a valuation allowance equal to the deferred income tax assets for the year ended December 31, 2016 and the period
from May 18, 2015 (date of inception) through December 31, 2015 because it was not known whether future taxable income will be
sufficient to utilize the loss carryforward. The potential tax benefit arising from the loss carryforward will expire in 2036.
Additionally, the future utilization of the net operating loss carryforward to offset future taxable income may be subject to special
tax rules which may limit their usage under the Separate Return Limitation Year (“SRLY”) rules. If necessary, the deferred
tax assets will be reduced by any carryforward that expires prior to utilization as a result of such limitations, with a corresponding
reduction of the valuation allowance.
The Company does
not have any uncertain tax positions or events leading to uncertainty in a tax position. The Company’s 2016 and 2015 Corporate
Income Tax Returns are subject to Internal Revenue Service examination.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE 10 –
STOCKHOLDERS’
EQUITY (DEFICIT)
Shares authorized
The Company is authorized to issue
10,000,000 shares of preferred stock and 490,000,000 shares of common shares with a par value of $0.0001.
There are no shares of its preferred
stock issued and outstanding as of December 31, 2016 and 2015.
There are 61,628,622 and 50,000,000
shares of its common stock issued and outstanding as of December 31, 2016 and 2015.
AHS’s
founders’ contribution
Between
May 18, 2015 (date of inception) and December 31, 2015, AHS’s founders contributed $89,000 to the Company for working capital
needs and the Company recorded an increase in additional paid-in capital.
During the year
ended December 31, 2016, AHS’s founders contributed $141,000 to the Company for working capital needs and the Company recorded
an increase in additional paid-in capital.
Common shares issued for services
On October 19,
2016, pursuant to a legal service agreement, the Company issued 1,056,122 shares of its common stock to a third party for legal
services rendered. These shares were valued at the fair value of services rendered at $21,500. For the year ended December 31,
2016, in connection with the issuance of these shares, the Company recorded stock-based professional fees of $21,500.
On October 19,
2016, pursuant to a consulting service agreement, the Company issued 1,552,500 shares of its common stock to a third party for
consulting services rendered in the areas of capital markets advisory. These shares were valued at the fair value of services at
$31,050. In connection with the issuance of these shares, the Company recorded stock-based professional fees of $31,050 for the
year ended December 31, 2016.
Common shares
sold for cash
On December 19,
2016, the Company sold 7,270,000 shares of common stock at a purchase price of $0.50 per share to several investors pursuant to
subscription agreements. The Company did not engage a placement agent with respect to the sale. The Company received proceeds of
$3,635,000.
Distribution
of Avalon GloboCare Corp’s shares to AHS’s founders
During
the year ended December 31, 2016, AHS made a distribution of Avalon GloboCare Corp.’s shares to three founders/owners which
was treated as a return of capital in the equity accounts and was recorded as a reduction in additional paid-in capital (See note
8, Distribution to founders).
NOTE 11 -
STATUTORY
RESERVE
Avalon
Shanghai operates in the PRC, are required to reserve 10% of its 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 made an appropriation to statutory reserve for Avalon Shanghai of $6,578
during the year ended December 31, 2016.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE 12 –
COMMITMENTS
AND CONTINCENGIES
Severance payments
The Company has
employment agreements with certain employees that provided severance payments upon termination of employment under certain circumstances,
as defined in the applicable agreements. The Company has estimated its possible severance payments of approximately $302,000 as
of December 31, 2016, which have not been reflected in its consolidated financial statements since the Company concluded that the
likelihood is remote at this moment.
Capital market
consulting service contract
On October 19, 2016, the Company entered
into a one-year consulting service agreement with a third party who has agreed to provide certain consulting service in the areas
of capital markets advisory to the Company. The agreement expires on October 15, 2017. In accordance with this agreement, the Company
pays a flat cash fee of $12,000 per month.
Legal
service contract
On
November 22, 2016, the Company entered into a legal service agreement with a law firm who has agreed to provide legal and corporate
advisory services to the Company. The term of this agreement is on a month to month basis. In accordance to this service agreement,
the Company pays a flat cash fee of $15,000 per month.
At December 31, 2016, the accrued legal service fees related
to the service agreement was $10,000 which was included in accounts payable and accrued liabilities on the accompanying consolidated
balance sheets.
Financial consulting service contract
On
October 17, 2016, the Company entered into a one-year consulting service agreement with a consultant who has agreed to provide
financial consulting service to the Company. In accordance with this agreement, the Company pays a flat fee of $4,800 per month
commencing on October 20, 2016. At December 31, 2016, the accrued service fees related to the service agreement was $1,600
which was included in accounts payable and accrued liabilities on the accompanying consolidated balance sheets.
Real property purchase agreement
On
December 22, 2016, the Company entered into an Agreement of Sale (the "Purchase Agreement") with Freehold Craig Road
Partnership (“Seller”), a New Jersey partnership, to purchase certain real property located in the Township of Freehold,
County of Monmouth, State of New Jersey, having a street address of 4400 Route 9, Freehold, NJ 07798 (the "Property").
The purchase price to be paid by the Company for the Property is $7,600,000 in cash. Upon execution of the Purchase Agreement,
the Company was required to deposit $700,000 with Seller's escrow agent. The purchase of the Property was expected to close on
February 15, 2017. The Company made the payment of $700,000 in December 2016 which was included in prepaid expenses and other on
the accompanying consolidated balance sheets. Currently, the Company is processing to sign a supplemental and amendatory agreement
with the seller and the closing date will be extended to May 8, 2017 (see note 15 R
eal property purchase supplemental and
amendatory agreement).
NOTE 13 -
CONCENTRATIONS
Customers
The
following table sets forth information as to each customer that accounted for 10% or more of the Company’s revenue for the
year ended December 31, 2016 and the period from May 18, 2015 (date of inception) through December 31, 2015.
Customer
|
|
Year Ended
December 31, 2016
|
|
|
Period from May 18, 2015 (Date of
Inception) through December 31, 2015
|
|
A (Shanghai Daopei, a related party)
|
|
|
51
|
%
|
|
|
0
|
|
B (Beijing Nanshan, a related party)
|
|
|
26
|
%
|
|
|
0
|
|
C (Hebei Yanda, a related party)
|
|
|
23
|
%
|
|
|
0
|
|
One customer,
who was a related party, accounted for 100% of the Company’s total outstanding accounts receivable at December 31, 2016.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE 13 –
CONCENTRATIONS
(continued)
Suppliers
No supplier accounted
for 10% or more of the Company’s purchase during the year ended December 31, 2016 and the period from May 18, 2015 (date
of inception) through December 31, 2015.
No
supplier accounted for 10% of the Company’s total outstanding accounts payable at December 31, 2016 and 2015.
Concentrations
of credit risk
At
December 31, 2016 and 2015, cash balances in the PRC are $2,525,630 and $0, respectively, are uninsured. The Company has not experienced
any losses in PRC bank accounts and believes it is not exposed to any risks on its cash in PRC bank accounts.
The Company maintains its cash in United
States bank and financial institution deposits that at times may exceed federally insured limits. As of December 31, 2016 and 2015,
the Company’s cash balances in United States bank accounts had approximately $80,000 and $0 in excess of the federally-insured
limits, respectively. The Company has not experienced any losses in its United States bank accounts through and as of the date
of this report.
NOTE 14 –
RESTRICTED NET ASSETS
A portion of the
Company’s operations are conducted through its PRC subsidiary, which can only pay dividends out of its retained earnings
determined in accordance with the accounting standards and regulations in the PRC and after it has met the PRC requirements for
appropriation to statutory reserve. In addition, the Company’s businesses and assets are primarily 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 subsidiary to
transfer its net assets to the Parent Company through loans, advances or cash dividends.
The Company’s
PRC subsidiary’s net assets as of December 31, 2016 and 2015 did not exceed 25% of the Company’s consolidated net assets.
Accordingly, condensed Parent Company financial statements have not been required in accordance with Rule 5-04 and Rule 12-04 of
SEC Regulation S-X.
