AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|
|
For the Three
Months Ended
|
|
For the Three Months Ended
|
|
For the Six Months Ended
|
|
For the Six Months Ended
|
|
|
June 30,
2019
|
|
June 30,
2018
|
|
June 30,
2019
|
|
June 30,
2018
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real property rental
|
|
$
|
264,889
|
|
|
$
|
278,872
|
|
|
$
|
531,515
|
|
|
$
|
575,495
|
|
Medical related consulting services - related party
|
|
|
111,434
|
|
|
|
141,996
|
|
|
|
125,694
|
|
|
|
141,996
|
|
Development services and sales of developed products
|
|
|
23,404
|
|
|
|
75,225
|
|
|
|
26,682
|
|
|
|
86,515
|
|
Total Revenues
|
|
|
399,727
|
|
|
|
496,093
|
|
|
|
683,891
|
|
|
|
804,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real property operating expenses
|
|
|
192,676
|
|
|
|
195,941
|
|
|
|
423,435
|
|
|
|
406,215
|
|
Medical related consulting services - related party
|
|
|
95,375
|
|
|
|
124,715
|
|
|
|
108,466
|
|
|
|
124,715
|
|
Development services and sales of developed products
|
|
|
31,784
|
|
|
|
42,093
|
|
|
|
62,091
|
|
|
|
58,613
|
|
Total Costs and Expenses
|
|
|
319,835
|
|
|
|
362,749
|
|
|
|
593,992
|
|
|
|
589,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REAL PROPERTY OPERATING INCOME
|
|
|
72,213
|
|
|
|
82,931
|
|
|
|
108,080
|
|
|
|
169,280
|
|
GROSS PROFIT FROM MEDICAL RELATED CONSULTING SERVICES
|
|
|
16,059
|
|
|
|
17,281
|
|
|
|
17,228
|
|
|
|
17,281
|
|
GROSS (LOSS) PROFIT FROM DEVELOPMENT SERVICES AND SALES OF DEVELOPED PRODUCTS
|
|
|
(8,380
|
)
|
|
|
33,132
|
|
|
|
(35,409
|
)
|
|
|
27,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising expenses
|
|
|
221,222
|
|
|
|
-
|
|
|
|
465,822
|
|
|
|
-
|
|
Compensation and related benefits
|
|
|
2,100,178
|
|
|
|
487,452
|
|
|
|
4,200,333
|
|
|
|
1,026,266
|
|
Professional fees
|
|
|
792,486
|
|
|
|
593,025
|
|
|
|
2,260,712
|
|
|
|
1,164,797
|
|
Research and development expenses
|
|
|
949,711
|
|
|
|
263
|
|
|
|
1,102,171
|
|
|
|
263
|
|
Other general and administrative
|
|
|
360,047
|
|
|
|
265,858
|
|
|
|
869,926
|
|
|
|
551,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Operating Expenses
|
|
|
4,423,644
|
|
|
|
1,346,598
|
|
|
|
8,898,964
|
|
|
|
2,742,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(4,343,752
|
)
|
|
|
(1,213,254
|
)
|
|
|
(8,809,065
|
)
|
|
|
(2,527,973
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
433
|
|
|
|
1,300
|
|
|
|
1,201
|
|
|
|
1,708
|
|
Interest expense
|
|
|
(8,822
|
)
|
|
|
(24,932
|
)
|
|
|
(34,519
|
)
|
|
|
(261,918
|
)
|
Interest expense - related party
|
|
|
(12,639
|
)
|
|
|
-
|
|
|
|
(14,583
|
)
|
|
|
-
|
|
Change in fair value of warrants liability
|
|
|
461,493
|
|
|
|
-
|
|
|
|
461,493
|
|
|
|
-
|
|
Financing expense
|
|
|
(525,418
|
)
|
|
|
|
|
|
|
(525,418
|
)
|
|
|
|
|
Loss from equity-method investment
|
|
|
(10,344
|
)
|
|
|
-
|
|
|
|
(23,087
|
)
|
|
|
-
|
|
Foreign currency transaction loss
|
|
|
-
|
|
|
|
(106,929
|
)
|
|
|
-
|
|
|
|
(106,929
|
)
|
Other income
|
|
|
226
|
|
|
|
-
|
|
|
|
226
|
|
|
|
328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Expense, net
|
|
|
(95,071
|
)
|
|
|
(130,561
|
)
|
|
|
(134,687
|
)
|
|
|
(366,811
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES
|
|
|
(4,438,823
|
)
|
|
|
(1,343,815
|
)
|
|
|
(8,943,752
|
)
|
|
|
(2,894,784
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAXES
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(4,438,823
|
)
|
|
$
|
(1,343,815
|
)
|
|
$
|
(8,943,752
|
)
|
|
$
|
(2,894,784
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LESS: NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST
|
|
|
(81,599
|
)
|
|
|
(49,421
|
)
|
|
|
(180,712
|
)
|
|
|
(118,811
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS
|
|
$
|
(4,357,224
|
)
|
|
$
|
(1,294,394
|
)
|
|
$
|
(8,763,040
|
)
|
|
$
|
(2,775,973
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
|
(4,438,823
|
)
|
|
|
(1,343,815
|
)
|
|
|
(8,943,752
|
)
|
|
|
(2,894,784
|
)
|
OTHER COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized foreign currency translation gain (loss)
|
|
|
(34,103
|
)
|
|
|
(96,207
|
)
|
|
|
9,379
|
|
|
|
(43,369
|
)
|
COMPREHENSIVE LOSS
|
|
$
|
(4,472,926
|
)
|
|
$
|
(1,440,022
|
)
|
|
$
|
(8,934,373
|
)
|
|
$
|
(2,938,153
|
)
|
LESS: COMPREHENSIVE GAIN (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST
|
|
|
(79,699
|
)
|
|
|
(49,540
|
)
|
|
|
(180,010
|
)
|
|
|
(118,770
|
)
|
COMPREHENSIVE LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS
|
|
$
|
(4,393,227
|
)
|
|
$
|
(1,390,482
|
)
|
|
$
|
(8,754,363
|
)
|
|
$
|
(2,819,383
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER COMMON SHARE ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.06
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
75,183,354
|
|
|
|
71,979,678
|
|
|
|
74,437,336
|
|
|
|
71,122,356
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For
the Six Months Ended June 30, 2018 and 2019
|
|
Avalon GloboCare Corp. Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
|
|
|
Treasury Stock
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Number
of
|
|
|
|
|
|
Additional Paid-in
|
|
|
Number of
|
|
|
|
|
|
Accumulated
|
|
|
Statutory
|
|
|
Other Comprehensive
|
|
|
Non-controlling
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Shares
|
|
|
Amount
|
|
|
Deficit
|
|
|
Reserve
|
|
|
Loss
|
|
|
Interest
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2017
|
|
|
-
|
|
|
|
-
|
|
|
|
70,278,622
|
|
|
$
|
7,028
|
|
|
$
|
11,490,285
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
(3,517,654
|
)
|
|
$
|
6,578
|
|
|
$
|
(91,994
|
)
|
|
$
|
(585,394
|
)
|
|
$
|
7,308,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury stock purchase
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(520,000
|
)
|
|
|
(522,500
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(522,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation and service fees
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
526,348
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
526,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
52,678
|
|
|
|
160
|
|
|
|
52,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the three months ended March 31, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,481,579
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(69,390
|
)
|
|
|
(1,550,969
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
70,278,622
|
|
|
$
|
7,028
|
|
|
$
|
12,016,633
|
|
|
|
(520,000
|
)
|
|
$
|
(522,500
|
)
|
|
$
|
(4,999,233
|
)
|
|
$
|
6,578
|
|
|
$
|
(39,316
|
)
|
|
$
|
(654,624
|
)
|
|
$
|
5,814,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued in equity raise, net of fees associated with equity raise
|
|
|
-
|
|
|
|
-
|
|
|
|
3,107,000
|
|
|
|
311
|
|
|
|
4,529,984
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,530,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
175,000
|
|
|
|
17
|
|
|
|
466,983
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
467,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,021,173
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,021,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(96,088
|
)
|
|
|
(119
|
)
|
|
|
(96,207
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the three months ended June 30, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,294,394
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(49,421
|
)
|
|
|
(1,343,815
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
73,560,622
|
|
|
$
|
7,356
|
|
|
$
|
18,034,773
|
|
|
|
(520,000
|
)
|
|
$
|
(522,500
|
)
|
|
$
|
(6,293,627
|
)
|
|
$
|
6,578
|
|
|
$
|
(135,404
|
)
|
|
$
|
(704,164
|
)
|
|
$
|
10,393,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
73,830,751
|
|
|
$
|
7,383
|
|
|
$
|
24,153,378
|
|
|
|
(520,000
|
)
|
|
$
|
(522,500
|
)
|
|
$
|
(11,291,776
|
)
|
|
$
|
6,578
|
|
|
$
|
(236,860
|
)
|
|
$
|
(862,200
|
)
|
|
$
|
11,254,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock upon cashless exercise of stock warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
350,856
|
|
|
|
35
|
|
|
|
(35
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock upon cashless
excercise of options
|
|
|
-
|
|
|
|
-
|
|
|
|
158,932
|
|
|
|
16
|
|
|
|
(16
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,272,747
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,272,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
44,680
|
|
|
|
(1,198
|
)
|
|
|
43,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the three months ended March 31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,405,816
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(99,113
|
)
|
|
|
(4,504,929
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
74,340,539
|
|
|
$
|
7,434
|
|
|
$
|
26,426,074
|
|
|
|
(520,000
|
)
|
|
$
|
(522,500
|
)
|
|
$
|
(15,697,592
|
)
|
|
$
|
6,578
|
|
|
$
|
(192,180
|
)
|
|
$
|
(962,511
|
)
|
|
$
|
9,065,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,524,139
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,524,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for service
|
|
|
-
|
|
|
|
-
|
|
|
|
120,812
|
|
|
|
13
|
|
|
|
313,788
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
313,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-3 financing
|
|
|
-
|
|
|
|
-
|
|
|
|
1,714,288
|
|
|
|
171
|
|
|
|
2,111,710
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,111,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(36,003
|
)
|
|
|
1,900
|
|
|
|
(34,103
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the three months ended June 30, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,357,224
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(81,599
|
)
|
|
|
(4,438,823
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
76,175,639
|
|
|
$
|
7,618
|
|
|
$
|
30,375,711
|
|
|
|
(520,000
|
)
|
|
$
|
(522,500
|
)
|
|
$
|
(20,054,816
|
)
|
|
$
|
6,578
|
|
|
$
|
(228,183
|
)
|
|
$
|
(1,042,210
|
)
|
|
$
|
8,542,198
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
For the Six
Months
Ended
|
|
For the Six
Months
Ended
|
|
|
June 30,
2019
|
|
June 30,
2018
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(8,943,752
|
)
|
|
$
|
(2,894,784
|
)
|
Adjustments to reconcile net loss from operations to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
284,494
|
|
|
|
247,975
|
|
Stock-based compensation and service expense
|
|
|
4,717,907
|
|
|
|
1,082,923
|
|
Loss on equity method investment
|
|
|
23,087
|
|
|
|
-
|
|
Changes in warrants derivative liabilities
|
|
|
(461,493
|
)
|
|
|
-
|
|
Allocation of financing expense
|
|
|
525,418
|
|
|
|
-
|
|
Chang in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(92,113
|
)
|
|
|
(67,542
|
)
|
Accounts receivable-related parties
|
|
|
-
|
|
|
|
(150,516
|
)
|
Tenants receivable
|
|
|
12,980
|
|
|
|
(58
|
)
|
Inventory
|
|
|
(74
|
)
|
|
|
(19,892
|
)
|
Prepaid expenses - related parties
|
|
|
34,629
|
|
|
|
-
|
|
Prepaid expenses and other current assets
|
|
|
379,070
|
|
|
|
(153,785
|
)
|
Security deposit
|
|
|
100,000
|
|
|
|
(308,694
|
)
|
Accounts payable
|
|
|
41,286
|
|
|
|
1,740
|
|
Advance from customer - related party
|
|
|
(15,030
|
)
|
|
|
-
|
|
Accrued liabilities and other payables
|
|
|
(472,671
|
)
|
|
|
176,584
|
|
Accrued liabilities and other payables - related parties
|
|
|
3,633
|
|
|
|
9,811
|
|
Deferred rental income
|
|
|
(350
|
)
|
|
|
(1,587
|
)
|
Interest payable
|
|
|
(75,342
|
)
|
|
|
(113,179
|
)
|
Interest payable - related party
|
|
|
14,583
|
|
|
|
-
|
|
VAT and other taxes payable
|
|
|
6,143
|
|
|
|
9,850
|
|
Tenants’ security deposit
|
|
|
(2,663
|
)
|
|
|
(18,888
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
|
(3,920,258
|
)
|
|
|
(2,200,042
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(140,400
|
)
|
|
|
(10,192
|
)
|
Prepayment for purchase of long-term assets
|
|
|
-
|
|
|
|
(22,606
|
)
|
Improvement of commercial real estate
|
|
|
(10,588
|
)
|
|
|
(165,155
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(150,988
|
)
|
|
|
(197,953
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds received from note payable - related party
|
|
|
1,000,000
|
|
|
|
-
|
|
Refund deposit in connection with Share Subscription Agreement-
|
|
|
-
|
|
|
|
(1,000,000
|
)
|
Proceeds received from equity offering
|
|
|
6,000,008
|
|
|
|
5,437,250
|
|
Disbursements for equity offering costs
|
|
|
(896,304
|
)
|
|
|
(380,607
|
)
|
Repayment of loan payable
|
|
|
(1,000,000
|
)
|
|
|
(500,000
|
)
|
Repurchase of common stock
|
|
|
-
|
|
|
|
(522,500
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
5,103,704
|
|
|
|
3,034,143
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE ON CASH
|
|
|
116,559
|
|
|
|
(19,865
|
)
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH
|
|
|
1,149,017
|
|
|
|
616,283
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH - beginning of period
|
|
|
2,252,287
|
|
|
|
3,027,033
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH - end of period
|
|
$
|
3,401,304
|
|
|
$
|
3,643,316
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
1,039
|
|
|
$
|
375,096
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Property and equipment acquired on credit as payable
|
|
$
|
25,896
|
|
|
$
|
-
|
|
Acquisition of equipment by decreasing prepayment for long-term assets
|
|
$
|
-
|
|
|
$
|
109,889
|
|
Common stock issued for future services
|
|
$
|
-
|
|
|
$
|
405,250
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 –
ORGANIZATION AND NATURE OF OPERATIONS
Avalon
GloboCare Corp. (f/k/a Global Technologies Corp.) (the “Company” or “AVCO”) is a Delaware corporation.
The Company was incorporated under the laws of the State of Delaware on July 28, 2014. On October 18, 2016, the Company changed
its name to Avalon GloboCare Corp. and completed a reverse split its shares of common stock at a ratio of 1:4. On October 19,
2016, the Company entered into and closed a Share Exchange Agreement with the shareholders of Avalon Healthcare System, Inc.,
a Delaware corporation (“AHS”), each of which are accredited investors (“AHS Shareholders”) pursuant to
which we acquired 100% of the outstanding securities of AHS in exchange for 50,000,000 shares of our common stock (the “AHS
Acquisition”). AHS was incorporated on May 18, 2015 under the laws of the State of Delaware. As a result of such acquisition,
the Company’s operations now are focused on integrating and managing global healthcare services and resources, as well as
empowering high-impact biomedical innovations and technologies to accelerate their clinical applications. We are dedicated to
advancing cell-based technologies and therapeutics, as well as empowering high-impact biomedical innovations to accelerate their
clinical applications. Our ecosystem covers the areas of exosome technology (including liquid biopsy and regenerative therapeutics)
and cellular immunotherapy. We plan to integrate technologies and services through joint venture and subsidiary structures that
bring shareholder value both in the short term, through operational entities and long term, through biomedical innovation development,
such as our recent joint venture for the advancement of exosome isolation systems and related products. AHS owns 100% of the capital
stock of Avalon (Shanghai) Healthcare Technology Co., Ltd. (“Avalon Shanghai”), which is a wholly foreign-owned enterprise
organized under the laws of the People’s Republic of China (“PRC”). Avalon Shanghai was incorporated on April
29, 2016 and is engaged in medical related consulting services for customers.
For
accounting purposes, AHS was the surviving entity. The transaction was accounted for as a recapitalization of AHS pursuant to
which AHS was treated as the accounting acquirer, surviving and continuing entity although the Company is the legal acquirer.
The Company did not recognize goodwill or any intangible assets in connection with this transaction. Accordingly, the Company’s
historical financial statements are those of AHS and its wholly-owned subsidiary, Avalon Shanghai immediately following the consummation
of this reverse merger transaction.
On
January 23, 2017, the Company incorporated Avalon (BVI) Ltd., a British Virgin Island company. There was no activity for the subsidiary
since its incorporation through June 30, 2019. Avalon (BVI) Ltd. is dormant and is in process of being dissolved.
On
February 7, 2017, the Company formed Avalon RT 9 Properties, LLC (“Avalon RT 9”), a New Jersey limited liability company.
On May 5, 2017, Avalon RT 9 purchased a real property located in Township of Freehold, County of Monmouth, State of New Jersey,
having a street address of 4400 Route 9 South, Freehold, NJ 07728. This property was purchased to serve as the Company’s
world-wide headquarters for all corporate administration and operation. In addition, the property generates rental income. Avalon
RT 9 owns this office building. Currently, Avalon RT 9’s business consists of the ownership and operation of the income-producing
real estate property in New Jersey.
On
July 31, 2017, the Company formed GenExosome Technologies Inc. (“GenExosome”) in Nevada
.
On
October 25, 2017, GenExosome and the Company entered into a Securities Purchase Agreement pursuant to which the Company acquired
600 shares of GenExosome in consideration of $1,326,087 in cash and 500,000 shares of common stock of the Company
.
On
October 25, 2017, GenExosome entered into and closed an Asset Purchase Agreement with Yu Zhou, MD, PhD, pursuant to which the
Company acquired all assets, including all intellectual property, held by Dr. Zhou pertaining to the business of researching,
developing and commercializing exosome technologies including, but not limited to, patent application number CN 2016 1 0675107.5
(application of an Exosomal MicroRNA in plasma as biomaker to diagnosis liver cancer), patent application number CN 2016 1 0675110.7
(clinical application of circulating exosome carried miRNA-33b in the diagnosis of liver cancer), patent application number CN
2017 1 0330847.X (saliva exosome based methods and composition for the diagnosis, staging and prognosis of oral cancer) and patent
application number CN 2017 1 0330835.7 (a novel exosome-based therapeutics against proliferative oral diseases). In consideration
of the assets, GenExosome agreed to pay Dr. Zhou $876,087 in cash, transfered 500,000 shares of common stock of the Company to
Dr. Zhou and issued Dr. Zhou 400 shares of common stock of GenExosome
.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 –
ORGANIZATION AND NATURE OF OPERATIONS (continued)
As
a result of the above transactions, effective October 25, 2017, the Company holds 60% of GenExosome and Dr. Zhou holds 40% of GenExosome.
GenExosome is engaged in developing proprietary diagnostic and therapeutic products leveraging its exosome technology
.
On
October 25, 2017, GenExosome entered into and closed a Stock Purchase Agreement with Beijing Jieteng (GenExosome) Biotech Co.
Ltd., a corporation incorporated in the People’s Republic of China on August 7, 2015 (“Beijing GenExosome”)
and Dr. Zhou, the sole shareholder of Beijing GenExosome, pursuant to which GenExosome acquired all of the issued and outstanding
securities of Beijing GenExosome in consideration of a cash payment in the amount of $450,000.
Beijing
GenExosome is engaged in the development of exosome technology to improve diagnosis and management of diseases. Exosomes are tiny,
subcellular, membrane-bound vesicles in diameter of 30-150 nm that are released by almost all cell types and that can carry membrane
and cellular proteins, as well as genetic materials that are representative of the cell of origin. Profiling various bio-molecules
in exosomes may serve as useful biomarkers for a wide variety of diseases. Beijing GenExosome is seeking to decode proteomic and
genomic alterations underlying a wide-range of pathologies, thus allowing for the introduction of novel non-invasive “liquid
biopsies”. Its mission is focused toward diagnostic advancements in the fields of oncology, infectious diseases and fibrotic
diseases, and discovery of disease-specific exosomes to provide disease origin insight necessary to enable personalized clinical
management.
On
July 18, 2018, the Company formed a wholly owned subsidiary, Avactis Biosciences Inc., a Nevada corporation, which will focus
on accelerating commercial activities related to cellular therapies, including regenerative medicine with stem/progenitor cells
as well as cellular immunotherapy including CAR-T, CAR-NK, TCR-T and others. The subsidiary is designed to integrate and optimize
our global scientific and clinical resources to further advance the use of cellular therapies to treat certain cancers. There
was no activity for the subsidiary since its incorporation through June 30, 2019.
On
June 13, 2019, the Company formed a wholly owned subsidiary, International Exosome Association LLC, a Delaware company. There
was no activity for the subsidiary since its incorporation through June 30, 2019.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 –
ORGANIZATION AND NATURE OF OPERATIONS (continued)
Details
of the Company’s subsidiaries which are included in these consolidated financial statements as of June 30, 2019 are as follows:
Name
of Subsidiaries
|
|
Place
and date of Incorporation
|
|
Percentage
of Ownership
|
|
Principal
Activities
|
Avalon
Healthcare System, Inc.
(“AHS”)
|
|
Delaware
May
18, 2015
|
|
100%
held by AVCO
|
|
Provides
medical related consulting services and developing Avalon Cell and Avalon Rehab in United States of America (“USA”)
|
|
|
|
|
|
|
|
Avalon
(BVI) Ltd.
(“Avalon
BVI”)
|
|
British
Virgin Island
January
23, 2017
|
|
100%
held by AVCO
|
|
Dormant,
is
in process of being dissolved
|
|
|
|
|
|
|
|
Avalon
RT 9 Properties LLC
(“Avalon
RT 9”)
|
|
New
Jersey
February
7, 2017
|
|
100%
held by AVCO
|
|
Owns
and operates an income-producing real property and holds and manages the corporate headquarters
|
|
|
|
|
|
|
|
Avalon
(Shanghai) Healthcare Technology Co., Ltd.
(“Avalon
Shanghai”)
|
|
PRC
April
29, 2016
|
|
100%
held by AHS
|
|
Provides
medical related consulting services and developing Avalon Cell and Avalon Rehab in China
|
|
|
|
|
|
|
|
GenExosome
Technologies Inc.
(“GenExosome”)
|
|
Nevada
July
31, 2017
|
|
60%
held by AVCO
|
|
Develops
proprietary diagnostic and therapeutic products leveraging exosome technology and markets
|
|
|
|
|
|
|
|
Beijing
Jieteng (GenExosome) Biotech Co., Ltd.
(“Beijing
GenExosome”)
|
|
PRC
August
7, 2015
|
|
100%
held by GenExosome
|
|
Provides
development services for hospitals and other customers and sells developed items to hospitals and other customers in China
|
|
|
|
|
|
|
|
Avactis
Biosciences Inc.
(“Avactis”)
|
|
Nevada
July
18, 2018
|
|
100%
held by AVCO
|
|
Integrate
and optimize global scientific and clinical resources to further advance cellular therapies, including regenerative medicine
with stem/progenitor cells as well as cellular immunotherapy including CAR-T, CAR-NK, TCR-T and others to treat certain cancers
|
|
|
|
|
|
|
|
International
Exosome Association LLC
|
|
Delaware
June
13, 2019
|
|
100%
held by AVCO
|
|
Provides
development services for hospitals and other customers and sells developed items in USA
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
2 –
BASIS OF PRESENTATION AND GOING CONCERN
These
interim
condensed consolidated financial statements of the Company and its subsidiaries are unaudited. In the opinion of management, all
adjustments (consisting of normal recurring accruals) and disclosures necessary for a fair presentation of these interim condensed
consolidated financial statements have been included. The results reported in the unaudited condensed consolidated financial statements
for any interim periods are not necessarily indicative of the results that may be reported for the entire year. The accompanying
unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities
and Exchange Commission and do not include all information and footnotes necessary for a complete presentation of financial statements
in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). The Company’s
unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation
.
Certain
information
and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP
have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with
the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission on March 26, 2019
.
Going
Concern
The
Company
currently has limited operations. Currently, the Company’s operations are focused on: (i) real estate property ownership
and operation in the United States; (ii) providing outsourced, customized international healthcare services to the rapidly changing
health care industry primarily focused in the People’s Republic of China; (iii) performing
development services
for hospitals and other customers and sales of developed products to hospitals and other customers
.
The Company is also pursuing the provision of healthcare services in the United States. 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 $20,054,816 at June 30, 2019, and has
incurred recurring net loss and negative cash flow from operating activities of $8,943,752 and $3,920,258 for the six months ended
June 30, 2019, respectively. The Company has a limited operating history and its continued growth is dependent upon the continuation
of providing medical consulting services to its only four clients who are related parties and generating rental revenue from its
income-producing real estate property in New Jersey and performing development services for hospitals and other customers and sales
of developed products to hospitals and other customers
; 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.
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.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use
of Estimates
The
preparation of the unaudited condensed consolidated financial statements in conformity with generally accepted accounting principles
in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates
during the three and six months ended June 30, 2019 and 2018 include the allowance for doubtful accounts, reserve for obsolete
inventory, the useful life of property and equipment and investment in real estate and intangible assets, assumptions used in
assessing impairment of long-term assets, valuation of deferred tax assets and the associated valuation allowances, and valuation
of stock-based compensation
.
Fair
Value of Financial Instruments and Fair Value Measurements
The
Company adopted the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies
the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify
the inputs used in measuring fair value as follows
:
|
●
|
Level
1-Inputs are unadjusted quoted prices in active
markets for identical assets or liabilities available at the measurement date
.
|
|
●
|
Level
2-Inputs are unadjusted quoted prices for similar
assets and liabilities in active markets, quoted prices for identical or similar assets
and liabilities in markets that are not active, inputs other than quoted prices that
are observable, and inputs derived from or corroborated by observable market data
.
|
|
●
|
Level
3-Inputs are unobservable inputs which reflect
the reporting entity’s own assumptions on what assumptions the market participants
would use in pricing the asset or liability based on the best available information
.
|
The
carrying amounts reported in the unaudited condensed consolidated balance sheets for cash, accounts receivable, tenants receivable,
security deposit, inventory, prepaid expenses and other current assets, accounts payable, accrued liabilities and other payables,
accrued liabilities and other payables – related parties, deferred rental income, loan payable, interest payable, interest
payable – related party, Value Added Tax (“VAT”) and other taxes payable, tenants’ security deposit, and
due to related party, approximate their fair market value based on the short-term maturity of these instruments
.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair
Value of Financial Instruments and Fair Value Measurements (continued)
At
June 30, 2019 and December 31, 2018, intangible assets were measured at fair value on a nonrecurring basis as shown in the following
tables.
|
|
Quoted
Price in Active Markets for Identical Assets
(Level 1)
|
|
|
Significant
Other Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable Inputs
(Level 3)
|
|
|
Balance
at
June 30, 2019
|
|
|
Impairment
Loss
|
|
Patents
and other technologies
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,091,903
|
|
|
$
|
1,091,903
|
|
|
$
|
-
|
|
|
|
Quoted
Price in Active Markets for Identical Assets
(Level 1)
|
|
|
Significant
Other Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable Inputs
(Level 3)
|
|
|
Balance
at December 31,
2018
|
|
|
Impairment
Loss
|
|
Patents
and other technologies
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,255,689
|
|
|
$
|
1,255,689
|
|
|
$
|
-
|
|
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 June 30, 2019 and December 31, 2018, cash balances in PRC are $640,253 and $1,216,485, respectively. Since March 31,
2015, balances at financial institutions and state-owned banks within the PRC are covered by insurance up to RMB 500,000 (USD
73,678) per bank. At June 30, 2019 and December 31, 2018, cash balances in United States are $2,761,051 and $1,035,802, respectively.
The Company has not experienced any losses in bank accounts and believes it is not exposed to any risks on its cash in bank accounts.
Concentrations
of Credit Risk
Currently,
a portion of the Company’s operations are carried out in PRC. Accordingly, the Company’s business, financial condition
and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state
of the PRC’s economy. The Company’s operations in PRC are subject to specific considerations and significant risks
not typically associated with companies in North America. The Company’s results may be adversely affected by changes in
governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad,
and rates and methods of taxation, among other things.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial
instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, trade accounts
receivable and tenants receivable. A portion of the Company’s cash is maintained with state-owned banks within the PRC,
and none of these deposits are covered by insurance. The Company has not experienced any losses in such accounts and believes
it is not exposed to any risks on its cash in bank accounts. A portion of the Company’s sales are credit sales which is
to the customer whose ability to pay is dependent upon the industry economics prevailing in these areas; however, concentrations
of credit risk with respect to trade accounts receivable and tenants receivable is limited due to generally short payment terms.
The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk.
At
June 30, 2019 and December 31, 2018, the Company’s cash balances by geographic area were as follows:
Country:
|
|
June
30, 2019
|
|
|
December
31, 2018
|
|
United States
|
|
$
|
2,761,051
|
|
|
|
81.2
|
%
|
|
$
|
1,035,802
|
|
|
|
46.0
|
%
|
China
|
|
|
640,253
|
|
|
|
18.8
|
%
|
|
|
1,216,485
|
|
|
|
54.0
|
%
|
Total cash
|
|
$
|
3,401,304
|
|
|
|
100.0
|
%
|
|
$
|
2,252,287
|
|
|
|
100.0
|
%
|
Accounts
Receivable and Allowance for Doubtful Accounts
Accounts
receivable are presented net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for
estimated losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when
there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances,
the Company considers many factors, including the age of the balance, a customer’s historical payment history, its current
credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection.
Management
believes that the accounts receivable are fully collectable. Therefore, no allowance for doubtful accounts is deemed to be required
on its accounts receivable at June 30, 2019 and December 31, 2018. The Company historically has not experienced uncollectible
accounts from customers granted with credit sales.
Tenants
Receivable and Allowance for Doubtful Accounts
Tenants
receivable are presented net of an allowance for doubtful accounts. Tenants receivable balance consist of base rents, tenant reimbursements
and receivables arising from straight-lining of rents primarily represent amounts accrued and unpaid from tenants in accordance
with the terms of the respective leases, subject to the Company’s revenue recognition policy. An allowance for the uncollectible
portion of tenant receivable is determined based upon an analysis of the tenant’s payment history, the financial condition
of the tenant, business conditions in the industry in which the tenant operates and economic conditions in Freehold, New Jersey
in which the property is located.
Management
believes that the tenants receivable are fully collectable. Therefore, no allowance for doubtful accounts is deemed to be required
on its tenants receivable at June 30, 2019 and December 31, 2018.
Inventory
Inventory is stated at the lower of cost and net realizable
value. Cost is determined using the first-in, first-out (FIFO) method. A reserve is established when management determines that
certain inventory may not be saleable. If inventory costs exceed expected market value due to obsolescence or quantities in excess
of expected demand, the Company will record a write down in inventory for the difference between the cost and the lower of cost
or estimated net realizable value. The reserve and write down are recorded based on estimates. The Company determined that certain
raw material and finished goods were impaired and has written off a total of $10,074 in the six months ended June 30, 2019, as
compared to none in the six months ended June 30, 2018.
Property
and Equipment
Property
and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets.
The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets
are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses
are included in income in the period of disposition. The Company examines the possibility of decreases in the value of fixed assets
when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Investment
in Real Estate and Depreciation
Investment
in real estate is carried at cost less accumulated depreciation and consists of building and improvement. The Company depreciates
real estate building and improvement on a straight-line basis over estimated useful life. Expenditures for ordinary repair and
maintenance costs are charged to expense as incurred. Expenditure for improvements, renovations, and replacements of real estate
asset is capitalized and depreciated over its estimated useful life if the expenditure qualifies as betterment. Real estate depreciation
expense was $39,962 and $31,806 for the three months ended June 30, 2019 and 2018, respectively
.
Real estate depreciation expense was $79,923 and $63,611 for the six months ended June 30,
2019 and 2018, respectively
.
Intangible
Assets
Intangible
assets consist of patents and other technologies. Patents and other technologies are being amortized on a straight-line method
over the estimated useful life of 5 years.
Investment
in Unconsolidated Company – Epicon Biotech Co., Ltd.
The
Company uses the equity method of accounting for its investment in, and earning or loss of, company that it does not control but
over which it does exert significant influence. The Company considers whether the fair value of its equity method investment has
declined below its carrying value whenever adverse events or changes in circumstances indicate that recorded value may not be
recoverable. If the Company considers any decline to be other than temporary (based on various factors, including historical financial
results and the overall health of the investee), then a write-down would be recorded to estimated fair value. See Note 9 for discussion
of equity method investment.
Impairment
of Long-lived Assets
In
accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an
impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount
of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did
not record any impairment charge for the three and six months ended June 30, 2019 and 2018 as there was no impairment indicator
noted as of the filing date of this report.
Deferred
Rental Income
Deferred
rental income represents rental income collected but not earned as of the reporting date. The Company defers the revenue related
to lease payments received from tenants in advance of their due dates. As of June 30, 2019 and December 31, 2018, deferred rental
income totaled $13,786 and $14,136, respectively.
Value
Added Tax
Avalon
Shanghai and Beijing GenExosome are subject to a value added tax (“VAT”) for providing medical related consulting
services and performing development services and sales of developed products. The amount of VAT liability is determined by applying
the applicable tax rates to the invoiced amount of medical related consulting services provided and the invoiced amount of development
services provided and sales of developed products (output VAT) less VAT paid on purchases made with the relevant supporting invoices
(input VAT). The Company reports revenue net of PRC’s value added tax for all the periods presented in the consolidated
statements of operations.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue
Recognition
Effective
January 1, 2018, the Company began recognizing revenue under Accounting Standards Codification (“ASC”) Topic 606,
Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective transition method. The impact
of adopting the new revenue standard was not material to the Company’s consolidated financial statements and there was no
adjustment to beginning accumulated deficit on January 1, 2018. The core principle of this new revenue standard is that a company
should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve
that core principle:
|
●
|
Step
1: Identify the contract with the customer
|
|
●
|
Step
2: Identify the performance obligations in the contract
|
|
●
|
Step
3: Determine the transaction price
|
|
●
|
Step
4: Allocate the transaction price to the performance obligations in the contract
|
|
●
|
Step
5: Recognize revenue when the company satisfies a performance obligation
|
In
order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services
in the contract and identify each promised goods or service that is distinct. A performance obligation meets ASC 606’s definition
of a “distinct” goods or service (or bundle of goods or services) if both of the following criteria are met:
|
●
|
The
customer can benefit from the goods or service either on its own or together with other
resources that are readily available to the customer (i.e., the goods or service is capable
of being distinct).
|
|
●
|
The
entity’s promise to transfer the goods or service to the customer is separately
identifiable from other promises in the contract (i.e., the promise to transfer the goods
or service is distinct within the context of the contract).
|
If
a goods or service is not distinct, the goods or service is combined with other promised goods or services until a bundle of goods
or services is identified that is distinct.
The
transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised
goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration
promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration is included
in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue
recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
The
transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price
allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over
time as appropriate.
Types
of revenue:
|
●
|
Rental
revenue from leasing commercial property under operating leases with terms of generally
three years or more.
|
|
●
|
Service
fees under consulting agreements with related parties to provide medical related consulting
services to its clients. The Company is paid for its services by its clients pursuant
to the terms of the written consulting agreements. Each contract calls for a fixed payment.
|
|
●
|
Service
fees under agreements to perform development services for hospitals and other customers.
The Company does not perform contracts that are contingent upon successful results.
|
|
●
|
Sales
of developed products to hospitals and other customers.
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue
recognition criteria:
|
●
|
The
Company recognizes rental revenue from its commercial leases on a straight-line basis
over the life of the lease including rent holidays, if any. Straight-line rent receivable
consists of the difference between the tenants’ rents calculated on a straight-line
basis from the date of lease commencement over the remaining terms of the related leases
and the tenants’ actual rents due under the lease agreements and is included in
tenants receivable in the accompanying consolidated balance sheets. Revenues associated
with operating expense recoveries are recognized in the period in which the expenses
are incurred.
|
|
●
|
The
Company recognizes revenue by providing medical related consulting services under written
service contracts with its customers. Revenue related to its service offerings is recognized
as the services are performed.
|
|
●
|
Revenue
from development services performed under written contracts is recognized as services
are provided.
|
|
●
|
Revenue
from sales of developed items to hospitals and other customers is recognized when items
are shipped to customers and titles are transferred.
|
The
Company does not offer promotional payments, customer coupons, rebates or other cash redemption offers to its customers.
Office
Lease
When
a
lease contains “rent holidays”, the Company records rental expense on a straight-line basis over the term of the lease
and the difference between the average rental amount charged to expense and the amount payable under the lease is recorded as
prepaid expenses in the consolidated balance sheets. The Company begins recording rent expense on the lease possession date
.
Real
Property Operating Expenses
Real
property operating expenses consist of property management fees, property insurance, real estate taxes, depreciation, repairs
and maintenance fees, utilities and other expenses related to the Company’s rental properties.
Medical
Related Consulting Services Costs
Costs
of medical related consulting services includes the cost of internal labor and related benefits, travel expenses related to consulting
services, subcontractor costs, other related consulting costs, and other overhead costs. Subcontractor costs were costs related
to medical related consulting services incurred by our subcontractor, such as medical professional’s compensation and travel
costs.
Development
Services and Sales of Developed Products Costs
Costs
of development services and sales of developed items includes inventory costs, materials and supplies costs, depreciation, internal
labor and related benefits, other overhead costs and shipping and handling costs incurred.
Shipping
and Handling Costs
Shipping
and handling costs are expensed as incurred and are included in cost of sales. For the three months ended June 30, 2019 and 2018,
shipping and handling costs amounted to $0 and $0, respectively. For the six months ended June 30, 2019 and 2018, shipping and
handling costs amounted to $0 and $25, respectively.
Research and Development
Expenditures for research and product development
costs are expensed as incurred. The Company incurred research and development expense in the amount of $949,711 and $263 for the
three months ended June 30, 2019 and 2018, respectively. The Company incurred research and development expense in the amount of
$1,102,171 and $263 for the six months ended June 30, 2019 and 2018, respectively.
Advertising Costs
All costs related to advertising are expensed
as incurred. For the three and six months ended June 30, 2019, advertising costs amounted to $221,222 and $465,822, respectively.
We did not incur any advertising expense during the three and six months ended June 30, 2018.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock-based
Compensation
The
Company accounts for its stock-based compensation awards in accordance with Accounting Standards Codification (“ASC”)
Topic 718, Compensation—Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments to employees
and non-employees including grants of stock options, to be recognized as expense in the statements of operations based on their
grant date fair values. The Company estimates the grant date fair value of each option award using the Black-Scholes option-pricing
model. The use of the Black-Scholes option-pricing model requires management to make assumptions with respect to the expected
term of the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest
rates and expected dividend yields of the common stock.
The
Company periodically issues common stock, warrants and common stock options to consultants for various services. Costs of these
transactions are measured at the fair value of the service received or the fair value of the equity instruments issued, whichever
is more reliably measurable. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment
for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty’s
performance is complete.
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 June 30, 2019 and December 31, 2018, the Company
had no significant uncertain tax positions that qualify for either recognition or disclosure in the financial statements. Tax
year that remains subject to examination is the years ended December 31, 2018, 2017 and 2016. The Company recognizes interest
and penalties related to significant uncertain income tax positions in other expense. However, no such interest and penalties
were recorded as of June 30, 2019 and December 31, 2018.
In
December 2017, the United States Government passed new tax legislation that, among other provisions, lowered the corporate tax
rate from 35% to 21%. In addition to applying the new lower corporate tax rate in 2018 and thereafter to any taxable income the
Company may have, the legislation affects the way the Company can use and carryforward net operating losses previously accumulated
and results in a revaluation of deferred tax assets and liabilities recorded on the balance sheet. Given that current deferred
tax assets are offset by a full valuation allowance, these changes will have no net impact on the balance sheet. However, when
the Company becomes profitable, the Company will receive a reduced benefit from such deferred tax assets.
Foreign
Currency Translation
The
reporting currency of the Company is the U.S. dollar. The functional currency of the parent company, AHS, Avalon RT 9, GenExosome,
and Avactis, is the U.S. dollar and the functional currency of Avalon Shanghai and Beijing GenExosome, is the Chinese Renminbi
(“RMB”). For the subsidiaries whose functional currency is the RMB, result of operations and cash flows are translated
at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of
the period, and equity is translated at historical exchange rates. As a result, amounts relating to assets and liabilities reported
on the statements of cash flows may not necessarily agree with the changes in the corresponding balances on the balance sheets.
Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are
included in determining comprehensive income/loss. Transactions denominated in foreign currencies are translated into the functional
currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies are
translated into the functional currency at the exchange rates prevailing at the balance sheet date with any transaction gains
and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency
are included in the results of operations as incurred.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
All
of the Company’s revenue transactions are transacted in the functional currency of the operating subsidiaries. The Company
does not enter into any material transaction in foreign currencies. Transaction gains or losses have not had, and are not expected
to have, a material effect on the results of operations of the Company.
Asset
and liability accounts at June 30, 2019 and December 31, 2018 were translated at 6,8668 RMB to $1.00 and at 6.8785 RMB to $1.00,
respectively, which were the exchange rates on the balance sheet dates. Equity accounts were stated at their historical rates.
The average translation rates applied to the statements of operations for the six months ended June 30, 2019 and 2018 were 6.7863
RMB and 6.3701 RMB to $1.00, respectively. Cash flows from the Company’s operations are calculated based upon the local
currencies using the average translation rate.
Comprehensive
Loss
Comprehensive
loss is comprised of net loss and all changes to the statements of equity, except those due to investments by stockholders, changes
in paid-in capital and distributions to stockholders. For the Company, comprehensive loss for the three and six months ended June
30, 2019 and 2018 consisted of net loss and unrealized gain from foreign currency translation adjustment.
Per
Share Data
ASC
Topic 260 “Earnings per Share,” requires presentation of both basic and diluted earnings per share (“EPS”)
with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted
EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity.
Basic
net loss per share are computed by dividing net loss available to common stockholders by the weighted average number of shares
of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average
number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.
Potentially dilutive common shares consist of the common shares issuable upon the exercise of common stock options and warrants
(using the treasury stock method). Common stock equivalents are not included in the calculation of diluted net loss per share
if their effect would be anti-dilutive. In a period in which the Company has a net loss, all potentially dilutive securities are
excluded from the computation of diluted shares outstanding as they would have had an anti-dilutive impact.
The
following table presents a reconciliation of basic and diluted net loss per share:
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Net
loss available to Avalon GloboCare Corp. common shareholders for basic and diluted net loss per share of common stock
|
|
$
|
(
4,357,224
|
)
|
|
$
|
(1,294,394
|
)
|
|
$
|
(
8,763,040
|
)
|
|
$
|
(2,775,973
|
)
|
Weighted average
common stock outstanding - basic and diluted
|
|
|
75,183,354
|
|
|
|
71,979,678
|
|
|
|
74,437,336
|
|
|
|
71,122,356
|
|
Net
loss per common share attributable to Avalon GloboCare Corp. common shareholders - basic and diluted
|
|
$
|
(0.06
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.04
|
)
|
The
following table summarizes the securities that were excluded from the diluted per share calculation because the effect of including
these potential shares was antidilutive:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Stock options
|
|
|
5,070,000
|
|
|
|
2,610,000
|
|
|
|
5,070,000
|
|
|
|
2,610,000
|
|
Warrants
|
|
|
1,714,288
|
|
|
|
578,891
|
|
|
|
1,714,288
|
|
|
|
578,891
|
|
Potentially dilutive securities
|
|
|
6,784,288
|
|
|
|
3,188,891
|
|
|
|
6,784,288
|
|
|
|
3,188,891
|
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Business
Acquisition
The
Company accounts for business acquisition in accordance with ASC No. 805, Business Combinations. The assets acquired and liabilities
assumed from the acquired business are recorded at fair value, with the residual of the purchase price recorded as goodwill. The
result of operations of the acquired business is included in the Company’s operating result from the date of acquisition.
Non-controlling
Interest
As
of June 30, 2019, Dr. Yu Zhou, director and Co-Chief Executive Officer of GenExosome, who owned 40% of the equity interests of
GenExosome, which is not under the Company’s control
.
Segment
Reporting
The
Company uses “the management approach” in determining reportable operating segments. The management approach considers
the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions
and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating
decision maker is the chief executive officer (“CEO”) and president of the Company, who reviews operating results
to make decisions about allocating resources and assessing performance for the entire Company. The Company has determined that
it has three reportable business segments: real property operating segment, medical related consulting services segment, and development
services and sales of developed products segment. These reportable segments offer different types of services and products, have
different types of revenue, and are managed separately as each requires different operating strategies and management expertise.
Related
Parties
Parties
are
considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are
controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its
management, members of the immediate families of principal owners of the Company and its management and other parties with which
the Company may deal with if one party controls or can significantly influence the management or operating policies of the other
to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company
discloses all significant related party transactions
.
Reclassification
Certain
prior period amounts have been reclassified to conform to the current period presentation. These reclassifications have no effect
on the previously reported financial position, results of operations and cash flows.
Reverse
Stock Split
The
Company
effected a one-for-four reverse stock split of its common stock on October 18, 2016. All share and per share information has been
retroactively adjusted to reflect this reverse stock split
.
Fiscal
Year End
The
Company has adopted a fiscal year end of December 31st
.
Recent
Accounting Pronouncements
In
February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2016-02, “Leases”, (“ASU 842”) which amended the existing accounting standards for lease accounting,
including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting.
ASU 842 is effective for public companies during interim and annual reporting periods beginning after December 15, 2018, with
early adoption permitted. In July 2018, the FASB issued ASU No. 2018-11, which permits entities to record the right-of-use asset
and lease liability on the date of adoption, with no requirement to recast comparative periods
.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The
Company adopted ASU 842 effective January 1, 2019 using the optional transition method of recognizing a cumulative-effect adjustment
to the opening balance of accumulated deficit on January 1, 2019. Therefore, comparative financial information was not adjusted
and continues to be reported under the prior lease accounting guidance in ASU 840. The Company elected the transition relief package
of practical expedients, and as a result, the Company did not assess 1) whether existing or expired contracts contain embedded
leases, 2) lease classification for any existing or expired leases, and 3) whether lease origination costs qualified as initial
direct costs. The Company elected the short-term lease practical expedient by establishing an accounting policy to exclude leases
with a term of 12 months or less, as well as the land easement practical expedient for maintaining its current accounting policy
for existing or expired land easements
.
In
June 2018, the FASB issued ASU 2018-07,
Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee
Share-Based Payment Accounting,
to expand the scope of Topic 718 to include share-based payment transactions for acquiring
goods and services from nonemployees and supersedes the guidance in Subtopic 505-50,
Equity - Equity-Based Payments to
Non-Employees
. Under ASU 2018-07, equity-classified nonemployee share-based payment awards are measured at the grant date
fair value on the grant date. The probability of satisfying performance conditions must be considered for equity-classified nonemployee
share-based payment awards with such conditions. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018,
with early adoption permitted. The adoption of this ASU did not have a material impact on the Company’s consolidated financial
statements.
In
August 2018, the FASB issued ASU No. 2018-13,
Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the
Disclosure Requirements for Fair Value Measurement
. The objective of ASU 2018-13 is to improve the effectiveness of disclosures
in the notes to the financial statements by removing, modifying, and adding certain fair value disclosure requirements to facilitate
clear communication of the information required by generally accepted accounting principles. The amendments are effective for
all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 with early adoption
permitted upon issuance of this ASU. The Company is currently evaluating the potential impact of this new guidance.
Other
accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected
to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements
that are not anticipated to have an impact on or are unrelated to its consolidated financial condition, results of operations,
cash flows or disclosures.
NOTE
4 –
INVENTORY
At
June 30, 2019 and December 31, 2018, inventory consisted of the following:
|
|
June
30,
2019
|
|
|
December
31, 2018
|
|
Raw material
|
|
$
|
12,553
|
|
|
$
|
12,953
|
|
Finished goods
|
|
|
448
|
|
|
|
41
|
|
|
|
|
13,001
|
|
|
|
12,994
|
|
Less: reserve
for obsolete inventory
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
13,001
|
|
|
$
|
12,994
|
|
NOTE
5 –
PREPAID EXPENSES AND OTHER CURRENT ASSETS
At
June 30, 2019 and December 31, 2018, prepaid expenses and other current assets consisted of the following:
|
|
June 30,
2019
|
|
December 31,
2018
|
Prepaid professional fees
|
|
$
|
279,433
|
|
|
$
|
607,833
|
|
Prepaid research and development service fees
|
|
|
3,609
|
|
|
|
300,000
|
|
Prepaid insurance expense
|
|
|
4,640
|
|
|
|
72,352
|
|
Prepaid listing fee
|
|
|
61,667
|
|
|
|
-
|
|
Prepaid dues and subscriptions
|
|
|
12,500
|
|
|
|
70,000
|
|
Other
|
|
|
58,624
|
|
|
|
96,290
|
|
|
|
$
|
420,473
|
|
|
$
|
1,146,475
|
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
6 –
PROPERTY AND EQUIPMENT
At
June 30, 2019 and December 31, 2018, property and equipment consisted of the following:
|
|
Useful
life
|
|
June
30,
2019
|
|
|
December
31,
2018
|
|
Laboratory equipment
|
|
5 Years
|
|
$
|
422,976
|
|
|
$
|
258,345
|
|
Office equipment and furniture
|
|
3 – 10 Years
|
|
|
36,791
|
|
|
|
35,627
|
|
Leasehold improvement
|
|
Shorter of
useful life or lease term
|
|
|
-
|
|
|
|
24,446
|
|
|
|
|
|
|
459,767
|
|
|
|
318,418
|
|
Less: accumulated
depreciation
|
|
|
|
|
(84,861
|
)
|
|
|
(68,863
|
)
|
|
|
|
|
$
|
374,906
|
|
|
$
|
249,555
|
|
For
the three months ended June 30, 2019 and 2018, depreciation expense of property and equipment amounted to $23,508 and $10,897,
respectively, of which, $818 and $819 was included in real property operating expenses, $17,130 and $5,864 was included in costs
of development services and sales of developed products, and $5,560 and $4,214 was included in other operating expenses, respectively
.
For
the six months ended June 30, 2019 and 2018, depreciation expense of property and equipment amounted to $40,785 and $20,578, respectively,
of which, $1,637 and $1,638 was included in real property operating expenses, $30,485 and $9,632 was included in costs of development
services and sales of developed products, and $8,662 and $9,308 was included in other operating expenses, respectively
.
NOTE
7 –
INVESTMENT IN REAL ESTATE
At
June 30, 2019 and December 31, 2018, investment in real estate consisted of the following:
|
|
Useful
life
|
|
June
30, 2019
|
|
|
December 31,
2018
|
|
Commercial real property
building
|
|
39 Years
|
|
$
|
7,708,571
|
|
|
$
|
7,708,571
|
|
Improvement
|
|
12 Years
|
|
|
402,094
|
|
|
|
391,506
|
|
|
|
|
|
|
8,110,665
|
|
|
|
8,100,077
|
|
Less: accumulated
depreciation
|
|
|
|
|
(300,116
|
)
|
|
|
(220,192
|
)
|
|
|
|
|
$
|
7,810,549
|
|
|
$
|
7,879,885
|
|
For
the three months ended June 30, 2019 and 2018, depreciation expense of this commercial real property amounted to $39,962 and $31,806,
which was included in real property operating expenses.
For
the six months ended June 30, 2019 and 2018, depreciation expense of this commercial real property amounted to $79,923 and $63,611,
which was included in real property operating expenses.
NOTE
8 –
INTANGIBLE ASSETS
At
June 30, 2019 and December 31, 2018, intangible assets consisted of the following:
|
|
Useful
Life
|
|
June
30, 2019
|
|
|
December
31, 2018
|
|
Patents
and other technologies
|
|
5
Years
|
|
$
|
1,583,260
|
|
|
$
|
1,583,260
|
|
Less: accumulated
amortization
|
|
|
|
|
(491,
357
|
)
|
|
|
(327,571
|
)
|
|
|
|
|
$
|
1,091,903
|
|
|
$
|
1,255,689
|
|
For
the three months ended June 30, 2019 and 2018, amortization expense amounted to $81,893. For the six months ended June 30, 2019
and 2018, amortization expense amounted to $163,786.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
8 –
INTANGIBLE ASSETS (continued)
Amortization
of intangible assets attributable to future periods is as follows:
Year
ending June 30:
|
|
Amortization
amount
|
|
2020
|
|
$
|
327,571
|
|
2021
|
|
|
327,571
|
|
2022
|
|
|
327,571
|
|
2023
|
|
|
109,190
|
|
|
|
$
|
1,091,903
|
|
NOTE
9 –
EQUITY METHOD INVESTMENT
As
of June 30, 2019 and December 31, 2018, equity method investment amounted to $363,002 and $385,162, respectively. The investment
represents the Company’s subsidiary, Avalon Shanghai’s interest in Epicon Biotech Co., Ltd. (“Epicon”).
Epicon was incorporated on August 14, 2018 in PRC. Avalon Shanghai and the other unrelated company, Jiangsu Unicorn Biological
Technology Co., Ltd. (“Unicorn”), accounted for 40% and 60% of the total ownership, respectively. Epicon is focused
on cell preparation, third party testing, biological sample repository for commercial and scientific research purposes and the
clinical transformation of scientific achievements.
The Company treats the equity investment in the consolidated financial statements under the equity method.
Under the equity method, the investment is initially recorded at cost, adjusted for any excess of the Company’s share of
the incorporated-date fair values of the investee’s identifiable net assets over the cost of the investment (if any). Thereafter,
the investment is adjusted for the post incorporation change in the Company’s share of the investee’s net assets and
any impairment loss relating to the investment. For the three and six months ended June 30, 2019, the Company’s share of
Epicon’s net loss was $
10,344 and $23,087,
respectively, which was included in loss from equity-method investment in the accompanying consolidated statements of operations
and comprehensive loss.
The
tables below present the summarized financial information, as provided to the Company by the investee, for the unconsolidated
company
:
|
|
June
30,
2019
|
|
|
December 31,
2018
|
|
Current assets
|
|
$
|
48,033
|
|
|
$
|
301,714
|
|
Noncurrent assets
|
|
|
204,181
|
|
|
|
7,015
|
|
Current liabilities
|
|
|
38
|
|
|
|
38
|
|
Noncurrent liabilities
|
|
|
-
|
|
|
|
-
|
|
Equity
|
|
|
252,177
|
|
|
|
308,691
|
|
|
|
For the Three Months Ended
June 30,
2019
|
|
|
For the Six Months Ended
June 30,
2019
|
|
Net revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
Gross profit
|
|
|
-
|
|
|
|
-
|
|
Loss from operation
|
|
|
25,861
|
|
|
|
57,717
|
|
Net loss
|
|
|
25,861
|
|
|
|
57,717
|
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
10 –
ACCRUED LIABILITIES AND OTHER PAYABLES
At
June 30, 2019 and December 31, 2018, accrued liabilities and other payables consisted of the following:
|
|
June 30,
2019
|
|
December 31,
2018
|
Accrued payroll liability
|
|
$
|
109,318
|
|
|
$
|
529,472
|
|
Accrued professional fees
|
|
|
484,453
|
|
|
|
166,077
|
|
Lab equipment purchase payable
|
|
|
|
|
|
|
-
|
|
Insurance payable
|
|
|
|
|
|
|
45,088
|
|
Accrued dues and subscriptions
|
|
|
82,776
|
|
|
|
42,500
|
|
Other
|
|
|
70,799
|
|
|
|
76,213
|
|
|
|
$
|
747,346
|
|
|
$
|
859,350
|
|
NOTE
11 –
LOAN PAYABLE
On
April
19, 2017, the Company entered into a loan agreement, providing for the issuance of a loan in the principal amount of $2,100,000.
The term of the loan is one year. On May 3, 2018, the Company signed an extension agreement with the maturity date of March 31,
2019. On August 3, 2018, the Company signed an extension agreement for the loan with the maturity date of March 31, 2020. The
annual interest rate for the loan is 10%. The loan is guaranteed by the Company’s Chairman, Mr. Wenzhao Lu.
The
Company repaid principal of $600,000, $500,000 and $1,000,000 in November 2017, April 2018 and April 2019, respectively. As
of
June 30, 2019, the outstanding principal balance of the loan was $0
.
NOTE
12 –
VAT AND OTHER TAXES PAYABLE
At
June 30, 2019 and December 31, 2018, VAT and other taxes payable amounted to $10,727 and 4,668, respectively.
