Annual report pursuant to Section 13 and 15(d)

Related Party Transactions

v3.20.1
Related Party Transactions
12 Months Ended
Dec. 31, 2019
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 11 – RELATED PARTY TRANSACTIONS

 

Medical Related Consulting Services Revenue from Related Parties and Accounts Receivable – Related Party

 

During the years ended December 31, 2019 and 2018, medical related consulting services revenue from related parties was as follows:

 

    Years Ended December 31,  
    2019     2018  
Medical related consulting services provided to:            
Beijing Daopei (1)   $ 54,909     $ 269,287  
Shanghai Daopei (2)     13,926       -  
Hebei Daopei (3)     286,709       -  
    $ 355,544     $ 269,287  

 

(1) Beijing Daopei is a subsidiary of an entity whose chairman is Wenzhao Lu, the largest shareholder of the Company.
(2) Shanghai Daopei is a subsidiary of an entity whose chairman is Wenzhao Lu, the largest shareholder of the Company.
(3) Hebei Daopei is a subsidiary of an entity whose chairman is Wenzhao Lu, the largest shareholder of the Company.

 

Accounts receivable – related party at December 31, 2019 and 2018 amounted to $215,418 and $0, respectively, and no allowance for doubtful accounts is deemed to be required on accounts receivable – related party at December 31, 2019 and 2018.

 

Prepaid Expenses – Related Parties

 

As of December 31, 2019 and 2018, the Company made a prepayment of $0 and $1,897, respectively, to David Jin, its shareholder, chief executive officer, president and board member, for business travel reimbursement, which has been included in prepaid expenses – related parties on the accompanying consolidated balance sheets.

 

As of December 31, 2019 and 2018, the Company made a prepayment of $0 and $32,293, respectively, to Meng Li, its shareholder and chief operating officer, for business travel reimbursement, which has been included in prepaid expenses – related parties on the accompanying consolidated balance sheets.

 

Accrued Liabilities and Other Payables – Related Parties

 

As of December 31, 2019 and 2018, the advance from customer – related party amounted to $0 and $14,829, respectively, which represents a prepayment received from our related party, Beijing Daopei, for medical related consulting services. When the services are performed, the amount recorded as an advance from customer – related party is recognized as revenue.

 

As of December 31, 2019 and 2018, the Company owed David Jin, its shareholder, chief executive officer, president and board member, $24,254 and $0, respectively, for travel and other miscellaneous reimbursements, which have been included in accrued liabilities and other payables – related parties on the accompanying consolidated balance sheets.

 

As of December 31, 2019 and 2018, the Company owed Meng Li, its shareholder and chief operating officer, $10,473 and $0, respectively, for travel and other miscellaneous reimbursements, which have been included in accrued liabilities and other payables – related parties on the accompanying consolidated balance sheets.

 

At December 31, 2019 and 2018, the Company owed Yu Zhou, director and former co-chief executive officer and 40% owner of Genexosome, of $3,121 and $0, respectively, for accrued travel and other miscellaneous reimbursements, which have been included in accrued liabilities and other payables – related parties on the accompanying consolidated balance sheets.

 

In connection with the acquisition discussed elsewhere in this report, the Company acquired Beijing Genexosome for a cash payment of $450,000. As of December 31, 2019 and 2018, the unpaid acquisition consideration of $100,000, was payable to Yu Zhou, 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 consolidated balance sheets.

 

As of December 31, 2019 and 2018, the accrued and unpaid interest related to borrowings from Wenzhao Lu, the Company's largest shareholder and chairman of the Board of Directors, amounted to $49,194 and $0, respectively, and have been included in accrued liabilities and other payables – related parties on the accompanying consolidated balance sheets.

 

Real Property Management Agreement

 

The Company pays a company, which is controlled by Wenzhao Lu, the Company's largest shareholder and chairman of the Board of Directors, for the management of its commercial real property located in New Jersey. The property management agreement commenced on May 5, 2017 and expired in March 2019. For the years ended December 31, 2019 and 2018, the management fee related to the property management agreement amounted to $23,334 and $65,004, respectively.

 

Borrowings from Related Party

 

Promissory Note

 

On March 18, 2019, the Company issued Wenzhao Lu, the Company's largest shareholder and Chairman of the Board of Directors, a Promissory Note in the principal amount of $1,000,000 ("Promissory Note") in consideration of cash in the amount of $1,000,000. The Promissory Note accrues interest at the rate of 5% per annum and matures March 19, 2022. The Company repaid principal of $410,000 in the third quarter of 2019. As of December 31, 2019, the outstanding principal balance was $590,000.

 

Line of Credit

 

On August 29, 2019, the Company entered into a Line of Credit Agreement (the "Line of Credit Agreement") providing the Company with a $20 million line of credit (the "Line of Credit") from Wenzhao Lu (the "Lender"), the largest shareholder and Chairman of the Board of Directors of the Company. The Line of Credit allows the Company to request loans thereunder and to use the proceeds of such loans for working capital and operating expense purposes until the facility matures on December 31, 2024. The loans are unsecured and are not convertible into equity of the Company. Loans drawn under the Line of Credit bears interest at an annual rate of 5% and each individual loan will be payable three years from the date of issuance. The Company has a right to draw down on the line of credit and not at the discretion of the related party Lender. The Company may, at its option, prepay any borrowings under the Line of Credit, in whole or in part at any time prior to maturity, without premium or penalty. The Line of Credit Agreement includes customary events of default. If any such event of default occurs, the Lender may declare all outstanding loans under the Line of Credit to be due and payable immediately. Under the Line of Credit, as of December 31, 2019, the Company received loan from the Lender of $2,600,000.

 

For the year ended December 31, 2019, the interest expense related to above borrowings amounted to $49,194 and has been included in interest expense – related party on the accompanying consolidated statements of operations and comprehensive loss.

 

As of December 31, 2019, the related accrued and unpaid interest for above borrowings was $49,194 and has been included in accrued liabilities and other payables – related parties on the accompanying consolidated balance sheets.

 

Office Space from Related Party

 

Beijing Genexosome uses office space of a related party, free of rent, which is considered immaterial.