NOTE 15 –
SUBSEQUENT EVENTS
Subscription agreement
On
March 3, 2017, the Company entered into and closed a Subscription Agreement with an accredited investor (the "March 2017 Accredited
Investor") pursuant to which the March 2017 Accredited Investor purchased 3,000,000 shares of the Company’s common stock
(“March 2017 Shares”) for a purchase price of $3,000,000 (the “Purchase Price”).
The
offer, sale and issuance of the above securities was made to an accredited investor and the Company relied upon the exemptions
contained in Section 4(2) of the Securities Act and/or Rule 506 of Regulation D promulgated there under with regard to the sale.
No advertising or general solicitation was employed in offering the securities. The offer and sale was made to an accredited investor
and transfer of the common stock issued was restricted by the Company in accordance with the requirements of the Securities Act
of 1933, as amended.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE 15 –
SUBSEQUENT EVENTS
(continued)
Subscription agreement (continued)
The
Company,
Avalon (Shanghai) Healthcare Technology Co., Ltd. (“Avalon Shanghai”), Beijing DOING Biomedical
Technology Co., Ltd. (“DOING”) and the March 2017 Accredited Investor entered into a Share Subscription Agreement
whereby the parties acknowledged, among other things, that DOING agreed to transfer the Purchase Price to Avalon Shanghai on behalf
of the March 2017 Investor and the March 2017 Accredited Investor agreed to transfer the March 2017 Shares to DOING upon DOING
completing the registration of the acquisition of the March 2017 Shares with the Beijing Commerce Commission (“BCC”)
and obtaining an Enterprise Overseas Investment Certificate (the “Investment Certificate”) from BCC. If DOING fails
to complete the registration and acquire the Investment Certificate within one year of the closing then Avalon Shanghai shall
transfer $3,000,000 with interest of 20% to DOING upon the request of DOING (the “BCC Repayment Obligation”).
As
of the date hereof, the Company is obligated to DOING in the principal amount of $3,000,000. The BCC Repayment Obligation
is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation
of the Company. Further,
Wenzhao Lu, a director and shareholder of the Company, and DOING entered into a Warranty
Agreement. Pursuant to the Warranty Agreement, Mr. Wenzhao Lu agreed to (i) cause the Company to be liable to DOING in the event
the March 2017 Accredited Investor defaults in its obligations to DOING, (ii) cause the March 2017 Accredited Investor to transfer
the March 2017 Shares to DOING upon DOING’s receipt of the Investment Certificate from BCC, (iii) within three years from
the date of the Warranty Agreement, DOING may require Mr. Wenzhao Lu to acquire the March 2017 Shares at $1.20 per share upon
three-month notice, and (iv) in the event Mr. Wenzhao Lu does not acquire the March 2017 Shares within the three-month period,
interest of 15% per annum will be added to the purchase price.
These March 2017 Shares were deemed as
debt due to the mandatorily redeemable feature of the shares that embody an unconditional obligation requiring the Company to repurchase
the shares by transferring $3,000,000 with interest of 20% should the terms of the BCC Repayment Obligation not met within one
year pursuant to ASC 480 “Distinguishing Liabilities from Equity”.
Real property purchase supplemental
and amendatory agreement
On
December 22, 2016, the Company entered into an Agreement of Sale (the "Purchase Agreement") with Freehold Craig Road
Partnership (“Seller”), a New Jersey partnership, to purchase certain real property located in the Township of Freehold,
County of Monmouth, State of New Jersey, having a street address of 4400 Route 9, Freehold, NJ 07798 (the "Property").
The purchase price to be paid by the Company for the Property is $7,600,000 in cash. Upon execution of the Purchase Agreement,
the Company was required to deposit $700,000 with Seller's escrow agent. The purchase of the Property was expected to close on
February 15, 2017. Currently, the Company is processing to sign a supplemental and amendatory agreement with the seller and the
closing date will be extended to May 8, 2017 (see Note 12 under Real property purchase agreement).
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND
DISTRIBUTION
The actual and estimated
expenses in connection with this offering, all of which will be borne by us, are as follows:
SEC Registration Fee
|
|
$
|
1,833.29
|
|
State Filing Fees
|
|
$
|
3,666.71
|
|
Edgarizing Costs
|
|
$
|
3,000.00
|
|
Accounting Fees and Expenses
|
|
$
|
10,000.00
|
|
Legal Fees and Expenses
|
|
$
|
30,000.00
|
|
Transfer Agent Fee
|
|
$
|
500.00
|
|
Miscellaneous
|
|
$
|
1,000.00
|
|
|
|
|
|
|
Total
|
|
$
|
50,000.00
|
*
|
None of the expenses of the offering will be paid by the selling
stockholders.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND
OFFICERS
The Company’s directors and executive
officers are indemnified as provided by the Delaware General Corporation Law and its Bylaws. These provisions state that the Company’s
directors may cause the Company to indemnify a director or former director against all costs, charges and expenses, including an
amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by him as a result of him acting as a director.
The indemnification of costs can include an amount paid to settle an action or satisfy a judgment. Such indemnification
is at the discretion of the Company’s board of directors and is subject to the Securities and Exchange Commission’s
policy regarding indemnification.
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling us pursuant to the foregoing
provisions, or otherwise, The Company has been advised that in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Act and is, therefore, unenforceable.
ITEM 15. RECENT SALE OF UNREGISTERED SECURITIES
No underwriters were involved in the issuance
of the securities noted below. All of the securities issued below were deemed to be exempt from registration under the Securities
Act in reliance upon Section 4(a)(2) of the Securities Act. The issuance of stock that was exempt under Section 4(a)(2) was a private
offering to an accredited investor. Each of the investors represented to the Company that it (i) is an “accredited investor”
as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended, (ii) is knowledgeable, sophisticated
and experienced in making investment decisions of this kind, and (iii) has had adequate access to information about the Company.
The company maintains accredited investor questionnaires
for each purchaser of unregistered securities from the Company.
On October 19, 2016, we entered into and closed
a Share Exchange Agreement with the shareholders of Avalon Healthcare System, Inc., a Delaware corporation (“AHS”),
each of which are accredited investors (“AHS Shareholders”) pursuant to which we acquired 100% of the outstanding securities
of AHS in exchange for 50,000,000 shares of our common stock (the “AHS Acquisition”).
On October 19, 2016, we issued 1,056,122 shares
of common stock to a third party for legal services rendered.
Effective October 19, 2016, we entered into
a Services Agreement with PCG Advisory Group pursuant to which we issued 1,552,500 shares of common stock for services.
We entered into and closed Subscription Agreements
with several accredited investors (the "December 2016 Accredited Investors") pursuant to which the December 2016 Accredited
Investors purchased an aggregate of 7,270,000 shares of common stock (the “2016 Subscription Shares”) for an aggregate
purchase price of $3,635,000. The closing occurred on December 19, 2016. We agreed to register 15% of the shares sold or 1,090,500
shares of common stock.
The offers, sales and issuances of the securities listed above were
made to accredited investors and we relied upon the exemptions contained in Section 4(2) of the Securities Act and/or Rule 506
of Regulation D promulgated there under with regard to those sales. No advertising or general solicitation was employed in offering
the securities. The offers and sales were made to a limited number of persons, each of whom was an accredited investor and transfer
of the common stock issued was restricted in accordance with the requirements of the Securities Act of 1933, as amended.
On February 21, 2017, Ms. Ingariola and the
Company entered into an Executive Retention Agreement effective February 9, 2017 pursuant to which Ms. Ingariola agreed to serve
as Chief Financial Officer. As partial compensation, the Company granted Ms. Ingariola a Stock Option to acquire 2,000,000 shares
of common stock at an exercise price of $0.50 per share for a period of ten years. The Stock Options vest in 36 equal tranches
commencing on the grant date.
