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What changed in Avalon GloboCare Corp.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Avalon GloboCare Corp.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+299 added−376 removedSource: 10-K (2024-04-15) vs 10-K (2023-03-30)

Top changes in Avalon GloboCare Corp.'s 2023 10-K

299 paragraphs added · 376 removed · 205 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

36 edited+18 added−43 removed82 unchanged
Biggest changeFurther, Avalon Laboratory Services paid SCBC Holdings LLC $21,000,000 for all the issued and outstanding equity interests of Laboratory Services, which comprised of (i) $9,000,000 in cash, (ii) $11,000,000 pursuant to the issuance of the Series B Preferred Stock, and (iii) a $1,000,000 cash payment on February 9, 2024.
Biggest changeFurther, Avalon Laboratory Services paid SCBC Holdings LLC $20,666,667 for 40% of all the issued and outstanding equity interests of Lab Services MSO, which comprised of (i) $9,000,000 in cash, (ii) $11,000,000 pursuant to the issuance of the Series B Preferred Stock, and (iii) a $666,667 cash payment on February 29, 2024. 1 ● Lab Services MSO is focused on delivering high quality services related to toxicology and wellness testing and 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.
As part of the consideration for the Laboratory Services MSO Acquisition, we issued shares of our newly designated Series B Convertible Stock, stated value $1,000 per share (“the Series B Preferred Stock”).
As part of the consideration for the Laboratory Services MSO Acquisition, we issued shares of our newly designated Series B Convertible Preferred Stock, stated value $1,000 per share (“the Series B Preferred Stock”).
None of our employees are represented by a collective bargaining arrangement. Government Regulation Overview The healthcare industry in the U.S. is highly regulated and subject to changing political, legislative, regulatory, and other influences. Further, the healthcare industry is currently undergoing rapid change. We are uncertain how, when or in what context these new changes will be adopted or implemented.
None of our employees are represented by a collective bargaining arrangement. 6 Government Regulation Overview The healthcare industry in the U.S. is highly regulated and subject to changing political, legislative, regulatory, and other influences. Further, the healthcare industry is currently undergoing rapid change. We are uncertain how, when or in what context these new changes will be adopted or implemented.
Our failure to anticipate accurately the application of these laws and regulations, or our other failure to comply, could create liability for us, result in adverse publicity, and otherwise negatively affect our business. 6 Holding Foreign Companies Accountable Act Compliance The Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on December 18, 2020.
Our failure to anticipate accurately the application of these laws and regulations, or our other failure to comply, could create liability for us, result in adverse publicity, and otherwise negatively affect our business. Holding Foreign Companies Accountable Act Compliance The Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on December 18, 2020.
Penalties may apply in some cases when such metrics are not submitted accurately and timely. 12 Additionally, the federal Physician Payments Sunshine Act, or the Sunshine Act, within the ACA, and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) report annually to CMS information related to certain payments or other transfers of value made or distributed to physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members.
Penalties may apply in some cases when such metrics are not submitted accurately and timely. 11 Additionally, the federal Physician Payments Sunshine Act, or the Sunshine Act, within the ACA, and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) report annually to CMS information related to certain payments or other transfers of value made or distributed to physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members.
Clinical The development and commercialization of new drug products is highly competitive. We expect that we will face significant competition from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide with respect to our product candidates that we may seek to develop or commercialize in the future.
Clinical The development and commercialization of new drug products is highly competitive. We expect that we will continue to face significant competition from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide with respect to our product candidates that we may seek to develop or commercialize in the future.
In addition, the ACA codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act, or FCA. 11 The federal false claims and civil monetary penalty laws, including the FCA, which imposes significant penalties and can be enforced by private citizens through civil qui tam actions, prohibit any person or entity from, among other things, knowingly presenting, or causing to be presented, a false or fraudulent claim for payment to, or approval by, the federal healthcare programs, including Medicare and Medicaid, or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government.
In addition, the ACA codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act, or FCA. 10 The federal false claims and civil monetary penalty laws, including the FCA, which imposes significant penalties and can be enforced by private citizens through civil qui tam actions, prohibit any person or entity from, among other things, knowingly presenting, or causing to be presented, a false or fraudulent claim for payment to, or approval by, the federal healthcare programs, including Medicare and Medicaid, or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government.
Under the Amended MIPA, we acquired from SCBC Holdings LLC through our subsidiary Avalon Laboratory Services, forty percent (40%) of all the issued and outstanding equity interests of Laboratory Services, free and clear of all liens (the “Laboratory Services MSO Acquisition”).
Under the Amended MIPA, we acquired from SCBC Holdings LLC through our subsidiary Avalon Laboratory Services, forty percent (40%) of all the issued and outstanding equity interests of Lab Services MSO, free and clear of all liens (the “Laboratory Services MSO Acquisition”).
Markets Laboratory Services Through our membership interest in Laboratory Services, we are focused on delivering high quality services related to toxicology and wellness testing. We use fast, accurate, and efficient equipment to provide practitioners with the tools to quickly determine if a patient is following their designated treatment plan.
Markets Laboratory Services Through our membership interest in Lab Services MSO, we are focused on delivering high quality services related to toxicology and wellness testing. We use fast, accurate, and efficient equipment to provide practitioners with the tools to quickly determine if a patient is following their designated treatment plan.
Fast Track designation, Breakthrough Therapy designation, priority review and accelerated approval do not change the standards for approval but may expedite the development or approval process. 10 Regenerative Medicine Advanced Therapies (RMAT) Designation The FDA has established a Regenerative Medicine Advanced Therapy, or RMAT, designation as part of its implementation of the 21st Century Cures Act, or Cures Act.
Fast Track designation, Breakthrough Therapy designation, priority review and accelerated approval do not change the standards for approval but may expedite the development or approval process. 9 Regenerative Medicine Advanced Therapies (RMAT) Designation The FDA has established a Regenerative Medicine Advanced Therapy, or RMAT, designation as part of its implementation of the 21st Century Cures Act, or Cures Act.
Any approval required from the FDA might not be obtained on a timely basis, if at all. 9 Among the conditions for an NDA or BLA approval is the requirement that the manufacturing operations conform on an ongoing basis with cGMPs.
Any approval required from the FDA might not be obtained on a timely basis, if at all. 8 Among the conditions for an NDA or BLA approval is the requirement that the manufacturing operations conform on an ongoing basis with cGMPs.
On our website, investors can obtain, free of charge, a copy of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, our Code of Conduct and Business Ethics, including disclosure related to any amendments or waivers thereto, other reports and any amendments thereto filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934, as amended, as soon as reasonably practicable after we file such material electronically with, or furnish it to, the Securities and Exchange Commission, or the SEC.
On our website, investors can obtain, free of charge, a copy of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, our Code of Conduct and Business Ethics, including disclosure related to any amendments or waivers thereto, other reports and any amendments thereto filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we file such material electronically with, or furnish it to, the Securities and Exchange Commission (the “SEC”).
China Operations Due to the winding down of the medical related consulting services segment, in November 2022, we decided to cease all operations in the People’s Republic of China (the “PRC”) with the exception of a small administrative office, in Shanghai.
China Operations Due to the winding down of the medical related consulting services segment, in November 2022, we decided to cease all operations in the People’s Republic of China (the “PRC”) with the exception of a small administrative office, in Beijing.
Through Laboratory Services, we use fast, accurate, and efficient equipment to provide practitioners with the tools to quickly determine if a patient is following their designated treatment plan. In most instances, we are able to provide a practitioner with qualitative drug class results the same day the sample is received.
Through Lab Services MSO, we use fast, accurate, and efficient equipment to provide practitioners with the tools to quickly determine if a patient is following their designated treatment plan. In most instances, we are able to provide a practitioner with qualitative drug class results the same day a sample is received.
It is centrally located and maintains high occupancy. There are other commercial properties in the vicinity that offer similar amenities. However, premier executive offices are limited and as such we expect to continue to maintain high occupancy in the near term. Employees As of March 30, 2023, we employed six employees, five of which are full time employees.
It is centrally located and maintains high occupancy. There are other commercial properties in the vicinity that offer similar amenities. However, premier executive offices are limited and as such we expect to continue to maintain high occupancy in the near term. Employees As of March 29, 2024, we employed five employees, four of which are full time employees.
On February 9, 2023, we entered into and closed an Amended and Restated Membership Interest Purchase Agreement (the “Amended MIPA”), by and among Avalon Laboratory Services, Inc., a wholly-owned subsidiary of us (“Avalon Laboratory Services”), SCBC Holdings LLC, Laboratory Services, the Zoe Family Trust, Bryan Cox and Sarah Cox.
On February 9, 2023, we entered into and closed an Amended and Restated Membership Interest Purchase Agreement (the “Amended MIPA”), by and among Avalon Laboratory Services, Inc., our wholly owned subsidiary (“Avalon Laboratory Services”), SCBC Holdings LLC, Laboratory Services MSO, LLC (“Lab Services MSO”), the Zoe Family Trust, Bryan Cox and Sarah Cox.
Strategic Development Through our wholly owned subsidiary Lab Services, we plan to embark in a rollup acquisition strategy of small to medium size laboratories accretive to our strategy and complimentary to our membership interest in Lab Services.
Strategic Development Through our wholly owned subsidiary Avalon Laboratory Services and through our membership interest in Lab Services MSO, we plan to execute on a rollup acquisition strategy of small to medium size laboratories accretive to our strategy and complimentary to our membership interest in Lab Services MSO.
In the United States, the process to receiving such approval is long, expensive and risky, and includes the following steps: ● pre-clinical laboratory tests, animal studies, and formulation studies; ● submission to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may begin; ● adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug for each indication; ● submission to the FDA of an NDA or BLA; ● satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance with current good manufacturing practices, or cGMPs; ● a potential FDA audit of the preclinical and clinical trial sites that generated the data in support of the NDA or BLA; ● the ability to obtain clearance or approval of companion diagnostic tests, if required, on a timely basis, or at all; and ● FDA review and approval of the NDA or BLA. 8 Regulation by U.S. and foreign governmental authorities is a significant factor affecting our ability to commercialize any of our products, as well as the timing of such commercialization and our ongoing research and development activities.
In the United States, the process to receiving such approval is long, expensive and risky, and includes the following steps: ● pre-clinical laboratory tests, animal studies, and formulation studies; ● submission to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may begin; ● adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug for each indication; ● submission to the FDA of an NDA or BLA; ● satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance with current good manufacturing practices, or cGMPs; 7 ● a potential FDA audit of the preclinical and clinical trial sites that generated the data in support of the NDA or BLA; ● the ability to obtain clearance or approval of companion diagnostic tests, if required, on a timely basis, or at all; and ● FDA review and approval of the NDA or BLA.
Specific capabilities include STAT blood testing, qualitative drug screening, genetic testing, urinary testing, sexually transmitted disease testing and more. The panels that we test for are thyroid panel, comprehensive metabolic panel, kidney profile, liver function tests, and other individual tests.
Specific capabilities include STAT blood testing, qualitative drug screening, genetic testing, urinary testing, and sexually transmitted disease testing. Lab Services MSO tests for the thyroid panel, comprehensive metabolic panel, kidney profile, liver function tests, and other individual tests.
A significant portion of clinical testing is likely to continue to be performed by independent delivery networks (including hospitals and hospital health systems) (“IDNs”), which generally have affiliations with community clinicians and may have more, or more convenient, locations in a market.
In addition, we believe that consolidation in the diagnostic information services industry will continue. A significant portion of clinical testing is likely to continue to be performed by independent delivery networks (including hospitals and hospital health systems) (“IDNs”), which generally have affiliations with community clinicians and may have more, or more convenient, locations in a particular market.
Our competitors may succeed in developing, acquiring or licensing technologies and drug products that are more effective, have fewer or more tolerable side effects or are less costly than any product candidates that we are currently developing or that we may develop, which could render our product candidates obsolete and noncompetitive.
Our competitors may succeed in developing, acquiring or licensing technologies and drug products that are more effective, have fewer or more tolerable side effects or are less costly than any product candidates that we are currently developing or that we may develop, which could render our product candidates obsolete and noncompetitive. 5 Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop.
To this end, we require all of our employees, consultants, advisors and other contractors to enter into confidentiality agreements that prohibit the disclosure and use of confidential information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions relevant to our technologies and important to our business. 4 Competition Laboratory Services While there has been consolidation in the diagnostic information services industry in recent years, the laboratory testing industry is fragmented and highly competitive.
To this end, we require all of our employees, consultants, advisors and other contractors to enter into confidentiality agreements that prohibit the disclosure and use of confidential information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions relevant to our technologies and important to our business.
The commercialization of drug products requires regulatory approval by governmental agencies prior to commercialization. Various laws and regulations govern or influence the research and development, non-clinical and clinical testing, manufacturing, processing, packing, validation, safety, labeling, storage, record keeping, registration, listing, distribution, advertising, sale, marketing and post-marketing commitments of our products.
Various laws and regulations govern or influence the research and development, non-clinical and clinical testing, manufacturing, processing, packing, validation, safety, labeling, storage, record keeping, registration, listing, distribution, advertising, sale, marketing and post-marketing commitments of our products. The lengthy process of seeking these approvals, and the subsequent compliance with applicable laws and regulations, require expending substantial resources.
There also has been a trend among physician practices to establish their own histology laboratory capabilities and/or bring pathologists into their practices, thereby reducing referrals from these practices and increasing the competitive position of these practices. In addition, we believe that consolidation in the diagnostic information services industry will continue.
In addition, we compete with many smaller regional and local commercial clinical laboratories, specialized advanced laboratories and providers of consumer-initiated testing. There also has been a trend among physician practices to establish their own histology laboratory capabilities and/or bring pathologists into their practices, thereby reducing referrals from these practices and increasing the competitive position of these practices.
Our competitors also may obtain FDA or other marketing approval for their products before we are able to obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. 5 General Many of our existing and potential future competitors have significantly greater financial resources and expertise in lab services and operations, research and development, manufacturing, preclinical testing, conducting clinical studies, obtaining marketing approvals and marketing approved products than we do.
General Many of our existing and potential future competitors have significantly greater financial resources and expertise in lab services and operations, research and development, manufacturing, preclinical testing, conducting clinical studies, obtaining marketing approvals and marketing approved products than we do.
Intellectual Property Our goal is to obtain, maintain and enforce patent rights for our products, formulations, processes, methods of use and other proprietary technologies, preserve our trade secrets, and operate without infringing on the proprietary rights of other parties, both in the United States and abroad.
We also intend to pursue the acquisition and development of healthcare related technologies for cell related diagnostics and therapeutics through acquisition, licensing or joint ventures with major universities and biotech companies seeking laboratory or medical device acquisitions. 4 Intellectual Property Our goal is to obtain, maintain and enforce patent rights for our products, formulations, processes, methods of use and other proprietary technologies, preserve our trade secrets, and operate without infringing on the proprietary rights of other parties, both in the United States and abroad.
We, through our Nevada Subsidiary Avactis Biosciences Inc., will continue to own Avactis Nanjing Biosciences Ltd., which only owns a patent and is not considered an operating entity. In addition, we reconstituted our board in December 2022 at our annual meeting of stockholders and our directors who were citizens of China did not stand for re-election at our annual meeting.
We, through our Nevada Subsidiary Avactis Biosciences Inc., will continue to own Avactis Nanjing Biosciences Ltd., which only owns a patent and is not considered an operating entity.
Starting in 2023, in addition to the rental, we also plan to generate income through our membership interest in Lab Services MSO. Corporate and Available Information We are incorporated in Delaware. Our website is located at http://www.avalon-globocare.com.
Corporate and Available Information We are incorporated in Delaware. Our website is located at http://www.avalon-globocare.com.
We primarily compete with three types of clinical testing providers: commercial clinical laboratories IDN-affiliated laboratories and physician-office laboratories. Our largest commercial clinical laboratory competitors are Quest Diagnostic Laboratories and Laboratory Corporation of America. In addition, we compete with many smaller regional and local commercial clinical laboratories, specialized advanced laboratories and providers of consumer-initiated testing.
Competition Laboratory Services While there has been consolidation in the diagnostic information services industry in recent years, the laboratory testing industry is fragmented and highly competitive. We primarily compete with three types of clinical testing providers: commercial clinical laboratories IDN-affiliated laboratories and physician-office laboratories. Our largest commercial clinical laboratory competitors are Quest Diagnostic Laboratories and Laboratory Corporation of America.
In addition, through our membership interest in Lab Services, we plan to generate revenue from toxicology and wellness laboratory testing.
Our senior management will be seeking opportunities for joint ventures, strategic relationships and acquisitions in consulting, biomedical innovations, laboratory, and medical device companies. In addition, through our membership interest in Lab Services MSO, we plan to generate revenue from toxicology and wellness laboratory testing.
We provide an extensive chemistry test menu that gives physicians the information to better treat their patients and maintain their overall wellness and have developed a premier reputation for customer service and fast turnaround times in the industry.
Lab Services MSO provides a menu of extensive chemistry tests that physicians can use to obtain information to better treat their patients and maintain their overall wellness. Lab Services MSO has developed a premier reputation for customer service and fast turnaround times. ● Lab Services MSO is also focused on commercialization of genetic-based proprietary testing.
The panels that we test for are thyroid panel, comprehensive metabolic panel, kidney profile, liver function tests, and other individual tests.
The panels that we test for are thyroid panel, comprehensive metabolic panel, kidney profile, liver function tests, and other individual tests. We are currently offering our laboratory services in California, Texas and Arizona. Breathalyzer System (KetoAir) Our current area of focus for the launch of the KetoAir is within the United States (“US”).
Sales and Marketing We seek to develop new business through relationships driven by our senior management, which have extensive contacts throughout the healthcare system. Our senior management will be seeking opportunities for joint ventures, strategic relationships and acquisitions in consulting, biomedical innovations, laboratory, and medical device companies.
(“Avalon Lab”) Delaware October 14, 2022 100% held by Company Laboratory holding company with a 40% membership interest in Lab Services MSO 3 Sales and Marketing Laboratory Services We seek to develop new business through relationships driven by our senior management, which have extensive contacts throughout the healthcare system.
We initiated a sponsored research and co-development project with Massachusetts Institute of Technology (MIT) led by Professor Shuguang Zhang as Principal Investigator in May 2019. Using the unique QTY code protein design platform, six water-soluble variant cytokine receptors have been successfully designed and tested to show binding affinity to the respective cytokines.
Using the unique QTY code protein design platform, six water-soluble variant cytokine receptors have been successfully designed and tested to show binding affinity to the respective cytokines. We currently are focused on bringing forward the intellectual property associated with this program through joint patent submissions.
We also intend to seek opportunities to expand the operations of Lab Services, through acquisition of additional lab companies and through the opening of new lab locations. 3 Consulting Services Due to the winding down of the medical related consulting services in 2022, the Company decided to cease all operations of Avalon Shanghai and no longer has any material revenues or expenses in Avalon Shanghai.
We also intend to seek opportunities to expand the operations of Lab Services MSO and our wholly owned subsidiary, Avalon Laboratory Services, through the acquisition of additional lab companies and through the opening of new lab locations. Breathalyzer System (KetoAir) We are in the process of launching sales of the KetoAir in the US.
This property is now our corporate headquarters and contains several commercial tenants that generate revenue through rental income. Laboratory Services On February 9, 2023, we acquired membership interest in Lab Services. We anticipate generating revenue through this membership interest in the areas of toxicology and wellness testing.
We are focused on the population within the US that is using the Keto Diet approach to weight loss and diabetic management. Avalon RT 9 Properties, LLC In May 2017, we acquired commercial property located in Freehold, New Jersey. This property serves as our corporate headquarters and contains several commercial tenants that generate revenue through rental income.
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ITEM 1. BUSINESS Overview We are a clinical-stage, vertically integrated, leading CellTech bio-developer dedicated to advancing and empowering innovative and transformative immune effector cell therapy and laboratory services. Through our membership interest in Lab Services MSO (“Lab Services”), we plan to focus on precision diagnostics along with toxicology and wellness testing.
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ITEM 1. BUSINESS We are dedicated to developing and delivering innovative, transformative, precision diagnostics and clinical laboratory services. Our main strategy is to acquire ownership or license rights in precision diagnostic assets, genetic testing and clinical laboratory companies through joint ventures, share ownership structures or distribution rights.
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Through our subsidiary structure with unique integration of verticals from innovative R&D to automated bioproduction and accelerated clinical development, we are establishing a leading role in the fields of cellular immunotherapy (including CAR-T), and laboratory services.
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We plan to play a leading role in the innovation of diagnostic testing, utilizing proprietary technology to deliver precise, genetics-driven results. We have the following areas of focus: Laboratory Acquisitions We have embarked on a laboratory rollup strategy focused on forming joint ventures and acquiring laboratories that are accretive to our commercial strategy.
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Laboratory Services is focused on delivering high quality services related to toxicology and wellness testing and 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.
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The first area of focus in this area is confirmatory genetic testing during toxicology screening and genetic testing to screen for addictive propensity. Lab Services MSO plans to focus on diagnostic testing utilizing proprietary technology to deliver precise genetic driven results. ● In the third quarter of 2023, Lab Services MSO acquired Merlin Technologies, Inc., a retail medical equipment company.
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We are also focused on achieving and fostering seamless integration of unique verticals to bridge and accelerate innovative research, bio-process development, clinical programs and product commercialization.
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Research and Development We are focused on bringing forward intellectual property through joint patent filings with the Massachusetts Institute of Technology (MIT). We completed a sponsored research and co-development project with MIT, led by Professor Shuguang Zhang as Principal Investigator.
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Avalon’s upstream innovative research incl udes: ● Novel therapeutic and diagnostic targets development utilizing QTY-code protein design technology with Massachusetts Institute of Technology (MIT) including using the QTY code protein design technology for development of novel therapeutic and diagnostic targets. ● Co-development of next generation, mRNA-based (Flash-CAR TM ) CAR-T, CAR-NK and other immune effector cell therapeutic modalities with Arbele Limited.
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Product Commercialization We have begun work on the commercialization and development of a versatile breathalyzer system. We were granted exclusive distributorship rights for the KetoAir from Qi Diagnostics in Hong Kong for the following territories: North America, South America, the EU and the UK.
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Avalon’s midstream bio-processing and bio-production facility is affiliated with the University of Pittsburgh Medical Center where our leading candidate AVA-011, as described below, is undergoing process development to generate clinical grade CAR-T cells for upcoming clinical trial in the US.
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We had a pilot launch and exhibition of the KetoAir in this year’s KetoCon conference in Austin, Texas (April 21-23, 2023). For our commercialization strategy, we intend to target the diabetes and obesity markets. We are evaluating options for commercialization, including identifying distribution partners or distributing the KetoAir ourselves.
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Avalon’s downstream medical team and facility consists of top-rated affiliated hospital network and experts specialized in hematology, oncology, cellular immunotherapy, hematopoietic stem/progenitor cell transplant, as well as regenerative therapeutics.
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The KetoAir breathalyzer system (the “KetoAir”) is a handheld device that allows the user to detect acetone levels in exhaled breath. The acetone level is in concentration units (ppm, part-per-million) such that the user will know his/her real-time ketosis status: inadequate ketosis (0-3.99 ppm), mild ketosis (4-9.99 ppm), optimal ketosis (10-40 ppm), or alarming level (> 40 ppm).
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Our major clinical programs include: ● AVA-001: Avalon has initiated its first-in-human clinical trial of CD19 CAR-T candidate, AVA-001 in August 2019 at the Hebei Yanda Lu Daopei Hospital and Beijing Lu Daopei Hospital in China (the world’s single largest CAR-T treatment network for the indication of relapsed/refractory B-cell acute lymphoblastic leukemia (B-ALL).
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The breathalyzer is registered with the United States Food and Drug Administration (“FDA”) as a Class I medical device. The device is also paired with an “AI Nutritionist” software program (via Bluetooth connection) which is downloadable from Google Play (for Android mobile phones, approved) and iPhone (the app is currently being reviewed by Apple iOS AppStore).
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The AVA-001 candidate (co-developed with China Immunotech Co. Ltd) is characterized by the utilization of 4-1BB (CD137) co-stimulatory signaling pathway, conferring a strong anti-cancer activity during pre-clinical study. It also features a shorter bio-manufacturing time which leads to the advantage of prompt treatment to patients where timing is important related hematologic malignancies.
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It helps users monitor and manage their ketogenic diet and related programs.
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We have successfully completed the first-in-human clinical trial of our AVA-001 anti-CD19 CAR-T cell therapy as a bridge to allogeneic bone marrow transplantation for patients with relapsed/refractory B-ALL at the Lu Daopei Hospital (registered clinical trial number NCT03952923) with excellent efficacy (90% complete remission rate) and minimal adverse side effects.
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We believe the KetoAir can be an essential tool to help diabetic patients adhere to their therapeutic programs and optimize their ketogenic dietary management. 2 Other Areas In order to preserve cash and focus on our core laboratory rollup strategy and product commercialization, we have currently suspended all research and development efforts related to cellular therapy (except for our joint patent filing with MIT as noted above) in order to redirect our funding efforts to our core business strategies outlined above.
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We are currently expanding the indication and plan to recuit patients in the USA for AVA-001 to include both relapsed/refractory B-ALL and non-Hodgkin lymphoma patients. 1 ● AVA-011 and FLASH-CAR™: Avalon advanced its next generation immune cell therapy using mRNA-based, non-viral FLASH-CAR™ technology co-developed with our strategic partner Arbele Limited.
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In addition, we reconstituted our Board of Directors (the “Board”) in December 2022 at our annual meeting of stockholders and our directors who were citizens of China did not stand for re-election at our annual meeting.
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The adaptable FLASH-CAR™ platform can be used to create personalized cell therapy from a patient’s own cells, as well as off-the-shelf cell therapy from a universal donor. Our leading candidate, AVA-011, is currently at process development stage to generate clinical-grade cell-therapy products for subsequent clinical studies.
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We do not expect nor do we plan that we will further operate in the PRC or generate revenue from PRC operations for the foreseeable future. The accompanying consolidated financial statements reflect the activities of the Company and each of the following entities: Name of Subsidiary Place and Date of Incorporation Percentage of Ownership Principal Activities Avalon Healthcare System, Inc.
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In July 2021, we and the University of Pittsburgh of the Commonwealth System of Higher Education (the “University”) entered into a Corporate Research Agreement (the “University Agreement”).
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(“AHS”) Delaware May 18, 2015 100% held by Company Holding company for payroll and other expenses Avalon RT 9 Properties, LLC (“Avalon RT 9”) New Jersey February 7, 2017 100% held by Company Owns and operates an income-producing real property and holds and manages the corporate headquarters Avalon (Shanghai) Healthcare Technology Co., Ltd.
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Pursuant to the University Agreement, for a term of two years the University agreed to use its reasonable efforts to perform academic research funded by us in connection with the development of point-of-care modular autonomous processing system to generate clinical-grade AVA-011, a RNA-based chimeric antigen receptor (CAR) T-cell therapy candidate with the appointment of Dr. Yen Michael S.
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(“Avalon Shanghai”) PRC April 29, 2016 100% held by AHS Ceased operations and is not considered an operating entity Genexosome Technologies Inc. (“Genexosome”) Nevada July 31, 2017 60% held by Company No current activities to report, dormant Avactis Biosciences Inc. (“Avactis”) Nevada July 18, 2018 60% held by Company Patent holding company Avactis Nanjing Biosciences Ltd.
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We are in the process of renegotiating this agreement to extend the term through 2023 and complete some of the research contemplated in the original agreement. ● AVA-Trap™: Avalon’s AVA-Trap™ therapeutic program plans to enter animal model testing followed by expedited clinical studies with the goal of providing an effective therapeutic option to combat COVID-19 and other life-threatening conditions involving cytokine storms.
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(“Avactis Nanjing”) PRC May 8, 2020 100% held by Avactis Owns a patent and is not considered an operating entity Avalon Laboratory Services, Inc.
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AVA-Trap TM can potentially generate novel therapeutic targets for cellular therapy, as well as in the field of precision diagnostics. We do not have a timeline for the next steps of this study. For the year ended December 31, 2022, we generated rental revenue from our commercial real property in New Jersey, where we are headquartered.
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We have retained a marketing expert to assist us to bring this product to market through social media, influencer promotion and our website. We will also be launching this product at the 2024 “KetoCon” convention taking place May 31, 2024 in Austin Texas, where we plan to begin taking orders for this product.
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We do not expect nor do we plan that we will further operate in the PRC or generate revenue from PRC operations for the foreseeable future. 2 The following diagram illustrates our corporate structure: Recent Developments In the fourth quarter of 2022, we conducted a private placement offering for shares of our newly designated Series A Convertible Preferred Stock, stated value $1,000 per share (the “Series A Preferred Stock”).
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Our competitors also may obtain FDA or other marketing approval for their products before we are able to obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market.
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We entered into a securities purchase agreement (the “Securities Purchase Agreement”), with certain accredited investors named therein, including Wenzhao Lu, the chairman of our board of directors, pursuant to which we sold an aggregate of 9,000 shares of our Series A Preferred Stock for the gross proceeds of $9,000,000, which funds were used to pay the cash purchase price in connection with our acquisition of Lab Services.
Added
Regulation by U.S. and foreign governmental authorities is a significant factor affecting our ability to commercialize any of our products, as well as the timing of such commercialization and our ongoing research and development activities. The commercialization of drug products requires regulatory approval by governmental agencies prior to commercialization.
Removed
In addition, at any time during the period beginning on the closing date of the Laboratory Services MSO Acquisition and ending on the date nine (9) months after such closing date, Avalon Laboratory Services, or its designated affiliates under the Amended MIPA, may purchase from SCBC Holdings LLC twenty percent (20%) of the total issued and outstanding equity interests of Laboratory Services MSO for the purchase price of (i) $6,000,000 in cash and (ii) the issuance of an additional 4,000 shares of Series B Preferred Stock valued at $4,000,000, in accordance with the terms and conditions set forth in the Amended MIPA.
Removed
Cellular Therapy We focus on the following markets in developing our cellular therapy business: ● Cellular Immunotherapy in Oncology: Regarded as the future of medicine, we believe cell-based technologies and therapeutics will replace pharmaceuticals as a more effective and functional modality in certain unmet medical areas.
Removed
We are actively engaging in this revolutionary trend and positioning to take a leading role in immune effector cell therapies in the immuno-oncology domai. ● QTY-Code Protein Design: Novel therapeutic and diagnostic targets development utilizing QTY-code protein design technology with Massachusetts Institute of Technology (MIT) including using the QTY code protein design technology for development of a hemofiltration device to treat Cytokine Storm (aka Cytokine Release Syndrome).
Removed
QTY-code can be applied to generate water-soluble, antibody-like molecular variants of native membrane-bound receptors, which may expand the repertoire of therapeutic targets in CAR-T cell therapies. Revenue Avalon RT 9 Properties, LLC In May 2017, we acquired commercial property located in Freehold, New Jersey.
Removed
We also intend to pursue the acquisition and development of healthcare related technologies for cell related diagnostics and therapeutics through acquisition, licensing or joint ventures with major universities and biotech companies. seeking laboratory or medical device acquisitions.
Removed
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop.
Removed
Although the audit reports of Avalon are prepared by U.S. auditors that are subject to inspection by the PCAOB, the PCAOB is currently unable to conduct inspections over the audit work of Avalon’s independent registered public accounting firms with respect to Avalon’s operations in mainland China without the approval of certain Chinese authorities.
Removed
Also, there is no guarantee that future audit reports will be prepared by auditors that are completely inspected by the PCAOB and, as such, future investors may be deprived of such inspections, which could result in limitations or restrictions to Avalon’s access of the U.S. capital markets.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

102 edited+21 added−65 removed323 unchanged
Biggest changeIf we fail to effectively manage this growth and adapt our business structure in a manner that preserves our reputation, then our business, financial condition and results of operations could be harmed. ● We must effectively manage the growth of our operations, or our company will suffer. 13 ● Our prospects will suffer if we are not able to hire, train, motivate, manage, and retain a significant number of highly skilled employees. ● Potential liability claims may adversely affect our business. ● In accordance with our strategic development policy, we may invest in companies for strategic reasons and may not realize a return on our investments. ● Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and any patent protection we may obtain in the future could be reduced or eliminated for non-compliance with these requirements. ● It is difficult and costly to protect our proprietary rights, and we may not be able to ensure their protection.
Biggest changeThe principal factors and uncertainties that make investing in our company risky include, among others: General Operating and Business Risks ● Our limited operating history makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance. ● Our results of operations have not resulted in profitability and we may not be able to achieve profitability going forward. ● There is substantial doubt about our ability to continue as a going concern, which will affect our ability to obtain future financing and may require us to curtail our operations. ● Our cash will only fund our operations for a limited time and we will need to raise additional capital in order to support our development. ● Joint ventures, joint ownership arrangements and other projects pose unique challenges and we may not be able to fully implement or realize synergies, expected returns or other anticipated benefits associated with such projects. 12 ● We must effectively manage the growth of our operations, or our company will suffer. ● Our prospects will suffer if we are not able to hire, train, motivate, manage, and retain a significant number of highly skilled employees. ● Potential liability claims may adversely affect our business. ● In accordance with our strategic development policy, we may invest in companies for strategic reasons and may not realize a return on our investments. ● Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and any patent protection we may obtain in the future could be reduced or eliminated for non-compliance with these requirements. ● It is difficult and costly to protect our proprietary rights, and we may not be able to ensure their protection.
We depend on third parties to provide supplies and services critical to our laboratory testing business. We are heavily reliant on third-party ground and air travel for transport of clinical trial and diagnostic testing supplies and specimens, research products, and people.
We depend on third parties to provide supplies and services critical to our laboratory services business. We are heavily reliant on third-party ground and air travel for transport of clinical trial and diagnostic testing supplies and specimens, research products, and people.
The future issuance of any such additional shares of our common stock may create downward pressure on the trading price of the common stock.
The future issuance of any such additional shares of our common stock may create downward pressure on the trading price of our common stock.
Moreover, the issuance of such additional shares of preferred stock to persons friendly to the Board of Directors could make it more difficult to remove incumbent managers and directors from office even if such change were to be favorable to stockholders generally. We are incorporated in Delaware.
Moreover, the issuance of such additional shares of preferred stock to persons friendly to the Board could make it more difficult to remove incumbent managers and directors from office even if such change were to be favorable to stockholders generally. We are incorporated in Delaware.
We have never declared or paid cash dividends on our common stock, and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their shares of common stock.
We have never declared or paid cash dividends on our common stock, and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their shares of our common stock.
Restrictions under applicable federal and state healthcare laws and regulations include, but are not limited to, the following: ● the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons from soliciting, receiving, offering or providing remuneration, directly or indirectly, to induce either the referral of an individual for a healthcare item or service, or the purchasing or ordering of an item or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare or Medicaid; ● federal civil and criminal false claims laws and civil monetary penalty laws, such as the U.S. federal FCA, which imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against, individuals or entities for knowingly presenting or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government.
Restrictions under applicable federal and state healthcare laws and regulations include, but are not limited to, the following: ● the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons from soliciting, receiving, offering or providing remuneration, directly or indirectly, to induce either the referral of an individual for a healthcare item or service, or the purchasing or ordering of an item or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare or Medicaid; 35 ● federal civil and criminal false claims laws and civil monetary penalty laws, such as the U.S. federal FCA, which imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against, individuals or entities for knowingly presenting or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government.
For example: ● others may be able to make products that are similar to our product candidates but that are not covered by the claims of any patents; ● we might not have been the first to make the inventions covered by any issued patents or patent applications; ● we might not have been the first to file patent applications for these inventions; ● it is possible that any patent applications we own or license will not result in issued patents; ● any issued patents may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges by third parties; ● we may not develop additional proprietary technologies that are patentable or protectable under trade secrets law; or ● the patents of others may have an adverse effect on our business.
For example: ● others may be able to make products that are similar to our product candidates but that are not covered by the claims of any patents; ● we might not have been the first to make the inventions covered by any issued patents or patent applications; ● we might not have been the first to file patent applications for these inventions; 21 ● it is possible that any patent applications we own or license will not result in issued patents; ● any issued patents may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges by third parties; ● we may not develop additional proprietary technologies that are patentable or protectable under trade secrets law; or ● the patents of others may have an adverse effect on our business.
Among the provisions of the ACA addressing coverage and reimbursement of pharmaceutical products, of importance to our potential therapeutic candidates are the following: ● increases to pharmaceutical manufacturer rebate liability under the Medicaid Drug Rebate Program due to an increase in the minimum basic Medicaid rebate on most branded prescription drugs and the application of Medicaid rebate liability to drugs used in risk-based Medicaid managed care plans; ● the expansion of the 340B Drug Pricing Program to require discounts for “covered outpatient drugs” sold to certain children’s hospitals, critical access hospitals, freestanding cancer hospitals, rural referral centers, and sole community hospitals; ● requirements imposed on pharmaceutical companies are required to offer discounts on brand-name cell based therapy to patients who fall within the Medicare Part D coverage gap, commonly referred to as the “Donut Hole”; ● requirements imposed on pharmaceutical companies to pay an annual non-tax-deductible fee to the federal government based on each company’s market share of prior year total sales of branded drugs to certain federal healthcare programs, such as Medicare, Medicaid, Department of Veterans Affairs and Department of Defense; and 42 ● for products classified as biologics, marketing approval for a follow-on biologic product may not become effective until 12 years after the date on which the reference innovator biologic product was first licensed by the FDA, with a possible six-month extension for pediatric products.
Among the provisions of the ACA addressing coverage and reimbursement of pharmaceutical products, of importance to our potential therapeutic candidates are the following: ● increases to pharmaceutical manufacturer rebate liability under the Medicaid Drug Rebate Program due to an increase in the minimum basic Medicaid rebate on most branded prescription drugs and the application of Medicaid rebate liability to drugs used in risk-based Medicaid managed care plans; ● the expansion of the 340B Drug Pricing Program to require discounts for “covered outpatient drugs” sold to certain children’s hospitals, critical access hospitals, freestanding cancer hospitals, rural referral centers, and sole community hospitals; ● requirements imposed on pharmaceutical companies are required to offer discounts on brand-name cell based therapy to patients who fall within the Medicare Part D coverage gap, commonly referred to as the “Donut Hole”; 38 ● requirements imposed on pharmaceutical companies to pay an annual non-tax-deductible fee to the federal government based on each company’s market share of prior year total sales of branded drugs to certain federal healthcare programs, such as Medicare, Medicaid, Department of Veterans Affairs and Department of Defense; and ● for products classified as biologics, marketing approval for a follow-on biologic product may not become effective until 12 years after the date on which the reference innovator biologic product was first licensed by the FDA, with a possible six-month extension for pediatric products.
In addition, the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA; 39 ● HIPAA includes a fraud and abuse provision referred to as the HIPAA All-Payor Fraud Law, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services.
In addition, the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA; ● HIPAA includes a fraud and abuse provision referred to as the HIPAA All-Payor Fraud Law, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services.
Although we currently do not provide any “in network” laboratory services, our plan is to begin providing such services in the near future. These organizations have different contracting philosophies, which are influenced by the design of their products. Some MCOs contract with a limited number of clinical laboratories and engage in direct negotiation of rates.
Although we currently do not provide any “in network” laboratory services, our plan is to begin providing such services in the near future. 24 These organizations have different contracting philosophies, which are influenced by the design of their products. Some MCOs contract with a limited number of clinical laboratories and engage in direct negotiation of rates.
In addition, any uncertainties resulting from the initiation and continuation of any litigation or inter partes review proceedings could have a material adverse effect on our ability to raise the funds necessary to continue our operations. 24 Some jurisdictions in which we operate have enacted legislation which allows members of the public to access information under statutes similar to the U.S.
In addition, any uncertainties resulting from the initiation and continuation of any litigation or inter partes review proceedings could have a material adverse effect on our ability to raise the funds necessary to continue our operations. Some jurisdictions in which we operate have enacted legislation which allows members of the public to access information under statutes similar to the U.S.
As a result of the Consolidated Appropriations Act, 2023, which became law in December 2022, the data reporting requirements and Medicare reimbursement cuts that would have occurred under PAMA in 2023 were delayed by one additional year. 26 For 2024-2026, a test price cannot be reduced by more than 15.0% per year.
As a result of the Consolidated Appropriations Act, 2023, which became law in December 2022, the data reporting requirements and Medicare reimbursement cuts that would have occurred under PAMA in 2023 were delayed by one additional year. For 2024-2026, a test price cannot be reduced by more than 15.0% per year.
Further, if any of our patents are deemed invalid and unenforceable, it could impact our ability to commercialize or license our technology. 22 The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage.
Further, if any of our patents are deemed invalid and unenforceable, it could impact our ability to commercialize or license our technology. The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage.
While we seek to conduct our business in compliance with all applicable laws, many of the laws and regulations applicable to us are vague or indefinite and have not been extensively interpreted by the courts, including many of those relating to: ● billing and reimbursement of clinical testing; ● certification or licensure of clinical laboratories; ● the anti-self-referral and anti-kickback laws and regulations; 32 ● the laws and regulations administered by the FDA; ● the corporate practice of medicine; ● operational, personnel and quality requirements intended to ensure that clinical testing services are accurate, reliable and timely; ● physician fee splitting; ● relationships with physicians and IDNs; ● marketing to consumers; ● privacy of patient data and other personal information; ● safety and health of laboratory employees; and ● handling, transportation and disposal of medical specimens, infectious and hazardous waste and radioactive materials.
While we seek to conduct our business in compliance with all applicable laws, many of the laws and regulations applicable to us are vague or indefinite and have not been extensively interpreted by the courts, including many of those relating to: ● billing and reimbursement of clinical testing; ● certification or licensure of clinical laboratories; ● the anti-self-referral and anti-kickback laws and regulations; ● the laws and regulations administered by the FDA; ● the corporate practice of medicine; 31 ● operational, personnel and quality requirements intended to ensure that clinical testing services are accurate, reliable and timely; ● physician fee splitting; ● relationships with physicians and IDNs; ● marketing to consumers; ● privacy of patient data and other personal information; ● safety and health of laboratory employees; and ● handling, transportation and disposal of medical specimens, infectious and hazardous waste and radioactive materials.
If our operations are found to be in violation of any of the federal and state healthcare laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including without limitation, civil, criminal and/or administrative penalties, damages, fines, disgorgement, exclusion from participation in government programs, such as Medicare and Medicaid, injunctions, private “qui tam” actions brought by individual whistleblowers in the name of the government, or refusal to allow us to enter into government contracts, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. 44 Our ability to obtain reimbursement or funding from the federal government may be impacted by possible reductions in federal spending.
If our operations are found to be in violation of any of the federal and state healthcare laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including without limitation, civil, criminal and/or administrative penalties, damages, fines, disgorgement, exclusion from participation in government programs, such as Medicare and Medicaid, injunctions, private “qui tam” actions brought by individual whistleblowers in the name of the government, or refusal to allow us to enter into government contracts, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. 40 Our ability to obtain reimbursement or funding from the federal government may be impacted by possible reductions in federal spending.
The perceived increased personal risk associated with these changes may deter qualified individuals from accepting roles as directors and executive officers. 48 Further, some of these changes heighten the requirements for board or committee membership, particularly with respect to an individual’s independence from the corporation and level of experience in finance and accounting matters.
The perceived increased personal risk associated with these changes may deter qualified individuals from accepting roles as directors and executive officers. Further, some of these changes heighten the requirements for board or committee membership, particularly with respect to an individual’s independence from the corporation and level of experience in finance and accounting matters.
These competitive pressures may affect the attractiveness or profitability of our laboratory services business, and could adversely affect our financial results. 28 The diagnostic information services industry also is faced with changing technology and new product introductions. Competitors may compete using advanced technology, including technology that enables more convenient or cost-effective testing.
These competitive pressures may affect the attractiveness or profitability of our laboratory services business, and could adversely affect our financial results. The diagnostic information services industry also is faced with changing technology and new product introductions. Competitors may compete using advanced technology, including technology that enables more convenient or cost-effective testing.
Increased approval of “waived” test kits could lead to increased testing by physicians in their offices or by patients at home, which could affect our market for laboratory testing services and negatively impact its revenues. 29 Changes or disruption in services supplies, or transportation provided by third parties have impacted and could continue to impact or adversely affect our business.
Increased approval of “waived” test kits could lead to increased testing by physicians in their offices or by patients at home, which could affect our market for laboratory testing services and negatively impact its revenues. Changes or disruption in services supplies, or transportation provided by third parties have impacted and could continue to impact or adversely affect our business.
Any such litigation, if instituted, could have a material adverse effect, potentially including monetary penalties, diversion of management resources, and injunction against continued manufacture, use, or sale of certain products or processes. We rely upon non-patented proprietary know-how.
Any such litigation, if instituted, could have a material adverse effect, potentially including monetary penalties, diversion of management resources, and injunction against continued manufacture, use, or sale of certain products or processes. 19 We rely upon non-patented proprietary know-how.
The ability of our Board of Directors to issue additional stock may prevent or make more difficult certain transactions, including a sale or merger. Our Board of Directors is authorized to issue up to 10,000,000 shares of preferred stock with powers, rights and preferences designated by it.
The ability of our Board to issue additional stock may prevent or make more difficult certain transactions, including a sale or merger. Our Board is authorized to issue up to 10,000,000 shares of preferred stock with powers, rights and preferences designated by it.
Disruption of supply and services has impacted and could continue to impact or have a material adverse effect on our business. Continued and increased consolidation of pharmaceutical, biotechnology and medical device companies, health systems, physicians and other customers could adversely affect our business.
Disruption of supply and services has impacted and could continue to impact or have a material adverse effect on our business. 28 Continued and increased consolidation of pharmaceutical, biotechnology and medical device companies, health systems, physicians and other customers could adversely affect our business.
These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. 21 Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions.
These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions.
The ability of the Board of Directors to issue such additional shares of preferred stock, with rights and preferences it deems advisable, could discourage an attempt by a party to acquire control of us by tender offer or other means.
The ability of the Board to issue such additional shares of preferred stock, with rights and preferences it deems advisable, could discourage an attempt by a party to acquire control of us by tender offer or other means.
We may not have adequate insurance coverage for claims against us. 18 In accordance with our strategic development policy, we may invest in companies for strategic reasons and may not realize a return on our investments. From time to time, we may make investments in companies.
We may not have adequate insurance coverage for claims against us. In accordance with our strategic development policy, we may invest in companies for strategic reasons and may not realize a return on our investments. From time to time, we may make investments in companies.
Any such determinations would delay or deny the introduction of our product candidates to the market and have a material adverse effect on our business, financial condition, and results of operations. 37 Cell based therapeutics are subject to ongoing periodic unannounced inspection by the FDA, the Drug Enforcement Agency, other federal agencies and corresponding state agencies to ensure strict compliance with good manufacturing practices, and other government regulations and corresponding foreign standards.
Any such determinations would delay or deny the introduction of our product candidates to the market and have a material adverse effect on our business, financial condition, and results of operations. 33 Cell based therapeutics are subject to ongoing periodic unannounced inspection by the FDA, the Drug Enforcement Agency, other federal agencies and corresponding state agencies to ensure strict compliance with good manufacturing practices, and other government regulations and corresponding foreign standards.
If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 49
If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
For example, we could incur damages under state laws, including pursuant to an action brought by a private party for the wrongful use or disclosure of health information or other personal information. 31 Failure to comply with U.S., state or local environmental, health and safety laws and regulations could result in fines, penalties and loss of licensure, and have a material adverse effect upon us.
For example, we could incur damages under state laws, including pursuant to an action brought by a private party for the wrongful use or disclosure of health information or other personal information. 30 Failure to comply with U.S., state or local environmental, health and safety laws and regulations could result in fines, penalties and loss of licensure, and have a material adverse effect upon us.
The rights of holders of our common stock are subject to the rights of the holders of our preferred stock, including our newly designated Series A Convertible Preferred Stock and Series B Convertible Preferred Stock, and any preferred stock that may be issued.
The rights of holders of our common stock are subject to the rights of the holders of our preferred stock, including our newly designated Series A Preferred Stock, Series B Preferred Stock, Series C Convertible Preferred Stock and any preferred stock that may be issued.
If any of our trade secrets, know-how or other proprietary information is improperly disclosed, the value of our trade secrets, know-how and other proprietary rights would be significantly impaired and our business and competitive position would suffer. 23 We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights and we may be unable to protect our rights to, or use of, our technology.
If any of our trade secrets, know-how or other proprietary information is improperly disclosed, the value of our trade secrets, know-how and other proprietary rights would be significantly impaired and our business and competitive position would suffer. 22 We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights and we may be unable to protect our rights to, or use of, our technology.
Such changes also could require us to modify our business objectives. 33 Failure to accurately bill for our services, or to comply with applicable laws relating to government healthcare programs, could have a material adverse effect on our business . Billing for diagnostic information services is complex and subject to extensive and non-uniform rules and administrative requirements.
Such changes also could require us to modify our business objectives. 32 Failure to accurately bill for our services, or to comply with applicable laws relating to government healthcare programs, could have a material adverse effect on our business . Billing for diagnostic information services is complex and subject to extensive and non-uniform rules and administrative requirements.
In addition, achieving and sustaining compliance with applicable laws and regulations may be costly to us in terms of money, time and resources. 40 Any cell based therapies we develop may become subject to unfavorable pricing regulations, third party coverage and reimbursement practices or healthcare reform initiatives, thereby harming our business.
In addition, achieving and sustaining compliance with applicable laws and regulations may be costly to us in terms of money, time and resources. 36 Any cell based therapies we develop may become subject to unfavorable pricing regulations, third party coverage and reimbursement practices or healthcare reform initiatives, thereby harming our business.
We cannot assure you, however, that we will be able to achieve any of the foregoing. See Note 2 to our Consolidated Financial Statements for further details. 15 Our cash will only fund our operations for a limited time and we will need to raise additional capital in order to support our development.
We cannot assure you, however, that we will be able to achieve any of the foregoing. See Note 2 to our Consolidated Financial Statements for further details. 14 Our cash will only fund our operations for a limited time and we will need to raise additional capital in order to support our development.
The independent registered public accounting firm that audited our 2022 financial statements, in their report, included an explanatory paragraph referring to our recurring losses since inception and expressing management’s assessment and conclusion that there is substantial doubt in our ability to continue as a going concern.
The independent registered public accounting firm that audited our 2023 financial statements, in their report, included an explanatory paragraph referring to our recurring losses since inception and expressing management’s assessment and conclusion that there is substantial doubt in our ability to continue as a going concern.
There is substantial doubt about our ability to continue as a going concern, which will affect our ability to obtain future financing and may require us to curtail our operations. Our financial statements as of December 31, 2022 were prepared under the assumption that we will continue as a going concern.
There is substantial doubt about our ability to continue as a going concern, which will affect our ability to obtain future financing and may require us to curtail our operations. Our financial statements as of December 31, 2023 were prepared under the assumption that we will continue as a going concern.
If we do not effectively integrate Laboratory Services MSO, the effectiveness of our business growth could suffer, and our reputation could be harmed, each of which could adversely impact our business, financial condition and results of operations. 17 The success of our business will depend, in part, on our ability to realize our anticipated benefits and opportunities from the acquisition.
If we do not effectively integrate Lab Services MSO, the effectiveness of our business growth could suffer, and our reputation could be harmed, each of which could adversely impact our business, financial condition and results of operations. The success of our business will depend, in part, on our ability to realize our anticipated benefits and opportunities from the acquisition.
Also, under applicable Delaware law, our Board of Directors may adopt additional anti-takeover measures in the future. 47 If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.
Also, under applicable Delaware law, our Board may adopt additional anti-takeover measures in the future. If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.
Future sales of our common stock or securities convertible or exchangeable for our common stock may cause our stock price to decline. If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the price of our common stock could decline.
Futu re sales of our common stock or securities convertible or exchangeable for our common stock may cause our stock price to decline. If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the price of our common stock could decline.
The Company could regain compliance with the $1.00 minimum bid listing requirement if the closing bid price of its common stock is at least $1.00 per share for a minimum of ten (10) consecutive business days during the 180-day compliance period.
We could regain compliance with the $1.00 minimum bid listing requirement if the closing bid price of our common stock is at least $1.00 per share for a minimum of ten (10) consecutive business days during the 180-day compliance period.
The independent registered public accounting firm that audited our 2022 financial statements, in their report, included an explanatory paragraph referring to our recurring losses since inception and expressing management’s assessment and conclusion that there is substantial doubt in our ability to continue as a going concern. At December 31, 2022, we had cash of approximately $2.0 million.
The independent registered public accounting firm that audited our 2023 financial statements, in their report, included an explanatory paragraph referring to our recurring losses since inception and expressing management’s assessment and conclusion that there is substantial doubt in our ability to continue as a going concern. At December 31, 2023, we had cash of approximately $285,000.
We have incurred and will continue to incur significant expenditures and the allocation of management time to assimilate Laboratory Services MSO in a manner that preserves the key aspects of our business, but there can be no assurance that we will be successful in our efforts.
The Laboratory Services MSO Acquisition has resulted in significant growth in our operations. We have incurred and will continue to incur significant expenditures and the allocation of management time to assimilate Lab Services MSO in a manner that preserves the key aspects of our business, but there can be no assurance that we will be successful in our efforts.
To qualify, the Company was required to meet the continued listing requirement for market value of its publicly held shares and all other Nasdaq initial listing standards, except the bid price requirement, and provide written notice to Nasdaq of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.
To qualify, we will be required to meet the continued listing requirement for market value of our publicly held shares and all other Nasdaq initial listing standards, except the bid price requirement, and provide written notice to Nasdaq of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.
CMS published its initial proposed CLFS rates under PAMA for 2018-2020 on September 22, 2017. Following a public comment period, CMS made adjustments and published final CLFS rates for 2018-2020 on November 17, 2017, with additional adjustments published on December 1, 2017. 2021, 2022 and 2023 PAMA rates were frozen as described above.
Following a public comment period, CMS made adjustments and published final CLFS rates for 2018-2020 on November 17, 2017, with additional adjustments published on December 1, 2017. 2021, 2022 and 2023 PAMA rates were frozen as described above.
To manage our growth, we believe we must continue to implement and improve our services and products. We may not have adequately evaluated the costs and risks associated with our planned expansion, and our systems, procedures, and controls may not be adequate to support our operations.
We must effectively manage the growth of our operations, or our company will suffer. To manage our growth, we believe we must continue to implement and improve our services and products. We may not have adequately evaluated the costs and risks associated with our planned expansion, and our systems, procedures, and controls may not be adequate to support our operations.
Our success depends on the continuing services of Wenzhao Lu, our Chairman of the Board, and David Jin, Meng Li and Luisa Ingargiola, our executive officers. The loss of Mr. Lu, Dr. Jin, Ms. Li or Ms. Ingargiola could have a material and adverse effect on our business operations.
We depend upon key personnel and need additional personnel. Our success depends on the continuing services of Wenzhao Lu, our Chairman of the Board, and David Jin, Meng Li and Luisa Ingargiola, our executive officers. The loss of Mr. Lu, Dr. Jin, Ms. Li or Ms. Ingargiola could have a material and adverse effect on our business operations.
Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have a material adverse effect on our business, financial conditions, results of operations, and prospects. 20 We may face uncertainty and difficulty in obtaining and enforcing our patents and other proprietary rights.
Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have a material adverse effect on our business, financial conditions, results of operations, and prospects.
If the Company was not eligible or it appeared to Nasdaq that the Company was not be able to cure the deficiency during the second compliance period, Nasdaq then provides written notice to the Company that the Company’s common stock will be subject to delisting.
If we are not eligible or it appeared to Nasdaq that we will not be able to cure the deficiency during the second compliance period, Nasdaq then provides written notice to us that our common stock will be subject to delisting.
Given the number of recent high-profile adverse safety events with certain drug and cell related products, the FDA may require, as a condition of approval, costly risk management programs, which may include safety surveillance, restricted distribution and use, patient education, enhanced labeling, special packaging or labeling, expedited reporting of certain adverse events, pre-approval of promotional materials, and restrictions on direct-to-consumer advertising.
In addition, the FDA currently requires as a condition for accelerated approval the pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product. 34 Given the number of recent high-profile adverse safety events with certain drug and cell related products, the FDA may require, as a condition of approval, costly risk management programs, which may include safety surveillance, restricted distribution and use, patient education, enhanced labeling, special packaging or labeling, expedited reporting of certain adverse events, pre-approval of promotional materials, and restrictions on direct-to-consumer advertising.
We incurred net losses amounting to $11,930,847 and $9,090,499 for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we had an accumulated deficit of approximately $63.1 million. If we incur additional significant losses, our stock price may decline, perhaps significantly. Our management is developing plans to achieve profitability.
We incurred net losses amounting to approximately $16.7 million and $11.9 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of approximately $79.8 million. If we incur additional significant losses, our stock price may decline, perhaps significantly. Our management is developing plans to achieve profitability.
If the Company did not regain compliance during the initial compliance period, it may be eligible for additional time to regain compliance with the Rule.
If we do not regain compliance during the initial compliance period, we may be eligible for additional time to regain compliance with the Rule.
On February 9, 2022, the Company received notice from The Nasdaq Stock Market (“Nasdaq”) that the closing bid price for the Company’s common stock had been below $1.00 per share for the previous 30 consecutive business days, and that the Company was therefore not in compliance with the minimum bid price requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Rule”).
On November 3, 2023, we received notice from Nasdaq that the closing bid price for our common stock had been below $1.00 per share for the previous 30 consecutive business days, and that we were therefore not in compliance with the minimum bid price requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Rule”).
Any failure by our management to effectively anticipate, implement, and manage changes required to sustain our growth would have a material adverse effect on our business, financial condition, and results of operations. Our revenue and results of operations may suffer if we are unable to attract new clients, continue to engage existing clients, or sell additional products and services.
Any failure by our management to effectively anticipate, implement, and manage changes required to sustain our growth would have a material adverse effect on our business, financial condition, and results of operations. 17 Our revenue and results of operations may suffer if we are unable to attract new tenants.
If we determine that impairment indicators exist and that there are other-than-temporary declines in the fair value of the investments, we may be required to write down the investments to their fair value and recognize the related write-down as an investment loss. We face intense competition which could cause us to lose market share.
If we determine that impairment indicators exist and that there are other-than-temporary declines in the fair value of the investments, we may be required to write down the investments to their fair value and recognize the related write-down as an investment loss.
Our failure to achieve the anticipated and the potential benefits underlying our reasons for the Laboratory Services MSO Acquisition could have a material adverse impact on our business, financial condition and results of operations. We must effectively manage the growth of our operations, or our company will suffer.
Our failure to achieve the anticipated and the potential benefits underlying our reasons for the Laboratory Services MSO Acquisition could have a material adverse impact on our business, financial condition and results of operations.
Steps to reduce utilization and reimbursement also discourage innovation and access to innovative solutions that we may offer. 27 Health plans and other third parties have taken steps to reduce the utilization and reimbursement of health services, including clinical testing services.
Steps to reduce utilization and reimbursement also discourage innovation and access to innovative solutions that we may offer. Health plans and other third parties have taken steps to reduce the utilization and reimbursement of health services, including clinical testing services. We face efforts by non-governmental third-party payers, including health plans, to reduce utilization of and reimbursement for clinical testing services.
Delaware law also prohibits corporations from engaging in a business combination with any holders of 15% or more of their capital stock until the holder has held the stock for three years unless, among other possibilities, our Board of Directors approves the transaction.
Delaware law also prohibits corporations from engaging in a business combination with any holders of 15% or more of their capital stock until the holder has held the stock for three years unless, among other possibilities, our Board approves the transaction. Our Board may use these provisions to prevent changes in the management and control of us.
Nasdaq’s notice had no immediate effect on the listing or trading of the Company’s common stock on The Nasdaq Capital Market. The notice indicated that the Company will have 180 calendar days, until August 8, 2022, to regain compliance with the Rule.
Nasdaq’s notice had no immediate effect on the listing or trading of our common stock on The Nasdaq Capital Market. The notice indicated that we will have 180 calendar days, until May 1, 2024, to regain compliance with the Rule.
Risk Factors Related to our Laboratory Services Business ● Continued changes in healthcare reimbursement models and products, changes in government payment and reimbursement systems, or changes in payer mix could have a material adverse effect on our revenues, profitability and cash flow. ● The clinical testing business is highly competitive, and if we fail to provide an appropriately priced level of service or otherwise fail to compete effectively it could have a material adverse effect on our revenues and profitability. ● Failure to obtain and retain new customers, the loss of existing customers or material contracts, or a reduction in services or tests ordered or specimens submitted by existing customers, or the inability to retain existing and/or create new relationships with health systems could impact our ability to successfully grow our business. ● Discontinuation or recalls of existing testing products; failure to develop or acquire licenses for new or improved testing technologies; or our customers using new technologies to perform their own tests could adversely affect our business. ● Continued and increased consolidation of pharmaceutical, biotechnology and medical device companies, health systems, physicians and other customers could adversely affect our business.
If we fail to effectively manage this growth and adapt our business structure in a manner that preserves our reputation, then our business, financial condition and results of operations could be harmed. ● The clinical testing business is highly competitive, and if we fail to provide an appropriately priced level of service or otherwise fail to compete effectively it could have a material adverse effect on our revenues and profitability. ● Failure to obtain and retain new customers, the loss of existing customers or material contracts, or a reduction in services or tests ordered or specimens submitted by existing customers, or the inability to retain existing and/or create new relationships with health systems could impact our ability to successfully grow our business. ● Discontinuation or recalls of existing testing products; failure to develop or acquire licenses for new or improved testing technologies; or our customers using new technologies to perform their own tests could adversely affect our business. ● Continued and increased consolidation of pharmaceutical, biotechnology and medical device companies, health systems, physicians and other customers could adversely affect our business.
In addition, compliance with future legislation could impose additional requirements on us, which may be costly. Failure of us or our third-party service providers to comply with privacy and security laws and regulations could result in fines, penalties and damage to our reputation with customers and have a material adverse effect upon our business.
Failure of us or our third-party service providers to comply with privacy and security laws and regulations could result in fines, penalties and damage to our reputation with customers and have a material adverse effect upon our business.
We may need to negotiate commercially reasonable terms and conditions with MIT to advance our research and development activities or allow the commercialization of CAR technology or any other product candidates we may identify and pursue. Avalon GloboCare and Arbele Limited (“Arbele”) are parties to the joint venture Avactis Biosciences, Inc.
We may need to negotiate commercially reasonable terms and conditions with MIT to advance our research and development activities or allow the commercialization of CAR technology or any other product candidates we may identify and pursue.
If we are unable to generate sufficient cash to repay our debt obligations when they become due and payable, either when they mature, or in the event of a default, we may not be able to obtain additional debt or equity financing on favorable terms, if at all, which may negatively impact our business operations and financial condition. 16 If we breach any of the undertakings or default on any of our obligations under our agreements with our lenders, our outstanding indebtedness could become immediately due and payable, which would harm our business, financial condition and results of operations and could require us to reduce or cease operations.
If we are unable to generate sufficient cash to repay our debt obligations when they become due and payable, either when they mature, or in the event of a default, we may not be able to obtain additional debt or equity financing on favorable terms, if at all, which may negatively impact our business operations and financial condition.
There can be no assurance that any patent applications we file or license will be approved, or that challenges will not be instituted against the validity or enforceability of any patent licensed-in or owned by us.
We may face uncertainty and difficulty in obtaining and enforcing our patents and other proprietary rights. There can be no assurance that any patent applications we file or license will be approved, or that challenges will not be instituted against the validity or enforceability of any patent licensed-in or owned by us.
If the shares we may issue from time to time upon exercise of outstanding options and warrants and conversion of outstanding Series A convertible preferred stock are sold, or if it is perceived that they will be sold, by the award recipients in the public market, the price of our common stock could decline.
If the shares we may issue from time to time upon the exercise of outstanding options and warrants and the conversion of our outstanding Series A Preferred Stock and Series B Preferred Stock are sold and outstanding convertible notes are issues, or if it is perceived that they will be sold, by the award recipients in the public market, the price of our common stock could decline. 42 You may experience dilution of your ownership interests because of the future issuance of additional shares of our common or preferred stock or other securities that are convertible into or exercisable for our common or preferred stock.
Actions by federal and state agencies regulating insurance, including healthcare exchanges, or changes in other laws, regulations, or policies may also have a material adverse effect upon our business. 30 Our business could be harmed from the loss or suspension of a license or imposition of a fine or penalties under, or future changes in, or interpretations of, the law or regulations of CLIA, Medicare, Medicaid or other national, state or local agencies in the U.S. and other countries where we operate laboratories currently and in the future.
Our business could be harmed from the loss or suspension of a license or imposition of a fine or penalties under, or future changes in, or interpretations of, the law or regulations of CLIA, Medicare, Medicaid or other national, state or local agencies in the U.S. and other countries where we operate laboratories currently and in the future.
Applicable regulatory requirements, including those contained in and issued under the Sarbanes-Oxley Act of 2002, may make it difficult for us to retain or attract qualified officers and directors, which could adversely affect the management of our business and our ability to obtain or retain listing of our common stock on a national securities exchange.
We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will not lose the entire amount of their investment. 43 Applicable regulatory requirements, including those contained in and issued under the Sarbanes-Oxley Act of 2002, may make it difficult for us to retain or attract qualified officers and directors, which could adversely affect the management of our business and our ability to obtain or retain listing of our common stock on a national securities exchange.
Steps to reduce utilization and reimbursement also discourage innovation and access to innovative solutions that we may offer. The clinical testing business is highly competitive, and if we fail to provide an appropriately priced level of service or otherwise fail to compete effectively it could have a material adverse effect on our revenues and profitability.
The clinical testing business is highly competitive, and if we fail to provide an appropriately priced level of service or otherwise fail to compete effectively it could have a material adverse effect on our revenues and profitability. The laboratory testing industry is fragmented and highly competitive.
Changes in key management, or the ability to attract and retain qualified personnel, as a result of increased competition for talent, wage growth, or other market factors, could lead to strategic and operational challenges and uncertainties, distractions of management from other key initiatives, and inefficiencies and increased costs, any of which could adversely affect our business, financial condition, results of operations, and cash flows.
Changes in key management, or the ability to attract and retain qualified personnel, as a result of increased competition for talent, wage growth, or other market factors, could lead to strategic and operational challenges and uncertainties, distractions of management from other key initiatives, and inefficiencies and increased costs, any of which could adversely affect our business, financial condition, results of operations, and cash flows. 16 Joint ventures, joint ownership arrangements and other projects pose unique challenges and we may not be able to fully implement or realize synergies, expected returns or other anticipated benefits associated with such projects.
As a result of significant consolidation in the commercial laboratory industry, larger commercial laboratory providers are able to increase cost efficiencies afforded by large-scale automated testing. This consolidation results in greater price competition.
Pricing of laboratory testing services is often one of the most significant factors used by physicians, third-party payers and consumers in selecting a laboratory. As a result of significant consolidation in the commercial laboratory industry, larger commercial laboratory providers are able to increase cost efficiencies afforded by large-scale automated testing. This consolidation results in greater price competition.
In addition, the United States government may seek to hold our company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire. 25 Risk Factors Related to our Laboratory Services MSO Business Continued changes in healthcare reimbursement models and products (e.g., health insurance exchanges), changes in government payment and reimbursement systems, or changes in payer mix, including an increase in third-party benefits management and value-based payment models, could have a material adverse effect on our revenues, profitability and cash flow.
Risk Factors Related to our Lab Services MSO Business Continued changes in healthcare reimbursement models and products (e.g., health insurance exchanges), changes in government payment and reimbursement systems, or changes in payer mix, including an increase in third-party benefits management and value-based payment models, could have a material adverse effect on our revenues, profitability and cash flow.
We face efforts by non-governmental third-party payers, including health plans, to reduce utilization of and reimbursement for clinical testing services. Examples include increased use of prior authorization requirements and increased denial of coverage for services. There is increased market activity regarding alternative payment models, including bundled payment models.
Examples include increased use of prior authorization requirements and increased denial of coverage for services. There is increased market activity regarding alternative payment models, including bundled payment models. We expect continuing efforts by third-party payers, including in their rules, practices and policies, to reduce reimbursements, to impose more stringent cost controls and to reduce utilization of clinical testing services.
For example, any labeling approved for any of our product candidates may include a restriction on the term of its use, or it may not include one or more of our intended indications. 38 Our product candidates will also be subject to ongoing FDA requirements for the labeling, packaging, storage, advertising, promotion, record-keeping, and submission of safety and other post-market information on the cell based therapy.
Our product candidates will also be subject to ongoing FDA requirements for the labeling, packaging, storage, advertising, promotion, record-keeping, and submission of safety and other post-market information on the cell based therapy.
The civil monetary penalties statute imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal healthcare program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent. 43 Federal false claims and false statement laws, including the federal FCA, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment to, or approval by, the federal healthcare programs, including Medicare and Medicaid, or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government.
Federal false claims and false statement laws, including the federal FCA, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment to, or approval by, the federal healthcare programs, including Medicare and Medicaid, or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government.
Specifically, Medicare Part B coverage may be available for eligible beneficiaries when the following, among other requirements have been satisfied: ● the product is reasonable and necessary for the diagnosis or treatment of the illness or injury for which the product is administered according to accepted standards of medical practice; ● the product is typically furnished incident to a physician’s services; ● the indication for which the product will be used is included or approved for inclusion in certain Medicare-designated pharmaceutical compendia (when used for an off-label use); and ● the product has been approved by the FDA. 41 Average prices for cell therapies may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs and cell based therapy from countries where they may be sold at lower prices than in the U.S.
Specifically, Medicare Part B coverage may be available for eligible beneficiaries when the following, among other requirements have been satisfied: ● the product is reasonable and necessary for the diagnosis or treatment of the illness or injury for which the product is administered according to accepted standards of medical practice; 37 ● the product is typically furnished incident to a physician’s services; ● the indication for which the product will be used is included or approved for inclusion in certain Medicare-designated pharmaceutical compendia (when used for an off-label use); and ● the product has been approved by the FDA.
If we raise additional funds through collaborations and licensing arrangements, we may be required to relinquish some rights to our technologies or products, or to grant licenses on terms that are not favorable to us.
If we raise additional funds through collaborations and licensing arrangements, we may be required to relinquish some rights to our technologies or products, or to grant licenses on terms that are not favorable to us. 15 We have significant outstanding debt obligations and servicing these debt obligations will require a significant amount of capital, and our business may not be able to pay our substantial debt.
Risk Factors Related to Clinical and Commercialization Activity ● We may not be able to file INDs to commence additional clinical trials on the timelines we expect, and even if we are able to do so, the FDA may not permit us to proceed. ● We have limited experience in conducting clinical trials. ● Delays in the commencement, enrollment, and completion of clinical testing could result in increased costs to us and delay or limit our ability to obtain regulatory approval for our product candidates. ● As the results of earlier pre-clinical studies or clinical trials are not necessarily predictive of future results, any product candidate we advance into clinical trials may not have favorable results in later clinical trials or receive regulatory approval. ● Even if our product candidates receive regulatory approval, we may still face future development and regulatory difficulties. ● Any cell based therapies we develop may become subject to unfavorable pricing regulations, third party coverage and reimbursement practices or healthcare reform initiatives, thereby harming our business. 14 Risks Related to Our Securities ● Our officers, directors and principal stockholders own a significant percentage of our capital stock and will be able to exert significant control over matters that are subject to stockholder approval. ● If we are unable to maintain listing of our securities on the Nasdaq Capital Market or another reputable stock exchange, it may be more difficult for our stockholders to sell their securities. ● The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for our stockholders. ● You may experience dilution of your ownership interests because of the future issuance of additional shares of our common or preferred stock or other securities that are convertible into or exercisable for our common or preferred stock.
Risk Factors Related to Clinical and Commercialization Activity ● We may not be able to file investigational new drug applications (INDs) to commence additional clinical trials on the timelines we expect, and even if we are able to do so, the FDA may not permit us to proceed. ● We have limited experience in conducting clinical trials. ● Delays in the commencement, enrollment, and completion of clinical testing could result in increased costs to us and delay or limit our ability to obtain regulatory approval for our product candidates. 13 ● As the results of earlier pre-clinical studies or clinical trials are not necessarily predictive of future results, any product candidate we advance into clinical trials may not have favorable results in later clinical trials or receive regulatory approval. ● Even if our product candidates receive regulatory approval, we may still face future development and regulatory difficulties. ● Any cell based therapies we develop may become subject to unfavorable pricing regulations, third party coverage and reimbursement practices or healthcare reform initiatives, thereby harming our business.
The laboratory testing industry is fragmented and highly competitive. We primarily compete with three types of clinical testing providers: commercial clinical laboratories IDN-affiliated laboratories and physician-office laboratories. Our largest commercial clinical laboratory competitors are Quest Diagnostic Laboratories and Laboratory Corporation of America.
