Annual report pursuant to Section 13 and 15(d)

Related Party Transactions

v3.22.1
Related Party Transactions
12 Months Ended
Dec. 31, 2021
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

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 year ended December 31, 2021, the related party rental revenue amounted to $33,600, and has been included in real property rental on the accompanying consolidated statements of operations and comprehensive loss. As of December 31, 2021, the related party rent receivable totaled $33,600 and no allowance for doubtful accounts was deemed to be required on rent receivable – related party at December 31, 2021.

 

Medical Related Consulting Services Revenue from Related Parties

 

During the years ended December 31, 2021 and 2020, medical related consulting services revenue from related parties was as follows:

 

    Years Ended
December 31,
 
    2021     2020  
Medical related consulting services provided to:            
Hebei Daopei *   $ 187,412     $
-
 
Shanghai Daopei *    
-
      170,908  
    $ 187,412     $ 170,908  

 

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

 

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 $216,169 and $282,582 for the years ended December 31, 2021 and 2020, respectively, which have been included in professional fees on the accompanying 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 December 31, 2021 and 2020, 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 consolidated balance sheets.

 

As of December 31, 2021 and 2020, 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 $368,433 and $167,956, 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. 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 and $200,000 in the third quarter of 2019 and second quarter of 2020, respectively. As of December 31, 2021 and 2020, the outstanding principal balance was $390,000.

 

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.

 

In the years ended December 31, 2021 and 2020, activity recorded for the Line of Credit is summarized in the following table:

 

Outstanding principal under the Line of Credit at January 1, 2020   $ 2,600,000  
Draw down from Line of Credit     600,000  
Outstanding principal under the Line of Credit at December 31, 2020     3,200,000  
Draw down from Line of Credit     2,550,262  
Settlement pursuant to Debt Settlement Agreement and Release *     (3,000,000 )
Outstanding principal under the Line of Credit at December 31, 2021   $ 2,750,262  

 

* On December 21, 2021, the Company and Mr. Lu entered into and closed a Debt Settlement Agreement and Release pursuant to which the $3.0 million debt was settled by issuance of the Company’s 2,400,000 shares of common stock (See Note 11 – Common Shares Issued Pursuant to for Related Party Debt Settlement Agreement and Release). The 2.4 million shares issued had a fair value of $3 million.

 

For the years ended December 31, 2021 and 2020, the interest expense related to above borrowings amounted to $200,477 and $168,762, respectively, and has been included in interest expense – related party on the accompanying consolidated statements of operations and comprehensive loss.

 

As of December 31, 2021 and 2020, the related accrued and unpaid interest for above borrowings was $368,433 and $167,956, 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, the fair market value on transaction date, for an aggregate purchase price of $1,000,000 (See Note 11 – Common Shares Sold for Cash).