AVALON GLOBOCARE CORP. AND SUBSIDIARIES
See accompanying notes to the condensed consolidated
financial statements.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(Unaudited)
| |
For the Three Months
Ended June 30, | | |
For the Six Months
Ended June 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
| | |
| | |
| | |
| |
REVENUES | |
| | | |
| | | |
| | | |
| | |
Real property rental | |
$ | 290,821 | | |
$ | 280,232 | | |
$ | 588,452 | | |
$ | 570,006 | |
Total Revenues | |
| 290,821 | | |
| 280,232 | | |
| 588,452 | | |
| 570,006 | |
| |
| | | |
| | | |
| | | |
| | |
COSTS AND EXPENSES | |
| | | |
| | | |
| | | |
| | |
Real property operating expenses | |
| 211,703 | | |
| 205,147 | | |
| 430,151 | | |
| 422,041 | |
Total Costs and Expenses | |
| 211,703 | | |
| 205,147 | | |
| 430,151 | | |
| 422,041 | |
| |
| | | |
| | | |
| | | |
| | |
GROSS PROFIT | |
| | | |
| | | |
| | | |
| | |
Real property operating income | |
| 79,118 | | |
| 75,085 | | |
| 158,301 | | |
| 147,965 | |
Total Gross Profit | |
| 79,118 | | |
| 75,085 | | |
| 158,301 | | |
| 147,965 | |
| |
| | | |
| | | |
| | | |
| | |
OTHER OPERATING EXPENSES: | |
| | | |
| | | |
| | | |
| | |
Advertising and marketing | |
| 130,395 | | |
| 7,500 | | |
| 657,201 | | |
| 16,323 | |
Professional fees | |
| 436,447 | | |
| 1,357,079 | | |
| 1,257,755 | | |
| 2,738,257 | |
Compensation and related benefits | |
| 503,541 | | |
| 547,829 | | |
| 1,026,586 | | |
| 1,109,835 | |
Research and development expenses | |
| 254,476 | | |
| 238,793 | | |
| 371,160 | | |
| 451,981 | |
Litigation settlement | |
| 1,350,000 | | |
| - | | |
| 1,350,000 | | |
| - | |
Other general and administrative | |
| 247,830 | | |
| 226,164 | | |
| 466,112 | | |
| 437,437 | |
| |
| | | |
| | | |
| | | |
| | |
Total Other Operating Expenses | |
| 2,922,689 | | |
| 2,377,365 | | |
| 5,128,814 | | |
| 4,753,833 | |
| |
| | | |
| | | |
| | | |
| | |
LOSS FROM OPERATIONS | |
| (2,843,571 | ) | |
| (2,302,280 | ) | |
| (4,970,513 | ) | |
| (4,605,868 | ) |
| |
| | | |
| | | |
| | | |
| | |
OTHER (EXPENSE) INCOME | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| (61,889 | ) | |
| - | | |
| (61,889 | ) | |
| - | |
Interest expense - related party | |
| (31,854 | ) | |
| (46,131 | ) | |
| (71,540 | ) | |
| (91,280 | ) |
Loss from equity method investment | |
| (11,882 | ) | |
| (15,418 | ) | |
| (24,798 | ) | |
| (33,932 | ) |
Change in fair value of derivative liability | |
| 769,269 | | |
| - | | |
| 769,269 | | |
| - | |
Other income (expense) | |
| 151,453 | | |
| (1,081 | ) | |
| 260,459 | | |
| (948 | ) |
| |
| | | |
| | | |
| | | |
| | |
Total Other Income (Expense), net | |
| 815,097 | | |
| (62,630 | ) | |
| 871,501 | | |
| (126,160 | ) |
| |
| | | |
| | | |
| | | |
| | |
LOSS BEFORE INCOME TAXES | |
| (2,028,474 | ) | |
| (2,364,910 | ) | |
| (4,099,012 | ) | |
| (4,732,028 | ) |
| |
| | | |
| | | |
| | | |
| | |
INCOME TAXES | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
NET LOSS | |
$ | (2,028,474 | ) | |
$ | (2,364,910 | ) | |
$ | (4,099,012 | ) | |
$ | (4,732,028 | ) |
| |
| | | |
| | | |
| | | |
| | |
LESS: NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
NET LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS | |
$ | (2,028,474 | ) | |
$ | (2,364,910 | ) | |
$ | (4,099,012 | ) | |
$ | (4,732,028 | ) |
| |
| | | |
| | | |
| | | |
| | |
COMPREHENSIVE LOSS: | |
| | | |
| | | |
| | | |
| | |
NET LOSS | |
$ | (2,028,474 | ) | |
$ | (2,364,910 | ) | |
$ | (4,099,012 | ) | |
$ | (4,732,028 | ) |
OTHER COMPREHENSIVE (LOSS) INCOME | |
| | | |
| | | |
| | | |
| | |
Unrealized foreign currency translation (loss) gain | |
| (43,503 | ) | |
| 14,786 | | |
| (41,482 | ) | |
| 12,064 | |
COMPREHENSIVE LOSS | |
| (2,071,977 | ) | |
| (2,350,124 | ) | |
| (4,140,494 | ) | |
| (4,719,964 | ) |
LESS: COMPREHENSIVE LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST | |
| - | | |
| - | | |
| - | | |
| - | |
COMPREHENSIVE LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS | |
$ | (2,071,977 | ) | |
$ | (2,350,124 | ) | |
$ | (4,140,494 | ) | |
$ | (4,719,964 | ) |
| |
| | | |
| | | |
| | | |
| | |
NET LOSS PER COMMON SHARE ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted | |
$ | (0.02 | ) | |
$ | (0.03 | ) | |
$ | (0.05 | ) | |
$ | (0.06 | ) |
| |
| | | |
| | | |
| | | |
| | |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted | |
| 88,932,809 | | |
| 84,623,723 | | |
| 88,718,812 | | |
| 84,021,787 | |
See accompanying notes to the condensed consolidated
financial statements.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
EQUITY
For the Three and Six Months Ended June 30, 2022
(Unaudited)
| |
Avalon
GloboCare Corp. Stockholders’ Equity | | |
| | |
| |
| |
Preferred
Stock | | |
Common
Stock | | |
| | |
Treasury
Stock | | |
| | |
| | |
Accumulated | | |
| | |
| |
| |
Number | | |
| | |
Number | | |
| | |
Additional | | |
Number | | |
| | |
| | |
| | |
Other | | |
Non- | | |
| |
| |
of | | |
| | |
of | | |
| | |
Paid-in | | |
of | | |
| | |
Accumulated | | |
Statutory | | |
Comprehensive | | |
controlling | | |
Total | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Shares | | |
Amount | | |
Deficit | | |
Reserve | | |
Loss | | |
Interest | | |
Equity | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance,
January 1, 2022 | |
| - | | |
$ | - | | |
| 88,975,169 | | |
$ | 8,898 | | |
$ | 54,888,559 | | |
| (520,000 | ) | |
$ | (522,500 | ) | |
$ | (51,131,874 | ) | |
$ | 6,578 | | |
$ | (165,266 | ) | |
$ | - | | |
$ | 3,084,395 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sale
of common stock, net | |
| - | | |
| - | | |
| 170,640 | | |
| 17 | | |
| 112,311 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 112,328 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock-based
compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| 152,323 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 152,323 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Foreign
currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,021 | | |
| - | | |
| 2,021 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
loss for the three months ended March 31, 2022 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,070,538 | ) | |
| - | | |
| - | | |
| - | | |
| (2,070,538 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance,
March 31, 2022 | |
| - | | |
| - | | |
| 89,145,809 | | |
| 8,915 | | |
| 55,153,193 | | |
| (520,000 | ) | |
| (522,500 | ) | |
| (53,202,412 | ) | |
| 6,578 | | |
| (163,245 | ) | |
| - | | |
| 1,280,529 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Warrants
issued with convertible debt offering | |
| - | | |
| - | | |
| - | | |
| - | | |
| 498,509 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 498,509 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance
of common stock for services | |
| - | | |
| - | | |
| 408,957 | | |
| 40 | | |
| 340,910 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 340,950 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock-based
compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| 126,301 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 126,301 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Foreign
currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (43,503 | ) | |
| - | | |
| (43,503 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
loss for the three months ended June 30, 2022 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,028,474 | ) | |
| - | | |
| - | | |
| - | | |
| (2,028,474 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance,
June 30, 2022 | |
| - | | |
$ | - | | |
| 89,554,766 | | |
$ | 8,955 | | |
$ | 56,118,913 | | |
| (520,000 | ) | |
$ | (522,500 | ) | |
$ | (55,230,886 | ) | |
$ | 6,578 | | |
$ | (206,748 | ) | |
$ | - | | |
$ | 174,312 | |
See accompanying notes to the condensed consolidated
financial statements.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
EQUITY
For the Three and Six Months Ended June 30, 2021
(Unaudited)
| |
Avalon
GloboCare Corp. Stockholders’ Equity | | |
| | |
| |
| |
Preferred
Stock | | |
Common
Stock | | |
| | |
Treasury
Stock | | |
| | |
| | |
Accumulated | | |
| | |
| |
| |
Number | | |
| | |
Number | | |
| | |
Additional | | |
Number | | |
| | |
| | |
| | |
Other | | |
Non- | | |
| |
| |
of | | |
| | |
of | | |
| | |
Paid-in | | |
of | | |
| | |
Accumulated | | |
Statutory | | |
Comprehensive | | |
controlling | | |
Total | |
| |
| Shares | | |
| Amount | | |
| Shares | | |
| Amount | | |
| Capital | | |
| Shares | | |
| Amount | | |
| Deficit | | |
| Reserve | | |
| Loss | | |
| Interest | | |
| Equity | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, January 1, 2021 | |
| - | | |
$ | - | | |
| 82,795,297 | | |
$ | 8,279 | | |
$ | 46,856,447 | | |
| (520,000 | ) | |
$ | (522,500 | ) | |
$ | (42,041,375 | ) | |
$ | 6,578 | | |
$ | (190,510 | ) | |
$ | - | | |
$ | 4,116,919 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sale of common stock, net | |
| - | | |
| - | | |
| 1,848,267 | | |
| 185 | | |
| 2,337,074 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,337,259 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of common stock for
services | |
| - | | |
| - | | |
| 300,000 | | |
| 30 | | |
| 359,970 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 360,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock-based compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| 202,505 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 202,505 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Foreign currency translation
adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,722 | ) | |
| - | | |
| (2,722 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss for the three
months ended March 31, 2021 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,367,118 | ) | |
| - | | |
| - | | |
| - | | |
| (2,367,118 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, March 31, 2021 | |
| - | | |
| - | | |
| 84,943,564 | | |
| 8,494 | | |
| 49,755,996 | | |
| (520,000 | ) | |
| (522,500 | ) | |
| (44,408,493 | ) | |
| 6,578 | | |
| (193,232 | ) | |
| - | | |
| 4,646,843 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of common stock for
settlement of accrued professional fees | |
| - | | |
| - | | |
| 167,355 | | |
| 17 | | |
