What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-08-07 compared with 2020-05-14 · 1295 added, 1278 removed, 543 unchanged (83% of the section changed)

Financial Statements.

AVALON GLOBOCARE CORP.

GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS

CURRENT ASSETS:

32 unchanged sentences

10,000,000 shares authorized;

no shares issued and outstanding at March 31, 2020 and December 31, 2019

no shares issued and outstanding at June 30, 2020 and December 31, 2019

Common stock, $0.0001 par value;

490,000,000 shares authorized;

77,933,737 shares issued and 77,413,737 shares outstanding at March 31, 2020;

80,108,887 shares issued and 79,588,887 shares outstanding at June 30, 2020;

76,730,802 shares issued and 76,210,802 shares outstanding at December 31, 2019

1 unchanged sentence

common stock held in treasury, at cost;

520,000 shares at March 31, 2020 and December 31, 2019

520,000 shares at June 30, 2020 and December 31, 2019

Accumulated deficit

5 unchanged sentences

stockholders’

equity and non-controlling interest

Non-controlling interest

Total Liabilities and Equity

See accompanying notes to the condensed

consolidated financial statements.

AVALON GLOBOCARE CORP.

accompanying notes to the condensed consolidated financial statements.

GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the Three Months Ended

For the Six Months Ended

Real property rental

21 unchanged sentences

Interest expense - related party

Change in fair value of warrants liabilities

Financing expense

Loss from equity method investment

3 unchanged sentences

$ (4,438,823 )

$ (6,327,163 )

$ (8,943,752 )

NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST

3 unchanged sentences

$ (4,357,224 )

$ (6,327,163 )

$ (8,763,040 )

COMPREHENSIVE LOSS:

1 unchanged sentence

$ (4,438,823 )

OTHER COMPREHENSIVE (LOSS) INCOME

Unrealized foreign currency translation (loss) gain

$ (6,327,163 )

$ (8,943,752 )

OTHER COMPREHENSIVE INCOME (LOSS)

Unrealized foreign currency translation gain (loss)

COMPREHENSIVE LOSS

4 unchanged sentences

$ (4,393,227 )

$ (6,345,920 )

$ (8,754,363 )

NET LOSS PER COMMON SHARE ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

3 unchanged sentences

Basic and diluted

See accompanying notes to the condensed

consolidated financial statements.

AVALON GLOBOCARE CORP.

accompanying notes to the condensed consolidated financial statements.

GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

For the Three Months Ended March 31, 2020

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

the Three and Six Months Ended June 30, 2020

Avalon GloboCare Corp.

2 unchanged sentences

Treasury Stock

Comprehensive

Non-controlling

Comprehensive Loss

Balance, January 1, 2020

7 unchanged sentences

(32,632,718 )

See accompanying notes to the condensed

consolidated financial statements.

AVALON GLOBOCARE CORP.

Sale of common stock, net

Issuance of common stock for services

Stock-based compensation

Foreign currency translation adjustment

Net loss for the three months ended June 30, 2020

Balance, June 30, 2020

$ (35,689,100 )

accompanying notes to the condensed consolidated financial statements.

GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS

OF CHANGES IN EQUITY

For the Three Months Ended March

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

the Three and Six Months Ended June 30, 2019

Avalon GloboCare Corp.

2 unchanged sentences

Treasury Stock

Comprehensive

Non-controlling

Comprehensive Loss

Balance, January 1, 2019

7 unchanged sentences

(15,697,592 )

See accompanying notes to the

condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

Stock-based compensation

Issuance of common stock for service

Sale of common stock

Foreign currency translation adjustment

Net loss for the three months ended June 30, 2019

Balance, June 30, 2019

$ (20,054,816 )

$ (1,042,210 )

accompanying notes to the condensed consolidated financial statements.

GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH

For the Three Months Ended

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

4 unchanged sentences

Depreciation and amortization

Decrease in straight-line rent receivable

Amortization of straight-line rent receivable

Stock-based compensation and service expense

Loss on equity method investment

Loss from equity method investment

Loss on fixed asset disposal

Changes in warrants derivative liabilities

Allocated financing costs

Changes in operating assets and liabilities:

4 unchanged sentences

Prepaid expenses and other current assets

Security deposit

Accrued liabilities and other payables

7 unchanged sentences

Improvement of commercial real estate

Additional investment in equity method investment

NET CASH USED IN INVESTING ACTIVITIES

1 unchanged sentence

Proceeds received from note payable - related party

Repayments of note payable - related party

Proceeds received from loan payable - related party

Proceeds received from equity offering

Disbursements for equity offering costs

Proceeds received from offering

Disbursements for offering costs

Repayments of loan payable

NET CASH PROVIDED BY FINANCING ACTIVITIES

EFFECT OF EXCHANGE RATE ON CASH

NET DECREASE IN CASH

NET INCREASE IN CASH

CASH - beginning of period

5 unchanged sentences

Common stock issued for future services

See accompanying notes to the condensed

consolidated financial statements.

AVALON GLOBOCARE CORP.

Deferred financing costs in accrued liabilities

accompanying notes to the condensed consolidated financial statements.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 1 –

AND NATURE OF OPERATIONS

Avalon GloboCare Corp.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ORGANIZATION AND NATURE OF OPERATIONS

GloboCare Corp.

(the “Company”

or “AVCO”) is a Delaware corporation.

The Company was incorporated under the laws of the

State of Delaware on July 28, 2014.

On October 19, 2016, the Company entered into and closed a Share Exchange Agreement with the

shareholders of Avalon Healthcare System, Inc., a Delaware corporation (“AHS”), each of which were accredited investors

(“AHS Shareholders”) pursuant to which we acquired 100% of the outstanding securities of AHS in exchange for 50,000,000

shares of the Company’s common stock (the “AHS Acquisition”).

AHS was incorporated on May 18, 2015 under the

laws of the State of Delaware.

For accounting

purposes, AHS was the surviving entity.

The transaction was accounted for as a recapitalization of AHS pursuant to which AHS was

treated as the accounting acquirer, surviving and continuing entity although the Company is the legal acquirer.

The Company did

not recognize goodwill or any intangible assets in connection with this transaction.

Accordingly, the Company’s historical

financial statements are those of AHS and its wholly-owned subsidiary, Avalon (Shanghai) Healthcare Technology Co., Ltd.

(“Avalon

Shanghai”) immediately following the consummation of this reverse merger transaction.

AHS owns 100% of the capital stock

of Avalon Shanghai, which is a wholly foreign-owned enterprise organized under the laws of the People’s Republic of China

(“PRC”).

Avalon Shanghai was incorporated on April 29, 2016 and is engaged in medical related consulting services

for customers.

The Company is

a clinical-stage, vertically-integrated, leading CellTech bio-developer dedicated to advancing and empowering innovative, transformative

immune effector cell therapy and exosome technology.

The Company also provides strategic advisory and outsourcing services to

facilitate and enhance its clients’

growth, development, as well as competitiveness in healthcare and CellTech industry markets.

Through its subsidiary structure with unique integration of verticals from innovative research and development (“R&D”)

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 TM ), and regenerative therapeutics.

On January 23,

2017, the Company incorporated Avalon (BVI) Ltd., a British Virgin Island company.

There was no activity for the subsidiary since

its incorporation through March 31, 2020.

The Company was incorporated under

the laws of the State of Delaware on July 28, 2014.

On October 19, 2016, the Company entered into and closed a Share Exchange

Agreement with the shareholders of Avalon Healthcare System, Inc., a Delaware corporation (“AHS”), each of which were

accredited investors (“AHS Shareholders”) pursuant to which we acquired 100% of the outstanding securities of AHS

in exchange for 50,000,000 shares of the Company’s common stock (the “AHS Acquisition”).

AHS was incorporated

on May 18, 2015 under the laws of the State of Delaware.

accounting purposes, AHS was the surviving entity.

The transaction was accounted for as a recapitalization of AHS pursuant to

which AHS was treated as the accounting acquirer, surviving and continuing entity although the Company is the legal acquirer.

The Company did not recognize goodwill or any intangible assets in connection with this transaction.

Accordingly, the Company’s

historical financial statements are those of AHS and its wholly-owned subsidiary, Avalon (Shanghai) Healthcare Technology Co.,

(“Avalon Shanghai”) immediately following the consummation of this reverse merger transaction.

AHS owns 100%

of the capital stock of Avalon Shanghai, which is a wholly foreign-owned enterprise organized under the laws of the People’s

Republic of China (“PRC”).

Avalon Shanghai was incorporated on April 29, 2016 and is engaged in medical related consulting

services for customers.

Company is a clinical-stage, vertically-integrated, leading CellTech bio-developer dedicated to advancing and empowering innovative,

transformative immune effector cell therapy, exosome technology, as well as Coronavirus (“COVID-19”) related diagnostics

and therapeutics.

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.

Through its subsidiary structure

with unique integration of verticals from innovative research and development (“R&D”) 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 TM ), and regenerative therapeutics.

January 23, 2017, the Company incorporated Avalon (BVI) Ltd., a British Virgin Island company.

There was no activity for the subsidiary

since its incorporation through June 30, 2020.

Avalon (BVI) Ltd.

is dormant and is in process of being dissolved.

On February 7,

2017, the Company formed Avalon RT 9 Properties, LLC (“Avalon RT 9”), a New Jersey limited liability company.

5, 2017, Avalon RT 9 purchased a real property located in Township of Freehold, County of Monmouth, State of New Jersey, having

a street address of 4400 Route 9 South, Freehold, NJ 07728.

This property was purchased to serve as the Company’s world-wide

headquarters for all corporate administration and operations.

February 7, 2017, the Company formed Avalon RT 9 Properties, LLC (“Avalon RT 9”), a New Jersey limited liability company.

On May 5, 2017, Avalon RT 9 purchased a real property located in Township of Freehold, County of Monmouth, State of New Jersey,

having a street address of 4400 Route 9 South, Freehold, NJ 07728.

This property was purchased to serve as the Company’s

world-wide headquarters for all corporate administration and operations.

In addition, the property generates rental income.

Avalon RT 9 owns

this office building.

RT 9 owns this office building.

Currently, Avalon RT 9’s business consists of the ownership and operation of the income-producing

real estate property in New Jersey.

The current occupancy rate of the building is 93.4%.

On July 31, 2017,

the Company formed Genexosome Technologies Inc.

As of June 30, 2020, the occupancy rate of the building is 93.4%.

July 31, 2017, the Company formed Genexosome Technologies Inc.

(“Genexosome”) in Nevada.

On July 18, 2018, the Company formed a

wholly owned subsidiary, Avactis Biosciences Inc., a Nevada corporation, which will focus on accelerating commercial activities

related to cellular therapies, including regenerative medicine with stem/progenitor cells as well as cellular immunotherapy including

CAR-T, CAR-NK, TCR-T and others.

The subsidiary is designed to integrate and optimize our global scientific and clinical resources

to further advance the use of cellular therapies to treat certain cancers.

On June 13, 2019, the Company formed a

wholly owned subsidiary, International Exosome Association LLC, a Delaware company.

There was no activity for the subsidiary since

its incorporation through March 31, 2020.

AVALON GLOBOCARE CORP.

July 18, 2018, the Company formed a wholly owned subsidiary, Avactis Biosciences Inc., a Nevada corporation, which will focus

on accelerating commercial activities related to cellular therapies, including regenerative medicine with stem/progenitor cells

as well as cellular immunotherapy including CAR-T, CAR-NK, TCR-T and others.

The subsidiary is designed to integrate and optimize

our global scientific and clinical resources to further advance the use of cellular therapies to treat certain cancers.

June 13, 2019, the Company formed a wholly owned subsidiary, International Exosome Association LLC, a Delaware company.

was no activity for the subsidiary since its incorporation through June 30, 2020.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 1 –

AND NATURE OF OPERATIONS (continued)

Details of the Company’s subsidiaries

which are included in these consolidated financial statements as of March 31, 2020 are as follows:

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ORGANIZATION AND NATURE OF OPERATIONS (continued)

of the Company’s subsidiaries which are included in these consolidated financial statements as of June 30, 2020 are as follows:

of Subsidiary

and date of Incorporation

Avalon Healthcare System, Inc.

Healthcare System, Inc.

(“AHS”)

100% held by AVCO

Provides medical related consulting services and developing

Avalon Cell and Avalon Rehab in United States of America (“USA”)

Avalon (BVI) Ltd.

medical related consulting services and developing Avalon Cell and Avalon Rehab in United States of America (“USA”)

(“Avalon BVI”)

British Virgin Island

Virgin Island

January 23, 2017

100% held by AVCO

is in process of being dissolved

Avalon RT 9 Properties LLC

RT 9 Properties LLC

(“Avalon RT 9”)

February 7, 2017

100% held by AVCO

Owns and operates an income-producing real property

and holds and manages the corporate headquarters

Avalon (Shanghai) Healthcare Technology

and operates an income-producing real property and holds and manages the corporate headquarters

(Shanghai) Healthcare Technology Co., Ltd.

(“Avalon Shanghai”)

April 29, 2016

100% held by AHS

Provides medical related consulting services and developing

Avalon Cell and Avalon Rehab in China

Genexosome Technologies Inc.

medical related consulting services and developing Avalon Cell and Avalon Rehab in China

Technologies Inc.

(“Genexosome”)

July 31, 2017

60% held by AVCO

Develops proprietary diagnostic and therapeutic products

using exosomes

Beijing Jieteng (Genexosome) Biotech

proprietary diagnostic and therapeutic products using exosomes

Jieteng (Genexosome) Biotech Co., Ltd.

(“Beijing Genexosome”)

August 7, 2015

100% held by Genexosome

Provides development services for hospitals and other

customers and sells developed items to hospitals and other customers in China

Avactis Biosciences Inc.

development services for hospitals and other customers and sells developed items to hospitals and other customers in China

Biosciences Inc.

(“Avactis”)

July 18, 2018

100% held by AVCO

Integrate and optimize global scientific and clinical

resources to further advance cellular therapies, including regenerative medicine with stem/progenitor cells as well as cellular

immunotherapy including CAR-T, CAR-NK, TCR-T and others to treat certain cancers

International Exosome Association

(“Exosome”)

and optimize global scientific and clinical resources to further advance cellular therapies, including regenerative medicine

with stem/progenitor cells as well as cellular immunotherapy including CAR-T, CAR-NK, TCR-T and others to treat certain cancers

International

Exosome Association LLC (“Exosome”)

June 13, 2019

100% held by AVCO

Promotes standardization

related to exosome industry

NOTE 2 –

PRESENTATION AND GOING CONCERN CONDITION

Basis of Presentation

These interim condensed consolidated

financial statements of the Company and its subsidiaries are unaudited.

In the opinion of management, all adjustments (consisting

of normal recurring accruals) and disclosures necessary for a fair presentation of these interim condensed consolidated financial

statements have been included.

The results reported in the unaudited condensed consolidated financial statements for any interim

periods are not necessarily indicative of the results that may be reported for the entire year.

The accompanying unaudited condensed

consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange

Commission and do not include all information and footnotes necessary for a complete presentation of financial statements in conformity

with accounting principles generally accepted in the United States (“U.S.

standardization related to exosome industry

BASIS OF PRESENTATION AND GOING CONCERN CONDITION

of Presentation

These interim

condensed consolidated financial statements of the Company and its subsidiaries are unaudited.

In the opinion of management, all

adjustments (consisting of normal recurring accruals) and disclosures necessary for a fair presentation of these interim condensed

consolidated financial statements have been included.

The results reported in the unaudited condensed consolidated financial statements

for any interim periods are not necessarily indicative of the results that may be reported for the entire year.

The accompanying

unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities

and Exchange Commission and do not include all information and footnotes necessary for a complete presentation of financial statements

in conformity with accounting principles generally accepted in the United States (“U.S.

GAAP”).

The Company’s unaudited condensed

consolidated financial statements include the accounts of the Company and its subsidiaries.

All significant intercompany accounts

and transactions have been eliminated in consolidation.

Certain information and footnote

disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S.

GAAP have been

condensed or omitted.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s

audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the

year ended December 31, 2019 filed with the Securities and Exchange Commission on April 6, 2020.

AVALON GLOBOCARE CORP.

The Company’s

unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries.

All significant

intercompany accounts and transactions have been eliminated in consolidation.

Certain information

and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S.

have been condensed or omitted.

These unaudited condensed consolidated financial statements should be read in conjunction with

the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report

on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission on April 6, 2020.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 2 –

PRESENTATION AND GOING CONCERN CONDITION (continued)

Going Concern

The Company is a

clinical-stage, vertically-integrated, leading CellTech bio-developer dedicated to advancing and empowering innovative, transformative

immune effector cell therapy and exosome technology.

The Company also provides strategic advisory and outsourcing services to facilitate

and enhance its clients’

growth, development, as well as competitiveness in healthcare and CellTech industry markets.

Company also develops related products for sale and licensure in the United States and the Peoples Republic of China.

the Company owns commercial real estate that houses its headquarters in Freehold, New Jersey.

The Company did not generate any

revenue from medical related consulting services segment and development services and sales of developed products segment during

the first quarter of 2020.

These unaudited condensed 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.

in the accompanying unaudited condensed consolidated financial statements, the Company had an accumulated deficit of $32,632,718

at March 31, 2020, and has incurred recurring net loss and negative cash flow from operating activities of $3,270,781 and $1,998,796

for the three months ended March 31, 2020, respectively.

The Company has a limited operating history and its continued growth

is dependent upon the continuation of providing medical consulting services to its only few clients who are related parties and

generating rental revenue from its income-producing real estate property in New Jersey and performing development services for

hospitals and other customers and sales of developed products to hospitals and other customers;

hence generating revenues, and

obtaining additional financing to fund future obligations and pay liabilities arising from normal business operations.

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.

of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital, implement

its business plan, and generate significant revenues.

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.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

BASIS OF PRESENTATION AND GOING CONCERN CONDITION (continued)

Company is a clinical-stage, vertically-integrated, leading CellTech bio-developer dedicated to advancing and empowering innovative,

transformative immune effector cell therapy, exosome technology, as well as COVID-19 related diagnostics and therapeutics.

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.

The Company also develops related products for sale

and licensure in the United States and the Peoples Republic of China.

In addition, the Company owns commercial real estate that

houses its headquarters in Freehold, New Jersey.

The Company did not generate any revenue from medical related consulting services

segment and development services and sales of developed products segment during the first half of 2020.

These unaudited condensed

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.

reflected in the accompanying unaudited condensed consolidated financial statements, the Company had an accumulated deficit of

$35,689,100 at June 30, 2020, and has incurred recurring net loss and negative cash flow from operating activities of $6,327,163

and $3,924,902 for the six months ended June 30, 2020, respectively.

The Company has a limited operating history and its continued

growth is dependent upon the re-commencing of medical consulting services which was completed in December 2019 to its only few

clients who are related parties and generating rental revenue from its income-producing real estate property in New Jersey and

performing development services for hospitals and other customers and sales of developed products to hospitals and other customers;

hence generating revenues, and obtaining additional financing to fund future obligations and pay liabilities arising from normal

business operations.

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.

The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise

additional capital, implement its business plan, and generate significant revenues.

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.

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,

The occurrence

of an uncontrollable event such as the COVID-19 pandemic is likely to negatively affect the Company’s operations.

to contain the spread of the coronavirus have intensified, including social distancing, travel bans and quarantine,

and these are likely to negatively impact the Company’s tenants, employees and consultants.

These, in turn, will not only

impact the Company’s operations, financial condition and demand for the Company’s medical related consulting services

but the Company’s overall ability to react timely to mitigate the impact of this event.

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 but is expected to adversely impact the Company’s business for the year of 2020.

The accompanying unaudited condensed 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.

NOTE 3 –

OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation

of the unaudited condensed consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates

and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities

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.

occurrence of an uncontrollable event such as the COVID-19 pandemic had negatively impact on the Company’s operations.

tenants have delayed on rent payment.

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.

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 but is expected to adversely impact the Company’s

business for the year of 2020.

accompanying unaudited condensed 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.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

preparation of the unaudited condensed consolidated financial statements in conformity with U.S.

GAAP requires management to make

estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities

at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

results could differ from these estimates.

Significant estimates during the three months ended March 31, 2020 and 2019 include

the allowance for doubtful accounts, 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, and valuation

Significant estimates during the six months ended June 30, 2020 and 2019 include the

allowance for doubtful accounts, 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, and valuation

of stock-based compensation.

AVALON GLOBOCARE CORP.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 3 –

SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

Fair Value of Financial Instruments

and Fair Value Measurements

The Company adopted

the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition

of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used

in measuring fair value as follows:

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Value of Financial Instruments and Fair Value Measurements

Company adopted the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies

the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify

the inputs used in measuring fair value as follows:

1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities

7 unchanged sentences

based on the best available information.

amounts reported in the unaudited condensed consolidated balance sheets for cash, accounts receivable –

related party, rent

receivable, deferred financing costs, prepaid expenses and other current assets, accrued liabilities and other payables, accrued

liabilities and other payables –

carrying amounts reported in the unaudited condensed consolidated balance sheets for cash, rent receivable, deferred financing

costs, prepaid expenses and other current assets, accrued liabilities and other payables, accrued liabilities and other payables

related parties, operating lease obligation, tenants’

security deposit, approximate

their fair market value based on the short-term maturity of these instruments.

ASC 825-10 “Financial Instruments”,

allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option).

fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs.

the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings

at each subsequent reporting date.

The Company did not elect to apply the fair value option to any outstanding instruments.

security deposit, approximate their fair market value based

on the short-term maturity of these instruments.

825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities

at fair value (fair value option).

The fair value option may be elected on an instrument-by-instrument basis and is irrevocable,

unless a new election date occurs.

If the fair value option is elected for an instrument, unrealized gains and losses for that

instrument should be reported in earnings at each subsequent reporting date.

The Company did not elect to apply the fair value

option to any outstanding instruments.

and Cash Equivalents

4 unchanged sentences

PRC will not be covered.

At March 31, 2020 and December 31, 2019, cash balances held in the PRC are $322,453 and $392,962, of

which, $179,563 and $244,579 were not covered by such limited insurance, respectively.

The Company has not experienced any losses

in such accounts and believes it is not exposed to any risks on its cash in bank accounts.

The Company maintains

cash balances in excess of Federal Deposit Insurance Corporation (“FDIC”) limits at certain financial institutions.

The Company manages this credit risk by concentrating its cash balances in high quality financial institutions and by periodically

evaluating the credit quality of the primary financial institutions holding such deposits.

The Company has not experienced any

losses in bank accounts and believes it is not exposed to any risks on its cash in bank accounts.

2020 and December 31, 2019, the Company’s cash balances by geographic area were as follows:

March 31, 2020

December 31, 2019

At June 30, 2020, cash balances held in the PRC are RMB 1,833,866 (approximately $260,000), of which,

RMB 1,312,028 (approximately $186,000) was not covered by such limited insurance.

The Company has not experienced any losses in

such accounts and believes it is not exposed to any risks on its cash in bank accounts.

Company maintains a portion of its cash in bank and financial institution deposits within U.S.

that at times may exceed federally-insured

limits of $250,000.

The Company manages this credit risk by concentrating its cash balances in high quality financial institutions

and by periodically evaluating the credit quality of the primary financial institutions holding such deposits.

The Company has

not experienced any losses in such bank accounts and believes it is not exposed to any risks on its cash in bank accounts.

June 30, 2020, the Company’s cash balances in United States bank accounts had approximately $353,000 in excess of the federally-insured

June 30, 2020, the Company’s cash balances by geographic area were as follows:

June 30, 2020

United States

of the consolidated statements of cash flows, the Company considers all highly liquid instruments purchased with a maturity of

purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of

three months or less when purchased and money market accounts to be cash equivalents.

The Company had no cash equivalents

at March 31, 2020 and December 31, 2019.

AVALON GLOBOCARE CORP.

at June 30, 2020 and December 31, 2019.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 3 –

SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Concentrations

of Credit Risk

Currently, a portion of the Company’s

operations are carried out in PRC.

Accordingly, the Company’s business, financial condition and results of operations may

be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC’s economy.

The Company’s operations in PRC are subject to specific considerations and significant risks not typically associated with

companies in North America.

The Company’s results may be adversely affected by changes in governmental policies with respect

to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation,

among other things.

Financial instruments which potentially

subject the Company to concentrations of credit risk consist principally of trade accounts receivable.

A portion of the Company’s

sales are credit sales which is to the customer whose ability to pay is dependent upon the industry economics prevailing in these

however, concentrations of credit risk with respect to trade accounts receivable is limited due to generally short payment

The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk.

a portion of the Company’s operations are carried out in PRC.

Accordingly, the Company’s business, financial condition

and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state

of the PRC’s economy.

The Company’s operations in PRC are subject to specific considerations and significant risks

not typically associated with companies in North America.

The Company’s results may be adversely affected by changes in

governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad,

and rates and methods of taxation, among other things.

instruments which potentially subject the Company to concentrations of credit risk consist principally of trade accounts receivable.

A portion of the Company’s sales are credit sales which is to the customer whose ability to pay is dependent upon the industry

economics prevailing in these areas;

however, concentrations of credit risk with respect to trade accounts receivable is limited

due to generally short payment terms.

The Company also performs ongoing credit evaluations of its customers to help further reduce

in Unconsolidated Company –

Epicon Biosciences Co., Ltd.

The Company uses the equity method of

accounting for its investment in, and earning or loss of, company that it does not control but over which it does exert significant

The Company considers whether the fair value of its equity method investment has declined below its carrying value

whenever adverse events or changes in circumstances indicate that recorded value may not be recoverable.

If the Company considers

any decline to be other than temporary (based on various factors, including historical financial results and the overall health

of the investee), then a write-down would be recorded to estimated fair value.

See Note 5 for discussion of equity method

Revenue Recognition

The Company recognizes

revenue under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC

The core principle of this new revenue standard is that a company should recognize revenue to depict the transfer

of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled

in exchange for those goods or services.

Company uses the equity method of accounting for its investment in, and earning or loss of, company that it does not control but

over which it does exert significant influence.

The Company considers whether the fair value of its equity method investment has

declined below its carrying value whenever adverse events or changes in circumstances indicate that recorded value may not be

If the Company considers any decline to be other than temporary (based on various factors, including historical financial

results and the overall health of the investee), then a write-down would be recorded to estimated fair value.

for discussion of equity method investment.

Company recognizes revenue under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with

Customers (“ASC 606”).

The core principle of this new revenue standard is that a company should recognize revenue

to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company

expects to be entitled in exchange for those goods or services.

The following five steps are applied to achieve that core principle:

2 unchanged sentences

Determine the transaction price

Allocate the transaction price to the performance obligations in

Allocate the transaction price to the performance obligations in the contract

Recognize revenue when the company satisfies a performance obligation

In order to identify

the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract

and identify each promised goods or service that is distinct.

A performance obligation meets ASC 606’s definition of a “distinct”

order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services

in the contract and identify each promised goods or service that is distinct.

A performance obligation meets ASC 606’s definition

of a “distinct”

goods or service (or bundle of goods or services) if both of the following criteria are met:

5 unchanged sentences

or service is distinct within the context of the contract).

or service is not distinct, the goods or service is combined with other promised goods or services until a bundle of goods or

services is identified that is distinct.

AVALON GLOBOCARE CORP.

a goods or service is not distinct, the goods or service is combined with other promised goods or services until a bundle of goods

or services is identified that is distinct.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 3 –

OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue Recognition

The transaction price is the amount of

consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer,

excluding amounts collected on behalf of third parties (for example, some sales taxes).

The consideration promised in a contract

with a customer may include fixed amounts, variable amounts, or both.

Variable consideration is included in the transaction price

only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur

when the uncertainty associated with the variable consideration is subsequently resolved.

The transaction price is allocated to

each performance obligation on a relative standalone selling price basis.

The transaction price allocated to each performance

obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

Types of revenue:

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recognition (continued)

transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised

goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes).

The consideration

promised in a contract with a customer may include fixed amounts, variable amounts, or both.

Variable consideration is included

in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue

recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

transaction price is allocated to each performance obligation on a relative standalone selling price basis.

The transaction price

allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over

time as appropriate.

fees under consulting agreements with related parties to provide medical related consulting

6 unchanged sentences

of developed products to hospitals and other customers.

Revenue recognition

recognition criteria:

Company recognizes revenue by providing medical related consulting services under written

6 unchanged sentences

are shipped to customers and titles are transferred.

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.

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.

The Company does not offer promotional

payments, customer coupons, rebates or other cash redemption offers to its customers.

Per Share Data

ASC Topic 260 “Earnings per Share,”

requires presentation of both basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator

and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation.

Basic EPS excludes

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock

were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of

AVALON GLOBOCARE CORP.

Company has determined that the ASC 606 does not apply to rental contracts, which are within the scope of other revenue recognition

accounting standards.

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

Company does not offer promotional payments, customer coupons, rebates or other cash redemption offers to its customers.

Topic 260 “Earnings per Share,”

requires presentation of both basic and diluted earnings per share (“EPS”)

with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted

EPS computation.

Basic EPS excludes dilution.

Diluted EPS reflects the potential dilution that could occur if securities or other

contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that

then shared in the earnings of the entity.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 3 –

SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

Per Share Data (continued)

Basic net loss per share are computed

by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during

Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock,

common stock equivalents and potentially dilutive securities outstanding during each period.

Potentially dilutive common shares

consist of the common shares issuable upon the exercise of common stock options and warrants (using the treasury stock method).

Common stock equivalents are not included in the calculation of diluted net loss per share if their effect would be anti-dilutive.

In a period in which the Company has a net loss, all potentially dilutive securities are excluded from the computation of diluted

shares outstanding as they would have had an anti-dilutive impact.

The following table summarizes the securities that were excluded

from the diluted per share calculation because the effect of including these potential shares was antidilutive:

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Share Data (continued)

net loss per share are computed by dividing net loss available to common stockholders by the weighted average number of shares

of common stock outstanding during the period.

Diluted net loss per share is computed by dividing net loss by the weighted average

number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.

Potentially dilutive common shares consist of the common shares issuable upon the exercise of common stock options and warrants

(using the treasury stock method).

Common stock equivalents are not included in the calculation of diluted net loss per share

if their effect would be anti-dilutive.

In a period in which the Company has a net loss, all potentially dilutive securities are

excluded from the computation of diluted shares outstanding as they would have had an anti-dilutive impact.

following table summarizes the securities that were excluded from the diluted per share calculation because the effect of including

these potential shares was antidilutive:

Three Months Ended

Six Months Ended

Stock options

1 unchanged sentence

Reclassification

Certain prior period amounts have been

reclassified to conform to the current period presentation.

These reclassifications have no effect on the previously reported

financial position, results of operations and cash flows.

Recent Accounting

In August 2018, the FASB issued ASU No.

prior period amounts have been reclassified to conform to the current period presentation.

These reclassifications have no effect

on the previously reported financial position, results of operations and cash flows.

Accounting Standards

August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value

Measurement .

The objective of ASU 2018-13 is to improve the effectiveness of disclosures in the notes to the financial statements

by removing, modifying, and adding certain fair value disclosure requirements to facilitate clear communication of the information

required by generally accepted accounting principles.

The amendments are effective for all entities for fiscal years, and interim

periods within those fiscal years, beginning after December 15, 2019 with early adoption permitted upon issuance of this ASU.

Disclosure Framework-Changes to the

Disclosure Requirements for Fair Value Measurement .

The objective of ASU 2018-13 is to improve the effectiveness of disclosures

in the notes to the financial statements by removing, modifying, and adding certain fair value disclosure requirements to facilitate

clear communication of the information required by generally accepted accounting principles.

The amendments are effective for

all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 with early adoption

permitted upon issuance of this ASU.

The adoption of ASU 2018 –

13 did not have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU

2016-13, Financial Instruments - Credit Losses (“Topic 326”).

The ASU introduces a new accounting

model, the Current Expected Credit Losses model (“CECL”), which requires earlier recognition of credit

losses and additional disclosures related to credit risk.

The CECL model utilizes a lifetime expected credit loss measurement

objective for the recognition of credit losses at the time the financial asset is originated or acquired.

ASU 2016-13 is effective

for annual period beginning after December 15, 2022, including interim reporting periods within those annual reporting periods.

The Company expects that the adoption will not have a material impact.

Other accounting standards that have been

issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the

consolidated financial statements upon adoption.

The Company does not discuss recent pronouncements that are not anticipated to

have an impact on or are unrelated to its consolidated financial condition, results of operations, cash flows or disclosures.

AVALON GLOBOCARE CORP.

13 did not have a material impact on the Company’s

consolidated financial statements.

June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (“Topic 326”).

ASU introduces a new accounting model, the Current Expected Credit Losses model (“CECL”), which requires earlier

recognition of credit losses and additional disclosures related to credit risk.

The CECL model utilizes a lifetime expected

credit loss measurement objective for the recognition of credit losses at the time the financial asset is originated or acquired.

ASU 2016-13 is effective for annual period beginning after December 15, 2022, including interim reporting periods within those

annual reporting periods.

The Company expects that the adoption will not have a material impact on the Company’s consolidated financial statements.

accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected

to have a material impact on the consolidated financial statements upon adoption.

The Company does not discuss recent pronouncements

that are not anticipated to have an impact on or are unrelated to its consolidated financial condition, results of operations,

cash flows or disclosures.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 4 –

EXPENSES AND OTHER CURRENT ASSETS

At March 31, 2020 and December 31,

2019, prepaid expenses and other current assets consisted of the following:

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PREPAID EXPENSES AND OTHER CURRENT ASSETS

June 30, 2020 and December 31, 2019, prepaid expenses and other current assets consisted of the following:

Prepaid professional fees

1 unchanged sentence

Security deposit

NOTE 5 –

METHOD INVESTMENT

As of March 31, 2020 and December 31,

2019, the equity method investment amounted to $466,014 and $483,101, respectively.

The investment represents the Company’s

subsidiary, Avalon Shanghai’s interest in Epicon Biotech Co., Ltd.

Prepaid NASDAQ listing fee

EQUITY METHOD INVESTMENT

of June 30, 2020 and December 31, 2019, the equity method investment amounted to $484,090 and $483,101, respectively.

The investment

represents the Company’s subsidiary, Avalon Shanghai’s interest in Epicon Biotech Co., Ltd.

(“Epicon”).

Epicon was incorporated on August

14, 2018 in PRC.

Avalon Shanghai and the other unrelated company, Jiangsu Unicorn Biological Technology Co., Ltd.

(“Unicorn”),

accounted for 40% and 60% of the total ownership, respectively.

Epicon is focused on cell preparation, third party testing, biological

sample repository for commercial and scientific research purposes and the clinical transformation of scientific achievements.

The Company treats the equity investment in the consolidated financial statements under the equity method.

Epicon was incorporated on August 14, 2018 in PRC.

Avalon Shanghai and the other unrelated company, Jiangsu Unicorn Biological

Technology Co., Ltd.

(“Unicorn”), accounted for 40% and 60% of the total ownership, respectively.

Epicon is focused

on cell preparation, third party testing, biological sample repository for commercial and scientific research purposes and the

clinical transformation of scientific achievements.

Company treats the equity investment in the consolidated financial statements under the equity method.

Under the equity method,

4 unchanged sentences

loss relating to the investment.

For the three months ended March 31, 2020

and 2019, the Company’s share of Epicon’s net loss was $9,084 and $12,743, respectively, which was included in loss

from equity-method investment in the accompanying unaudited condensed consolidated statements of operations and comprehensive

Activity recorded for the Company’s equity method investment in Epicon is summarized in the following table:

the three months ended June 30, 2020 and 2019, the Company’s share of Epicon’s net loss was $11,332 and $10,344, respectively,

which was included in loss from equity-method investment in the accompanying unaudited condensed consolidated statements of operations

and comprehensive loss.

For the six months ended June 30, 2020 and 2019, the Company’s share of Epicon’s net loss

was $20,416 and $23,087, respectively, which was included in loss from equity-method investment in the accompanying unaudited

condensed consolidated statements of operations and comprehensive loss.

recorded for the Company’s equity method investment in Epicon is summarized in the following table:

Equity investment carrying amount at January 1, 2020

Payment made for equity method investment

Epicon’s net loss attributable to the Company

Foreign currency fluctuation

Equity investment carrying amount at March 31, 2020

The tables below

present the summarized financial information, as provided to the Company by the investee, for the unconsolidated company:

Equity investment carrying amount at June 30, 2020

tables below present the summarized financial information, as provided to the Company by the investee, for the unconsolidated

Current assets

2 unchanged sentences

Noncurrent liabilities

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

EQUITY METHOD INVESTMENT (continued)

For the Three Months Ended

For the Six Months Ended

Loss from operation

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 6 –

LIABILITIES AND OTHER PAYABLES

2020 and December 31, 2019, accrued liabilities and other payables consisted of the following:

ACCRUED LIABILITIES AND OTHER PAYABLES

June 30, 2020 and December 31, 2019, accrued liabilities and other payables consisted of the following:

Accrued professional fees

3 unchanged sentences

Accounts payable

NOTE 7 –

PARTY TRANSACTIONS

Medical Related Consulting Services

Revenue from Related Party and Accounts Receivable –

Accrued utilities

Accrued liability insurance premium

RELATED PARTY TRANSACTIONS

Related Consulting Services Revenue from Related Parties and Accounts Receivable –

Related Party

During the three months ended March 31,

2020 and 2019, medical related consulting services revenue from related party was as follows:

the three and six months ended June 30, 2020 and 2019, medical related consulting services revenue from related parties was as

Three Months Ended

Six Months Ended

Medical related consulting services provided to:

Beijing Daopei *

(1) Beijing Daopei is a subsidiary of an entity whose chairman

is Wenzhao Lu, the largest shareholder of the Company.

Accounts receivable

related party at March 31, 2020 and December 31, 2019 amounted to $127,076 and $215,418, respectively, and no allowance

Shanghai Daopei *

Hebei Daopei *

Daopei, Shanghai Daopei, and Hebei Daopei are subsidiaries of an entity whose chairman is Wenzhao Lu, the largest shareholder

of the Company.

receivable –

related party at June 30, 2020 and December 31, 2019 amounted to $0 and $215,418, respectively, and no allowance

for doubtful accounts is deemed to be required on accounts receivable –

related party at March 31, 2020 and December 31,

The Company received the $127,076 in April 2020.

Accrued Liabilities and Other Payables

related party at June 30, 2020 and December 31,

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

RELATED PARTY TRANSACTIONS (continued)

Liabilities and Other Payables –

Related Parties

As of March 31, 2020 and December 31,

2019, the Company owed David Jin, its shareholder, chief executive officer, president and board member, $20,748 and $24,254, respectively,

for travel and other miscellaneous reimbursements, which have been included in accrued liabilities and other payables –

of June 30, 2020 and December 31, 2019, the Company owed David Jin, its shareholder, chief executive officer, president and board

member, $29,410 and $24,254, respectively, for travel and other miscellaneous reimbursements, which have been included in accrued

liabilities and other payables –

related parties on the accompanying consolidated balance sheets.

As of March 31, 2020 and December 31,

2019, the Company owed Meng Li, its shareholder and chief operating officer, $0 and $10,473, respectively, for travel and other

miscellaneous reimbursements, which have been included in accrued liabilities and other payables –

related parties on the

accompanying consolidated balance sheets.

At March 31, 2020 and December 31,

2019, the Company owed Yu Zhou, director and former co-chief executive officer and 40% owner of Genexosome, of $3,121 for accrued

travel and other miscellaneous reimbursements, which have been included in accrued liabilities and other payables –

parties on the accompanying consolidated balance sheets.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 7 –

PARTY TRANSACTIONS (continued)

Accrued Liabilities and Other Payables

Related Parties (continued)

The Company acquired Beijing Genexosome for

a cash payment of $450,000.

As of March 31, 2020 and December 31, 2019, the unpaid acquisition consideration of $100,000, was payable

to Yu Zhou, director and former co-chief executive officer and 40% owner of Genexosome, and has been included in accrued liabilities

and other payables –

of June 30, 2020 and December 31, 2019, the Company owed Meng Li, its shareholder and chief operating officer, $0 and $10,473,

respectively, for travel and other miscellaneous reimbursements, which have been included in accrued liabilities and other payables

related parties on the accompanying consolidated balance sheets.

As of March 31, 2020 and December 31,

2019, the accrued and unpaid interest related to borrowings from Wenzhao Lu, the Company’s largest shareholder and chairman

of the Board of Directors, amounted to $91,363 and $49,194, respectively, and have been included in accrued liabilities and other

of June 30, 2020 and December 31, 2019, the Company owed Luisa Ingargiola, its chief financial officer, $4,403 and $0, respectively,

for travel and other miscellaneous reimbursements, which have been included in accrued liabilities and other payables –

related parties on the accompanying consolidated balance sheets.

30, 2020 and December 31, 2019, the Company owed Yu Zhou, director and former co-chief executive officer and 40% owner of Genexosome,

of $3,121 for accrued travel and other miscellaneous reimbursements, which have been included in accrued liabilities and other

payables –

related parties on the accompanying consolidated balance sheets.

Borrowings from Related Party

Promissory Note

On March 18, 2019, the Company issued

Wenzhao Lu, the Company’s largest shareholder and Chairman of the Board of Directors, a Promissory Note in the principal

amount of $1,000,000 (“Promissory Note”) in consideration of cash in the amount of $1,000,000.

The Promissory Note

accrues interest at the rate of 5% per annum and matures March 19, 2022.

The Company repaid principal of $410,000 in the third

quarter of 2019.

As of March 31, 2020 and December 31, 2019, the outstanding principal balance was $590,000.

Line of Credit

On August 29, 2019,

the Company entered into a Line of Credit Agreement (the “Line of Credit Agreement”) providing the Company with

a $20 million line of credit (the “Line of Credit”) from Wenzhao Lu (the “Lender”), the largest shareholder

and Chairman of the Board of Directors of the Company.

The Line of Credit allows the Company to request loans thereunder and to

use the proceeds of such loans for working capital and operating expense purposes until the facility matures on December 31, 2024.

The loans are unsecured and are not convertible into equity of the Company.

Loans drawn under the Line of Credit bears interest

at an annual rate of 5% and each individual loan will be payable three years from the date of issuance.

The Company has a right

to draw down on the line of credit and not at the discretion of the related party Lender.

The Company may, at its option, prepay

any borrowings under the Line of Credit, in whole or in part at any time prior to maturity, without premium or penalty.

Line of Credit Agreement includes customary events of default.

If any such event of default occurs, the Lender may declare all

outstanding loans under the Line of Credit to be due and payable immediately.

As of March 31, 2020 and December 31, 2019,

$2,900,000 and $2,600,000 was outstanding under the Line of Credit, respectively.

For the three months ended March 31, 2020

and 2019, the interest expense related to above borrowings amounted to $42,169 and $1,944, respectively, and has been included

in interest expense –

related party on the accompanying unaudited condensed consolidated statements of operations and comprehensive

31, 2020 and December 31, 2019, the related accrued and unpaid interest for above borrowings was $91,363 and $49,194, respectively,

Company acquired Beijing Genexosome for a cash payment of $450,000.

As of June 30, 2020 and December 31, 2019, the unpaid acquisition

consideration of $100,000, was payable to Yu Zhou, director and former co-chief executive officer and 40% owner of Genexosome,

and has been included in accrued liabilities and other payables –

related parties on the accompanying consolidated balance

of June 30, 2020 and December 31, 2019, the accrued and unpaid interest related to borrowings from Wenzhao Lu, the Company’s

largest shareholder and chairman of the Board of Directors, amounted to $133,832 and $49,194, respectively, and have been included

in accrued liabilities and other payables –

related parties on the accompanying consolidated balance sheets.

from Related Party

Beijing Genexosome

uses office space of a related party, free of rent, which is considered immaterial.

AVALON GLOBOCARE CORP.

March 18, 2019, the Company issued Wenzhao Lu, the Company’s largest shareholder and Chairman of the Board of Directors,

a Promissory Note in the principal amount of $1,000,000 (“Promissory Note”) in consideration of cash in the amount

of $1,000,000.

The Promissory Note accrues interest at the rate of 5% per annum and matures March 19, 2022.

The Company repaid

principal of $410,000 and $200,000 in the third quarter of 2019 and second quarter of 2020, respectively.

As of June 30,

2020 and December 31, 2019, the outstanding principal balance was $390,000 and $590,000, respectively.

August 29, 2019, the Company entered into a Line of Credit Agreement (the “Line of Credit Agreement”) providing

the Company with a $20 million line of credit (the “Line of Credit”) from Wenzhao Lu (the “Lender”), the

largest shareholder and Chairman of the Board of Directors of the Company.

The Line of Credit allows the Company to request loans

thereunder and to use the proceeds of such loans for working capital and operating expense purposes until the facility matures

on December 31, 2024.

The loans are unsecured and are not convertible into equity of the Company.

Loans drawn under the Line of

Credit bears interest at an annual rate of 5% and each individual loan will be payable three years from the date of issuance.

The Company has a right to draw down on the line of credit and not at the discretion of the related party Lender.

may, at its option, prepay any borrowings under the Line of Credit, in whole or in part at any time prior to maturity, without

premium or penalty.

The Line of Credit Agreement includes customary events of default.

If any such event of default occurs,

the Lender may declare all outstanding loans under the Line of Credit to be due and payable immediately.

As of June 30, 2020

and December 31, 2019, $2,900,000 and $2,600,000 was outstanding under the Line of Credit, respectively.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 8 –

Common Shares

Sold for Cash

On December 13, 2019, the Company entered

into an Open Market Sale Agreement SM (the “Sales Agreement”) with Jefferies LLC, as sales agent (“Jefferies”),

pursuant to which the Company may offer and sell, from time to time, through Jefferies, shares of its common stock, par value $0.0001

per share, having an aggregate offering price of up to $20.0 million.

On April 6, 2020, the date on which the Company filed its

Annual Report on Form 10-K for the fiscal year ended December 31, 2019, the Company’s registration statement

became subject to the offering limits set forth in General Instruction I.B.6 of Form S-3.

During the first quarter of 2020, Jefferies

sold an aggregate of 980,358 shares of common stock at an average price of $1.66 per share to investors.

The Company recorded net

proceeds of $1,539,251, net of commission and other offering costs of $84,333.

Common Shares

Issued for Services

During the first

quarter of 2020, the Company issued a total of 222,577 shares of its common stock for services rendered and to be rendered.

shares of common stock were issued under the 2019 Incentive Stock Plan.

These shares were valued at $213,300, the fair market

values on the grant dates using the reported closing share prices on the dates of grant and the Company recorded stock-based compensation

expense of $156,093 for the quarter ended March 31, 2020 and recorded prepaid expense of $57,207 as of March 31, 2020 which will

be amortized over the rest of corresponding service periods.

The following table summarizes the shares

of the Company’s common stock issuable upon exercise of options outstanding at March 31, 2020:

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

RELATED PARTY TRANSACTIONS (continued)

from Related Party (continued)

of Credit (continued)

the three months ended June 30, 2020 and 2019, the interest expense related to above borrowings amounted to $42,469 and $12,639,

respectively, and has been included in interest expense –

related party on the accompanying unaudited condensed consolidated

statements of operations and comprehensive loss.

For the six months ended June 30, 2020 and 2019, the interest expense related

to above borrowings amounted to $84,638 and $14,583, respectively, and has been included in interest expense –

related party

on the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.

June 30, 2020 and December 31, 2019, the related accrued and unpaid interest for above borrowings was $133,832 and $49,194, respectively,

and has been included in accrued liabilities and other payables –

related parties on the accompanying consolidated balance

Shares Sold to Related Party

April 1, 2020, the Company sold 645,161 shares of its common stock to WLM Limited (“WLM”), an entity owned by Wenzhao

Lu, Chairman of the Board of Directors of the Company, at a price per share of $1.55 for an aggregate purchase price of $1,000,000

(See Note 8 –

Common Shares Sold for Cash).

Space from Related Party

Genexosome uses office space of a related party, free of rent, which is considered immaterial.

Shares Sold for Cash

April 1, 2020, the Company entered into a Subscription Agreement with WLM, an entity owned by Wenzhao Lu, Chairman of the Board

of Directors of the Company, pursuant to which WLM purchased 645,161 shares of the Company’s common stock at a price per

share of $1.55 for an aggregate purchase price of $1,000,000.

The closing occurred on April 1, 2020.

December 13, 2019, the Company entered into an Open Market Sale Agreement SM (the “Sales Agreement”)

with Jefferies LLC, as sales agent (“Jefferies”), pursuant to which the Company may offer and sell, from time to time,

through Jefferies, shares of its common stock, par value $0.0001 per share, having an aggregate offering price of up to $20.0

On April 6, 2020, the date on which the Company filed its Annual Report on Form 10-K for the fiscal year ended

December 31, 2019, the Company’s registration statement became subject to the offering limits set forth in General

Instruction I.B.6 of Form S-3.

During the six months ended June 30, 2020, Jefferies sold an aggregate of 2,130,347 shares

of common stock at an average price of $1.74 per share to investors.

The Company recorded net proceeds of $3,499,118, net of commission

and other offering costs of $204,772.

Shares Issued for Services

the six months ended June 30, 2020, the Company issued a total of 602,577 shares of its common stock for services rendered and

to be rendered.

The shares of common stock were issued under the 2019 Incentive Stock Plan.

These shares were valued at $612,030,

the fair market values on the grant dates using the reported closing share prices on the dates of grant and the Company recorded

stock-based compensation expense of $594,530 for the six months ended June 30, 2020 and recorded prepaid expense of $17,500 as

of June 30, 2020 which will be amortized over the rest of corresponding service periods.

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

EQUITY (continued)

following table summarizes the shares of the Company’s common stock issuable upon exercise of options outstanding at June

Options Outstanding

Options Exercisable

Exercise Price

Number Outstanding at March 31, 2020

Range of Weighted Average Remaining Contractual Life (Years)

Weighted Average Exercise Price

Number Exercisable at March 31, 2020

Weighted Average Exercise Price

Outstanding at

Contractual Life

Exercisable at

$ 0.50 –

The stock options

issued during the three months ended March 31, 2020 were issued under the 2019 Stock Incentive Plan.

Stock option activities for

the three months ended March 31, 2020 were as follows:

Number of Options

Weighted Average Exercise Price

option activities for the six months ended June 30, 2020 were as follows:

Outstanding at January 1, 2020

Terminated / Exercised

Outstanding at March 31, 2020

Options exercisable at March 31, 2020

Outstanding at June 30, 2020

Options exercisable at June 30, 2020

Options expected to vest

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 8 –

Options (continued)

The aggregate intrinsic values of stock

options outstanding and stock options exercisable at March 31, 2020 was $2,364,900 and $2,330,100, respectively.

aggregate intrinsic values of stock options outstanding and stock options exercisable at June 30, 2020 was $3,766,000 and $3,467,267,

respectively.

stock options granted during the six months ended June 30, 2020 were granted under the 2019 Stock Incentive Plan.

The fair values

of options granted during the three months ended March 31, 2020 were estimated at the date of grant using the Black-Scholes option-pricing

of options granted during the six months ended June 30, 2020 were estimated at the date of grant using the Black-Scholes option-pricing

model with the following assumptions:

1 unchanged sentence

of 0% and expected life of 3.00 –

The aggregate fair value of the options granted during the three months ended

March 31, 2020 was $2,422,225.

Stock-based compensation

expense associated with stock options granted amounted to $785,350 and $2,272,747 for the three months ended March 31, 2020 and

2019, respectively.

A summary of the status of the Company’s

nonvested stock options granted as of March 31, 2020 and changes during the three months ended March 31, 2020 is presented below:

Number of Options

Weighted Average Exercise Price

The aggregate fair value of the options granted during the six months ended

June 30, 2020 was $2,644,161.

compensation expense associated with stock options granted amounted to $726,600 and $1,524,139 for the three months ended June

30, 2020 and 2019, respectively.

compensation expense associated with stock options granted amounted to $1,511,950 and $3,796,886 for the six months ended June

30, 2020 and 2019, respectively.

summary of the status of the Company’s nonvested stock options granted as of June 30, 2020 and changes during the six months

ended June 30, 2020 is presented below:

Nonvested at January 1, 2020

Nonvested at March 31, 2020

NOTE 9 - STATUTORY

Avalon Shanghai and Beijing Genexosome

operate in the PRC, are required to reserve 10% of their net profit after income tax, as determined in accordance with the PRC

accounting rules and regulations.

Appropriation to the statutory reserve by the Company is based on profit arrived at under PRC

accounting standards for business enterprises for each year.

Nonvested at June 30, 2020

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9 - STATUTORY RESERVE

Avalon Shanghai

and Beijing Genexosome operate in the PRC, are required to reserve 10% of their net profit after income tax, as determined in

accordance with the PRC accounting rules and regulations.

Appropriation to the statutory reserve by the Company is based on profit

arrived at under PRC accounting standards for business enterprises for each year.

arrived at must be set off against any accumulated losses sustained by the Company in prior years, before allocation is made to

5 unchanged sentences

The Company did not make any appropriation to statutory reserve for Avalon Shanghai and Beijing

Genexosome during the three months ended March 31, 2020 as they incurred net losses in the period.

