Quarterly report pursuant to Section 13 or 15(d)

Related Party Transactions

v3.20.2
Related Party Transactions
6 Months Ended
Jun. 30, 2020
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 7 – RELATED PARTY TRANSACTIONS

 

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

 

During the three and six months ended June 30, 2020 and 2019, medical related consulting services revenue from related parties was as follows:

 

    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2020     2019     2020     2019  
Medical related consulting services provided to:                        
Beijing Daopei *   $      -     $ 41,648     $      -     $ 55,908  
Shanghai Daopei *     -       14,180       -       14,180  
Hebei Daopei *     -       55,606       -       55,606  
    $ -     $ 111,434     $ -     $ 125,694  

 

* Beijing Daopei, Shanghai Daopei, and Hebei Daopei are subsidiaries of an entity whose chairman is Wenzhao Lu, the largest shareholder of the Company.

 

Accounts receivable – related party at June 30, 2020 and December 31, 2019 amounted to $0 and $215,418, respectively, and no allowance for doubtful accounts is deemed to be required on accounts receivable – related party at June 30, 2020 and December 31, 2019.

 

Accrued Liabilities and Other Payables – Related Parties

 

As of June 30, 2020 and December 31, 2019, the Company owed David Jin, its shareholder, chief executive officer, president and board member, $29,410 and $24,254, 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 June 30, 2020 and December 31, 2019, the Company owed Meng Li, its shareholder and chief operating officer, $0 and $10,473, 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 June 30, 2020 and December 31, 2019, the Company owed Luisa Ingargiola, its chief financial officer, $4,403 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 June 30, 2020 and December 31, 2019, the Company owed Yu Zhou, director and former co-chief executive officer and 40% owner of Genexosome, of $3,121 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.

 

The Company acquired Beijing Genexosome for a cash payment of $450,000. As of June 30, 2020 and December 31, 2019, 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 June 30, 2020 and December 31, 2019, 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 $133,832 and $49,194, respectively, and have been included in accrued liabilities and other payables – related parties on the accompanying 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. The Company repaid principal of $410,000 and $200,000 in the third quarter of 2019 and second quarter of 2020, respectively. As of June 30, 2020 and December 31, 2019, the outstanding principal balance was $390,000 and $590,000, 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. As of June 30, 2020 and December 31, 2019, $2,900,000 and $2,600,000 was outstanding under the Line of Credit, respectively.

 

For the three months ended June 30, 2020 and 2019, the interest expense related to above borrowings amounted to $42,469 and $12,639, respectively, and has been included in interest expense – related party on the accompanying unaudited condensed consolidated statements of operations and comprehensive loss. For the six months ended June 30, 2020 and 2019, the interest expense related to above borrowings amounted to $84,638 and $14,583, respectively, and has been included in interest expense – related party on the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.

 

As of June 30, 2020 and December 31, 2019, the related accrued and unpaid interest for above borrowings was $133,832 and $49,194, respectively, and has been included in accrued liabilities and other payables – related parties on the accompanying consolidated balance sheets.

 

Common Shares Sold to Related Party

 

On April 1, 2020, the Company sold 645,161 shares of its common stock to WLM Limited ("WLM"), an entity owned by Wenzhao Lu, Chairman of the Board of Directors of the Company, at a price per share of $1.55 for an aggregate purchase price of $1,000,000 (See Note 8 – Common Shares Sold for Cash).

 

Office Space from Related Party

 

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