Annual report pursuant to Section 13 and 15(d)

Statutory Reserve and Restricted Net Assets

v3.22.1
Statutory Reserve and Restricted Net Assets
12 Months Ended
Dec. 31, 2021
Statutory Reserve [Abstract]  
STATUTORY RESERVE AND RESTRICTED NET ASSETS

NOTE 12 - STATUTORY RESERVE AND RESTRICTED NET ASSETS

  

The Company’s PRC subsidiaries, Avalon Shanghai and Beijing Genexosome, are restricted in their ability to transfer a portion of their net assets 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.

 

Relevant PRC laws and regulations restrict the Company’s PRC subsidiaries, Avalon Shanghai and Beijing Genexosome, from transferring a portion of their 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 entities’ accumulated profits may be distributed as dividends to the Company’s shareholders without the consent of a third party.

 

The Company did not make any appropriation to statutory reserve for Avalon Shanghai and Beijing Genexosome during the years ended December 31, 2021 and 2020 as they incurred net losses in these periods. As of December 31, 2021 and 2020, the restricted amounts as determined pursuant to PRC statutory laws totaled $6,578 and $6,578, respectively, and total restricted net assets amounted to $783,984 and $683,984, respectively.