| 202,483 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 202,500 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of common stock for
services | |
| - | | |
| - | | |
| 490,000 | | |
| 49 | | |
| 534,251 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 534,300 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock-based compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| 195,209 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 195,209 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Foreign currency translation
adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 14,786 | | |
| - | | |
| 14,786 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss for the three
months ended June 30, 2021 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,364,910 | ) | |
| - | | |
| - | | |
| - | | |
| (2,364,910 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, June 30, 2021 | |
| - | | |
$ | - | | |
| 85,600,919 | | |
$ | 8,560 | | |
$ | 50,687,939 | | |
| (520,000 | ) | |
$ | (522,500 | ) | |
$ | (46,773,403 | ) | |
$ | 6,578 | | |
$ | (178,446 | ) | |
$ | - | | |
$ | 3,228,728 | |
See accompanying notes to the condensed consolidated
financial statements.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| |
For the Six Months
Ended June 30, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
Net loss | |
$ | (4,099,012 | ) | |
$ | (4,732,028 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation | |
| 168,564 | | |
| 141,285 | |
Change in straight-line rent receivable | |
| 8,857 | | |
| 4,934 | |
Amortization of right-of-use asset | |
| 68,206 | | |
| 60,254 | |
Stock-based compensation and service expense | |
| 821,247 | | |
| 1,086,546 | |
Loss on equity method investment | |
| 24,798 | | |
| 33,932 | |
Amortization of debt discount | |
| 54,685 | | |
| - | |
Change in fair market value of derivative liability | |
| (769,269 | ) | |
| - | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Rent receivable | |
| 15,230 | | |
| 12,093 | |
Rent receivable - related party | |
| (24,900 | ) | |
| - | |
Security deposit | |
| (432 | ) | |
| 6,015 | |
Deferred leasing costs | |
| 10,596 | | |
| 5,492 | |
Prepaid expenses and other assets | |
| (20,731 | ) | |
| 42,555 | |
Accounts payable | |
| 389,106 | | |
| - | |
Accrued liabilities and other payables | |
| 674,998 | | |
| 714,348 | |
Accrued liabilities and other payables - related parties | |
| 71,541 | | |
| 91,280 | |
Operating lease obligation | |
| (80,206 | ) | |
| (60,254 | ) |
| |
| | | |
| | |
NET CASH USED IN OPERATING ACTIVITIES | |
| (2,686,722 | ) | |
| (2,593,548 | ) |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
Purchase of property and equipment | |
| (1,749 | ) | |
| - | |
Improvement of commercial real estate | |
| - | | |
| (10,332 | ) |
Additional investment in equity method investment | |
| (54,008 | ) | |
| (40,179 | ) |
| |
| | | |
| | |
CASH USED IN INVESTING ACTIVITIES | |
| (55,757 | ) | |
| (50,511 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | |
Repayments of note payable - related party | |
| (390,000 | ) | |
| - | |
Proceeds from loan payable - related party | |
| 100,000 | | |
| 193,188 | |
Repayments of loan payable - related party | |
| (410,000 | ) | |
| | |
Proceeds from issuance of convertible debt and warrants | |
| 3,718,943 | | |
| - | |
Proceeds from equity offering | |
| 135,567 | | |
| 2,481,405 | |
Disbursements for equity offering costs | |
| (24,067 | ) | |
| (74,442 | ) |
| |
| | | |
| | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | |
| 3,130,443 | | |
| 2,600,151 | |
| |
| | | |
| | |
EFFECT OF EXCHANGE RATE ON CASH | |
| (15,294 | ) | |
| 2,635 | |
| |
| | | |
| | |
NET INCREASE (DECREASE) IN CASH | |
| 372,670 | | |
| (41,273 | ) |
| |
| | | |
| | |
CASH - beginning of period | |
| 807,538 | | |
| 726,577 | |
| |
| | | |
| | |
CASH - end of period | |
$ | 1,180,208 | | |
$ | 685,304 | |
| |
| | | |
| | |
NON-CASH INVESTING AND FINANCING ACTIVITIES: | |
| | | |
| | |
Common stock issued for future services | |
$ | 56,027 | | |
$ | 234,750 | |
Common stock issued for accrued liabilities | |
$ | 30,000 | | |
$ | 261,032 | |
Deferred financing costs in accrued liabilities | |
$ | - | | |
$ | 16,093 | |
Accrued professional fees relieved for shares issued | |
$ | - | | |
$ | 202,500 | |
Warrants issued with convertible note payable | |
$ | 498,509 | | |
$ | - | |
Derivative liability | |
$ | 2,782,569 | | |
$ | - | |
See accompanying notes to the condensed consolidated financial statements.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – ORGANIZATION
AND NATURE OF OPERATIONS
Avalon GloboCare Corp. (the “Company”
or “AVCO”) is a Delaware corporation. The Company was incorporated under the laws of the State of Delaware on July 28, 2014.
On October 19, 2016, the Company entered into and closed a Share Exchange Agreement with the shareholders of Avalon Healthcare System,
Inc., a Delaware corporation (“AHS”), each of which were accredited investors (“AHS Shareholders”) pursuant to
which we acquired 100% of the outstanding securities of AHS in exchange for 50,000,000 shares of the Company’s common
stock (the “AHS Acquisition”). AHS was incorporated on May 18, 2015 under the laws of the State of Delaware.
For accounting purposes, AHS was the surviving
entity. The transaction was accounted for as a recapitalization of AHS pursuant to which AHS was treated as the accounting acquirer,
surviving and continuing entity although the Company is the legal acquirer. The Company did not recognize goodwill or any intangible
assets in connection with this transaction. Accordingly, the Company’s historical financial statements are those of AHS and its
wholly-owned subsidiary, Avalon (Shanghai) Healthcare Technology Co., Ltd. (“Avalon Shanghai”) immediately following the
consummation of this reverse merger transaction. AHS owns 100% of the capital stock of Avalon Shanghai, which is a wholly foreign-owned
enterprise organized under the laws of the People’s Republic of China (“PRC”). Avalon Shanghai was incorporated on
April 29, 2016 and is engaged in medical related consulting services for customers.
The Company
is a clinical-stage, vertically integrated, leading CellTech bio-developer dedicated to advancing and empowering innovative, transformative
immune effector cell therapy, exosome technology, as well as companion diagnostics. The Company also provides strategic advisory and
outsourcing services to facilitate and enhance its clients’ growth and development, as well as competitiveness in healthcare and
CellTech industry markets. Through its subsidiary structure with unique integration of vertical segments from innovative R&D to automated
bioproduction and accelerated clinical development, the Company is establishing a leading role in the fields of cellular immunotherapy
(including CAR-T/NK), exosome technology (ACTEX™), and regenerative therapeutics.
On January 23, 2017, the Company incorporated
Avalon (BVI) Ltd., a British Virgin Island company. There was no activity for the subsidiary since its incorporation through June 30,
2022. Avalon (BVI) Ltd. is dormant and is in process of being dissolved.
On February 7, 2017, the Company formed Avalon
RT 9 Properties, LLC (“Avalon RT 9”), a New Jersey limited liability company. On May 5, 2017, Avalon RT 9 purchased a real
property located in Township of Freehold, County of Monmouth, State of New Jersey, having a street address of 4400 Route 9 South, Freehold,
NJ 07728. This property was purchased to serve as the Company’s world-wide headquarters for all corporate administration and operations.
In addition, the property generates rental income. Avalon RT 9 owns this office building. Avalon RT 9’s business consists of the
ownership and operation of the income-producing real estate property in New Jersey. As of June 30, 2022, the occupancy rate of the building
is 87.0%.
On July 31, 2017, the Company formed Genexosome
Technologies Inc. (“Genexosome”) in Nevada. Genexosome was engaged in developing proprietary diagnostic and therapeutic products
using exosomes. Genexosome owns 100% of the capital stock of Beijing Jieteng (Genexosome) Biotech Co., Ltd., a corporation incorporated
in the People’s Republic of China on August 7, 2015 (“Beijing Genexosome”) which was dissolved in June 2022, and the
Company holds 60% of Genexosome and Dr. Yu Zhou holds 40% of Genexosome. The Company had not been able to realize the financial
projections provided by Dr. Zhou at the time of the acquisition and has decided to impair the intangible asset associated with this acquisition
to zero. Dr. Zhou was terminated as Co-CEO of Genexosome on August 14, 2019. Since the fourth quarter of 2019, the non-controlling interest
has remained inactive.
On July 18, 2018, the Company formed a wholly
owned subsidiary, Avactis Biosciences Inc. (“Avactis”), 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. Commencing on April 6, 2022, the Company owns 60% of Avactis
and Arbele Biotherapeutics Limited (“Arbele Biotherapeutics”) owns 40% of Avactis.
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, 2022.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – ORGANIZATION
AND NATURE OF OPERATIONS (continued)
Details of the Company’s subsidiaries which
are included in these condensed consolidated financial statements as of June 30, 2022 are as follows:
Name of
Subsidiary |
|
Place and
date of Incorporation |
|
Percentage
of Ownership |
|
Principal
Activities |
Avalon Healthcare System, Inc.
(“AHS”) |
|
Delaware May 18, 2015 |
|
100% held by AVCO |
|
Provides medical related consulting services and developing Avalon Cell and Avalon Rehab in United States of America (“USA”) |
|
|
|
|
|
|
|
Avalon (BVI) Ltd.
(“Avalon BVI”) |
|
British Virgin Island January 23, 2017 |
|
100% held by AVCO |
|
Dormant, is in process of being dissolved |
|
|
|
|
|
|
|
Avalon RT 9 Properties LLC
(“Avalon RT 9”) |
|
New Jersey February 7, 2017 |
|
100% held by AVCO |
|
Owns and operates an income-producing real property and holds and manages the corporate headquarters |
|
|
|
|
|
|
|
Avalon (Shanghai) Healthcare Technology Co.,
Ltd.
(“Avalon Shanghai”) |
|
PRC April 29, 2016 |
|
100% held by AHS |
|
Provides medical related consulting services |
|
|
|
|
|
|
|
Genexosome Technologies Inc.
(“Genexosome”) |
|
Nevada July 31, 2017 |
|
60% held by AVCO |
|
Dormant |
|
|
|
|
|
|
|
Avactis Biosciences Inc.
(“Avactis”) |
|
Nevada July 18, 2018 |
|
60% held by AVCO |
|
Integrate and optimize global scientific and clinical resources to further advance cellular therapies, including regenerative medicine with stem/progenitor cells as well as cellular immunotherapy including CAR-T, CAR-NK, TCR-T and others to treat certain cancers |
International Exosome Association LLC
(“Exosome”) |
|
Delaware June 13, 2019 |
|
100% held by AVCO |
|
Promotes standardization related to exosome industry |
NOTE 2 – BASIS OF PRESENTATION
AND GOING CONCERN CONDITION
Basis of Presentation
These interim condensed consolidated financial
statements of the Company and its subsidiaries are unaudited. In the opinion of management, all adjustments (consisting of normal recurring
accruals) and disclosures necessary for a fair presentation of these interim condensed consolidated financial statements have been included.
The results reported in the condensed consolidated financial statements for any interim periods are not necessarily indicative of the
results that may be reported for the entire year. The accompanying condensed consolidated financial statements have been prepared in
accordance with the rules and regulations of the Securities and Exchange Commission and do not include all information and footnotes
necessary for a complete presentation of financial statements in conformity with accounting principles generally accepted in the United
States (“U.S. GAAP”). The Company’s condensed consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Certain information and footnote disclosures
normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.
These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial
statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed
with the Securities and Exchange Commission on March 30, 2022.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 – BASIS OF PRESENTATION
AND GOING CONCERN CONDITION (continued)
Going Concern
The Company
is a clinical-stage, vertically integrated, leading CellTech bio-developer dedicated to advancing and empowering innovative, transformative
immune effector cell therapy, exosome technology, as well as companion diagnostics. The Company also provides strategic advisory and outsourcing
services to facilitate and enhance its clients’ growth and development, as well as competitiveness in healthcare and CellTech industry
markets. Through its subsidiary structure with unique integration of vertical segments from innovative R&D to automated bioproduction
and accelerated clinical development, the Company is establishing a leading role in the fields of cellular immunotherapy (including CAR-T/NK),
exosome technology (ACTEX™), and regenerative therapeutics.
In addition, the Company owns commercial real
estate that houses its headquarters in Freehold, New Jersey and provides outsourced, customized international healthcare services
to the rapidly changing health care industry primarily focused in the People’s Republic of China. These condensed consolidated
financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things,
the realization of assets and the satisfaction of liabilities in the normal course of business.
As reflected in the accompanying condensed consolidated
financial statements, the Company had a working capital deficit of $5,557,470 as of June 30, 2022 and has incurred recurring net
losses and generated negative cash flow from operating activities of $4,099,012 and $2,686,722 for the six months ended June
30, 2022, respectively. The Company has a limited operating history and its continued growth is dependent upon the continuation of providing
medical related consulting services to its only few clients who are related parties and generating rental revenue from its income-producing
real estate property in New Jersey; hence generating revenues, and obtaining additional financing to fund future obligations and pay
liabilities arising from normal business operations. In addition, the current cash balance cannot be projected to cover the operating
expenses for the next twelve months from the release date of this report. These matters raise substantial doubt about the Company’s
ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s
ability to raise additional capital, implement its business plan, and generate significant revenues. There are no assurances that the
Company will be successful in its efforts to generate significant revenues, maintain sufficient cash balance or report profitable operations
or to continue as a going concern. The Company plans on raising capital through the sale of equity to implement its business plan. However,
there is no assurance these plans will be realized and that any additional financings will be available to the Company on satisfactory
terms and conditions, if any.
The occurrence of an uncontrollable event such
as the COVID-19 pandemic had negatively impact on the Company’s operations. Our general development operations have continued during
the COVID-19 pandemic and we have not had significant disruption. However, we are uncertain if the COVID-19 pandemic will impact future
operations at our laboratory, or our ability to collaborate with other laboratories and universities. In addition, we are unsure if the
COVID-19 pandemic will impact future clinical trials. Given the dynamic nature of these circumstances, the duration of business disruption
and reduced traffic, the related financial effect cannot be reasonably estimated at this time but is expected to adversely impact the
Company’s business for the rest of 2022.
The accompanying condensed consolidated financial
statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and
classification of liabilities that may result should the Company be unable to continue as a going concern.
NOTE 3 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of the condensed consolidated
financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates
during the three and six months ended June 30, 2022 and 2021 include the useful life of property and equipment and investment in real
estate, assumptions used in assessing impairment of long-term assets, valuation of deferred tax assets and the associated valuation allowances,
valuation of stock-based compensation, and assumptions used to determine fair value of warrants and embedded conversion features of convertible
note payable.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
Fair Value of Financial Instruments and
Fair Value Measurements
The Company adopted
the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition
of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring
fair value as follows:
| ● | Level 1-Inputs are unadjusted quoted prices in active markets
for identical assets or liabilities available at the measurement date. |
| ● | Level 2-Inputs are unadjusted quoted prices for similar assets
and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs
other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. |
| ● | Level 3-Inputs are unobservable inputs which reflect the reporting
entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best
available information. |
The fair value of the
Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,”
approximates the carrying amounts represented in the accompanying condensed consolidated financial statements, primarily due to their
short-term nature.
Assets and liabilities
measured at fair value on a recurring basis. Certain assets and liabilities are measured at fair value on a recurring
basis. These assets and liabilities are measured at fair value on an ongoing basis. These assets and liabilities include derivative liability.
Derivative liability. Derivative
liability is carried at fair value and measured on an ongoing basis. The table below reflects the activity of derivative liability measured
at fair value for the six months ended June 30, 2022:
| |
Significant Unobservable Inputs
(Level 3) | |
Balance of derivative liability as of January 1, 2022 | |
$ | - | |
Initial fair value of derivative liability attributable to embedded conversion feature of convertible note payable | |
| 2,782,569 | |
Gain from change in the fair value of derivative liability | |
| (769,269 | ) |
Balance of derivative liability as of June 30, 2022 | |
$ | 2,013,300 | |
ASC 825-10 “Financial
Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value
option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs.
If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings
at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.
Cash and Cash Equivalents
At June 30, 2022 and
December 31, 2021, the Company’s cash balances by geographic area were as follows:
Country: | |
June 30, 2022 | | |
December 31, 2021 | |
United States | |
$ | 716,240 | | |
| 60.7 | % | |
$ | 767,605 | | |
| 95.1 | % |
China | |
| 463,968 | | |
| 39.3 | % | |
| 39,933 | | |
| 4.9 | % |
Total cash | |
$ | 1,180,208 | | |
| 100.0 | % | |
$ | 807,538 | | |
| 100.0 | % |
For purposes of the condensed consolidated statements
of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less when purchased and money market
accounts to be cash equivalents. The Company had no cash equivalents at June 30, 2022 and December 31, 2021.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
Credit Risk and Uncertainties
A portion of the Company’s cash is maintained
with state-owned banks within the PRC. Balances at state-owned banks within the PRC are covered by insurance up to RMB 500,000 (approximately
$75,000) per bank. Any balance over RMB 500,000 per bank in PRC will not be covered. At June 30, 2022, cash balances held in the PRC
are RMB 3,108,354 (approximately $464,000), of which, RMB 2,582,643 (approximately $385,000) was not covered by such limited insurance.
The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts.
The Company maintains a portion of its cash in
bank and financial institution deposits within U.S. that at times may exceed federally-insured limits of $250,000. The Company manages
this credit risk by concentrating its cash balances in high quality financial institutions and by periodically evaluating the credit
quality of the primary financial institutions holding such deposits. The Company has not experienced any losses in such bank accounts
and believes it is not exposed to any risks on its cash in bank accounts. At June 30, 2022, the Company’s cash balances in United
States bank accounts had approximately $137,000 in excess of the federally-insured limits.
Currently, a portion of the Company’s operations
are carried out in PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by
the political, economic and legal environment in the PRC, and by the general state of the PRC’s economy. The Company’s operations
in PRC are subject to specific considerations and significant risks not typically associated with companies in North America. The Company’s
results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures,
currency conversion and remittance abroad, and rates and methods of taxation, among other things.
Financial instruments which potentially subject
the Company to concentrations of credit risk consist principally of trade accounts receivable. A portion of the Company’s sales
are credit sales which is to the customer whose ability to pay is dependent upon the industry economics prevailing in these areas; however,
concentrations of credit risk with respect to trade accounts receivable is limited due to short-term payment terms. The Company also
performs ongoing credit evaluations of its customers to help further reduce credit risk.
Investment in Unconsolidated
Company – Epicon Biosciences Co., Ltd.
The Company uses the equity method of accounting
for its investment in, and earning or loss of, company that it does not control but over which it does exert significant influence. The
Company considers whether the fair value of its equity method investment has declined below its carrying value whenever adverse events
or changes in circumstances indicate that recorded value may not be recoverable. If the Company considers any decline to be other than
temporary (based on various factors, including historical financial results and the overall health of the investee), then a write-down
would be recorded to estimated fair value. See Note 5 for discussion of equity method investment.
Revenue Recognition
The Company recognizes
revenue under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”).
The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or
services. The following five steps are applied to achieve that core principle:
| ● | Step 1: Identify the contract with the customer |
|
● |
Step 2: Identify the performance obligations in the contract |
|
● |
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 |
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
Revenue Recognition (continued)
In order to identify
the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify
each promised goods or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct”
goods or service (or bundle of goods or services) if both of the following criteria are met:
| ● | The customer can benefit from the goods or service either on
its own or together with other resources that are readily available to the customer (i.e., the goods or service is capable of being distinct). |
| ● | The entity’s promise to transfer the goods or service
to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the goods or service is
distinct within the context of the contract). |
If a goods or service is not distinct, the goods
or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.
The transaction price is the amount of consideration
to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected
on behalf of third parties (for example, some sales taxes). The consideration promised in a contract with a customer may include fixed
amounts, variable amounts, or both. Variable consideration is included in the transaction price only to the extent that it is probable
that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable
consideration is subsequently resolved.
The transaction price is allocated to each performance
obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation is recognized
when that performance obligation is satisfied, at a point in time or over time as appropriate.
The Company’s revenues are derived from
providing medial related consulting services for its’ related parties. Revenues related to its service offerings are recognized
at a point in time when service is rendered. Any payments received in advance of the performance of services are recorded as deferred
revenue until such time as the services are performed.
The Company has determined that the ASC 606 does
not apply to rental contracts, which are within the scope of other revenue recognition accounting standards.
Rental income from operating leases is recognized
on a straight-line basis under the guidance of ASC 842. Lease payments under tenant leases are recognized on a straight-line basis over
the term of the related leases. The cumulative difference between lease revenue recognized under the straight-line method and contractual
lease payments are included in rent receivable on the consolidated balance sheets.
The Company does not offer promotional payments,
customer coupons, rebates or other cash redemption offers to its customers.
Per Share Data
ASC Topic 260 “Earnings per Share,”
requires presentation of both basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator and denominator
of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS
reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.
Basic net loss per share is computed by dividing
net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted
net loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents
and potentially dilutive securities outstanding during each period. For the three and six months ended June 30, 2022 and 2021, potentially
dilutive common shares consist of the common shares issuable upon the conversion of convertible note (using the if-converted method)
and 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.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
Per Share Data (continued)
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, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Stock options | |
| 8,385,000 | | |
| 7,700,000 | | |
| 8,385,000 | | |
| 7,700,000 | |
Warrants | |
| 1,239,647 | | |
| - | | |
| 1,239,647 | | |
| - | |
Convertible note (*) | |
| 4,958,590 | | |
| - | | |
| 4,958,590 | | |
| - | |
Potentially dilutive securities | |
| 14,583,237 | | |
| 7,700,000 | | |
| 14,583,237 | | |
| 7,700,000 | |
(*) Assumed the convertible note was converted
into shares of common stock of the Company at a conversion price of $0.75 per share.
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. During
the three and six months ended June 30, 2022 and 2021, the Company operates through two business segments: real property operating segment
and medical related consulting services segment. These reportable segments offer different types of services and products, have
different types of revenue, and are managed separately as each requires different operating strategies and management expertise.
Reclassification
Certain prior period amounts have been reclassified
to conform to the current period presentation. These reclassifications have no effect on the previously reported financial position,
results of operations and cash flows.
Recent Accounting Standards
In August 2020, the
Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt
- Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own
Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”),
which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This ASU (1) simplifies
the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt:
Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion
features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting
in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and
classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises the guidance
in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments
by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an
instrument may be settled in cash or shares. ASU 2020-06 is effective for public business entities for fiscal years beginning after December
15, 2021 (or December 15, 2023 for companies who meet the SEC definition of Smaller Reporting Companies), and interim periods within
those fiscal years. The guidance is to be adopted through either a fully retrospective or modified retrospective method of transition.
However, early adoption is permitted as early as fiscal years, and interim periods within those fiscal years, beginning after December
15, 2020. The Company adopted the new standard on January 1, 2022, which adoption required the Company to bifurcate the embedded conversion
feature from the convertible note it issued during the second quarter of 2022.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
Recent Accounting Standards (continued)
In June 2016, the FASB issued ASU 2016-13, Financial
Instruments - Credit Losses (“Topic 326”). The ASU introduces a new accounting model, the Current Expected Credit
Losses model (“CECL”), which requires earlier recognition of credit losses and additional disclosures related to credit risk.
The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses at the time the financial
asset is originated or acquired. ASU 2016-13 is effective for annual period beginning after December 15, 2022, including interim reporting
periods within those annual reporting periods. The Company expects that the adoption will not have a material impact on the Company’s
condensed consolidated financial statements.
Other accounting standards that have been issued
or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial
statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated
to its consolidated financial condition, results of operations, cash flows or disclosures.
NOTE 4 – PREPAID EXPENSES
AND OTHER CURRENT ASSETS
At June 30, 2022 and December 31, 2021, prepaid
expenses and other current assets consisted of the following:
| |
June 30,
2022 | | |
December 31,
2021 | |
Prepaid directors and officers liability insurance premium | |
$ | 8,915 | | |
$ | 49,656 | |
Prepaid professional fees | |
| 88,185 | | |
| 186,609 | |
Recoverable VAT | |
| 20,005 | | |
| 23,655 | |
Deferred leasing costs | |
| 33,402 | | |
| 31,422 | |
Security deposit | |
| 19,649 | | |
| - | |
Prepaid NASDAQ listing fee | |
| 44,813 | | |
| - | |
Other | |
| 35,333 | | |
| 18,313 | |
Total | |
$ | 250,302 | | |
$ | 309,655 | |
NOTE 5 – EQUITY
METHOD INVESTMENT
As of June 30, 2022 and December 31, 2021, the
equity method investment amounted to $517,442 and $515,632, 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
condensed consolidated financial statements under the equity method. Under the equity method, the investment is initially recorded at
cost, adjusted for any excess of the Company’s share of the incorporated-date fair values of the investee’s identifiable
net assets over the cost of the investment (if any). Thereafter, the investment is adjusted for the post incorporation change in the
Company’s share of the investee’s net assets and any impairment loss relating to the investment.
For the three months ended June 30, 2022 and
2021, the Company’s share of Epicon’s net loss was $11,882 and $15,418, respectively, which was included in loss from
equity method investment in the accompanying condensed consolidated statements of operations and comprehensive loss. For the six months
ended June 30, 2022 and 2021, the Company’s share of Epicon’s net loss was $24,798 and $33,932, respectively, which
was included in loss from equity method investment in the accompanying condensed consolidated statements of operations and comprehensive
loss.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5 – EQUITY METHOD INVESTMENT
(continued)
In the six months ended June 30, 2022, activity
recorded for the Company’s equity method investment in Epicon is summarized in the following table:
Equity investment carrying amount at January 1, 2022 | |
$ | 515,632 | |
Payment made for equity method investment | |
| 54,008 | |
Epicon’s net loss attributable to the Company | |
| (24,798 | ) |
Foreign currency fluctuation | |
| (27,400 | ) |
Equity investment carrying amount at June 30, 2022 | |
$ | 517,442 | |
The tables below present
the summarized financial information, as provided to the Company by the investee, for the unconsolidated company:
| |
June 30,
2022 | | |
December 31,
2021 | |
Current assets | |
$ | 14,044 | | |
$ | 5,479 | |
Noncurrent assets | |
| 177,093 | | |
| 216,864 | |
Current liabilities | |
| 41,645 | | |
| 56,626 | |
Noncurrent liabilities | |
| - | | |
| - | |
Equity | |
| 149,492 | | |
| 165,717 | |
| |
For the Three Months
Ended June 30, | | |
For the Six Months
Ended June 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Net revenue | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
Gross profit | |
| - | | |
| - | | |
| - | | |
| - | |
Loss from operation | |
| 29,703 | | |
| 38,543 | | |
| 62,026 | | |
| 84,829 | |
Net loss | |
| 29,703 | | |
| 38,543 | | |
| 61,994 | | |
| 84,829 | |
NOTE 6 – ACCRUED
LIABILITIES AND OTHER PAYABLES
At June 30, 2022 and
December 31, 2021, accrued liabilities and other payables consisted of the following:
| |
June 30,
2022 | | |
December 31,
2021 | |
Accrued tenants’ improvement reimbursement | |
$ | 43,500 | | |
$ | 43,500 | |
Tenants’ security deposit | |
| 73,733 | | |
| 73,733 | |
Accrued business expense reimbursement | |
| 40,181 | | |
| 68,172 | |
Accrued utilities | |
| 12,820 | | |
| 14,372 | |
Advance from customer | |
| 12,306 | | |
| - | |
Deferred rental income | |
| 30,344 | | |
| 8,638 | |
Accrued equity offering costs | |
| 40,000 | | |
| 40,000 | |
Taxes payable | |
| 15,122 | | |
| 14,459 | |
Others | |
| 76,346 | | |
| 12,446 | |
Total | |
$ | 344,352 | | |
$ | 275,320 | |
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 7 – CONVERTIBLE NOTE PAYABLE
On March 28, 2022, the
Company entered into Securities Purchase Agreement with an accredited investor, which was amended on June 8, 2022, providing for the
sale by the Company to the investor of a Convertible Note in the amount of $3,718,943 (“2022 Convertible Note”). In addition
to the 2022 Convertible Note, the investor also received a Stock Purchase Warrant (“2022 Warrant”) to acquire an aggregate
of 1,239,647 shares of common stock. The 2022 Warrant is exercisable for five years at an exercise price of $1.25. The financing closed
with respect to:
| ● | $2,669,522 of the financing on April 15, 2022, |
| ● | $659,581 of the financing on April 29, 2022, |
| ● | $199,840 of the financing on May 18, 2022 and |
| ● | $190,000 of the financing on May 25, 2022. |
As a result of each
of the closings, the Company issued the investor a 2022 Convertible Note in the principal amount of $2,669,522 and a 2022 Warrant to
acquire 889,840 shares of common stock dated April 15, 2022, a 2022 Convertible Note in the principal amount of $659,581 and a 2022 Warrant
to acquire 219,860 shares of common stock dated April 29, 2022, a 2022 Convertible Note in the principal amount of $199,840 and a 2022
Warrant to acquire 66,614 shares of common stock and a 2022 Convertible Note in the principal amount of $190,000 and a 2022 Warrant to
acquire 63,333 shares of common stock.
The 2022 Convertible
Note bears interest at 1% per annum payable at maturity and matures ten years from issuance. The investor may elect to convert all or
part of the 2022 Convertible Note, plus accrued interest, at any time into shares of common stock of the Company at a conversion price
equal to 95% of the average of the highest three trading prices for the common stock during the 20-trading day period ending one trading
day prior to the conversion date but in no event will the conversion price be lower than $0.75 per share.
The investor agreed
to restrict its ability to convert the 2022 Convertible Note and exercise the 2022 Warrant and receive shares of common stock such that
the number of shares of common stock held by the investor after such conversion or exercise does not exceed 4.99% of the then issued
and outstanding shares of common stock. Further, the investor agreed to not sell or transfer any or all of the shares of common stock
underlying the 2022 Convertible Note or the 2022 Warrant for a period of 90 days beginning on the closing date (the “Lock-Up Period”).
Following the expiration of the Lock-Up Period, the investor has agreed to limit its sale or transfer of such shares of common stock
to a maximum monthly amount equal to 20% of the shares of common stock issuable upon conversion of the 2022 Convertible Note. The Company
agreed to use its reasonable best efforts to file a registration statement on Form S-3 (or other appropriate form) providing for the
resale by the investor of the shares of common stock underlying the 2022 Convertible Note and the 2022 Warrant.
Based upon the Company’s
analysis of the criteria contained in ASC Topic 815-40, “Derivatives and Hedging - Contracts in an Entity’s Own Equity”,
the Company determined that all the warrants issued to the investor with this private placement are classified as equity in additional
paid in-capital.
In accordance with ASC
470-20-25-2, proceeds from the sale of a debt instrument with stock purchase warrants are allocated to the two elements based on the relative
fair values of the debt instrument without the warrants and of the warrants themselves at time of issuance. The portion of the proceeds
so allocated to the warrants are accounted for as additional paid-in capital. The remainder of the proceeds are allocated to the debt
instrument portion of the transaction.
The fair values of the warrants issued to
the investor with this private placement were computed using the Black-Scholes option-pricing model with the following assumptions: volatility
of 111.94%, risk-free rate of 2.71% - 2.92%, annual dividend yield of 0% and expected life of 5 years.
In accordance with ASC
480-10-25-14, the Company determined that the conversion provisions contain an embedded derivative feature and the Company valued the
derivative feature separately, recording debt discount and derivative liabilities in accordance with the provisions of the convertible
debt (see Note 8). The Company calculates the fair value of conversion option at the commitment dates using the Black-Scholes valuation
model with the following assumptions: volatility of 95.97%, risk-free rate of 2.75% - 2.89%, annual dividend yield of 0%
and expected life of 10 years.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 7 – CONVERTIBLE NOTE PAYABLE
(continued)
The warrants issued
to the investor to purchase 1,239,647 shares of the Company’s common stock were treated as a discount on the convertible note
payable and were valued at $498,509 and will be amortized over the term of the 2022 Convertible Note. Additionally, the fair value
of embedded conversion option at commitment dates, which was valued at $2,782,569, is recorded as a discount on the convertible note
payable and will be amortized over the term of the 2022 Convertible Note. Hence, in connection with the issuance of the 2022
Convertible Note and 2022 Warrant, the Company recorded a total debt discount of $3,281,078 to be amortized over the term of the
convertible note payable. For the three and six months ended June 30, 2022, amortization of debt discount and interest expense
related to the 2022 Convertible Note amounted to $54,685 and $7,204, respectively, which have been reflected as interest expense on
the accompanying condensed consolidated statements of operation and comprehensive loss.
At June 30, 2022, convertible note payable consisted
of the following:
| |
June 30,
2022 | |
Principal amount | |
$ | 3,718,943 | |
Less: unamortized debt discount | |
| (3,226,393 | ) |
Convertible note payable, net | |
$ | 492,550 | |
In accordance with an agreement signed on July
25, 2022, all outstanding principal and unpaid interest were converted into common stock of the Company at a conversion
price of $0.65 per share (see Note 16 - Common Shares Issued for Debt Conversion).
NOTE 8 – DERIVATIVE LIABILITY
As stated in Note 7,
2022 Convertible Note, the Company determined that the convertible note payable contained an embedded derivative feature in the form
of a conversion provision which was adjustable based on future prices of the Company’s common stock. In accordance with ASC 815-10-25,
each derivative feature was initially recorded at its fair value using the Black-Scholes option valuation method and then re-valued at
each reporting date, with changes in the fair value reported in the statements of operations.
The estimated fair value
of the derivative feature of convertible debt was $2,782,569 at commitment dates, which was calculated using the following assumptions:
volatility of 95.97%, risk-free rate of 2.75% - 2.89%, annual dividend yield of 0% and expected life of 10 years.
The estimated fair value
of the derivative feature of convertible debt was $2,013,300 at June 30, 2022, which was computed using the following assumptions: volatility
of 95.71%, risk-free rate of 2.98%, annual dividend yield of 0% and expected life of 9.8 – 9.9 years.
Increases or decreases
in fair value of the derivative liability is included as a component of total other (expenses) income in the accompanying condensed consolidated
statements of operations and comprehensive loss for the respective period. The changes to the derivative liability resulted in a decrease
of $769,269 in the derivative liability and the corresponding increase in other income as a gain for the three and six months ended
June 30, 2022. There was no derivative liability in the three and six months ended June 30, 2021.
NOTE 9 – RELATED PARTY TRANSACTIONS
Rental Revenue from Related Party and Rent
Receivable – Related Party
The Company leases space of its commercial real
property located in New Jersey to a company, which is controlled by Wenzhao Lu, the Company’s largest shareholder and chairman
of the Board of Directors. The term of the related party lease agreement is five years commencing on May 1, 2021 and will expire on April
30, 2026. For the three months ended June 30, 2022 and 2021, the related party rental revenue amounted to $12,600 and $8,400, respectively,
and has been included in real property rental on the accompanying condensed consolidated statements of operations and comprehensive loss.
For the six months ended June 30, 2022 and 2021, the related party rental revenue amounted to $25,200 and $8,400, respectively, and has
been included in real property rental on the accompanying condensed consolidated statements of operations and comprehensive loss. The
related party rent receivable totaled $58,500 and $33,600, respectively, and no allowance for doubtful accounts was deemed to be
required on rent receivable – related party at June 30, 2022 and December 31, 2021.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 9 – RELATED PARTY TRANSACTIONS
(continued)
Services Provided by Related Party
From time to time, Wilbert Tauzin, a director
of the Company, and his son provide consulting services to the Company. As compensation for professional services provided, the Company
recognized consulting expenses of $36,460 and $54,545 for the three months ended June 30, 2022 and 2021, respectively, which
have been included in professional fees on the accompanying condensed consolidated statements of operations and comprehensive loss. As
compensation for professional services provided, the Company recognized consulting expenses of $87,598 and $111,950 for the
six months ended June 30, 2022 and 2021, respectively, which have been included in professional fees on the accompanying condensed consolidated
statements of operations and comprehensive loss.
Accrued Liabilities and Other Payables –
Related Parties
In 2017, the Company acquired Beijing Genexosome
for a cash payment of $450,000. As of June 30, 2022 and December 31, 2021, the unpaid acquisition consideration of $100,000, was payable
to Dr. Yu Zhou, former director and former co-chief executive officer and 40% owner of Genexosome, and has been included in accrued
liabilities and other payables – related parties on the accompanying condensed consolidated balance sheets.
As of June 30, 2022 and December 31, 2021, $439,974
and $368,433 of accrued and unpaid interest related to borrowings from Wenzhao Lu, the Company’s largest shareholder and chairman
of the Board of Directors, respectively, have been included in accrued liabilities and other payables – related parties on the
accompanying condensed consolidated balance sheets.
Borrowings from Related Party
Promissory Note
On March 18, 2019, the Company issued Wenzhao
Lu, the Company’s largest shareholder and Chairman of the Board of Directors, a Promissory Note in the principal amount of $1,000,000 (“Promissory
Note”) in consideration of cash in the amount of $1,000,000. The Promissory Note accrues interest at the rate of 5% per annum
and matures March 19, 2022. In March 2022, the Company and Wenzhao Lu entered into a Loan Extension and Modification Agreement (the “Extension”)
to extend the maturity date to March 19, 2024.The Company repaid principal of $410,000, $200,000 and $390,000 in the third quarter
of 2019, second quarter of 2020 and second quarter of 2022, respectively. As of June 30, 2022 and December 31, 2021, the outstanding
principal balance was $0 and $390,000, respectively.
Line of Credit
On August 29, 2019, the Company entered into
a Line of Credit Agreement (the “Line of Credit Agreement”) providing the Company with a $20 million line of credit
(the “Line of Credit”) from Wenzhao Lu (the “Lender”), the largest shareholder and Chairman of the Board of Directors
of the Company. The Line of Credit allows the Company to request loans thereunder and to use the proceeds of such loans for working capital
and operating expense purposes until the facility matures on December 31, 2024. The loans are unsecured and are not convertible
into equity of the Company. Loans drawn under the Line of Credit bears interest at an annual rate of 5% and each individual loan
will be payable three years from the date of issuance. The Company has a right to draw down on the line of credit and not at the discretion
of the related party Lender. The Company may, at its option, prepay any borrowings under the Line of Credit, in whole or in part at any
time prior to maturity, without premium or penalty. The Line of Credit Agreement includes customary events of default. If any such event
of default occurs, the Lender may declare all outstanding loans under the Line of Credit to be due and payable immediately.
In the six months ended June 30, 2022, activity
recorded for the Line of Credit is summarized in the following table:
Outstanding principal under the Line of Credit at January 1, 2022 | |
$ | 2,750,262 | |
Draw down from Line of Credit | |
| 100,000 | |
Repayment of Line of Credit | |
| (410,000 | ) |
Outstanding principal under the Line of Credit at June 30, 2022 | |
$ | 2,440,262 | |
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 9 – RELATED PARTY TRANSACTIONS
(continued)
Borrowings from Related Party (continued)
For the three months ended June 30, 2022 and
2021, the interest expense related to above borrowings amounted to $31,854 and $46,131, respectively, and has been included in interest
expense – related party on the accompanying condensed consolidated statements of operations and comprehensive loss. For the six
months ended June 30, 2022 and 2021, the interest expense related to above borrowings amounted to $71,540 and $91,280, respectively,
and has been included in interest expense – related party on the accompanying condensed consolidated statements of operations and
comprehensive loss.
As of June 30, 2022 and December 31, 2021, the
related accrued and unpaid interest for above borrowings was $439,974 and $368,433, respectively, has been included in accrued liabilities
and other payables – related parties on the accompanying condensed consolidated balance sheets.
On July 25, 2022, the outstanding principal
and related accrued and unpaid interest were settled by issuance of the Company’s common stock (see Note 16 - Common Shares
Issued Pursuant to Related Party Debt Settlement Agreement and Release).
NOTE 10 – EQUITY
Common Shares Sold
for Cash
On December 13, 2019, the Company entered into
an Open Market Sale AgreementSM (the “Sales Agreement”) with Jefferies LLC, as sales agent (“Jefferies”),
pursuant to which the Company may offer and sell, from time to time, through Jefferies, shares of its common stock. During the six months
ended June 30, 2022, Jefferies sold an aggregate of 170,640 shares of common stock at an average price of $0.79 per share
to investors and the Company recorded net proceeds of $112,328, net of commission and other offering costs of $23,239.
Common Shares Issued for Services
During the six months ended June 30, 2022, the
Company issued a total of 408,957 shares of its common stock for services rendered and to be rendered. These shares were valued
at $340,950, the fair market values on the grant dates using the reported closing share prices on the dates of grant, and the Company
recorded stock-based compensation expense of $254,923 for the six months ended June 30, 2022 and reduced accrued liabilities of
$30,000 and recorded prepaid expense of $56,027 as of June 30, 2022 which will be amortized over the rest of corresponding service
periods.
Options
The following table summarizes the shares of
the Company’s common stock issuable upon exercise of options outstanding at June 30, 2022:
Options Outstanding | | |
Options Exercisable | |
Range of
Exercise
Price | | |
Number
Outstanding at
June 30, 2022 | | |
Weighted Average
Remaining
Contractual Life
(Years) | | |
Weighted
Average
Exercise
Price | | |
Number
Exercisable at
June 30, 2022 | | |
Weighted
Average
Exercise Price | |
$ | 0.50 – 0.82 | | |
| 2,660,000 | | |
| 4.48 | | |
$ | 0.56 | | |
| 2,233,334 | | |
$ | 0.53 | |
| 1.00 – 1.93 | | |
| 2,895,000 | | |
| 4.40 | | |
| 1.38 | | |
| 2,888,333 | | |
| 1.39 | |
| 2.00 – 2.80 | | |
| 2,560,000 | | |
| 1.37 | | |
| 2.15 | | |
| 2,560,000 | | |
| 2.15 | |
| 4.76 | | |
| 30,000 | | |
| 1.76 | | |
| 4.76 | | |
| 30,000 | | |
| 4.76 | |
$ | 0.50 – 4.76 | | |
| 8,145,000 | | |
| 3.46 | | |
$ | 1.37 | | |
| 7,711,667 | | |
$ | 1.40 | |
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 10 – EQUITY
(continued)
Options (continued)
Stock option activities
for the six months ended June 30, 2022 were as follows:
| |
Number of Options | | |
Weighted Average Exercise Price | |
Outstanding at January 1, 2022 | |
| 7,725,000 | | |
$ | 1.45 | |
Granted | |
| 660,000 | | |
| 0.73 | |
Expired/forfeited/exercised | |
| (240,000 | ) | |
| (2.26 | ) |
Outstanding at June 30, 2022 | |
| 8,145,000 | | |
$ | 1.37 | |
Options exercisable at June 30, 2022 | |
| 7,711,667 | | |
$ | 1.40 | |
Options expected to vest | |
| 433,333 | | |
$ | 0.69 | |
The aggregate intrinsic value of both stock options
outstanding and stock options exercisable at June 30, 2022 was $0.
The fair values of options granted during the
six months ended June 30, 2022 were estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:
volatility of 74.8% - 117.46%, risk-free rate of 1.37% - 3.56%, annual dividend yield of 0%, and expected life of 3.00
- 5.00 years. The aggregate fair value of the options granted during the six months ended June 30, 2022 was $373,982.
The fair values of options granted during the
six months ended June 30, 2021 were estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:
volatility of 123.27% - 128.42%, risk-free rate of 0.33% - 0.80%, annual dividend yield of 0% and expected life
of 3.00 - 5.00 years. The aggregate fair value of the options granted during the six months ended June 30, 2021 was
$575,078.
For the three months ended June 30, 2022 and
2021, stock-based compensation expense associated with stock options granted amounted to $126,301 and $195,209, of which, $93,171 and
$136,392 was recorded as compensation and related benefits, $21,460 and $39,545 was recorded as professional fees, and
$11,670 and $19,272 was recorded as research and development expenses, respectively.
For the six months ended June 30, 2022 and 2021, stock-based
compensation expense associated with stock options granted amounted to $278,624 and $397,714, of which, $198,084 and $275,899 was
recorded as compensation and related benefits, $57,598 and $82,988 was recorded as professional fees, and $22,942 and $38,827 was
recorded as research and development expenses, respectively.
A summary of the status of the Company’s
nonvested stock options granted as of June 30, 2022 and changes during the six months ended June 30, 2022 is presented below:
| |
Number of Options | | |
Weighted Average Exercise Price | |
Nonvested at January 1, 2022 | |
| 205,834 | | |
$ | 1.04 | |
Granted | |
| 660,000 | | |
| 0.73 | |
Vested | |
| (432,501 | ) | |
| (0.92 | ) |
Nonvested at June 30, 2022 | |
| 433,333 | | |
$ | 0.69 | |
Warrants
On March 28, 2022, the
Company entered into Securities Purchase Agreement with an accredited investor, which was amended on June 8, 2022, providing for the
sale by the Company to the investor of a Convertible Note in the amount of $3,718,943 (“2022 Convertible Note”). In addition
to the 2022 Convertible Note, the investor also received a Stock Purchase Warrant (“2022 Warrant”) to acquire an aggregate
of 1,239,647 shares of common stock. The 2022 Warrant is exercisable for five years at an exercise price of $1.25.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 10 – EQUITY
(continued)
Warrants (continued)
The fair values of the
warrants issued to the investor with this private placement were computed using the Black-Scholes option-pricing model with the following
assumptions: volatility of 111.94%, risk-free rate of 2.71% - 2.92%, annual dividend yield of 0% and expected life
of 5 years. The warrants issued to the investor to purchase 1,239,647 shares of the Company’s common stock were treated
as a discount on the convertible note payable and were valued at $498,509 and will be amortized over the term of the 2022 Convertible
Note.
Stock warrant activities
for the six months ended June 30, 2022 were as follows:
| |
Number of Warrants | | |
Exercise Price | |
Outstanding at January 1, 2022 | |
| - | | |
$ | - | |
Issued | |
| 1,239,647 | | |
| 1.25 | |
Expired/exercised | |
| - | | |
| - | |
Outstanding and exercisable at June 30, 2022 | |
| 1,239,647 | | |
$ | 1.25 | |
The following table summarizes the shares of
the Company’s common stock issuable upon exercise of warrants outstanding at June 30, 2022:
Warrants Outstanding | | |
Warrants Exercisable | |
Exercise
Price | | |
Number
Outstanding at
June 30, 2022 | | |
Weighted Average
Remaining
Contractual Life
(Years) | | |
Number
Exercisable at
June 30, 2022 | | |
Exercise Price | |
$ | 1.25 | | |
| 1,239,647 | | |
| 4.81 | | |
| 1,239,647 | | |
$ | 1.25 | |
The aggregate intrinsic value of both stock warrants
outstanding and stock warrants exercisable at June 30, 2022 was $0.
NOTE 11 – STATUTORY
RESERVE AND RESTRICTED NET ASSETS
The Company’s PRC subsidiary, Avalon
Shanghai, is restricted in its ability to transfer a portion of its net asset to the Company. The payment of dividends by entities
organized in China is subject to limitations, procedures and formalities. Regulations in the PRC currently permit payment of dividends
only out of accumulated profits as determined in accordance with accounting standards and regulations in China.
The Company is required to make appropriations
to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus reserve, based on after-tax net income
determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”). Appropriations to the statutory
surplus reserve are required to be at least 10% of the after-tax net income determined in accordance with PRC GAAP until the reserve
is equal to 50% of the entity’s registered capital. Appropriations to the discretionary surplus reserve are made at the discretion
of the Board of Directors. The statutory reserve may be applied against prior year losses, if any, and may be used for general business
expansion and production or increase in registered capital, but are not distributable as cash dividends. The Company did not make any
appropriation to statutory reserve for Avalon Shanghai during the three and six months ended June 30, 2022 as it incurred net loss in
the periods. As of both June 30, 2022 and December 31, 2021, the restricted amount as determined pursuant to PRC statutory laws
totaled $6,578.
Relevant PRC laws and regulations restrict the
Company’s PRC subsidiary, Avalon Shanghai, from transferring a portion of its net assets, equivalent to their statutory reserves
and their share capital, to the Company’s shareholders in the form of loans, advances or cash dividends. Only PRC entity’s
accumulated profit may be distributed as dividend to the Company’s shareholders without the consent of a third party. As of both
June 30, 2022 and December 31, 2021, total restricted net assets amounted to $706,578.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 12 – CONDENSED
FINANCIAL INFORMATION OF THE PARENT COMPANY
Pursuant to the requirements of Rule 12-04(a),
5-04(c) and 4-08(e)(3) of Regulation S-X, the condensed financial information of the parent company shall be filed when the restricted
net assets of consolidated subsidiary 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 subsidiary shall mean that amount of the Company’s
proportionate share of net assets of consolidated subsidiary (after intercompany eliminations) which as of the end of the most recent
fiscal year may not be transferred to the parent company by subsidiary in the form of loans, advances or cash dividends without the consent
of a third party.
The Company performed a test on the restricted
net assets of consolidated subsidiary in accordance with such requirement and concluded that it was not applicable to the Company as
the restricted net assets of the Company’s PRC subsidiary did not exceed 25% of the consolidated net assets of the Company,
therefore, the condensed financial statements for the parent company have not been required.
NOTE 13 – 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, 2022
and 2021.
| |
Three Months Ended
June 30, | | |
Six Months Ended
June 30, | |
Customer | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
A | |
| 32 | % | |
| 31 | % | |
| 30 | % | |
| 31 | % |
B | |
| 20 | % | |
| 20 | % | |
| 19 | % | |
| 20 | % |
C | |
| 13 | % | |
| 13 | % | |
| 13 | % | |
| 13 | % |
Two customers, of which, one is a related
party and the other is a third party, whose outstanding receivable accounted for 10% or more of the Company’s total outstanding
rent receivable and rent receivable – related party at June 30, 2022, accounted for 81.0% of the Company’s total outstanding
rent receivable and rent receivable – related party at June 30, 2022.
Two customers, of which, one is a related
party and the other is a third party, whose outstanding receivable accounted for 10% or more of the Company’s total outstanding
rent receivable and rent receivable – related party at December 31, 2021, accounted for 80.6% of the Company’s total
outstanding rent receivable and rent receivable – related party at December 31, 2021.
Suppliers
No supplier accounted for 10% or more of
the Company’s purchase during the three and six months ended June 30, 2022 and 2021.
One supplier, whose outstanding payable
accounted for 10% or more of the Company’s total outstanding accounts payable at June 30, 2022, accounted for 100.0%
of the Company’s total outstanding accounts payable at June 30, 2022.