NOTE
13 –
RELATED PARTY TRANSACTIONS
Medical
Related Consulting Services Revenue from Related Party and Accounts Receivable – Related Party
During
the three and six months ended June 30, 2019 and 2018, medical related consulting services revenue from related parties was as
follows:
|
|
Three
Months Ended
June 30,
|
|
|
Six
Months Ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Medical related consulting services
provided to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing
Daopei (1)
|
|
$
|
41,648
|
|
|
$
|
141,996
|
|
|
$
|
55,908
|
|
|
$
|
141,996
|
|
Shanghai Daopei
(2)
|
|
|
14,180
|
|
|
|
-
|
|
|
|
14,180
|
|
|
|
-
|
|
Hebei
Daopei (3)
|
|
|
55,606
|
|
|
|
-
|
|
|
|
55,606
|
|
|
|
-
|
|
|
|
$
|
111,434
|
|
|
$
|
141,996
|
|
|
$
|
125,694
|
|
|
$
|
141,996
|
|
|
(1)
|
Beijing
Daopei is a subsidiary of an entity whose chairman is Wenzhao Lu, the major shareholder
of the Company.
|
|
(2)
|
Shanghai
Daopei is a subsidiary of an entity whose chairman is Wenzhao Lu, the major shareholder
of the Company.
|
|
(3)
|
Hebei
Daopei is a subsidiary of an entity whose chairman is Wenzhao Lu, the major shareholder
of the Company.
|
Accounts
receivable – related party, net of allowance for doubtful accounts, at June 30, 2019 and December 31, 2018 amounted to $58,251
and $0, respectively, and no allowance for doubtful accounts is deemed to be required on accounts receivable – related party
at June 30, 2019 and December 31, 2018.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
13 –
RELATED PARTY TRANSACTIONS (continued)
Prepaid
Expenses – Related Parties
As
of June 30, 2019 and December 31, 2018, the Company made prepayment of $0 and $1,897, respectively, to David Jin, its shareholder,
chief executive officer, president and board member, for business travel reimbursement, which have been included in prepaid expenses
– related parties on the accompanying consolidated balance sheets.
As
of June 30, 2019 and December 31, 2018, the Company made prepayment of $0 and $32,293, respectively, to Meng Li, its shareholder
and chief operating officer, for business travel reimbursement, which have been included in prepaid expenses – related parties
on the accompanying consolidated balance sheets.
Advance
from Customer – Related Party
At
June 30, 2019 and December 31, 2018, advance from customer – related party amounted to $0 and $14,829, respectively,
which represents prepayment received from our related party, Beijing Daopei, for medical related consulting services. When the
services are performed, the amount recorded as advance from customer – related party is recognized as revenue.
Accrued
Liabilities and Other Payables – Related Parties
At
June 30, 2019 and December 31, 2018, the Company owed Luisa Ingargiola, its chief financial officer, of $36,806 and $0, respectively,
for travel and other miscellaneous reimbursements, which have been included in accrued liabilities and other payables –
related parties on the accompanying consolidated balance sheets.
Due
to Related Party
In
connection with the acquisition discussed elsewhere in this report, the Company acquired Beijing GenExosome in cash payment of
$450,000. On October 25, 2017, Dr. Yu Zhou, the former sole shareholder of Beijing GenExosome, was appointed to the board of directors
of GenExosome and served as co-chief executive officer of GenExosome. As of June 30, 2019 and December 31, 2018, the unpaid acquisition
consideration of $100,000, was payable to Dr. Yu Zhou, co-chief executive officer and board member of GenExosome, and reflected
as due to related party on the accompanying consolidated balance sheets.
Real
Property Management Agreement
The Company pays a company, which is controlled by Wenzhao Lu, the Company’s largest shareholder
and chairman of the Board of Directors, for the management of its commercial real property located in New Jersey. The property
management agreement commenced on May
25, 2017 and
expired in March 2019. On March 1, 2019, the Company entered into a contract with a third-party consultant to manage its real property
till February 2020. For the three months ended June 30, 2019 and 2018, the management fee related to the property management agreement
amounted to $30,753 and $16,251, respectively. For the six months ended June 30, 2019 and 2018, the management fee related to the
property management agreement amounted to $54,087 and $32,502, respectively.
Note
Payable – Related Party
On
March 18, 2019, the Company issued Wenzhao Lu, the Company’s largest shareholder and chairman of the Board of Directors,
a Promissory Note in the principal amount of $1,000,000 (“Promissory Note”) in consideration of cash in the amount
of $1,000,000. The Promissory Note accrues interest at the rate of 5% per annum and matures March 19, 2022.
As
of
June 30, 2019, the outstanding principal balance of the note and related accrued and unpaid interest for the note was $1,000,000
and $14,583, respectively
.
Office
Space from Related Party
Beijing
GenExosome uses office space of a related party, free of rent, which is considered immaterial.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 –
DERIVATIVE
LIABILITIES
On April 25, 2019,
the Company issued 1,714,288 five-year warrants to several third party institutional investors in a registered direct offering
(see Note 15). The warrants include the fundamental transaction provisions and the exercise price of the warrants is protected
against down-round financing throughout the term of the warrants. Upon evaluation, the warrants meet the definition of derivative
liabilities under FASB ASC 815, as the Company cannot avoid a net cash settlement under certain circumstances. Accordingly, the
fair value of the warrants was classified as derivative liabilities of $3,517,241 on the issuance date, April 25, 2019. The estimated
fair value of the warrants were computed at issuance using Black-Scholes
option-pricing model,
with the following assumptions: stock price of $2.82, volatility of 100.87%, risk-free rate of 2.33%, annual dividend yield of
0% and expected life of 5 years.
The
estimated fair value of the outstanding warrant as derivative liabilities was $3,055,748 at June 30, 2019.
The estimated
fair value of the warrants were computed as of June 30, 2019 using Black-Scholes
option-pricing
model, with the following assumptions: stock price of $2.60, volatility of 97.69%, risk-free rate of 1.76%, annual dividend yield
of 0% and expected life of 4.82 years.
Increases
or decreases in fair value of the derivative liabilities are included as a component of total other income / expenses in the accompanying
consolidated statements of operations for the respective period. The changes to the derivative liabilities for the warrants resulted
in a decrease of $461,493 in the derivative liabilities and the corresponding increase in other income as a gain for
the
three and six months ended June 30, 2019.
NOTE
15 –
EQUITY
Shares
Authorized
The
Company is authorized to issue 10,000,000 shares of preferred stock and 490,000,000 shares of common shares with a par value of
$0.0001 per share.
There
are no shares of its preferred stock issued and outstanding as of June 30, 2019 and December 31, 2018.
There
are 76,175,639 and 73,830,751 shares of its common stock issued as of June 30, 2019 and December 31, 2018, respectively.
There
are 75,655,639 and 73,310,751 shares of its common stock outstanding as of June 30, 2019 and December 31, 2018, respectively.
Common
Shares Issued for Warrant Exercise
On
January 9, 2019, the Company issued 350,856 shares of its common stock upon cashless exercise of warrants to purchase 578,891
shares of common stock
.
Common
Shares Issued for Option Exercise
On
February 27, 2019, the Company issued 158,932 shares of its common stock upon cashless exercise of options to purchase 200,000
shares of common stock.
Common
Shares Issued for Service Fee
On
April 1, 2019, the Company issued a total of 120,812 shares of its common stock in payment of service fee from certain consultants.
Units
Sold for Cash
On
April 25, 2019, the Company entered into a purchase agreement with several third party institutional investors for the purchase
of 1,714,288 units in a registered direct offering, for gross proceeds of $6,000,008 before placement agent fees and other offering
expenses payable by the Company. Each unit was sold at a public offering price of $3.50 and consists of one share of common stock
and a warrant to purchase one share of common stock. The Company received net cash proceeds of $5,103,704, net of cash paid for
placement agent fees and other offering expenses.
The
warrants are exercisable immediately as of the date of issuance (the “Initial Exercise Date”), at an exercise
price of $3.50 per share, subject to adjustment as provided in the warrants, and expire on the fifth (5
th
)
anniversary of the Initial Exercise Date. The warrants include anti-dilution rights, which provide that if at any time the
warrants are outstanding, the Company issues or is deemed to have issued any common stock or common stock equivalents for
consideration less than the then current exercise price of the warrants, the exercise price of such warrants is automatically
reduced to the lowest price per share of consideration provided or deemed to have been provided for such securities (subject
to adjustment for reverse and forward stock splits, recapitalizations and similar transactions). The warrants include the
fundamental transaction provisions and the exercise price of the warrants is protected against down-round financing
throughout the term of the warrants. Upon evaluation, the warrants meet the definition of a derivative under FASB ASC 815, as
the Company cannot avoid a net cash settlement under certain circumstances (see Note 14).
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
15 –
EQUITY (continued)
Options
The
following table summarizes the shares of the Company’s common stock issuable upon exercise of options outstanding at June
30, 2019:
|
Options
Outstanding
|
|
|
|
Options
Exercisable
|
|
|
Range
of Exercise Price
|
|
|
|
Number
Outstanding at
June 30,
2019
|
|
|
|
Range
of Weighted Average Remaining Contractual Life (Years)
|
|
|
|
Weighted
Average Exercise Price
|
|
|
|
Number
Exercisable at June 30, 2019
|
|
|
|
Weighted
Average Exercise
Price
|
|
$
|
0.50
|
|
|
|
2,000,000
|
|
|
|
7.62
|
|
|
$
|
0.50
|
|
|
|
1,611,111
|
|
|
$
|
0.50
|
|
|
1.49
|
|
|
|
60,000
|
|
|
|
2.83
|
|
|
|
1.49
|
|
|
|
60,000
|
|
|
|
1.49
|
|
|
1.00
|
|
|
|
50,000
|
|
|
|
3.34
|
|
|
|
1.00
|
|
|
|
50,000
|
|
|
|
1.00
|
|
|
1.00
|
|
|
|
80,000
|
|
|
|
1.34
|
|
|
|
1.00
|
|
|
|
80,000
|
|
|
|
1.00
|
|
|
2.50
|
|
|
|
110,000
|
|
|
|
3.51
|
|
|
|
2.50
|
|
|
|
110,000
|
|
|
|
2.50
|
|
|
1.00
|
|
|
|
80,000
|
|
|
|
1.84
|
|
|
|
1.00
|
|
|
|
80,000
|
|
|
|
1.00
|
|
|
2.30
|
|
|
|
20,000
|
|
|
|
3.93
|
|
|
|
2.30
|
|
|
|
20,000
|
|
|
|
2.30
|
|
|
2.30
|
|
|
|
20,000
|
|
|
|
4.01
|
|
|
|
2.30
|
|
|
|
20,000
|
|
|
|
2.30
|
|
|
2.80
|
|
|
|
20,000
|
|
|
|
4.08
|
|
|
|
2.80
|
|
|
|
20,000
|
|
|
|
2.80
|
|
|
2.80
|
|
|
|
20,000
|
|
|
|
4.12
|
|
|
|
2.80
|
|
|
|
20,000
|
|
|
|
2.80
|
|
|
1.00
|
|
|
|
180,000
|
|
|
|
2.34
|
|
|
|
1.00
|
|
|
|
180,000
|
|
|
|
1.00
|
|
|
2.75
|
|
|
|
240,000
|
|
|
|
4.51
|
|
|
|
2.75
|
|
|
|
120,000
|
|
|
|
2.75
|
|
|
2.00
|
|
|
|
1,950,000
|
|
|
|
4.51
|
|
|
|
2.00
|
|
|
|
975,000
|
|
|
|
2.00
|
|
|
4.76
|
|
|
|
60,000
|
|
|
|
4.77
|
|
|
|
4.76
|
|
|
|
20,000
|
|
|
|
4.76
|
|
|
2.52
|
|
|
|
180,000
|
|
|
|
2.84
|
|
|
|
2.52
|
|
|
|
60,000
|
|
|
|
2.52
|
|
$
|
0.50–4.76
|
|
|
|
5,070,000
|
|
|
|
5.45
|
|
|
$
|
1.43
|
|
|
|
3,426,111
|
|
|
$
|
1.25
|
|
Stock
options granted to employee and director
Employee
and director stock option activities for the six months ended June 30, 2019 were as follows:
|
|
Number
of Options
|
|
|
Weighted
Average Exercise Price
|
|
Outstanding at December 31, 2018
|
|
|
2,280,000
|
|
|
$
|
0.69
|
|
Granted
|
|
|
2,250,000
|
|
|
|
2.15
|
|
Terminated /
Exercised
|
|
|
-
|
|
|
|
-
|
|
Outstanding at June 30, 2019
|
|
|
4,530,000
|
|
|
$
|
1.41
|
|
Options exercisable at June 30, 2019
|
|
|
3,006,111
|
|
|
$
|
1.25
|
|
Options expected to vest
|
|
|
1,523,889
|
|
|
$
|
1.75
|
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
15 –
EQUITY (continued)
Options
(continued)
Stock
options granted to employee and director (continued)
The
fair values of options granted to employee and director during the six months ended June 30, 2019 and 2018, respectively, were
estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:
|
|
Six Months
Ended
June 30,
2019
|
|
|
Six Months
Ended
June 30,
2018
|
|
Dividend rate
|
|
|
0
|
|
|
|
0
|
|
Terms (in years)
|
|
|
5.0
|
|
|
|
5.0
|
|
Volatility
|
|
|
149.74% -150.61
|
%
|
|
|
175.94% - 185.28%
|
|
Risk-free interest rate
|
|
|
2.31% - 2.49%
|
|
|
|
2.25% - 2.78%
|
|
The aggregate fair value of the options granted
to employee and director during the six months ended June 30, 2019 was $5,956,574, of which, $1,510,545 and $2,935,484 for the
three and six months ended June 30, 2019, respectively, has been reflected as compensation and related benefits on the accompanying
unaudited condensed consolidated statements of operations because the options were fully earned and non-cancellable.
The
aggregate fair value of the options granted to employee and director during the six months ended June 30, 2018 was $337,523, of
which, $79,193 and $151,480 for the three and six months ended June 30, 2018, respectively, has been reflected as compensation
and related benefits on the accompanying unaudited condensed consolidated statements of operations because the options were fully
earned and non-cancellable.
As of June 30, 2019, the aggregate value of nonvested employee and director options was $3,507,
201,
which will be amortized as stock-based compensation expense as the options are vesting, over the remaining 0.58 years.
The
aggregate intrinsic values of the employee and director stock options outstanding and the employee and director stock options
exercisable at June 30, 2019 was $5,539,600 and $4,137,933, respectively.
A
summary of the status of the Company’s nonvested employee and director stock options granted as of June 30, 2019 and changes
during the six months ended June 30, 2019 is presented below:
|
|
Number of
Options
|
|
Weighted
Average
Exercise
Price
|
|
Grant Date Fair
Value
|
Nonvested at December 31, 2018
|
|
|
722,222
|
|
|
$
|
0.50
|
|
|
$
|
902,779
|
|
Granted
|
|
|
2,250,000
|
|
|
|
2.15
|
|
|
|
5,956,574
|
|
Vested
|
|
|
(1,448,333
|
)
|
|
|
(1.76
|
)
|
|
|
(3,352,152
|
)
|
Nonvested at June 30, 2019
|
|
|
1,523,889
|
|
|
$
|
1.75
|
|
|
$
|
3,507,201
|
|
Stock
Options Granted to Non-employee
Non-employee
stock option activities for the six months ended June 30, 2019 were as follows:
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
Outstanding at December 31, 2018
|
|
|
560,000
|
|
|
$
|
1.06
|
|
Granted
|
|
|
180,000
|
|
|
|
2.52
|
|
Exercised
|
|
|
(200,000
|
)
|
|
|
1.00
|
|
Outstanding at June 30, 2019
|
|
|
540,000
|
|
|
|
1.57
|
|
Options exercisable at June 30, 2019
|
|
|
420,000
|
|
|
$
|
1.30
|
|
Options expected to vest
|
|
|
-
|
|
|
$
|
-
|
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
15 –
EQUITY (continued)
Options
(continued)
Stock
Options Granted to Non-employee (continued)
The
fair values of these non-employee options vested in six months ended June 30, 2019 and 2018, and nonvested non-employee options
as of June 30, 2019 and 2018, respectively, were estimated using the Black-Scholes option-pricing model with the following assumptions:
|
|
Six Months Ended
June 30,
2019
|
|
Six Months Ended
June 30,
2018
|
Dividend rate
|
|
|
0
|
|
|
|
0
|
|
Terms (in years)
|
|
|
3.00 – 5.00
|
|
|
|
2.51 - 3.0
|
|
Volatility
|
|
|
150.35% – 151.70%
|
|
|
|
172.87% - 188.29%
|
|
Risk-free interest rate
|
|
|
2.28% - 2.51%
|
|
|
|
2.29% - 2.66%
|
|
Stock-based
compensation expense associated with stock options granted to non-employee is recognized as the stock options vest. The stock-based
compensation expense related to non-employee will fluctuate as the fair value of the Company’s common stock fluctuates.
Stock-based compensation expense associated with stock options granted to non-employee amounted to $444,732 and $383,042 for the
six months ended June 30, 2019 and 2018, respectively.
As of June 30, 2019, the aggregate value of vested and nonvested non-employee options was $905,696, which
will be amortized as stock-based compensation expense over the remaining 0.
33
years.
The
aggregate intrinsic values of the non-employee stock options outstanding and the non-employee stock options exercisable at June
30, 2019 was $557,900 and $548,800, respectively.
A
summary of the status of the Company’s nonvested non-employee stock options granted as of June 30, 2019 and changes during
the six months ended June 30, 2019 is presented below:
|
|
Number of
Options
|
|
Weighted
Average
Exercise
Price
|
|
Fair Value at
June 30,
2019
|
Nonvested at December 31, 2018
|
|
|
193,333
|
|
|
$
|
1.12
|
|
|
|
|
|
Granted
|
|
|
180,000
|
|
|
|
2.52
|
|
|
|
|
|
Vested
|
|
|
(193,333
|
)
|
|
|
(1.12
|
)
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Nonvested at June 30, 2019
|
|
|
180,000
|
|
|
$
|
2.52
|
|
|
$
|
-
|
|
In
the three months ended June 30, 2019, the overall value of common stock granted at unit price below $3.50 and stock options granted
at exercise price below $3.50 to non-employee is $490,098.
NOTE
16 –
STATUTORY RESERVE
Avalon
Shanghai
and Beijing GenExosome operate in the PRC, are required to reserve 10% of their net profit after income tax, as determined in
accordance with the PRC accounting rules and regulations. Appropriation to the statutory reserve by the Company is based on profit
arrived at under PRC accounting standards for business enterprises for each year.
The
profit
arrived at must be set off against any accumulated losses sustained by the Company in prior years, before allocation is made to
the statutory reserve. Appropriation to the statutory reserve must be made before distribution of dividends to shareholders. The
appropriation is required until the statutory reserve reaches 50% of the registered capital. This statutory reserve is not distributable
in the form of cash dividends. The Company did not make any appropriation to statutory reserve for Avalon Shanghai and Beijing
GenExosome during the six months ended June 30, 2019 as they incurred net losses in the period.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
17 –
NONCONTROLLING INTEREST
As
of
June 30, 2019, Dr. Yu Zhou, director and Co-Chief Executive Officer of GenExsome, who owned 40% of the equity interests of GenExosome,
which is not under the Company’s control. The following is a summary of noncontrolling interest activities in the six months
ended June 30, 2019
.
|
|
Amount
|
|
Noncontrolling interest at December 31, 2018
|
|
$
|
(862,200
|
)
|
Net loss attributable to noncontrolling
interest
|
|
|
(180,712
|
)
|
Foreign currency
translation adjustment attributable to noncontrolling interest
|
|
|
702
|
|
Noncontrolling interest at June 30,
2019
|
|
$
|
(1,042,210
|
)
|
NOTE
18 –
RESTRICTED NET ASSETS
A
portion of the Company’s operations are conducted through its PRC subsidiaries, which can only pay dividends out of their
retained earnings determined in accordance with the accounting standards and regulations in the PRC and after they have met the
PRC requirements for appropriation to statutory reserve. In addition, a portion of the Company’s businesses and assets are
denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either
through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted
by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory
institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed
contracts. These currency exchange control procedures imposed by the PRC government authorities may restrict the ability of the
Company’s PRC subsidiaries to transfer their net assets to the Parent Company through loans, advances or cash dividends.
Schedule
I of Article 5-04 of Regulation S-X requires the condensed financial information of the parent company to be filed when the restricted
net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed
fiscal year. For purposes of this test, restricted net assets of consolidated subsidiaries shall mean that amount of the registrant’s
proportionate share of net assets of its consolidated subsidiaries (after intercompany eliminations) which as of the end of the
most recent fiscal year may not be transferred to the parent company in the form of loans, advances or cash dividends without
the consent of a third party.
The
Company’s PRC subsidiaries’ net assets as of June 30, 2019 and December 31, 2018 did not exceed 25% of the Company’s
consolidated net assets. Accordingly, Parent Company’s condensed financial statements have not been required in accordance
with Rule 5-04 and Rule 12-04 of SEC Regulation S-X.
NOTE
19 –
COMMITMENTS AND CONTINCENGIES
Operating
Leases
Beijing
GenExosome Beijing Office Lease
In
March 2019, Beijing GenExosome signed an agreement to lease its office space under operating lease. Pursuant to the signed lease,
the annual rent is RMB 7,000 (approximately $1,000). The term of this lease is one year commencing on March 15, 2019 and expires
on March 14, 2020. For the three and six months ended June 30, 2019, rent expense related to the lease amounted to $255 and $510,
respectively.
Future
minimum rental payment required under this operating lease is as follows:
Year
Ending June 30:
|
|
Amount
|
|
2020
|
|
$
|
680
|
|
Total
|
|
$
|
680
|
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
19 –
COMMITMENTS AND CONTINCENGIES (continued)
Avalon
Shanghai Office Lease
On January 19, 2017, Avalon Shanghai entered
into a lease for office space in Beijing, China, with a third party (the “Beijing Office Lease”). Pursuant to the Beijing
Office Lease, the monthly rent is RMB 50,586 (approximately $7,367) with a required security deposit of RMB 164,764 (approximately
$23,994). In addition, Avalon Shanghai needs to pay monthly maintenance fees of RMB 4,336 (approximately $631). The term of the
Beijing Office Lease is 26 months commencing on January 1, 2017 and expired on February 28, 2019 with two months of free rent in
the months of December 2017 and February 2019. On December 27, 2018, Avalon Shanghai signed an extension for the lease with expiration
date of February 29, 2020. For the three months ended June 30, 2019 and 2018, rent expense and maintenance fees related to the
Beijing Office Lease amounted to approximately $20,000 and $23,000, respectively. For the six months ended June 30, 2019 and 2018,
rent expense and maintenance fees related to the Beijing Office Lease amounted to approximately $42,000- and $49,000, respectively.
Future
minimum rental payment required under the Beijing Office Lease is as follows:
Year
Ending June 30:
|
|
Amount
|
|
2020
|
|
$
|
63,985
|
|
Total
|
|
$
|
63,985
|
|
Insurance
Premium Financing Agreement
On July 18, 2018, the Company entered into
a financing agreement, providing for the issuance of a loan in the principal amount of $108,528. The term of the loan is for a
period of 10 months from the execution of the agreement. The annual interest rate for the loan is 6.9%. All of financed amount
is used to pay for Directors & Officers Insurance premium. At June 30, 2019 and December 31, 2018, the outstanding principal
balance of the loan and related unpaid interest was $0 and $45,088, respectively, which was included in the accrued liabilities
and other payables on the accompanying consolidated balance sheets.
Equity
Investment Commitment
On
May 29, 2018, Avalon Shanghai entered into a Joint Venture Agreement with Jiangsu Unicorn Biological Technology Co., Ltd. (“Unicorn”),
pursuant to which a company named Epicon Biotech Co., Ltd. (“Epicon”) was formed on August 14, 2018. Epicon is owned
60% by Unicorn and 40% by Avalon Shanghai. Within two years of execution of the Joint Venture Agreement, Unicorn shall invest
cash into Epicon in an amount not less than RMB 8,000,000 (approximately $1.2 million) and the premises of the laboratories of
Nanjing Hospital of Chinese Medicine for exclusive use by Epicon, and Avalon Shanghai shall invest cash into Epicon in an amount
not less than RMB 10,000,000 (approximately $1.5 million). Epicon is focused on cell preparation, third party testing, biological
sample repository for commercial and scientific research purposes and the clinical transformation of scientific achievements.
As of June 30, 2019, Avalon Shanghai has contributed RMB 3,000,000 (approximately $0.4 million) that was included in equity method
investment on the accompanying consolidated balance sheets. Avalon Shanghai intends to use its present working capital together
with loans/borrowings/equity raise to fund the project cost.
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
19 –
COMMITMENTS AND CONTINCENGIES (continued)
Joint
Venture – AVAR BioTherapeutics (China) Co. Ltd.
On
October 23, 2018, Avactis Biosciences, Inc. (“Avactis”), a wholly-owned subsidiary of the Company, and Arbele Limited
(“Arbele”) agreed to the establishment of AVAR BioTherapeutics (China) Co. Ltd. (“AVAR”), a Sino-foreign
equity joint venture, pursuant to an Equity Joint Venture Agreement (the “AVAR Agreement”), which will be owned 60%
by Avactis and 40% by Arbele. The purpose and business scope of the Joint Venture is to research, develop, produce, sell, distribute
and generally commercialize CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy in China. Avactis is required to contribute USD
$10 million (or equivalent in RMB) in cash and/or services, which shall be contributed in tranches based on milestones to be determined
jointly by AVAR and Avactis in writing subject to Avactis’ cash reserves. Within 30 days, Arbele shall make contribution
of USD $6.66 million in the form of entering into a License Agreement with AVAR granting AVAR with an exclusive right and license
in China to its technology and intellectual property pertaining to CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy technology
and any additional technology developed in the future with terms and conditions to be mutually agreed upon Avactis and AVAR and
services.
In
addition, Avactis is responsible for:
|
●
|
Contributing
registered capital of RMB 5,000,000 (approximately $730,000) for working capital purposes
as required by local regulation, which is not required to be contributed immediately
and will be contributed subject to Avactis’ discretion;
|
|
●
|
assist
AVAR in setting up its business operations and obtaining all required permits and licenses
from the Chinese government;
|
|
●
|
assisting
AVAR in recruiting, hiring and retaining personnel;
|
|
●
|
providing
AVAR with access to various hospital networks in China to assist in the testing and commercialization
of the CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy technology in China;
|
|
●
|
assisting
AVAR in managing the Good Manufacturing Practices (GMP) facility and clinic to be developed
by AVAR;
|
|
●
|
providing
AVAR with advice pertaining to conducting clinicals in China; and
|
|
●
|
Within
6 days of signing the AVAR Agreement, Avactis is required to pay to Arbele $300,000 as
a research and development fee with an additional two payments of $300,000 (for a total
of $900,000) to be paid upon mutually agreed upon milestones.
|
Under
AVAR Agreement, Arbele shall be responsible for the following:
|
●
|
Entering
into a License Agreement with AVAR; and
|
|
●
|
Providing
AVAR with research and development expertise pertaining to clinical laboratory medicine
when hired by AVAR.
|
As
of the date of this report, Avactis has paid $600,000 to Arbele as research and development fee, AVAR is in process of being established
and the License Agreement has not been finalized.
NOTE
20 –
SEGMENT INFORMATION
For
the three and six months ended June 30, 2019 and 2018, the Company operated in three reportable business segments - (1) the real
property operating segment, (2) the medical related consulting services segment, and (3) the performing development services for
hospitals and other customers and sales of developed products to hospitals and other customers segment. The Company’s reportable
segments are strategic business units that offer different services and products. They are managed separately based on the fundamental
differences in their operations. Information with respect to these reportable business segments for the three and six months ended
June 30, 2019 and 2018 was as follows
:
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
20 –
SEGMENT INFORMATION (continued)
|
|
Three Months
|
|
Three Months
|
|
Six Months
|
|
Six Months
|
|
|
Ended
|
|
Ended
|
|
Ended
|
|
Ended
|
|
|
June 30,
2019
|
|
June 30,
2018
|
|
June 30,
2019
|
|
June 30,
2018
|
Revenues
|
|
|
|
|
|
|
|
|
Real property operating
|
|
$
|
264,889
|
|
|
$
|
278,872
|
|
|
$
|
531,515
|
|
|
$
|
575,495
|
|
Medical related consulting services – related party
|
|
|
111,434
|
|
|
|
141,996
|
|
|
|
125,694
|
|
|
|
141,996
|
|
Development services and sales of developed products
|
|
|
23,404
|
|
|
|
75,225
|
|
|
|
26,682
|
|
|
|
86,515
|
|
|
|
|
399,727
|
|
|
|
496,093
|
|
|
|
683,891
|
|
|
|
804,006
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real property operating
|
|
|
40,780
|
|
|
|
32,625
|
|
|
|
81,561
|
|
|
|
65,249
|
|
Medical related consulting services
|
|
|
4,766
|
|
|
|
3,991
|
|
|
|
7,706
|
|
|
|
7,997
|
|
Development services and sales of developed products
|
|
|
100,443
|
|
|
|
87,980
|
|
|
|
195,853
|
|
|
|
174,729
|
|
|
|
|
145,989
|
|
|
|
124,596
|
|
|
|
285,120
|
|
|
|
247,975
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real property operating
|
|
|
8,819
|
|
|
|
24,932
|
|
|
|
32,877
|
|
|
|
261,918
|
|
Medical related consulting services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Development services and sales of developed products
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
8,819
|
|
|
|
24,932
|
|
|
|
32,877
|
|
|
|
261,918
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real property operating
|
|
|
(3,690
|
)
|
|
|
5,617
|
|
|
|
(102,379
|
)
|
|
|
(232,083
|
)
|
Medical related consulting services
|
|
|
(54,627
|
)
|
|
|
16,456
|
|
|
|
(244,697
|
)
|
|
|
(157,018
|
)
|
Development services and sales of developed products
|
|
|
(230,406
|
)
|
|
|
(196,896
|
)
|
|
|
(478,188
|
)
|
|
|
(297,028
|
)
|
Other (a)
|
|
|
(4,150,100
|
)
|
|
|
(1,168,992
|
)
|
|
|
(8,118,488
|
)
|
|
|
(2,208,655
|
)
|
|
|
$
|
(4,438,823
|
)
|
|
$
|
(1,343,815
|
)
|
|
$
|
(8,943,752
|
)
|
|
$
|
(2,894,784
|
)
|
Identifiable long-lived
tangible assets at June 30, 2019 and December 31, 2018
|
|
June
30,
2019
|
|
|
December
31, 2018
|
|
Real
property operating
|
|
$
|
7,810,549
|
|
|
$
|
7,898,224
|
|
Medical related
consulting services
|
|
|
3,417
|
|
|
|
6,852
|
|
Development
services and sales of developed products
|
|
|
371,489
|
|
|
|
224,364
|
|
|
|
$
|
8,185,455
|
|
|
$
|
8,129,440
|
|
Identifiable long-lived
tangible assets at June 30, 2019 and December 31, 2018
|
|
June
30,
2019
|
|
|
December 31,
2018
|
|
United
States
|
|
$
|
7,907,804
|
|
|
$
|
7,898,806
|
|
China
|
|
|
277,651
|
|
|
|
230,634
|
|
|
|
$
|
8,185,455
|
|
|
$
|
8,129,440
|
|
|
(a)
|
The
Company does not allocate any interest expense and general and administrative expense
of its being a public company activities to its reportable segments as these activities
are managed at a corporate level.
|
AVALON
GLOBOCARE CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
21 –
CONCENTRATIONS
Customers
The
following
table sets forth information as to each customer that accounted for 10% or more of the Company’s revenues for the three
and six months ended June 30, 2019 and 2018.
|
|
Three
Months Ended
June 30,
|
|
|
Six
Months Ended
June 30,
|
|
Customer
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
A (Beijing Daopei, a related
party)
|
|
|
14.0
|
%
|
|
|
29
|
%
|
|
|
8.2
|
%
|
|
|
18
|
%
|
B (Hebei Daopei, a related party)
|
|
|
13.9
|
%
|
|
|
16
|
%
|
|
|
8.1
|
%
|
|
|
20
|
%
|
C
|
|
|
20.2
|
%
|
|
|
11
|
%
|
|
|
23.8
|
%
|
|
|
13
|
%
|
D
|
|
|
13.5
|
%
|
|
|
*
|
|
|
|
15.9
|
%
|
|
|
11
|
%
|
Three
customers, whose outstanding receivable accounted for 10% or more of the Company’s total outstanding accounts receivable
and accounts receivable – related party and tenants receivable at June 30, 2019, accounted for 83.5%
of
the Company’s total outstanding accounts receivable and accounts receivable – related party and tenants receivable
at June 30, 2019.
Two
customers, whose outstanding receivable accounted for 10% or more of the Company’s total outstanding accounts receivable
and accounts receivable – related party and tenants receivable at December 31, 2018, accounted for 56.0% of the Company’s
total outstanding accounts receivable and accounts receivable – related party and tenants receivable at December 31, 2018.
Suppliers
Four suppliers accounted for 10% or more of
the Company’s purchase during the three and six months ended June 30, 2019. Three suppliers accounted for 10% or more of
the Company’s purchase during the three and six months ended June 30, 2018.
Four suppliers, whose outstanding payable accounted
for 10% or more of the Company’s total outstanding accounts payable at June 30, 2019, accounted for 87.5% of the Company’s
total outstanding accounts payable at June 30, 2019.
Three supplier, whose outstanding payable accounted
for 10% or more of the Company’s total outstanding accounts payable at December 31, 2018, accounted for 95.5% of the Company’s
total outstanding accounts payable at December 31, 2018.
Concentrations
of Credit Risk
At
June 30, 2019 and December 31, 2018, cash balances in the PRC are $640,253 and $1,216,485, respectively, are uninsured. The Company
has not experienced any losses in PRC bank accounts and believes it is not exposed to any risks on its cash in PRC bank accounts.
The
Company maintains its cash in United States bank and financial institution deposits that at times may exceed federally insured
limits. At June 30, 2019 and December 31, 2018, the Company’s cash balances in United States bank accounts had approximately
$2,761,051 and $239,000 in excess of the federally-insured limits, respectively. The Company has not experienced any losses in
its United States bank accounts through and as of the date of this report.
NOTE
22 –
SUBSEQUENT EVENTS
Management
has evaluated subsequent events through the date of the filing.