|9 Months Ended|
Sep. 30, 2022
|Subsequent Events [Abstract]|
NOTE 17 – SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
In October 2022, the Company formed a wholly owned subsidiary, Avalon Laboratory Services, Inc., a Delaware company.
Cease all operations in the People’s Republic of China
In November of 2022, the Company decided to cease all operations in the People’s Republic of China with the exception of a small administrative office, Avalon Shanghai. The Company, through its Nevada Subsidiary Avactis Biosciences Inc., will continue to own Avactis Nanjing Biosciences Ltd. However, Avactis Nanjing Biosciences Ltd. only owns a patent and is not considered an operating entity. The Company does not expect nor does it plan that there will be further revenue generated from PRC operations in the foreseeable future. The impact of ceasing operations will not have a material effect on the Company’s operations.
Membership Interest Purchase Agreement
On November 7, 2022, Avalon Laboratory Services, Inc. (the “Buyer”), a wholly-owned subsidiary of Avalon GloboCare Corp. (the “Company”), entered into a Membership Interest Purchase Agreement (the “MIPA”), by and among SCBC Holdings LLC (the “Seller”), the Zoe Family Trust, and Bryan Cox and Sarah Cox as individuals (each an “Owner” and collectively, the “Owners”), and Laboratory Services MSO, LLC (“Laboratory Services MSO”), pursuant to which, subject to the terms and conditions set forth in the MIPA, the Buyer will acquire from the Seller, sixty percent (60%) of all the issued and outstanding equity interests of the Laboratory Services MSO (the “Purchased Interests”), free and clear of all liens (the “Transaction”). The consideration to be paid for the Purchased Interests consists of up to thirty-one million dollars ($31,000,000), of which (i) five million dollars ($5,000,000) was paid as a refundable prepayment at signing, (ii) ten million dollars ($10,000,000) will be paid in cash at the closing, (iii) fifteen million dollars ($15,000,000) will be paid pursuant to the issuance of 15,000 shares of the Company’s newly designated Series B Convertible Preferred Stock (the “Series B Preferred Stock”), stated value $1,000 (the “Series B Stated Value”), which Series B Preferred Stock will be convertible into shares of the Company’s common stock at a conversion price per share equal to $0.575 or an aggregate of 26,086,957 shares of the Company’s common stock, which are subject to the Lock Up Period and the restrictions on sale set forth under Item 5.03 Amendments to Articles of Incorporation or Bylaws: Change in Fiscal Year - Series B Preferred Stock - Conversion, and (iv) one million dollars ($1,000,000) will be paid on the first anniversary of the closing date (the “Anniversary Payment”). The Seller is also eligible to receive certain earnout payments upon achievement of certain operating results, which may be comprised of up to ten million dollars ($10,000,000) of which (x) five million dollars ($5,000,000) will be paid in cash and (y) five million dollars ($5,000,000) will be paid pursuant to the issuance of the number of shares of Company common stock valued at five million dollars ($5,000,000), calculated using the closing price of the Company’s common stock on December 31, 2023 (collectively, the “Earnout Payments”).
Headquartered in Costa Mesa California, Laboratory Services MSO provides a broad portfolio of diagnostic tests including drug testing, toxicology, and a broad array of test services, from general bloodwork to anatomic pathology, and urine toxicology. Specific capabilities include STAT blood testing, qualitative drug screening, genetic testing, urinary testing, sexually transmitted disease testing and more. Laboratory Services MSO has developed a premier reputation for customer service and fast turnaround times in the industry. Laboratory Services MSO is the parent company of Laboratory Services, LLC, a Wyoming limited liability company and Laboratory Services DME, LLC, a Delaware limited liability company.
The board of directors of the Company and the managing member of the Buyer have approved the MIPA and certain ancillary documents related to the Purchased Interests of Laboratory Services MSO, as discussed above. The MIPA contains customary representations and warranties and covenants. The Anniversary Payment and the Earnout Payments will be available to compensate the Buyer for certain losses it may incur as a result of any breach of the representations, warranties or covenants of the Seller and Laboratory Services MSO and for post-closing working capital adjustments.
In connection with the closing of the Transaction, Sarah Cox will become the Chief Operating Officer of the Company, replacing Meng Li, who will continue to serve as a Chief Operating Officer of Avalon (Shanghai) Healthcare Technology Co., Ltd, a subsidiary of the Company. In addition, Ms. Cox will be appointed as a director of the Company and Ms. Li will resign as a director of the Company. Ms. Cox, age 46, has continuously served as the Chief Executive Officer of Laboratory Services MSO for the past five years. Ms. Cox co-founded Laboratory Services MSO in 2017. Ms. Cox earned her undergraduate degree from the University of Deakin, in Australia where she studied business and received a degree in financial planning. At the closing of the Transaction, Ms. Cox and the Company will enter into an employment agreement providing for an annual salary of three hundred and fifty thousand dollars ($350,000) and other customary compensation.
The closing of the Transaction is subject to customary conditions to closing, including completion of financing for the remainder of the cash purchase price. The transaction is expected to close in 30 days, subject to a 90 day right of extension by the Company.
In conjunction with the Transaction, on November 7, 2022, the Company conducted a private placement offering (the “Private Placement”) of 5,000 shares of its newly designated Series A Convertible Preferred Stock (the “Series A Preferred Stock”), stated value $1,000, and entered into a securities purchase agreement (the “Securities Purchase Agreement”), with an accredited investor named therein (the “Investor”), pursuant to which the Company sold to the Investor 5,000 shares of its Series A Preferred Stock for gross proceeds of $5,000,000. The Series A Preferred Stock is convertible into shares of the Company’s common stock at a conversion price per share equal to the greater of (i) one dollar ($1.00), and (ii) ninety percent (90%) of the closing price of the Company’s common stock on the Nasdaq Stock Market (“Nasdaq”) on the day prior to receipt of the conversion notice from the Investor, subject to adjustment for stock splits and similar matters. The Company intends to complete the financing for the Transaction through the sale and issuance of an additional 10,000 shares of the Series A Preferred Stock.
The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef