Commitments and Contincengies
|9 Months Ended|
Sep. 30, 2019
|Commitments and Contingencies Disclosure [Abstract]|
|COMMITMENTS AND CONTINCENGIES||
NOTE 16 – COMMITMENTS AND CONTINCENGIES
Beijing Genexosome Beijing Office Lease
In March 2019, Beijing Genexosome signed an agreement to lease its office space under operating lease. Pursuant to the signed lease, the annual rent is RMB 7,000 (approximately $1,000). The term of this lease is one year commencing on March 15, 2019 and expires on March 14, 2020. For the three and nine months ended September 30, 2019, rent expense related to the lease amounted to $251and $552, respectively.
Future minimum rental payment required under this operating lease is as follows:
Avalon Shanghai Office Lease
On January 19, 2017, Avalon Shanghai entered into a lease for office space in Beijing, China, with a third party (the "Beijing Office Lease"). Pursuant to the Beijing Office Lease, the monthly rent is RMB 50,586 (approximately $7,000) with a required security deposit of RMB 164,764 (approximately $23,000). In addition, Avalon Shanghai needs to pay monthly maintenance fees of RMB 4,336 (approximately $600). The term of the Beijing Office Lease is 26 months commencing on January 1, 2017 and expired on February 28, 2019 with two months of free rent in the months of December 2017 and February 2019. On December 27, 2018, Avalon Shanghai signed an extension for the lease with expiration date of February 29, 2020. For the three months ended September 30, 2019 and 2018, rent expense and maintenance fees related to the Beijing Office Lease amounted to approximately $26,000 and $20,000, respectively. For the nine months ended September 30, 2019 and 2018, rent expense and maintenance fees related to the Beijing Office Lease amounted to approximately $68,000 and $69,000, respectively.
Future minimum rental payment required under the Beijing Office Lease is as follows:
Insurance Premium Financing Agreement
On July 9, 2019, the Company entered into a financing agreement, providing for the issuance of a loan in the principal amount of $206,172. The term of the loan is for a period of 12 months from the execution of the agreement. The annual interest rate for the loan is 6.29%. All of financed amount is used to pay for Directors & Officers Insurance premium. At September 30, 2019, the outstanding principal balance of the loan was $169,563, which was included in the accrued liabilities and other payables on the accompanying condensed consolidated balance sheets.
Equity Investment Commitment
On May 29, 2018, Avalon Shanghai entered into a Joint Venture Agreement with Jiangsu Unicorn Biological Technology Co., Ltd. ("Unicorn"), pursuant to which a company named Epicon Biotech Co., Ltd. ("Epicon") was formed on August 14, 2018. Epicon is owned 60% by Unicorn and 40% by Avalon Shanghai. Within two years of execution of the Joint Venture Agreement, Unicorn shall invest cash into Epicon in an amount not less than RMB 8,000,000 (approximately $1.1 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 $1.4 million). Epicon is focused on cell preparation, third party testing, biological sample repository for commercial and scientific research purposes and the clinical transformation of scientific achievements. As of September 30, 2019, Avalon Shanghai has contributed RMB 3,800,000 (approximately $0.5 million) that was included in equity method investment on the accompanying condensed consolidated balance sheets. Avalon Shanghai intends to use its present working capital together with loans, borrowings, and equity raises to fund the project cost.
Joint Venture – AVAR BioTherapeutics (China) Co. Ltd.
On October 23, 2018, Avactis Biosciences, Inc. ("Avactis"), a wholly-owned subsidiary of the Company, and Arbele Limited ("Arbele") agreed to the establishment of AVAR BioTherapeutics (China) Co. Ltd. ("AVAR"), a Sino-foreign equity joint venture, pursuant to an Equity Joint Venture Agreement (the "AVAR Agreement"), which will be owned 60% by Avactis and 40% by Arbele. The purpose and business scope of the Joint Venture is to research, develop, produce, sell, distribute and generally commercialize CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy in China. Avactis is required to contribute $10 million (or equivalent in RMB) in cash and/or services, which shall be contributed in tranches based on milestones to be determined jointly by AVAR and Avactis in writing subject to Avactis' cash reserves. Within 30 days, Arbele shall make a contribution of $6.66 million in the form of entering into a License Agreement with AVAR granting AVAR with an exclusive right and license in China to its technology and intellectual property pertaining to CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy technology and any additional technology developed in the future with terms and conditions to be mutually agreed upon Avactis and AVAR and services.
In addition, Avactis is responsible for:
Under AVAR Agreement, Arbele shall be responsible for the following:
As of the date of this report, Avactis has paid $600,000 to Arbele as research and development fee, AVAR is in process of being established and the License Agreement has not been finalized.
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 "Daniel" 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.
The entire disclosure for commitments and contingencies.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef