Change Agents Corporation 10-K for FY2020

Change Agents Corporation. (CHGA)

10-K 2021-03-30 For: 2020-12-31

Added on April 09, 2026

About this 10-K

Change Agents Corporation filed this 10-K on March 30, 2021, covering the fiscal year ended December 31, 2020 (FY2020).

Headline figures

Fiscal year ended December 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.38M; down 10.9% from $1.55M a year earlier
Net loss: $12.68M; compared with a net loss of $18.07M a year earlier

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Delaware		47-1685128
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

4400 Route 9 South, Suite 3100
Freehold, New Jersey 07728		732-780-4400
(Address of principal executive offices)		(Registrant’s telephone number)

Title of each Class:		Trading Symbol		Name of Each Exchange
Common Stock, $0.0001 par value per share		AVCO		The NASDAQ Stock Market LLC

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

PART I

Item 1.	Business	1

Item 1A.	Risk Factors	11

Item 1B.	Unresolved Staff Comments	35

Item 2.	Properties	35

Item 3.	Legal Proceedings	35

Item 4.	Mine Safety Disclosures	35

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	36

Item 6.	Selected Financial Data	36

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	48

Item 8.	Financial Statements and Supplementary Data	48

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	48

Item 9A.	Controls and Procedures	49

Item 9B.	Other Information	49

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	50

Item 11.	Executive Compensation	57

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	60

Item 13.	Certain Relationships and Related Transactions, and Director Independence	61

Item 14.	Principal Accounting Fees and Services	62

PART IV

Item 15.	Exhibits	63

Item 16.	Form 10-K Summary	66

Signatures		67

	●	providing scientific research consulting services;

	●	integrating experts, medical institutions and other resources in the United States in support of scientific research;

	●	providing technical education and training; and

	●	assisting in publication of academic papers.

	●	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.

	●	Phase I clinical trials typically are conducted in a small number of volunteers or patients to assess the early tolerability and safety profile, and the pattern of drug absorption, distribution and metabolism;

	●	Phase II clinical trials typically are conducted in a limited patient population with a specific disease in order to assess appropriate dosages and dose regimens, expand evidence of the safety profile and evaluate preliminary efficacy; and

	●	Phase III clinical trials typically are larger scale, multicenter, well-controlled trials conducted on patients with a specific disease to generate enough data to statistically evaluate the efficacy and safety of the product, to establish the overall benefit-risk relationship of the drug and to provide adequate information for the registration of the drug.

	●	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.

	●	the scope of rights granted under the license agreement and other interpretation-related issues;

	●	the extent to which our product candidates, technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;

	●	the sublicensing of patent and other rights under our collaborative development relationships;

	●	our diligence obligations under the license agreement and what activities satisfy those diligence obligations;

	●	the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and

	●	the priority of invention of patented technology.

	●	the withdrawal of clinical trial participants;

	●	the termination of clinical trial sites or entire trial programs;

	●	costs of related litigation;

	●	substantial monetary awards to patients or other claimants;

	●	impairment of our business reputation;

	●	loss of revenues; and

	●	the inability to commercialize our product candidates.

	●	findings in pre-clinical studies;

	●	reaching agreements on acceptable terms with prospective clinical research organizations, or CROs, and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

	●	obtaining regulatory approval to commence a clinical trial;

	●	complying with conditions imposed by a regulatory authority regarding the scope or term of a clinical trial, or being required to conduct additional trials before moving on to the next phase of trials;

	●	obtaining institutional review board, or IRB, approval to conduct a clinical trial at numerous prospective sites;

	●	recruiting and enrolling patients to participate in clinical trials for a variety of reasons, including the size of the patient population, nature of trial protocol, meeting the enrollment criteria for our studies, screening failures, the inability of the sites to conduct trial procedures properly, the availability of approved effective treatments for the relevant disease and competition from other clinical trial programs for similar indications;

	●	retaining patients who have initiated their participation in a clinical trial but may be prone to withdraw due to the treatment protocol, lack of efficacy, personal issues, or side effects from the therapy, or who are lost to further follow-up;

	●	manufacturing sufficient quantities of a product candidate for use in clinical trials on a timely basis;

	●	complying with design protocols of any applicable special protocol assessment we receive from the FDA;

	●	severe or unexpected cell therapy side effects experienced by patients in a clinical trial;

	●	collecting, analyzing and reporting final data from the clinical trials;

	●	breaches in quality of manufacturing runs that compromise all or some of the doses made; positive results in FDA-required viral testing; karyotypic abnormalities in our cell product; or contamination in our manufacturing facilities, all of which events would necessitate disposal of all cells made from that source;

	●	availability of materials provided by third parties necessary to manufacture our product candidates;

	●	availability of adequate amounts of acceptable tissue for preparation of master cell banks for our products; and

	●	requirements to conduct additional trials and studies, and increased expenses associated with the services of our CROs and other third parties.