We primarily compete with three types of clinical testing providers: commercial clinical laboratories IDN-affiliated laboratories and physician-office laboratories. Our largest commercial clinical laboratory competitors are Quest Diagnostic Laboratories and Laboratory Corporation of America. In addition, we compete with many smaller regional and local commercial clinical laboratories, specialized advanced laboratories and providers of consumer-initiated testing.
As of the date of this filing, we have issued an aggregate of (i) 9,000 shares of our newly designated Series A Convertible Preferred Stock and (ii) 11,000 shares of our newly designated Series B Convertible Preferred Stock.
As of the date of this filing, we have issued an aggregate of (i) 9,000 shares of our newly designated Series A Preferred Stock and (ii) 11,000 shares of our newly designated Series B Preferred Stock. In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our stockholders.
If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose intellectual property rights that are important to our business.
This intense competitive environment may require us to make changes in our services, products, pricing, licensing, distribution, or marketing to develop a market position. 18 If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose intellectual property rights that are important to our business.
In order to service this indebtedness and any additional indebtedness we may incur in the future, we will need to generate cash from our operating activities. Our ability to generate cash is subject, in part, to our ability to successfully execute our business strategy, as well as general economic, financial, competitive, regulatory and other factors beyond our control.
Our ability to generate cash is subject, in part, to our ability to successfully execute our business strategy, as well as general economic, financial, competitive, regulatory and other factors beyond our control.
Further changes in third-party payer regulations, policies, or laboratory benefit or utilization management programs may have a material adverse effect on our business.
Further changes in third-party payer regulations, policies, or laboratory benefit or utilization management programs may have a material adverse effect on our business. Actions by federal and state agencies regulating insurance, including healthcare exchanges, or changes in other laws, regulations, or policies may also have a material adverse effect upon our business.
New CLFS rates will be established in 2025 based on data from 2019 to be reported in 2024. New CLFS rates will be established in 2028 based on data from 2026 to be reported in 2027 CLFS rates for Advanced Diagnostic Laboratory Tests (ADLTs) will be updated annually.
New CLFS rates will be established in 2028 based on data from 2026 to be reported in 2027 CLFS rates for Advanced Diagnostic Laboratory Tests (ADLTs) will be updated annually. 25 CMS published its initial proposed CLFS rates under PAMA for 2018-2020 on September 22, 2017.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeTotal rent expense under these lease agreements was approximately $141,000 and $143,000 for the years ended December 31, 2022 and 2021, respectively. We believe that our current office space is adequate for our current and immediately foreseeable operating needs.
Biggest changeTotal rent expense under these lease agreements was approximately $129,000 and $141,000 for the years ended December 31, 2023 and 2022, respectively. We believe that our current office space is adequate for our current and immediately foreseeable operating needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we are subject to ordinary routine litigation incidental to our normal business operations. We are not currently a party to, and our property is not subject to, any material legal proceedings, except as set forth below. On October 25, 2017, our subsidiary, Genexosome Technologies Inc.
Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we are subject to ordinary routine litigation incidental to our normal business operations. We are not currently a party to, and our property is not subject to, any material legal proceedings, except as set forth below.
Zhou $876,087 in cash, transferred 500,000 shares of common stock of the Company to Dr. Zhou and issued Dr. Zhou 400 shares of common stock of Genexosome. Further, The Company had not been able to realize the financial projections provided by Dr.
Zhou $876,087 in cash, transferred 500,000 shares of our common stock to Dr. Zhou and issued Dr. Zhou 400 shares of common stock of Genexosome. Further, the Company had not been able to realize the financial projections provided by Dr.
In addition, the Company agreed to pay the Research Institute 30% of the Company’s initial pre-tax profit of $3,333,333, 20% of the Company’s second pre-tax profit of $3,333,333 and 10% of the Company’s third pre-tax profit of $3,333,333. The parties provided a mutual release as well. ITEM 4. MINE SAFETY DISCLOSURES None. 50 PART II
In addition, the Company agreed to pay the Research Institute 30% of the Company’s initial pre-tax profit of $3,333,333, 20% of the Company’s second pre-tax profit of $3,333,333 and 10% of the Company’s third pre-tax profit of $3,333,333. The parties provided a mutual release as well. ITEM 4. MINE SAFETY DISCLOSURES None. 45 PART II
(“Genexosome”), entered into and closed a Stock Purchase Agreement with Beijing Jieteng (Genexosome) Biotech Co., Ltd., a corporation incorporated in the People’s Republic of China on August 7, 2015 (“Beijing Genexosome”) which was dissolved in June 2022, and Yu Zhou, MD, PhD, the sole shareholder of Beijing Genexosome, pursuant to which Genexosome acquired all of the issued and outstanding securities of Beijing Genexosome in consideration of a cash payment in the amount of $450,000, of which $100,000 is still owed.
On October 25, 2017, our subsidiary, Genexosome, entered into and closed a Stock Purchase Agreement with Beijing Jieteng (Genexosome) Biotech Co., Ltd., a corporation incorporated in the People’s Republic of China on August 7, 2015 (“Beijing Genexosome”) which was dissolved in June 2022, and Yu Zhou, MD, PhD, the sole shareholder of Beijing Genexosome, pursuant to which Genexosome acquired all of the issued and outstanding securities of Beijing Genexosome in consideration of a cash payment in the amount of $450,000, of which $100,000 is still owed.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur common stock was listed on the Nasdaq Capital Market under the symbol “AVCO” from November 5, 2018 through the close of business on November 9, 2022.
Biggest changeOur common stock was listed on The Nasdaq Capital Market under the symbol “AVCO” from November 5, 2018 through the close of business on November 9, 2022. Holders of Record As of March 29, 2024, there were approximately 223 registered holders of record of our shares of common stock, based upon information received from our stock transfer agent.
Holders of Record As of March 30, 2023, there were approximately 222 registered holders of record of our shares of common stock, based upon information received from our stock transfer agent. However, this number does not include beneficial owners whose shares were held of record by nominees or broker dealers. ITEM 6. [RESERVED]
However, this number does not include beneficial owners whose shares were held of record by nominees or broker dealers. ITEM 6. [RESERVED]
Removed
Our common shares were traded previously on the OTC Market Group Inc.’s Venture Market (the “OTCQB”) since February 22, 2016, under the symbol “AVCO” since October 18, 2016 and “GTHC” prior to October 18, 2016.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOther expense, net, totaled $3,137,952 for the year ended December 31, 2022, as compared to $256,669 for the year ended December 31, 2021, an increase of $2,881,283, or 1,122.6%, which was primarily attributable to an increase in third party interest expense of approximately $3,496,000 mainly driven by the amortization of debt discount and debt issuance cost of approximately $3,311,000 and the increased interest expense of approximately $186,000 from third party debts in year 2022, and an increase in conversion inducement expense of approximately $344,000 resulted from the reduction in the conversion price, offset by an increase in gain from change in fair value of derivative liability of approximately $601,000, an increase in other miscellaneous income of approximately $219,000, mainly driven by reagent sale in year 2022, a decrease in interest expense – related party of approximately $121,000 due to the decrease in outstanding borrowing in year 2022, and a decrease in loss from equity method investment of approximately $19,000.
Biggest changeOther (Expense) Income Other (expense) income mainly includes third party and related party interest expense, conversion inducement expense, loss from equity method investment - Epicon, change in fair value of derivative liability, impairment of equity method investment - Epicon, gain on debts extinguishment, and other miscellaneous (expense) income. 51 Other expense, net, totaled $953,327 for the year ended December 31, 2023, as compared to $ 3,137,952 for the year ended December 31, 2022, a decrease of $2,184,625, or 69.6%, which was primarily attributable to a decrease in third party interest expense of approximately $2,179,000, mainly driven by the decrease in amortization of debt discount and debt issuance cost of approximately $2,767,000 which was offset by the increased interest expense of approximately $588,000 from third party debts in the year ended December 31, 2023, a decrease in conversion inducement expense of approximately $344,000 resulted from the reduction in the conversion price which was incurred in the year ended December 31, 2022, and an increase in gain on debts extinguishment of approximately $683,000, offset by a decrease in gain from change in fair value of derivative liability of approximately $412,000, and an increase in impairment of equity method investment - Epicon of approximately $455,000 due to Epicon’s series of operating losses and the joint venture partner unable to obtain funds to commence operations, and a decrease in other miscellaneous income of approximately $224,000.
In the third quarter of 2019, we had secured a $20 million credit facility (Line of Credit) provided by our Chairman, Wenzhao Lu. The unsecured credit facility bears interest at a rate of 5% and provides for maturity on drawn loans 36 months after funding.
August 2019 Credit Facility In the third quarter of 2019, we had secured a $20 million credit facility (Line of Credit) provided by our Chairman, Wenzhao Lu. The unsecured credit facility bears interest at a rate of 5% and provides for maturity on drawn loans 36 months after funding.
If we are unable to obtain additional financing, we will be required to cease our operations. To date, we have not considered this alternative, nor do we view it as a likely occurrence. 63 Off-balance Sheet Arrangements We presently do not have off-balance sheet arrangements.
If we are unable to obtain additional financing, we will be required to cease our operations. To date, we have not considered this alternative, nor do we view it as a likely occurrence. Off-balance Sheet Arrangements We presently do not have off-balance sheet arrangements.
Costs and Expenses Real property operating expenses consist of property management fees, property insurance, real estate taxes, depreciation, repairs and maintenance fees, utilities and other expenses related to our rental properties.
Real Property Operating Expenses Real property operating expenses consist of property management fees, property insurance, real estate taxes, depreciation, repairs and maintenance fees, utilities and other expenses related to our rental properties.
When used in this Form 10-K, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management.
When used in this Annual Report on Form 10-K, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management.
Special Note Regarding Forward-looking Statements All statements other than statements of historical fact included in this Form 10-K including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements.
Special Note Regarding Forward-looking Statements All statements other than statements of historical fact included in this Annual Report Form 10-K including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations for the years ended December 31, 2022 and 2021 should be read in conjunction with our consolidated financial statements and related notes to those consolidated financial statements that are included elsewhere in this report.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations for the years ended December 31, 2023 and 2022 should be read in conjunction with our consolidated financial statements and related notes to those consolidated financial statements that are included elsewhere in this report.
In addition, the current cash balance cannot be projected to cover the operating expenses for the next twelve months from the release date of this report. These matters raise substantial doubt about the Company’s ability to continue as a going concern.
In addition, the current cash balance cannot be projected to cover the operating expenses for the next twelve months from the release date of this report. These matters raise substantial doubt about our ability to continue as a going concern.
In addition, the current cash balance cannot be projected to cover the operating expenses for the next twelve months from the release date of this report. These matters raise substantial doubt about the Company’s ability to continue as a going concern.
In addition, the current cash balance cannot be projected to cover the operating expenses for the next twelve months from the release date of this report. These matters raise substantial doubt about our ability to continue as a going concern.
The accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
The accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should we be unable to continue as a going concern.
In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probably that taxable profit will be available against which deductible temporary differences can be utilized.
In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized.
Inflation The effect of inflation on our revenue and operating results was not significant. 64
Inflation The effect of inflation on our revenue and operating results was not significant.
Income Taxes We did not have any income taxes expense for the years ended December 31, 2022 and 2021 since we incurred losses in these periods.
Income Taxes We did not have any income taxes expense for the years ended December 31, 2023 and 2022 since we incurred losses in these periods.
The increase was primarily due to increased advertising activities to enhance the visibility and marketability of our company and to improve brand recognition and awareness.
The increase was primarily due to increased advertising activities to enhance our visibility and marketability and to improve brand recognition and awareness.
Foreign Currency Translation Adjustment Our reporting currency is the U.S. dollar. The functional currency of our parent company, AHS, Avalon RT 9, Genexosome, Avactis, and Exosome, is the U.S. dollar and the functional currency of Avalon Shanghai is the Chinese Renminbi (“RMB”).
Foreign Currency Translation Adjustment Our reporting currency is the U.S. dollar. The functional currency of our parent company, AHS, Avalon RT 9, and Avalon Lab is the U.S. dollar and the functional currency of Avalon Shanghai is the Chinese Renminbi (“RMB”).
Net gains and losses resulting from foreign exchange transactions are included in the results of operations. As a result of foreign currency translations, which are a non-cash adjustment, we reported a foreign currency translation loss of $47,871 and a foreign currency translation gain of $ 25,244 for the years ended December 31, 2022 and 2021, respectively.
Net gains and losses resulting from foreign exchange transactions are included in the results of operations. As a result of foreign currency translations, which are a non-cash adjustment, we reported a foreign currency translation loss of $18,590 and $47,871 for the years ended December 31, 2023 and 2022, respectively.
Thus, exchange rate fluctuations between RMB and US dollars do not have a material effect on us. For the years ended December 31, 2022 and 2021, we had an unrealized foreign currency translation loss of approximately $48,000 and an unrealized foreign currency translation gain of approximately $25,000, respectively, because of changes in the exchange rate.
Thus, exchange rate fluctuations between the RMB and the US dollar do not have a material effect on us. For the years ended December 31, 2023 and 2022, we had an unrealized foreign currency translation loss of approximately $19,000 and $48,000, respectively, because of changes in the exchange rate.
At December 31, 2022 and 2021, we had cash balance of approximately $1,991,000 and $808,000, respectively.
At December 31, 2023 and 2022, we had cash balance of approximately $285,000 and $1,991,000, respectively.
Other than funds received from the sale of our equity and advances from our related party, and cash resource generating from our operations, we presently have no other significant alternative source of working capital. We have used these funds to fund our operating expenses, pay our obligations and grow our company.
Other than funds received as described above and cash resource generating from our operations, we presently have no other significant alternative source of working capital. We have used these funds to fund our operating expenses, pay our obligations and grow our company.
This non-cash loss/gain had the effect of increasing/decreasing our reported comprehensive loss. Comprehensive Loss As a result of our foreign currency translation adjustment, we had comprehensive loss of $11,978,718 and $9,065,255 for the years ended December 31, 2022 and 2021, respectively.
This non-cash loss had the effect of increasing our reported comprehensive loss. Comprehensive Loss As a result of our foreign currency translation adjustment, we had comprehensive loss of $16,725,600 and $11,978,718 for the years ended December 31, 2023 and 2022, respectively.
Net cash flow provided by financing activities was $17,263,989 for the year ended December 31, 2022 as compared to $5,170,132 for the year ended December 31, 2021.
Net cash flow provided by financing activities was $4,825,337 for the year ended December 31, 2023 as compared to $17,263,989 for the year ended December 31, 2022.
We expect that our revenue from real property rent will remain in its current level with minimal increase in the near future.
We expect our real property operating income will remain at its current level with minimal increase in the near future.
