Change Agents Corporation 10-K for FY2021

Change Agents Corporation. (CHGA)

10-K 2022-03-30 For: 2021-12-31

Added on April 09, 2026

About this 10-K

Change Agents Corporation filed this 10-K on March 30, 2022, covering the fiscal year ended December 31, 2021 (FY2021).

Headline figures

Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.39M; up 1.0% from $1.38M a year earlier
Net loss: $9.09M; compared with a net loss of $12.68M 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	15

Item 1B.	Unresolved Staff Comments	44

Item 2.	Properties	44

Item 3.	Legal Proceedings	44

Item 4.	Mine Safety Disclosures	44

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	45

Item 6.	[Reserved]	46

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	56

Item 8.	Financial Statements and Supplementary Data	56

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	56

Item 9A.	Controls and Procedures	56

Item 9B.	Other Information	57

Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	57

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	58

Item 11.	Executive Compensation	65

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	68

Item 13.	Certain Relationships and Related Transactions, and Director Independence	69

Item 14.	Principal Accounting Fees and Services	71

PART IV

Item 15.	Exhibits	72

Item 16.	Form 10-K Summary	75

Signatures		76

	●	AVA-011 and FLASH-CAR™: The Company advanced its next generation immune cell therapy using RNA-based, non-viral FLASH-CAR™ technology co-developed with the Company’s strategic partner Arbele Limited. 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. On July 8, 2021, the Company and the University of Pittsburgh of the Commonwealth System of Higher Education (the “University”) entered into a Corporate Research Agreement (the “University Agreement”). 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 the Company 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 (the “Project”) subject to the appointment of Dr. Yen Michael S. Hsu as Principal Investigator. During the term, the Company agreed to make eight payments of $125,000 to the University. As of December 31, 2021, the Company did not make any payment. The Company and the University shall each own an undivided, one half interest in any intellectual property rights jointly developed by both parties. The Company has been granted a worldwide, irrevocable, non-exclusive, royalty free, fully paid-up, perpetual right to use intellectual property developed by the University in connection with the Project for commercial purposes research activities and other purposes. Further, the Company will have an exclusive right of first offer to an exclusive royalty-bearing license to intellectual property developed by the University or co-developed by the Company and the University in connection with the Project.

	●	ACTEX™: Stem cell-derived Avalon Clinical-grade Tissue-specific Exosomes (ACTEX™) is one of the core technology platforms that has been co-developed by Avalon GloboCare and the University of Pittsburgh Medical Center. The Company formed a strategic partnership with HydroPeptide, LLC, a leading epigenetics skin care company, to engage in co-development and commercialization of a series of clinical-grade, exosome-based cosmeceutical and orthopedic products. As part of this agreement, the Company signed a three-way Material Transfer Agreement between Avalon GloboCare, HydroPeptide and the University of Pittsburgh Medical Center.

	●	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. 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.

	●	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.

	●	Trading in Avalon’s securities may be restricted under the Holding Foreign Companies Accountable Act if the PCAOB determines that it cannot inspect or fully investigate Avalon’s auditors, and as a result, U.S. national securities exchanges, such as Nasdaq, may determine to delist Avalon’s securities.

	●	Our business might be subject to various evolving PRC laws and regulations regarding data privacy and cybersecurity. Failure of cybersecurity and data security compliance could subject us to penalties, damage our reputation and brand and harm our business and results of operations.

	●	If we become directly subject to the recent scrutiny, criticism and negative publicity involving certain U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, stock price and reputation and could result in a loss of your investment in our stock, especially if such matter cannot be addressed and resolved quickly.

	●	The PRC government exerts substantial influence over the manner in which Avalon must conduct its business activities and Avalon may face the risk that the future regulatory actions by the PRC government could significantly limit or completely hinder Avalon’s ability to offer future securities to investors.

	●	Under the current Enterprise Income Tax, or EIT, law, we may be classified as a “resident enterprise” of China. Such classification will likely result in unfavorable tax consequences to us and our non- PRC stockholders.

	●	We may be unable to complete a business combination transaction efficiently or on favorable terms due to complicated merger and acquisition regulations implemented on September 8, 2006.

	●	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.

	●	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 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
2021
First Quarter	$	1.65	$	1.03
Second Quarter	$	1.57	$	0.87
Third Quarter	$	1.19	$	0.80
Fourth Quarter	$	1.15	$	0.79
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

	●	Step 1: Identify the contract with the customer

	●	Step 2: Identify the performance obligations in the contract

	●	Step 3: Determine the transaction price

	●	Step 4: Allocate the transaction price to the performance obligations in the contract

	●	Step 5: Recognize revenue when the company satisfies a performance obligation

	Years Ended December 31,
	2021		2020
Professional fees	$	4,946,696	$	6,553,009
Compensation and related benefits		2,042,278		4,156,150
Research and development		1,025,009		883,855
Advertising expenses		328,565		294,352
Travel and entertainment		156,483		175,300
Directors and officers liability insurance premium		367,365		276,028
Rent and related utilities		78,547		92,370
Other general and administrative		303,405		413,158
	$	9,248,348	$	12,844,222