	●	delay commercialization of, and our ability to derive product revenues from, our product candidates;

	●	impose costly procedures on us; or

	●	diminish any competitive advantages that we may otherwise enjoy.

	●	regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication, or field alerts to physicians and pharmacies;

	●	regulatory authorities may withdraw their approval of the IND or the product or require us to take our approved products off the market;

	●	we may be required to change the way the product is manufactured or administered and we may be required to conduct additional clinical trials or change the labeling of our products;

	●	we may have limitations on how we promote our products; and

	●	we may be subject to litigation or product liability claims.

	●	issue warning letters;

	●	require us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due dates for specific actions, and penalties for noncompliance;

	●	impose other civil or criminal penalties;

	●	suspend regulatory approval;

	●	suspend any ongoing clinical trials;

	●	refuse to approve pending applications or supplements to approved applications filed by us;

	●	impose restrictions on operations, including costly new manufacturing requirements; or

	●	seize or detain products or require a product recall.

	●	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. 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. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

	●	HIPAA, as amended by HITECH, and its implementing regulations, which impose obligations on certain covered entity healthcare providers, health plans, and healthcare clearinghouses as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information, including mandatory contractual terms, with respect to safeguarding, the privacy, security, and transmission of individually identifiable health information, and require notification to affected individuals and regulatory authorities of certain breaches of security of individually identifiable health information;

	●	federal and state consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;

	●	the federal Physician Payment Sunshine Act and the implementing regulations, also referred to as “Open Payments,” issued under the ACA, which require that manufacturers of pharmaceutical and biological drugs reimbursable under Medicare, Medicaid, and Children’s Health Insurance Programs report to the Department of Health and Human Services all consulting fees, travel reimbursements, research grants, and other payments, transfers of value or gifts made to physicians and teaching hospitals with limited exceptions; and

	●	analogous state laws and regulations, such as, state anti-kickback and false claims laws potentially applicable to sales or marketing arrangements and claims involving healthcare items or services reimbursed by nongovernmental third party payors, including private insurers; and some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug and cell based therapy manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

	●	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.

	●	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

	●	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. After this exclusivity ends, it may be possible for biosimilar manufacturers to enter the market, which is likely to reduce the pricing for the innovator product and could affect our profitability if our products are classified as biologics.

	●	the higher level of government involvement;

	●	the early stage of development of the market-oriented sector of the economy;

	●	the rapid growth rate;

	●	the higher level of control over foreign exchange; and

	●	the allocation of resources.

	●	the success of competitive products or technologies;

	●	developments related to our existing or any future collaborations;

	●	regulatory or legal developments in the United States, China and other countries;

	●	developments or disputes concerning patent applications, issued patents or other proprietary rights;

	●	the recruitment or departure of key personnel;

	●	actual or anticipated changes in estimates as to financial results or recommendations by securities analysts;

	●	variations in our financial results or those of companies that are perceived to be similar to us;

	●	changes in the structure of healthcare payment systems;

	●	market conditions in the healthcare, pharmaceutical and biotechnology sectors;

	●	general economic, industry and market conditions; and

	●	the other factors described in this “Risk Factors” section.

	●	a limited availability for market quotations for our securities;

	●	reduced liquidity with respect to our securities;

	●	a determination that our common stock is a “penny stock,” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our common stock;

	●	limited amount of news and analyst coverage; and

	●	a decreased ability to issue additional securities or obtain additional financing in the future.