NOTE 14 – SEGMENT
INFORMATION
For the three and six months ended June 30, 2022
and 2021, the Company operated in two reportable business segments - (1) the real property operating segment, and (2) the medical
related consulting services segment.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 14 – SEGMENT INFORMATION
(continued)
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, 2022 and 2021
was as follows:
| |
Three Months Ended
June 30, | | |
Six Months Ended
June 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Revenues | |
| | |
| | |
| | |
| |
Real property operations | |
$ | 290,821 | | |
$ | 280,232 | | |
$ | 588,452 | | |
$ | 570,006 | |
Costs and expenses | |
| | | |
| | | |
| | | |
| | |
Real property operations | |
| 211,703 | | |
| 205,147 | | |
| 430,151 | | |
| 422,041 | |
Gross profit | |
| | | |
| | | |
| | | |
| | |
Real property operations | |
| 79,118 | | |
| 75,085 | | |
| 158,301 | | |
| 147,965 | |
Other operating expenses | |
| | | |
| | | |
| | | |
| | |
Real property operations | |
| 81,899 | | |
| 78,830 | | |
| 188,952 | | |
| 180,253 | |
Medical related consulting services | |
| 106,235 | | |
| 167,275 | | |
| 193,350 | | |
| 328,828 | |
Corporate/Other | |
| 1,384,555 | | |
| 2,131,260 | | |
| 3,396,512 | | |
| 4,244,752 | |
Total | |
| 1,572,689 | | |
| 2,377,365 | | |
| 3,778,814 | | |
| 4,753,833 | |
Other (expense) income | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| | | |
| | | |
| | | |
| | |
Corporate/Other | |
| (93,743 | ) | |
| (46,131 | ) | |
| (133,429 | ) | |
| (91,280 | ) |
Total | |
| (93,743 | ) | |
| (46,131 | ) | |
| (133,429 | ) | |
| (91,280 | ) |
Other income (expense) | |
| | | |
| | | |
| | | |
| | |
Real property operations | |
| 3 | | |
| 4 | | |
| 7 | | |
| 108 | |
Medical related consulting services | |
| 136,497 | | |
| (16,503 | ) | |
| 232,583 | | |
| (34,989 | ) |
Corporate/Other | |
| (577,660 | ) | |
| - | | |
| (577,660 | ) | |
| 1 | |
Total | |
| (441,160 | ) | |
| (16,499 | ) | |
| (345,070 | ) | |
| (34,880 | ) |
Total other expense, net | |
| (534,903 | ) | |
| (62,630 | ) | |
| (478,499 | ) | |
| (126,160 | ) |
Net (loss) income | |
| | | |
| | | |
| | | |
| | |
Real property operations | |
| (2,778 | ) | |
| (3,741 | ) | |
| (30,644 | ) | |
| (32,180 | ) |
Medical related consulting services | |
| 30,262 | | |
| (183,778 | ) | |
| 39,233 | | |
| (363,817 | ) |
Corporate/Other | |
| (2,055,958 | ) | |
| (2,177,391 | ) | |
| (4,107,601 | ) | |
| (4,336,031 | ) |
Total | |
$ | (2,028,474 | ) | |
$ | (2,364,910 | ) | |
$ | (4,099,012 | ) | |
$ | (4,732,028 | ) |
Identifiable long-lived tangible assets at June 30, 2022 and December 31, 2021 | |
June 30,
2022 | | |
December 31,
2021 | |
Real property operations | |
$ | 7,452,856 | | |
$ | 7,537,281 | |
Medical related consulting services | |
| 515 | | |
| 742 | |
Corporate/Other | |
| 256,766 | | |
| 352,294 | |
Total | |
$ | 7,710,137 | | |
$ | 7,890,317 | |
Identifiable long-lived tangible assets at June 30, 2022 and December 31, 2021 | |
June 30,
2022 | | |
December 31,
2021 | |
United States | |
$ | 7,489,017 | | |
$ | 7,583,880 | |
China | |
| 221,120 | | |
| 306,437 | |
Total | |
$ | 7,710,137 | | |
$ | 7,890,317 | |
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 15 – COMMITMENTS
AND CONTINGENCIES
Litigation
From time to time, the Company is subject to
ordinary routine litigation incidental to its normal business operations. The Company is not currently a party to, and its property is
not subject to, any material legal proceedings, except as set forth below.
On October 25, 2017, Genexosome entered into
and closed a Stock Purchase Agreement with Beijing Genexosome and Yu Zhou, MD, PhD, the sole shareholder of Beijing Genexosome, pursuant
to which Genexosome acquired all of the issued and outstanding securities of Beijing Genexosome in consideration of a cash payment in
the amount of $450,000, of which $100,000 is still owed. Further, on October 25, 2017, Genexosome entered into and closed an Asset Purchase
Agreement with Dr. Zhou, pursuant to which the Company acquired all assets, including all intellectual property and exosome separation
systems, held by Dr. Zhou pertaining to the business of researching, developing and commercializing exosome technologies. In consideration
of the assets, Genexosome paid Dr. Zhou $876,087 in cash, transferred 500,000 shares of common stock of the Company to Dr. Zhou and issued
Dr. Zhou 400 shares of common stock of Genexosome. Further, the Company had not been able to realize the financial projections provided
by Dr. Zhou at the time of the acquisition and has decided to impair the intangible asset associated with this acquisition to zero. Dr.
Zhou was terminated as Co-CEO of Genexosome on August 14, 2019. Further, on October 28, 2019, Research Institute at Nationwide Children’s
Hospital (“Research Institute”) filed a Complaint in the United States District Court for the Southern District of Ohio Eastern
Division against Dr. Zhou, Li Chen, the Company and Genexosome with various claims against the Company and Genexosome. The criminal proceedings
against Dr. Zhou and Li Chen have been concluded. The Company, Genexosome and the Research Institute entered into a Settlement Agreement
dated June 7, 2022 (the “Settlement Date”) whereby the Company agreed to pay the Research Institute $450,000 on each of the
sixty-day, one year and two-year anniversaries of the Settlement Date. In addition, the Company agreed to pay the Research Institute
30% of the Company’s initial pre-tax profit of $3,333,333, 20% of the Company’s second pre-tax profit of $3,333,333 and 10%
of the Company’s third pre-tax profit of $3,333,333. The parties provided a mutual release as well.
Operating Leases Commitment
The Company is a party to leases for office space.
Rent expense under all operating leases amounted to approximately $72,000 and $73,000 for the six months ended June 30, 2022
and 2021, respectively. Supplemental cash flow information related to leases for the six months ended June 30, 2022 and 2021 is as follows:
| |
Six Months Ended
June 30, | |
| |
2022 | | |
2021 | |
Cash paid for amounts included in the measurement of lease liabilities: | |
| | |
| |
Operating cash flows paid for operating lease | |
$ | 82,792 | | |
$ | 65,035 | |
Right-of-use assets obtained in exchange for lease obligation: | |
| | | |
| | |
Operating lease | |
$ | - | | |
$ | 133,473 | |
The following table summarizes the lease term
and discount rate for the Company’s operating lease as of June 30, 2022:
| |
Operating Lease | |
Weighted average remaining lease term (in years) | |
| 0.58 | |
Weighted average discount rate | |
| 4.88 | % |
The following table summarizes the maturity of lease liabilities under
operating lease as of June 30, 2022:
For the Twelve-month Period Ending June 30: | |
Operating Lease | |
2023 | |
$ | 75,263 | |
2024 and thereafter | |
| - | |
Total lease payments | |
| 75,263 | |
Amount of lease payments representing interest | |
| (915 | ) |
Total present value of operating lease liabilities | |
$ | 74,348 | |
| |
| | |
Current portion | |
$ | 74,348 | |
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 15 – COMMITMENTS
AND CONTINCENGIES (continued)
Equity Investment Commitment
On May 29, 2018, Avalon Shanghai entered
into a Joint Venture Agreement with Jiangsu Unicorn Biological Technology Co., Ltd. (“Unicorn”), pursuant to which a company
named Epicon Biotech Co., Ltd. (“Epicon”) was formed on August 14, 2018. Epicon is owned 60% by Unicorn and 40% by Avalon
Shanghai. Within five years of execution of the Joint Venture Agreement, Unicorn shall invest cash into Epicon in an amount not less
than RMB 8,000,000 (approximately $1.2 million) and the premises of the laboratories of Nanjing Hospital of Chinese Medicine for exclusive
use by Epicon, and Avalon Shanghai shall invest cash into Epicon in an amount not less than RMB 10,000,000 (approximately $1.5 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, 2022, Avalon Shanghai has contributed RMB 5,110,000 (approximately
$0.8 million) that was included in equity method investment on the accompanying condensed consolidated balance sheets. The Company
intends to use its present working capital together with borrowings from related party and equity raises to fund the project cost.
Joint Venture – Avactis Biosciences
Inc.
On July 18, 2018, the Company formed Avactis
Biosciences Inc. (“Avactis”), a Nevada corporation, as a wholly owned subsidiary. On October 23, 2018, Avactis 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 was to be owned 60% by
Avactis and 40% by Arbele. On April 6, 2022, the Company, Acactis, Arbele and Arbele Biotherapeutics Limited (“Arbele Biotherapeutics”),
a wholly owned subsidiary of Arbele, entered into an Amendment No. 1 to the Equity Joint Venture Agreement pursuant to which Arbele Biotherapeutics
acquired 40% of Avactis for the purpose of the Company and Arbele establishing a joint venture in the United States and the parties agreed
that they would no longer pursue AVAR as a joint venture. Further, all rights and obligations under the AVAR Agreement were assigned
by Avactis to Avalon and by Arbele to Arbele Biotherapeutics. Avactis established Avactis Nanjing Biosciences Ltd., a wholly owned foreign
entity in the PRC. Further, the parties agreed that the Exclusive Patent License Agreement dated January 3, 2019 entered between Arbele,
as licensor, and AVAR, as licensee (the “Arbele License Agreement”), was assigned to Avactis and Avalon and Arbele agreed
to enter into a new Arbele License Agreement with Avactis on the same/similar terms as the Arbele License Agreement. Further, Dr. Anthony
Chan was appointed to the Board of Directors of Avactis and as the Chief Scientific Officer of Avactis. Avactis purpose and business
scope is to research, research, develop, produce, sell, distribute and generally commercialize CAR-T/CAR-NK/TCR-T/universal cellular
immunotherapy globally including in the PRC. The Company is required to contribute $10 million (or equivalent in RMB) in cash
and/or services, which shall be contributed in tranches based on milestones to be determined jointly by Avactis and the Company in writing
subject to the Company’s cash reserves. Within 30 days, Arbele Biotherapeutics shall make contribution of $6.66 million in the
form of entering into a License Agreement with Avactis granting Avactis 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 the Company and Avactis and services. As of the date hereof,
the License Agreement has not been finalized. In addition, the Company is responsible for:
| ● | Contributing registered capital of RMB 5,000,000 (approximately $0.7 million) for working capital purposes as required by local regulation, which is not required to be contributed immediately and will be contributed subject to the Company’s discretion; |
| ● | assist
Avactis in setting up its business operations and obtaining all required permits and licenses
from the Chinese government; |
| ● | assisting
Avactis in recruiting, hiring and retaining personnel; |
| ● | providing
Avactis 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
Avactis in managing the Good Manufacturing Practices (GMP) facility and clinic to be developed
by Avactis; |
| ● | providing
Avactis with advice pertaining to conducting clinicals in China; and |
| ● | Within 6 days of signing the AVAR Agreement, the Company is required to pay to Arbele Biotherapeutics $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. |
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 15 – COMMITMENTS AND CONTINCENGIES (continued)
Joint Venture – Avactis Biosciences
Inc. (continued)
Under AVAR Agreement, as amended, Arbele Biotherapeutics
shall be responsible for the following:
|
● |
Entering into a License Agreement with Avactis; and |
|
|
|
|
● |
Providing Avactis with research and development expertise pertaining to clinical laboratory medicine
when hired by Avactis. |
As of both June 30, 2022 and December 31, 2021,
the Company paid the $900,000 to Arbele Biotherapeutics as research and development fee. As of June 30, 2022, License Agreement
has not been finalized.
Line of Credit Agreement
On August 29, 2019, the Company entered into
a Line of Credit Agreement (the “Line of Credit Agreement”) providing the Company with a $20 million line of credit
(the “Line of Credit”) from Wenzhao Lu (the “Lender”), a significant shareholder and director of the Company.
The Line of Credit allows the Company to request loans thereunder and to use the proceeds of such loans for working capital and operating
expense purposes until the facility matures on December 31, 2024. The loans are unsecured and are not convertible into equity of the
Company. Loans drawn under the Line of Credit bears interest at an annual rate of 5% and each individual loan will be payable three
years from the date of issuance. The Company has a right to draw down on the line of credit and not at the discretion of the related
party Lender. The Company may, at its option, prepay any borrowings under the Line of Credit, in whole or in part at any time prior to
maturity, without premium or penalty. The Line of Credit Agreement includes customary events of default. If any such event of default
occurs, the Lender may declare all outstanding loans under the Line of Credit to be due and payable immediately. As of June 30, 2022,
$2,440,262 was outstanding under the Line of Credit. On July 25, 2022, the outstanding principal and related accrued and unpaid interest were settled
by issuance of the Company’s common stock (see Note 16 - Common Shares Issued Pursuant to Related Party Debt Settlement Agreement
and Release).
NOTE 16 – SUBSEQUENT
EVENTS
The Company evaluated subsequent events and transactions
that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, other than
as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial
statements.
Common Shares Issued for Debt Conversion
On July
25, 2022, the Company and a convertible note holder entered into a Conversion Agreement pursuant to which the convertible note holder
converted its Convertible Notes in the principal amount of $3,718,943 and unpaid interest of $9,751 into
5,736,452 shares of common stock of the Company at a per share price of $0.65.
Common Shares Issued Pursuant to Related Party
Debt Settlement Agreement and Release
On July 25, 2022, the Company and Mr. Lu entered into
and closed a Debt Settlement Agreement and Release pursuant to which the Company settled $2,440,262 debt owed under the Line of Credit
and unpaid interest of $448,331 by issuance of 4,443,990 shares of common stock, with a fair value of $2,888,593, of the Company at a
per share price of $0.65.
Unaudited Pro Forma Condensed Consolidated Balance Sheet As of June
30, 2022
On July
25, 2022, the Company and a convertible note holder entered into a Conversion Agreement pursuant to which the convertible note holder
converted its Convertible Notes in the principal amount of $3,718,943 and unpaid interest of $9,751 into
5,736,452 shares of common stock of the Company at a per share price of $0.65.
On July 25, 2022, the Company and Mr. Lu entered
into and closed a Debt Settlement Agreement and Release pursuant to which the Company settled $2,440,262 debt owed under the Line
of Credit and unpaid interest of $448,331 by issuance of 4,443,990 shares of common stock of the Company at a per share price of $0.65.
The 4,443,990 shares issued had a fair value of $2,888,593.
The unaudited pro forma
condensed consolidated balance sheet as of June 30, 2022 combines the historical unaudited condensed consolidated balance sheet as of
June 30, 2022 and the debt conversion transactions mentioned above, giving effect to the conversions as if they had been consummated on
June 30, 2022.
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE
SHEET
As of June 30, 2022
| |
| | |
Pro Forma Adjustments | | |
| |
| |
Historical | | |
Dr. | | |
Cr. | | |
Pro Forma | |
ASSETS | |
| | |
| | |
| | |
| |
| |
| | |
| | |
| | |
| |
CURRENT ASSETS: | |
| | |
| | |
| | |
| |
Cash | |
$ | 1,180,208 | | |
$ | - | | |
$ | - | | |
$ | 1,180,208 | |
Rent receivable | |
| 24,778 | | |
| - | | |
| - | | |
| 24,778 | |
Rent receivable - related party | |
| 58,500 | | |
| - | | |
| - | | |
| 58,500 | |
Deferred financing costs, net | |
| 139,170 | | |
| - | | |
| - | | |
| 139,170 | |
Prepaid expenses and other current assets | |
| 250,302 | | |
| - | | |
| - | | |
| 250,302 | |
| |
| | | |
| | | |
| | | |
| | |
Total Current Assets | |
| 1,652,958 | | |
| - | | |
| - | | |
| 1,652,958 | |
| |
| | | |
| | | |
| | | |
| | |
NON-CURRENT ASSETS: | |
| | | |
| | | |
| | | |
| | |
Rent receivable - noncurrent portion | |
| 147,964 | | |
| - | | |
| - | | |
| 147,964 | |
Deferred financing costs - noncurrent portion, net | |
| 74,937 | | |
| - | | |
| - | | |
| 74,937 | |
Deferred leasing costs | |
| 97,216 | | |
| - | | |
| - | | |
| 97,216 | |
Operating lease right-of-use assets, net | |
| 74,348 | | |
| - | | |
| - | | |
| 74,348 | |
Property and equipment, net | |
| 265,709 | | |
| - | | |
| - | | |
| 265,709 | |
Investment in real estate, net | |
| 7,444,428 | | |
| - | | |
| - | | |
| 7,444,428 | |
Equity method investment | |
| 517,442 | | |
| - | | |
| - | | |
| 517,442 | |
| |
| | | |
| | | |
| | | |
| | |
Total Non-current Assets | |
| 8,622,044 | | |
| - | | |
| - | | |
| 8,622,044 | |
| |
| | | |
| | | |
| | | |
| | |
Total Assets | |
$ | 10,275,002 | | |
$ | - | | |
$ | - | | |
$ | 10,275,002 | |
| |
| | | |
| | | |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
CURRENT LIABILITIES: | |
| | | |
| | | |
| | | |
| | |
Accounts payable | |
$ | 376,386 | | |
$ | - | | |
$ | - | | |
$ | 376,386 | |
Accrued professional fees | |
| 1,485,695 | | |
| - | | |
| - | | |
| 1,485,695 | |
Accrued research and development fees | |
| 609,222 | | |
| - | | |
| - | | |
| 609,222 | |
Accrued payroll liability and directors' compensation | |
| 374,601 | | |
| - | | |
| - | | |
| 374,601 | |
Accrued settlement of lawsuit | |
| 900,000 | | |
| - | | |
| - | | |
| 900,000 | |
Accrued liabilities and other payables | |
| 344,352 | | |
| 7,204 | | |
| - | | |
| 337,148 | |
Accrued liabilities and other payables - related parties | |
| 539,974 | | |
| 439,974 | | |
| - | | |
| 100,000 | |
Operating lease obligation | |
| 74,348 | | |
| - | | |
| - | | |
| 74,348 | |
Convertible note payable, net | |
| 492,550 | | |
| 3,718,943 | | |
| 3,226,393 | | |
| - | |
Derivative liability | |
| 2,013,300 | | |
| 2,013,300 | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Total Current Liabilities | |
| 7,210,428 | | |
| 6,179,421 | | |
| 3,226,393 | | |
| 4,257,400 | |
| |
| | | |
| | | |
| | | |
| | |
NON-CURRENT LIABILITIES: | |
| | | |
| | | |
| | | |
| | |
Accrued settlement of lawsuit - noncurrent portion | |
| 450,000 | | |
| - | | |
| - | | |
| 450,000 | |
Loan payable - related party | |
| 2,440,262 | | |
| 2,440,262 | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Total Non-current Liabilities | |
| 2,890,262 | | |
| 2,440,262 | | |
| - | | |
| 450,000 | |
| |
| | | |
| | | |
| | | |
| | |
Total Liabilities | |
| 10,100,690 | | |
| 8,619,683 | | |
| 3,226,393 | | |
| 4,707,400 | |
| |
| | | |
| | | |
| | | |
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STOCKHOLDERS' EQUITY: | |
| | | |
| | | |
| | | |
| | |
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding | |
| - | | |
| - | | |
| - | | |
| - | |
Common stock, $0.0001 par value; 490,000,000 shares authorized; 89,554,766 shares issued and 89,034,766 shares outstanding; 99,735,208 pro forma shares issued and 99,215,208 pro forma shares outstanding | |
| 8,955 | | |
| - | | |
| 1,016 | | |
| 9,971 | |
Additional paid-in capital | |
| 56,118,913 | | |
| - | | |
| 8,618,667 | | |
| 64,737,580 | |
Less: common stock held in treasury, at cost; 520,000 shares | |
| (522,500 | ) | |
| - | | |
| - | | |
| (522,500 | ) |
Accumulated deficit | |
| (55,230,886 | ) | |
| 3,226,393 | | |
| - | | |
| (58,457,279 | ) |
Statutory reserve | |
| 6,578 | | |
| - | | |
| - | | |
| 6,578 | |
Accumulated other comprehensive loss | |
| (206,748 | ) | |
| - | | |
| - | | |
| (206,748 | ) |
| |
| | | |
| | | |
| | | |
| | |
Total Stockholders' Equity | |
| 174,312 | | |
| 3,226,393 | | |
| 8,619,683 | | |
| 5,567,602 | |
| |
| | | |
| | | |
| | | |
| | |
Total Liabilities and Stockholders' Equity | |
$ | 10,275,002 | | |
$ | 11,846,076 | | |
$ | 11,846,076 | | |
$ | 10,275,002 | |
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Unaudited Pro Forma Adjustment Reflects the Following Four Transactions:
Transaction 1:
Derivative liability | |
| 2,013,300 | | |
| | |
Additional paid-in capital | |
| | | |
| 2,013,300 | |
The transaction reflects the embedded conversion
option derivative liability was reclassified to additional paid-in capital upon the related note conversion.
Transaction 2:
Interest expense | |
| 3,226,393 | | |
| | |
Discount on convertible note payable | |
| | | |
| 3,226,393 | |
To amortize the discount upon conversion.
Transaction 3:
Convertible note payable | |
| 3,718,943 | | |
| | |
Interest payable | |
| 7,204 | | |
| | |
Common stock | |
| | | |
| 573 | |
Additional paid-in capital | |
| | | |
| 3,725,574 | |
The transaction reflects the principal and unpaid
interest were converted into shares of common stock of the Company pursuant to a Conversion
Agreement.
Transaction 4:
Loan payable - related party | |
| 2,440,262 | | |
| | |
Accrued liabilities and other payables - related parties | |
| 439,974 | | |
| | |
Common stock | |
| | | |
| 443 | |
Additional paid-in capital | |
| | | |
| 2,879,793 | |
The transaction reflects debt owed under the Line of Credit and unpaid
interest were settled by issuance of shares of common stock of the Company pursuant to a Debt Settlement Agreement and Release.