There are no assurances that the Company will be successful in its efforts to generate significant revenues, maintain sufficient cash balance or report profitable operations or to continue as a going concern. The Company plans on raising capital through the sale of equity to implement its business plan.
The ability of us to continue as a going concern is dependent on our ability to raise additional capital, implement our business plan, and generate sufficient revenues. There are no assurances that we will be successful in its efforts to generate sufficient revenues, maintain sufficient cash balance or report profitable operations or to continue as a going concern.
There are no assurances that the Company will be successful in its efforts to generate significant revenues, maintain sufficient cash balance or report profitable operations or to continue as a going concern. The Company plans on raising capital through the sale of equity to implement its business plan.
The ability of us to continue as a going concern is dependent on our ability to raise additional capital, implement its business plan, and generate sufficient revenues. There are no assurances that we will be successful in its efforts to generate sufficient revenues, maintain sufficient cash balance or report profitable operations or to continue as a going concern.
Cash Flows for the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 The following summarizes the key components of our cash flows for the years ended December 31, 2022 and 2021: Years Ended December 31, 2022 2021 Net cash used in operating activities $ (7,037,224 ) $ (5,024,479 ) Net cash used in investing activities (9,053,470 ) (68,135 ) Net cash provided by financing activities 17,263,989 5,170,132 Effect of exchange rate on cash and restricted cash 10,077 3,443 Net increase in cash and restricted cash $ 1,183,372 $ 80,961 Net cash flow used in operating activities for the year ended December 31, 2022 was $7,037,224, which primarily reflected our consolidated net loss of approximately $11,931,000, and the non-cash item adjustment consisting of change in fair market value of derivative liability of approximately $601,000, and the changes in operating assets and liabilities, primarily consisting of a decrease in operating lease obligation of approximately $142,000, offset by an increase in accrued liabilities and other payables of approximately $331,000, an increase in accrued liabilities and other payables – related parties of approximately $80,000, and the non-cash items adjustment primarily consisting of depreciation of approximately $331,000, amortization of right-of-use asset of approximately $136,000, stock-based compensation and service expense of approximately $1,107,000, amortization of debt discount of approximately $3,281,000 mainly resulting from the conversion of convertible debt in July 2022, and conversion inducement expense of approximately $344,000 resulted from the reduction in the conversion price.
Net cash flow used in operating activities for the year ended December 31, 2022 was $7,037,224, which primarily reflected our consolidated net loss of approximately $11,931,000, and the non-cash item adjustment consisting of change in fair market value of derivativ e liability of approximately $601,000, and the changes in operating assets and liabilities, primarily consisting of a decrease in operating lease obligation of approximately $142,000, offset by an increase in accrued liabilities and other payables of approximately $331,000, an increase in accrued liabilities and other payables – related parties of approximately $80,000, and the non-cash items adjustment primarily consisting of depreciation of approximately $331,000, amortization of operating lease right-of-use asset of approximately $136,000, stock-based compensation and service expense of approximately $1,107,000, amortization of debt issuance costs and debt discount of approximately $3,311,000 mainly resulting from the conversion of convertible debt in July 2022, and conversion inducement expense of approximately $344,000 resulted from the reduction in the conversion price .
During the year ended December 31, 2022, we received proceeds from related party borrowings of $100,000, and proceeds from issuance of convertible debt and warrants of approximately $3,719,000, and net proceeds from issuance of balloon promissory note of approximately $4,534,000 (net of cash paid for debt issuance costs of approximately $266,000), and net proceeds from equity offering of approximately $712,000 (net of cash paid for commission and other offering costs of approximately $24,000), and proceeds from issuance of Series A preferred stock of $9,000,000 to fund our working capital needs, offset by repayments made for note payable – related party of $390,000 and repayments made for loan payable – related party of $410,000.
During the year ended December 31, 2022, we received proceeds from related party borrowings of $100,000, and proceeds from issuance of convertible debt and warrants of approximately $3,719,000, and net proceeds from issuance of balloon promissory note of approximately $4,534,000 (net of cash paid for debt issuance costs of approximately $266,000), and net proceeds from equity offering of approximately $712,000 (net of cash paid for commission and other offering costs of approximately $24,000), and proceeds from issuance of Series A Preferred Stock of $9,000,000 to fund our working capital needs and equity interest purchase, offset by repayments made for note payable – related party of $390,000 and repayments made for loan payable – related party of $410,000. 54 The following trends are reasonably likely to result in a material decrease in our liquidity over the near to long term: ● an increase in working capital requirements to finance our current business; ● the use of capital for acquisitions and the development of business opportunities; and ● the cost of being a public company.
The increase was mainly due to an increase in building cleaning fees of approximately $15,000, an increase in property management fees of approximately $21,000, an increase in repairs and maintenance fee of approximately $32,000, an increase in utilities of approximately $30,000, and an increase in other miscellaneous items of approximately $2,000.
The increase was primarily due to an increase in property management fees of approximately $15,000, an increase in repairs and maintenance fee of approximately $64,000, and an increase in other miscellaneous items of approximately $9,000.
We expect that our advertising expenses will remain in its current level with minimal increase in the near future. ● Professional fees primarily consisted of accounting fees, audit fees, legal service fees, consulting fees, investor relations service charges, valuation service fees and other fees.
We expect that our advertising and marketing expenses will decrease in the near future as we conserve cash. 50 ● Professional fees primarily consisted of accounting fees, audit fees, legal service fees, consulting fees, investor relations service charges and other fees.
Liquidity and Capital Resources The Company has a limited operating history and its continued growth is dependent upon generating rental revenue from its income-producing real estate property in New Jersey and obtaining additional financing to fund future obligations and pay liabilities arising from normal business operations.
Liquidity and Capital Resources We have a limited operating history and our continued growth is dependent upon the continuation of generating rental revenue from our income-producing real estate property in New Jersey and income from equity method investment through our equity interest in Lab Services MSO, as well as obtaining additional financing to fund future obligations and pay liabilities arising from ordinary course business operations.
For the year ended December 31, 2022, our real property operating expenses amounted to $929,441, as compared to $829,287 for the year ended December 31, 2021, an increase of $100,154, or 12.1%.
For the year ended December 31, 2023, our real property operating expenses amounted to $1,017,493, as compared to $ 929,441 for the year ended December 31, 2022, an increase of $88,052 or 9.5%.
Net Loss As a result of the factors described above, our net loss was $11,930,847 for the year ended December 31, 2022, as compared to $9,090,499 for the year ended December 31, 2021, an increase of $2,840,348 or 31.2%. 58 Net Loss Attributable to Avalon GloboCare Corp.
Net Loss As a result of the factors described above, our net loss was $16,707,010 for the year ended December 31, 2023, as compared to $11,930,847 for the year ended December 31, 2022, an increase of $4,776,163 or 40.0%. Net Loss Attributable to Avalon GloboCare Corp.
The Company has a limited operating history and its continued growth is dependent upon the generating rental revenue from its income-producing real estate property in New Jersey and obtaining additional financing to fund future obligations and pay liabilities arising from normal business operations.
We have a limited operating history and our continued growth is dependent upon the continuation of generating rental revenue from its income-producing real estate property in New Jersey and income from equity method investment through its forty percent (40%) interest in Lab Services MSO and obtaining additional financing to fund future obligations and pay liabilities arising from ordinary course business operations.
Actual results could differ materially from those contemplated by the forward-looking statements as a result of a number of factors, including those set forth under the risk factors and business sections in this Form 10-K.
Actual results could differ materially from those contemplated by the forward-looking statements as a result of a number of factors, including those set forth under the risk factors and business sections in this Annual Report on Form 10-K. Overview We are a commercial stage company dedicated to developing and delivering innovative, transformative, precision diagnostics and clinical laboratory services.
The decrease was mainly attributable to decreased research and development projects in year 2022. We expect that our research and development expenses will remain in its current level with minimal decrease in the near future. ● For the year ended December 31, 2022, litigation settlement increased by $1,350,000, or 100.0%, as compared to the year ended December 31, 2021.
We expect that our research and development expenses will continue to decrease in the near future as we redirect our funding efforts to our core business strategies discussed above . ● For the year ended December 31, 2023, litigation settlement decreased by $1,350,000, or 100.0%, as compared to the year ended December 31, 2022.
We expect that our compensation and related benefits will remain in its current level with minimal increase in the near future. ● For the year ended December 31, 2022, research and development expenses decreased by $293,681, or 28.7%, as compared to the year ended December 31, 2021.
We expect that our compensation and related benefits will continue to decrease in the near future . ● For the year ended December 31, 2023, research and development expenses decreased by $621,710, or 85.0%, as compared to the year ended December 31, 2022.
The increase was due to a settlement signed in June 2022 related to Research Institute litigation. ● For the year ended December 31, 2022, Directors and Officers Liability Insurance premium increased by $47,392, or 12.9%, as compared to the year ended December 31, 2021.
The decrease was due to a settlement signed in June 2022. ● For the year ended December 31, 2023, Directors and Officers Liability Insurance premium decreased by $65,012, or 15.7%, as compared to the year ended December 31, 2022.
Common Shareholders The net loss attributable to Avalon GloboCare Corp. common shareholders was $11,930,847 or $1.28 per share (basic and diluted) for the year ended December 31, 2022, as compared with $9,090,499 or $1.07 per share (basic and diluted) for the year ended December 31, 2021, an increase of $2,840,348 or 31.2%.
Common Shareholders The net loss attributable to our common shareholders was $16,707,010 or $1.59 per share (basic and diluted) for the year ended December 31, 2023, as compared to $11,930,847 or $1.28 per share (basic and diluted) for the year ended December 31, 2022, an increase of $4,776,163 or 40.0%.
Rental income from operating leases is recognized on a straight-line basis under the guidance of ASC 842. Lease payments under tenant leases are recognized on a straight-line basis over the term of the related leases. The cumulative difference between lease revenue recognized under the straight-line method and contractual lease payments are included in rent receivable on the consolidated balance sheets.
Lease payments under tenant leases are recognized on a straight-line basis over the term of the related leases. The cumulative difference between lease revenue recognized under the straight-line method and contractual lease payments are included in rent receivable on the consolidated balance sheets. We do not offer promotional payments, customer coupons, rebates or other cash redemption offers to its customers.
Significant estimates during the years ended December 31, 2022 and 2021 include the useful life of property and equipment and investment in real estate, assumptions used in assessing impairment of long-term assets, valuation of deferred tax assets and the associated valuation allowances, valuation of stock-based compensation, and assumptions used to determine fair value of warrants and embedded conversion features of convertible note payable.
Significant estimates during the years ended December 31, 2023 and 2022 include the useful life of property and equipment, investment in real estate, and intangible assets, the assumptions used in assessing impairment of long-term assets, the valuation of deferred tax assets and the associated valuation allowances, the valuation of stock-based compensation, the assumptions used to determine fair value of warrants and embedded conversion features of convertible note payable, and the fair value of the consideration given and assets acquired in the purchase of our equity interest in Lab Services MSO. 48 Investment in Unconsolidated Companies We use the equity method of accounting for its investments in, and earning or loss of, companies that it does not control but over which it does exert significant influence.
Loss from Operations As a result of the foregoing, for the year ended December 31, 2022, loss from operations amounted to $8,792,895, as compared to $8,833,830 for the year ended December 31, 2021, a decrease of $40,935 or 0.5%.
Loss from Operations As a result of the foregoing, for the year ended December 31, 2023, loss from operations amounted to $15,753,683, as compared to $ 8,792,895 for the year ended December 31, 2022, an increase of $6,960,788 or 79.2%.
Our gross profit from medical related consulting services for the year ended December 31, 2021 was $40,245, with a gross margin of 21.5%. 56 Other Operating Expenses For the years ended December 31, 2022 and 2021, other operating expenses consisted of the following: Years Ended December 31, 2022 2021 Advertising and marketing $ 1,325,313 $ 328,565 Professional fees 2,909,652 4,946,696 Compensation and related benefits 1,863,188 2,042,278 Research and development 731,328 1,025,009 Litigation settlement 1,350,000 - Directors and officers liability insurance premium 414,757 367,365 Travel and entertainment 163,213 156,483 Rent and related utilities 77,352 78,547 Other general and administrative 230,820 303,405 $ 9,065,623 $ 9,248,348 ● For the year ended December 31, 2022, advertising and marketing expenses increased by $996,748 or 303.4% as compared to the year ended December 31, 2021.
Other Operating Expenses For the years ended December 31, 2023 and 2022, other operating expenses consisted of the following: Years Ended December 31, 2023 2022 Advertising and marketing expenses $ 1,666,721 $ 1,325,313 Professional fees 3,076,477 2,909,652 Compensation and related benefits 1,768,449 1,863,188 Research and development 109,618 731,328 Litigation settlement - 1,350,000 Directors and officers’ liability insurance premium 349,745 414,757 Travel and entertainment 166,921 163,213 Rent and related utilities 64,149 77,352 Other general and administrative 218,144 230,820 $ 7,420,224 $ 9,065,623 ● For the year ended December 31, 2023, advertising and marketing expenses increased by $341,408 or 25.8% as compared to the year ended December 31, 2022.
For the year ended December 31, 2022, other general and administrative expenses decreased by $72,585, or 23.9%, as compared to the year ended December 31, 2021.
For the year ended December 31, 2023, other general and administrative expenses decreased by $12,676, or 5.5%, as compared to the year ended December 31, 2022, reflecting our efforts at stricter controls on corporate expenditures.
For the year ended December 31, 2022, professional fees decreased by $2,037,044, or 41.2%, as compared to the year ended December 31, 2021, which was primarily attributable to a decrease in consulting fees of approximately $1,648,000 mainly due to the decrease in use of consulting service providers, a decrease in legal service fees of approximately $262,000 mainly due to the decrease in use of legal service providers related to the acquisition of a British Virgin Island company which was terminated on January 1, 2022, and a decrease in one time valuation service fees of $180,000, offset by an increase in other miscellaneous items of approximately $53,000.
For the year ended December 31, 2023, professional fees increased by $166,825, or 5.7%, as compared to the year ended December 31, 2022, which was primarily attributable to an increase in consulting fees of approximately $331,000, mainly due to the increase in use of consulting service providers related to our acquisition of Lab Services MSO, an increase in audit fees of approximately $242,000, due to the increased audit services related to our acquisition of Lab Services MSO, and an increase in accounting fees of approximately $425,000 mainly due to the increased accounting services related to our acquisition of Lab Services MSO, offset by a decrease in investor relations service charges of approximately $242,000, resulting from the decrease in investor relations service providers, a decrease in legal service fees of approximately $568,000, mainly due to the decreased legal services related to our acquisition of Lab Services MSO, and a decrease in other miscellaneous items of approximately $21,000.
The increase was mainly due to different insurance provider with different premium. 57 ● For the year ended December 31, 2022, travel and entertainment expense increased by $6,730, or 4.3%, as compared to the year ended December 31, 2021.
The decrease was mainly due to us switching to a different insurance provider, resulting in a lower premium. ● For the year ended December 31, 2023, travel and entertainment expense increased by $3,708, or 2.3%, as compared to the year ended December 31, 2022. ● For the year ended December 31, 2023, rent and related utilities expenses decreased by $13,203, or 17.1%, as compared to the year ended December 31, 2022.
The increase was mainly due to increased business travel activities in year 2022. ● For the year ended December 31, 2022, rent and related utilities expenses decreased by $1,195, or 1.5%, as compared to the year ended December 31, 2021. ● Other general and administrative expenses mainly consisted of NASDAQ listing fee, office supplies, and other miscellaneous items.
The decrease was attributable to decreased rental rate in the year ended December 31, 2023 . ● Other general and administrative expenses mainly consisted of NASDAQ listing fee, office supplies, miscellaneous taxes, and other miscellaneous items.
The decrease was primarily attributable to the increase in real property operating expenses as described above. We expect our real property operating income will remain in its current level with minimal increase in the near future.
The increase was primarily attributable to the increase in the number of tenants occupying the building in the year ended December 31, 2023 as compared to the year ended December 31, 2022. We expect that our revenue from real property rent will remain at its current level with minimal increase in the near future.
However, there is no assurance these plans will be realized and that any additional financings will be available to the Company on satisfactory terms and conditions, if any. The occurrence of an uncontrollable event such as the COVID-19 pandemic had negatively impact on the Company’s operations.
We plan on raising capital through the sale of equity to implement its business plan. However, there is no assurance these plans will be realized and that any additional financings will be available to us on satisfactory terms and conditions, if any.
Net cash flow used in investing activities was $5,053,748 for the year ended December 31, 2022 as compared to $68,135 for the year ended December 31, 2021.
Net cash flow used in investing activities was $22,159 for the year ended December 31, 2023 as compared to $9,053,470 for the year ended December 31, 2022. During the year ended December 31, 2023, we made payment for purchase of property and equipment of approximately $22,000.
However, there is no assurance these plans will be realized and that any additional financings will be available to the Company on satisfactory terms and conditions, if any. The occurrence of an uncontrollable event such as the COVID-19 pandemic is likely to negatively affect the Company’s operations.
However, there is no assurance these plans will be realized and that any additional financings will be available to us on satisfactory terms and conditions, if at all. 52 Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis.
We expect that our professional fees will remain in its current level with minimal increase in the near future. ● For the year ended December 31, 2022, compensation and related benefits decreased by $179,090, or 8.8%, as compared to the year ended December 31, 2021, which was primarily attributable to the decrease in stock-based compensation which reflected the value of options granted and vested to our management.
We expect that our professional fees are likely to decrease in the near future. ● For the year ended December 31, 2023, compensation and related benefits decreased by $94,739, or 5.1%, as compared to the year ended December 31, 2022.
The Company does not offer promotional payments, customer coupons, rebates or other cash redemption offers to its customers. Income Taxes We are governed by the income tax laws of China and the United States.
Income Taxes We are governed by the income tax laws of China and the United States.
For the year ended December 31, 2021, costs of medical related consulting services amounted to $147,167. Real Property Operating Income Our real property operating income for the year ended December 31, 2022 was $272,728, representing a decrease of $101,545, or 27.1%, as compared to $374,273 for the year ended December 31, 2021.
Real Property Operating Income Our real property operating income for the year ended December 31, 2023 was $238,188, representing a decrease of $34,540 or 12.7%, as compared to $ 272,728 for the year ended December 31, 2022. The decrease was primarily attributable to the increase in real property operating expenses as described above.
We estimate that based on current plans and assumptions, that our available cash will be insufficient to satisfy our cash requirements under our present operating expectations through cash available under our Credit Line and sales of equity through our Sales Agreement. Under the Line of Credit, the Company received a loan from the Lender of $750,000 in March 2023.
We and our subsidiaries also entered into security agreements in connection with the March 2024 Note, creating a security interest in certain property of the Company and its subsidiaries to secure the prompt payment, performance and discharge in full of all of our obligations under the March 2024 Note. 56 We estimate that based on current plans and assumptions, that our available cash will be insufficient to satisfy our cash requirements under our present operating expectations through cash flow provided by operations, and cash available under our ATM and lending facilities and sales of equity.
These consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business. 53 As reflected in the accompanying consolidated financial statements, the Company had working capital deficit of $1,206,279 at December 31, 2022 and had incurred recurring net losses and generated negative cash flow from operating activities of $11,930,847 and $7,037,224 for the year ended December 31, 2022, respectively.
As reflected in the accompanying consolidated financial statements, we had working capital deficit of approximately $5,912,000 at December 31, 2023 and had incurred recurring net losses and generated negative cash flow from operating activities of approximately $16,707,000 and $6,505,000 for the year ended December 31, 2023, respectively.
The Company initiated a sponsored research and co-development project with Massachusetts Institute of Technology (MIT) led by Professor Shuguang Zhang as Principal Investigator in May 2019. Using the unique QTY code protein design platform, six water-soluble variant cytokine receptors have been successfully designed and tested to show binding affinity to the respective cytokines.
Using the unique QTY code protein design platform, six water-soluble variant cytokine receptors have been successfully designed and tested to show binding affinity to the respective cytokines. We currently are focused on bringing forward the intellectual property associated with this program through joint patent submissions. Product Commercialization We have begun the commercialization and development of a versatile breathalyzer system.
RESULTS OF OPERATIONS Comparison of Results of Operations for the Years Ended December 31, 2022 and 2021 Revenues For the year ended December 31, 2022, we had real property rental revenue of $1,202,169, as compared to $1,203,560 for the year ended December 31, 2021, a decrease of $1,391, or 0.1%.
Deferred tax assets and liabilities are offset when they related to income taxes levied by the same taxation authority and we intend to settle its current tax assets and liabilities on a net basis. 49 RESULTS OF OPERATIONS Comparison of Results of Operations for the Years Ended December 31, 2023 and 2022 Real Property Rental Revenue For the year ended December 31, 2023, we had real property rental revenue of $1,255,681, as compared to $1,202,169 for the year ended December 31, 2022, an increase of $53,512, or 4.5%.
During the year ended December 31, 2021, we received proceeds from related party borrowings of approximately $2,550,000 and net proceeds from equity offering of approximately $2,620,000 (net of cash paid for commission and other offering costs of approximately $240,000) to fund our working capital needs.
During the year ended December 31, 2023, we received proceeds from related party borrowings of $850,000, and net proceeds from issuance of convertible debt and warrants of approximately $2,238,000 (net of original issue discount of $135,000 and cash paid for convertible note issuance costs of approximately $327,000), and net proceeds from issuance of balloon promissory note of approximately $936,000 (net of cash paid for promissory note issuance costs of approximately $64,000), and net proceeds from equity offering of approximately $616,000 (net of cash paid for commission and other offering costs of approximately $19,000), and advance from sale of noncontrolling interest in subsidiary of approximately $486,000, offset by repayments made for convertible debt of $300,000.
As of December 31, 2022, the total principal amount outstanding under the Credit Line was $0 and we used approximately $5.9 million of the credit facility and have approximately $14.1 million remaining available under the Line Credit. 62 On December 13, 2019, we entered into an Open Market Sale Agreement SM (the “Sales Agreement”) with Jefferies LLC, as sales agent (“Jefferies”), pursuant to which we may offer and sell, from time to time, through Jefferies, shares of our common stock, par value $0.0001 per share, having an aggregate offering price of up to $20.0 million.
ATM In June 2023, we entered into a sales agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (“Roth”) under which we may offer and sell from time to time shares of our common stock having an aggregate offering price of up to $3.5 million.
Any payments received in advance of the performance of services are recorded as deferred revenue until such time as the services are performed. The Company has determined that the ASC 606 does not apply to rental contracts, which are within the scope of other revenue recognition accounting standards.
Real Property Rental We have determined that ASC 606 does not apply to rental contracts, which are within the scope of other revenue recognition accounting standards. Rental income from operating leases is recognized on a straight-line basis under the guidance of ASC 842.
The following table sets forth a summary of changes in our working capital deficit from December 31, 2021 to December 31, 2022: December 31, Changes in 2022 2021 Amount Percentage Working capital deficit: Total current assets $ 2,373,526 $ 1,323,042 $ 1,050,484 79.4 % Total current liabilities 3,579,805 4,401,658 (821,853 ) (18.7 )% Working capital deficit $ (1,206,279 ) $ (3,078,616 ) $ 1,872,337 (60.8 )% Our working capital deficit decreased by $1,872,337 to $1,206,279 at December 31, 2022 from $3,078,616 at December 31, 2021.
These funds are kept in financial institutions located as follows: Country: December 31, 2023 December 31, 2022 United States $ 280,197 98.2 % $ 1,806,083 90.7 % China 5,203 1.8 % 184,827 9.3 % Total cash $ 285,400 100.0 % $ 1,990,910 100.0 % The following table sets forth a summary of changes in our working capital deficit from December 31, 2022 to December 31, 2023: December 31, Changes in 2023 2022 Amount Percentage Working capital deficit: Total current assets $ 850,867 $ 2,373,526 $ (1,522,659 ) (64.2 )% Total current liabilities 6,762,686 3,579,805 3,182,881 88.9 % Working capital deficit $ (5,911,819 ) $ (1,206,279 ) $ (4,705,540 ) 390.1 % Our working capital deficit increased by $4,705,540 to $5,911,819 at December 31, 2023 from $1,206,279 at December 31, 2022.
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Impact of COVID-19 on Our Operations, Financial Condition, Liquidity and Results of Operations Although the COVID-19 vaccines have generally been introduced to the public, the ultimate impact of the COVID-19 pandemic on our operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, a significant increase in new and variant strains of COVID-19 cases, availability and effectiveness of COVID-19 vaccines and therapeutics, the level of acceptance of the vaccine by the general population and any additional preventative and protective actions that governments, or us, may determine are needed. 51 The occurrence of COVID-19 pandemic had negative impact on our operations.
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We are focused on establishing a leading role in the innovation of diagnostic testing, utilizing proprietary technology to deliver precise, genetics-driven results.
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Some of the universities and laboratories with which we collaborate were temporarily closed. Our general development operations have continued during the COVID-19 pandemic and we have not had significant disruption. However, we are uncertain if the COVID-19 pandemic will impact future operations at our laboratory, or our ability to collaborate with other laboratories and universities.
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As a first step into the laboratory market, we completed an acquisition of a 40% membership interest in Laboratory Services MSO, LLC (“Lab Services MSO”), which closed in February 2023. 46 We have the following areas of focus: Laboratory Acquisitions We have embarked on a laboratory rollup strategy focused on forming joint ventures and acquiring laboratories that are accretive to our commercial strategy.
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In addition, we are unsure if the COVID-19 pandemic will impact future clinical trials. Given the dynamic nature of these circumstances, the duration of business disruption and reduced traffic, the related financial effect cannot be reasonably estimated at this time.
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As a first step, in February of 2023, we acquired a 40% membership interest in Lab Services MSO. ● Lab Services MSO is focused on delivering high quality services related to toxicology and wellness testing and 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.
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We have limited cash available to fund planned operations and although we have other sources of capital described below under “Liquidity and Capital Resources,” management continues to pursue various financing alternatives to fund our operations so we can continue as a going concern. However, the COVID-19 pandemic has created significant economic uncertainty and volatility in the credit and capital markets.
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Specific capabilities include STAT blood testing, qualitative drug screening, genetic testing, urinary testing, and sexually transmitted disease testing. The panels that Lab Services MSO tests for are thyroid panel, comprehensive metabolic panel, kidney profile, liver function tests, and other individual tests.
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Management plans to secure the necessary financing through the issue of new equity and/or the entering into of strategic partnership arrangements but the ultimate impact of the COVID-19 pandemic on our ability to raise additional capital is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak and new information which may emerge concerning the severity of the COVID-19 pandemic.
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Through Lab Services MSO, we use fast, accurate, and efficient equipment to provide practitioners with the tools to quickly determine if a patient is following their designated treatment plan. In most instances, we are able to provide a practitioner with qualitative drug class results the same day the sample is received.
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We may not be able to raise sufficient additional capital and may tailor our operations based on the amount of funding we are able to raise in the future. Nevertheless, there is no assurance that these initiatives will be successful. Further, there is no assurance that capital available to us in any future financing will be on acceptable terms.
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Lab Services MSO provides a menu of extensive chemistry tests that physicians can use to obtain information to better treat their patients and maintain their overall wellness. Lab Services MSO has developed a premier reputation for customer service and fast turnaround times. ● Lab Services MSO is also focused on commercialization of genetic-based proprietary testing.
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Overview The Company is a clinical-stage biotechnology company dedicated to developing and delivering innovative, transformative cellular therapeutics, precision diagnostics, and clinical laboratory services. The Company also provides strategic advisory and outsourcing services to facilitate and enhance its clients’ growth and development, as well as competitiveness in healthcare and CellTech industry markets.
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The first area of focus in this area is confirmatory genetic testing during toxicology screening and genetic testing to screen for addictive propensity.
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Through its subsidiary structure with unique integration of verticals from innovative research and development to automated bioproduction and accelerated clinical development, the Company is establishing a leading role in the fields of cellular immunotherapy (including CAR-T/NK), exosome technology (ACTEX™), and regenerative therapeutics.
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Lab Services MSO laboratory plans to focus on diagnostic testing utilizing proprietary technology to deliver precise genetic driven results. ● In the third quarter of 2023, Lab Services MSO acquired Merlin Technologies, Inc. which is a medical equipment retail company.
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Avalon achieves and fosters seamless integration of unique verticals to bridge and accelerate innovative research, bio-process development, clinical programs and product commercialization.
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Research and Development We are focused on bringing forward intellectual property through joint patent filings with the Massachusetts Institute of Technology (MIT). We completed a sponsored research and co-development project with MIT led by Professor Shuguang Zhang as Principal Investigator.
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Avalon’s upstream innovative research includes: ● Development of Avalon Clinical-grade Tissue-specific Exosome (“ACTEX™”); ● Novel therapeutic and diagnostic targets development utilizing QTY-code protein design technology with Massachusetts Institute of Technology (MIT) including using the QTY code protein design technology for development of a hemofiltration device to treat Cytokine Storm; ● Co-development of next generation, mRNA-based immune effector cell therapeutic modalities with Arbele Limited.
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We were granted exclusive distributorship rights for the KetoAir from Qi Diagnostics for the following territories: North America, South America, the EU and the UK. We had a pilot launch and exhibition of the KetoAir in this year’s KetoCon conference in Austin, Texas (April 21-23, 2023). For our commercialization strategy, we intend to target the diabetes and obesity markets.

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