	High		Low
2019
First Quarter	$	12.55	$	2.60
Second Quarter	$	5.63	$	1.91
Third Quarter	$	2.59	$	1.73
Fourth Quarter	$	2.32	$	1.44
2020
First Quarter	$	2.04	$	0.50
Second Quarter	$	2.19	$	1.05
Third Quarter	$	2.16	$	1.10
Fourth Quarter	$	1.33	$	1.06

	Years Ended December 31,
	2020		2019
Professional fees	$	6,553,009	$	5,994,129
Compensation and related benefits		4,156,150		8,743,691
Research and development		883,855		1,781,869
Advertising expenses		294,352		685,064
Amortization		-		245,678
Travel and entertainment		175,300		522,805
Directors and officers liability insurance premium		276,028		184,423
Rent and related utilities		92,370		91,033
Other general and administrative		413,158		458,440
Impairment loss		-		1,010,011
	$	12,844,222	$	19,717,143

Country:	December 31, 2020				December 31, 2019
United States	$	559,711	77.0	%	$	371,929	48.6	%
China		166,866	23.0	%		392,962	51.4	%
Total cash	$	726,577	100.0	%	$	764,891	100.0	%

	December 31,						Changes in
	2020			2019			Amount			Percentage
Working capital deficit:
Total current assets	$	1,286,337		$	1,571,095		$	(284,758	)		(18.1	)%
Total current liabilities		2,592,393			2,835,463			(243,070	)		(8.6	)%
Working capital deficit	$	(1,306,056	)	$	(1,264,368	)	$	(41,688	)		3.3	%

	Payments Due by Period
Contractual obligations:	Total		Less than 1 year		1-3 years		3-5 years		5⁺years
Operating lease commitment	$	160,820	$	88,820	$	72,000	$	-	$	-
Acquisition consideration		100,000		100,000		-		-		-
Borrowings from related party (principal)		3,590,000		-		3,590,000		-		-
Accrued interest – related party		167,956		167,956		-		-		-
Epicon equity investment obligation		842,189		280,730		561,459		-		-
AVAR joint venture commitment		10,765,626		765,626		5,000,000		5,000,000		-
Total	$	15,626,591	$	1,403,132	$	9,223,459	$	5,000,000	$	-

	1.	application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report was provided to the Company nor oral advice was provided that the New Auditor concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or

	2.	any matter that was either the subject of a disagreement (as defined in Regulation S-K, Item 304(a)(1)(iv) and the related instructions) or reportable event (as defined in Regulation S-K, Item 304(a)(1)(v)).

Name	Age	Position

Wenzhao Lu	63	Chairman of the Board of Directors

David Jin, MD, PhD	53	Chief Executive Officer, President and Director

Meng Li	43	Chief Operating Officer, Secretary and Director

Luisa Ingargiola	53	Chief Financial Officer

Steven A. Sanders	75	Director

Yancen Lu	46	Director

Wilbert J. Tauzin II	76	Director

William B. Stilley, III	53	Director

Tevi Troy	53	Director

Yue “Charles” Li	47	Director

	●	any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

	●	any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

	●	being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities;

	●	being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

	●	being subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

	●	being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Nominating and Corporate Governance Committee	Compensation Committee	Audit Committee
Steven Sanders (Chairman)	Yancen Lu (Chairman)	William Stilley (Chairman)
Tevi Troy	Steven Sanders	Yancen Lu
William Stilley	Tevi Troy	Steve Sanders

	●	developing and maintaining our corporate governance policy guidelines;

	●	developing and maintaining our codes of conduct and ethics;

	●	overseeing the interpretation and enforcement of our Code of Conduct and our Code of Ethics for Chief Executive Officer and Senior Financial and Accounting Officers;

	●	evaluating the performance of our board of directors, its committees, and committee chairmen and our directors; and

	●	selecting and recommending a slate of director nominees for election at each of our annual meetings of the stockholders and recommending to the board director nominees to fill vacancies or new positions on the board of directors or its committees that may occur from time to time.

	●	reviewing our annual audited financial statements with management and our independent auditors, including major issues regarding accounting and auditing principles and practices and financial reporting that could significantly affect our financial statements;

	●	reviewing our quarterly financial statements with management and our independent auditor prior to the filing of our Quarterly Reports on Form 10-Q, including the results of the independent auditors’ reviews of the quarterly financial statements;

	●	recommending to the board of directors the appointment of, and continued evaluation of the performance of, our independent auditor;

	●	approving the fees to be paid to our independent auditor for audit services and approving the retention of our independent auditor for non-audit services and all fees for such services;

	●	reviewing periodic reports from our independent auditor regarding our auditor’s independence, including discussion of such reports with the auditor;

	●	reviewing the adequacy of our overall control environment, including internal financial controls and disclosure controls and procedures; and

	●	reviewing with our management and legal counsel legal matters that may have a material impact on our financial statements or our compliance policies and any material reports or inquiries received from regulators or governmental agencies.