We entered into and closed a Subscription
Agreement with an accredited investor (the "March 2017 Accredited Investor") pursuant to which the March 2017 Accredited
Investor purchased 3,000,000 shares of common stock (“March 2017 Shares”) for a purchase price of $3,000,000 (the
“Purchase Price”). The closing occurred on March 3, 2017. Avalon (Shanghai) Healthcare Technology Co., Ltd. (“Avalon
Shanghai”), Beijing DOING Biomedical Technology Co., Ltd. (“DOING”), the March 2017 Accredited Investor and
our company entered into a Share Subscription Agreement whereby the parties acknowledged, among other things, that DOING agreed
to transfer the Purchase Price to Avalon Shanghai on behalf of the March 2017 Investor and the March 2017 Accredited Investor
agreed to transfer the March 2017 Shares to DOING upon DOING completing the registration of the acquisition of the March 2017
Shares with the Beijing Commerce Commission (“BCC”) and obtaining an Enterprise Overseas Investment Certificate (the
“Investment Certificate”) from BCC. If DOING fails to complete the registration and acquire the Investment Certificate
within one year of the closing then Avalon Shanghai shall transfer $3,000,000 with interest of 20% to DOING upon the request of
DOING (the “BCC Repayment Obligation”). As of the date hereof, the Company is obligated to DOING in the principal
amount of $3,000,000. The BCC Repayment Obligation is a debt obligation arising other than in the ordinary course of
business, which constitutes a direct financial obligation of our company. Further, Wenzhao Lu, a director and shareholder of our
company, and DOING entered into a Warranty Agreement. Pursuant to the Warranty Agreement, Mr. Wenzhao Lu agreed to (i) cause us
to be liable to DOING in the event the March 2017 Accredited Investor defaults in its obligations to DOING, (ii) cause the March
2017 Accredited Investor to transfer the March 2017 Shares to DOING upon DOING’s receipt of the Investment Certificate from
BCC, (iii) within three years from the date of the Warranty Agreement, DOING may require Mr. Wenzhao Lu to acquire the March 2017
Shares at $1.20 per share upon three months notice, and (iv) in the event Mr. Wenzhao Lu does not acquire the March 2017 Shares
within the three month period, interest of 15% per annum will be added to the purchase price.
The offers, sales, and issuances of the securities
described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities
Act of 1933 or Regulation D promulgated thereunder as transactions by an issuer not involving a public offering. The recipients
of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the
recipients of securities in these transactions was an accredited or sophisticated person and had adequate access, through employment,
business or other relationships, to information about us.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
3.1(1)
|
|
Certificate of Amendment
of Certificate of Incorporation filed pursuant to Delaware General Corporation Law
|
|
|
|
3.2(1)
|
|
Certificate of Correction
to the Certificate of Amendment of Certificate of Incorporation filed pursuant to Delaware General Corporation Law
|
|
|
|
4.1(3)
|
|
Form of Subscription
Agreement by and between Avalon GloboCare Corp. and the December 2016 Accredited Investors
|
|
|
|
4.2(8)
|
|
Stock Option issued
to Luisa Ingargiola dated February 21, 2017
|
|
|
|
4.3(9)
|
|
Form of Subscription
Agreement by and between Avalon GloboCare Corp. and the March 2017 Accredited Investor
|
|
|
|
4.4(9)
|
|
Share Subscription
Agreement between Avalon GloboCare Corp., Avalon (Shanghai) Healthcare Technology Co., Ltd., Beijing DOING Biomedical Technology
Co., Ltd. and Daron Liang
|
|
|
|
4.5(9)
|
|
Warranty Agreement between
Wenzhao
Lu and Beijing DOING Biomedical Technology Co., Ltd.
|
|
|
|
5.1
|
|
Opinion of Fleming
PLLC with respect to legality of the securities, including consent (to be filed by amendment)
|
|
|
|
10.1(1)
|
|
Share Exchange Agreement
dated as of October 19, 2016 by and among Avalon Healthcare System, Inc., the shareholders of Avalon Healthcare System, Inc.
and Avalon GloboCare Corp.
|
|
|
|
10.2(2)
|
|
Executive Employment Agreement, effective December 1, 2016, by and between Avalon GloboCare Corp. and David Jin
|
|
|
|
10.3(4)
|
|
Agreement of Sale by and between Freehold Craig
Road Partnership, as Seller, and Avalon GloboCare Corp., as Buyer dated as of December 22, 2016
|
|
|
|
10.4(7)
|
|
Executive Employment Agreement by and between
Avalon (Shanghai) Healthcare Technology Ltd. and Meng Li dated January 11, 2017 (7)
|
|
|
|
10.4(8)
|
|
Executive Retention Agreement by and between
Avalon GloboCare Corp. and Luisa Ingargiola dated February 21, 2017 (8)
|
|
|
|
10.5(8)
|
|
Indemnification Agreement by and between Avalon
GloboCare Corp. and Luisa Ingargiola dated February 21, 2017 (8)
|
|
|
|
10.6(11)
|
|
Director Agreement by and between Avalon GloboCare
Corp. and Steven P. Sukel dated April 28, 2017
|
|
|
|
10.7(11)
|
|
Director Agreement by and between Avalon GloboCare
Corp. and Yancen Lu dated April 28, 2017
|
|
|
|
14.1(1)
|
|
Code of Ethics
|
|
|
|
21.1(10)
|
|
List of Subsidiaries
|
|
|
|
23.1
|
|
Consent of Independent
Registered Public Accounting Firm - RBSM LLP
|
|
|
|
23.3
|
|
Consent of Fleming PLLC (included with Exhibit
5.1)
|
|
|
|
99.1
|
|
Form of Subscription
Agreement
|
|
(1)
|
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 19, 2016.
|
|
(2)
|
Incorporated by reference to the Form S-1 Registration Statement filed with the Securities and Exchange Commission on March 26, 2015.
|
|
(3)
|
Incorporated by reference to the Form S-1 Registration Statement filed with the Securities and Exchange Commission on February 19, 2015.
|
|
(4)
|
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 2, 2016.
|
|
(5)
|
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 21, 2016.
|
|
(6)
|
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 23, 2016.
|
|
(7)
|
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 11, 2017.
|
|
(8)
|
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 21, 2017.
|
|
(9)
|
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 7, 2017.
|
|
(10)
|
Incorporated by reference to the Form 10-K Annual Report filed with the Securities and Exchange Commission on March 28, 2017.
|
|
(11)
|
Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 28, 2017.
|
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers
or sales are being made, a post-effective amendment to this registration statement:
|
(i)
|
To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
|
|
(ii)
|
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and
|
|
(iii)
|
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
|
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of
a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability
under the Securities Act of 1933 to any purchaser:
(i) If the registrant is
subject to Rule 430C (§230.430C of this chapter), each prospectus filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A (§230.430A of this chapter), shall be deemed to be part of and included in the registration statement
as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior
to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of
the registration statement or made in any such document immediately prior to such date of first use.
(5) That, for the purpose of determining liability
of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned
registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement,
regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such
purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will
be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus
or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§230.424 of
this chapter);
(ii) Any free writing prospectus
relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any
other free writing prospectus relating to the offering containing material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication
that is an offer in the offering made by the undersigned registrant to the purchaser.
(b) Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the city of Freehold, State of New Jersey, on May 9, 2017.
Avalon GloboCare Corp.
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By:
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/s/ David Jin
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Chief Executive Officer and President (Principal Executive Officer)
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By:
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/s/ Luisa Ingariola
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Chief Financial Officer (Principal Financial and Accounting Officer)
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Pursuant to the requirements of the Securities
Act of 1933, this registration statement on Form S-1 has been signed by the following persons in the capacities and on the dates
indicated.
Signature
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Title
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Date
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/s/ David Jin
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Chief Executive Officer, President and Director
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May 9, 2017
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David Jin
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(Principal Executive, Financial and Accounting Officer)
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/s/ Wenzhao Lu
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Chairman
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May 9, 2017
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Wenzhao Lu
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/s/ Meng Li
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Chief Operating Officer, Secretary and Director
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May 9, 2017
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Meng Li
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/s/ Yancen Lu
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Director
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May 9, 2017
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Yancen Lu
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/s/ Steven P. Sukel
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Director
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May 9, 2017
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Steven P. Sukel
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