NOTE 10 –

RESTRICTED NET ASSETS

A portion of the Company’s operations

are conducted through its PRC subsidiaries, which can only pay dividends out of their retained earnings determined in accordance

with the accounting standards and regulations in the PRC and after they have met the PRC requirements for appropriation to statutory

In addition, a portion of the Company’s businesses and assets are denominated in RMB, which is not freely convertible

into foreign currencies.

All foreign exchange transactions take place either through the People’s Bank of China or other

banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China.

Approval of foreign currency payments

by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with

suppliers’

invoices, shipping documents and signed contracts.

These currency exchange control procedures imposed by the

PRC government authorities may restrict the ability of the Company’s PRC subsidiaries to transfer their net assets to the

Parent Company through loans, advances or cash dividends.

Schedule I of Article 5-04 of Regulation

S-X requires the condensed financial information of the parent company to be filed when the restricted net assets of consolidated

subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year.

of this test, restricted net assets of consolidated subsidiaries shall mean that amount of the registrant’s proportionate

share of net assets of its consolidated subsidiaries (after intercompany eliminations) which as of the end of the most recent

fiscal year may not be transferred to the parent company in the form of loans, advances or cash dividends without the consent

of a third party.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 10 –

Genexosome during the six months ended June 30, 2020 as they incurred net losses in the period.

RESTRICTED NET ASSETS

The Company’s PRC subsidiaries’

net assets as of March 31, 2020 and December 31, 2019 did not exceed 25% of the Company’s consolidated net assets.

the Parent Company’s condensed consolidated financial statements have not been required in accordance with Rule 5-04 and

Rule 12-04 of SEC Regulation S-X.

NOTE 11 - CONCENTRATIONS

The following

table sets forth information as to each customer that accounted for 10% or more of the Company’s revenues for the three

months ended March 31, 2020 and 2019.

portion of the Company’s operations are conducted through its PRC subsidiaries, which can only pay dividends out of their

retained earnings determined in accordance with the accounting standards and regulations in the PRC and after they have met the

PRC requirements for appropriation to statutory reserve.

In addition, a portion of the Company’s businesses and assets are

denominated in RMB, which is not freely convertible into foreign currencies.

All foreign exchange transactions take place either

through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted

by the People’s Bank of China.

Approval of foreign currency payments by the People’s Bank of China or other regulatory

institutions requires submitting a payment application form together with suppliers’

invoices, shipping documents and signed

These currency exchange control procedures imposed by the PRC government authorities may restrict the ability of the

Company’s PRC subsidiaries to transfer their net assets to the Parent Company through loans, advances or cash dividends.

I of Article 5-04 of Regulation S-X requires the condensed financial information of the parent company to be filed when the restricted

net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed

For purposes of this test, restricted net assets of consolidated subsidiaries shall mean that amount of the registrant’s

proportionate share of net assets of its consolidated subsidiaries (after intercompany eliminations) which as of the end of the

most recent fiscal year may not be transferred to the parent company in the form of loans, advances or cash dividends without

the consent of a third party.

Company’s PRC subsidiaries’

net assets as of June 30, 2020 and December 31, 2019 did not exceed 25% of the Company’s

consolidated net assets.

Accordingly, the Parent Company’s condensed consolidated financial statements have not been required

in accordance with Rule 5-04 and Rule 12-04 of SEC Regulation S-X.

11 - CONCENTRATIONS

following table sets forth information as to each customer that accounted for 10% or more of the Company’s revenues for

the three and six months ended June 30, 2020 and 2019.

Three Months Ended

Two customers,

whose outstanding receivable accounted for 10% or more of the Company’s total outstanding accounts receivable, accounts

receivable –

related party, and rent receivable at March 31, 2020, accounted for 88.3% of the Company’s total outstanding

accounts receivable, accounts receivable –

related party, and rent receivable at March 31, 2020.

Two customers,

whose outstanding receivable accounted for 10% or more of the Company’s total outstanding accounts receivable, accounts

receivable –

related party, and rent receivable at December 31, 2019, accounted for 93.0% of the Company’s total outstanding

accounts receivable, accounts receivable –

Six Months Ended

A (Beijing Daopei, a related party)

B (Hebei Daopei, a related party)

customers, whose outstanding receivable accounted for 10% or more of the Company’s total outstanding accounts receivable,

accounts receivable –

related party, and rent receivable at June 30, 2020, accounted for 78.7% of the Company’s total

outstanding accounts receivable, accounts receivable –

related party, and rent receivable at June 30, 2020.

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONCENTRATIONS (continued)

customers, whose outstanding receivable accounted for 10% or more of the Company’s total outstanding accounts receivable,

accounts receivable –

related party, and rent receivable at December 31, 2019, accounted for 93.0% of the Company’s

total outstanding accounts receivable, accounts receivable –

related party, and rent receivable at December 31, 2019.

No supplier accounted

for 10% or more of the Company’s purchase during the three months ended March 31, 2020 and 2019.

One supplier, whose outstanding payable

accounted for 10% or more of the Company’s total outstanding accounts payable at March 31, 2020, accounted for 93.6% of

the Company’s total outstanding accounts payable at March 31, 2020.

One supplier, whose outstanding payable

accounted for 10% or more of the Company’s total outstanding accounts payable at December 31, 2019, accounted for 90.8%

of the Company’s total outstanding accounts payable at December 31, 2019.

NOTE 12 –

For the three

months ended March 31, 2020 and 2019, the Company operated in three reportable business segments - (1) the real property operating

segment, (2) the medical related consulting services segment, and (3) the performing development services for hospitals and other

customers and sales of developed products to hospitals and other customers segment.

The Company’s reportable segments are

strategic business units that offer different services and products.

They are managed separately based on the fundamental differences

in their operations.

Information with respect to these reportable business segments for the three months ended March 31, 2020

and 2019 was as follows:

AVALON GLOBOCARE CORP.

supplier accounted for 10% or more of the Company’s purchase during the three and six months ended June 30, 2020.

Four suppliers

accounted for 10% or more of the Company’s purchase during the three and six months ended June 30, 2019.

supplier, whose outstanding payable accounted for 10% or more of the Company’s total outstanding accounts payable at June

30, 2020, accounted for 93.6% of the Company’s total outstanding accounts payable at June 30, 2020.

supplier, whose outstanding payable accounted for 10% or more of the Company’s total outstanding accounts payable at December

31, 2019, accounted for 90.8% of the Company’s total outstanding accounts payable at December 31, 2019.

SEGMENT INFORMATION

the three and six months ended June 30, 2020 and 2019, the Company operated in three reportable business segments - (1) the real

property operating segment, (2) the medical related consulting services segment, and (3) the performing development services for

hospitals and other customers and sales of developed products to hospitals and other customers segment.

The Company’s reportable

segments are strategic business units that offer different services and products.

They are managed separately based on the fundamental

differences in their operations.

Information with respect to these reportable business segments for the three and six months ended

June 30, 2020 and 2019 was as follows:

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 12 –

INFORMATION (continued)

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEGMENT INFORMATION (continued)

Three Months Ended

Six Months Ended

Real property operations

Medical related consulting services - related party

Medical related consulting services - related parties

Development services and sales of developed products

1 unchanged sentence

Real property operations

Medical related consulting services - related party

Medical related consulting services - related parties

Development services and sales of developed products

1 unchanged sentence

Real property operations

Medical related consulting services - related party

Medical related consulting services - related parties

Development services and sales of developed products

1 unchanged sentence

Real property operations

Medical related consulting services - related party

Medical related consulting services - related parties

Development services and sales of developed products

6 unchanged sentences

Real property operations

Medical related consulting services - related party

Medical related consulting services - related parties

Development services and sales of developed products

Corporate/Other

Total other income (expense)

Real property operations

Medical related consulting services - related party

Medical related consulting services - related parties

Development services and sales of developed products

Corporate/Other

AVALON GLOBOCARE CORP.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 12 –

INFORMATION (continued)

Identifiable long-lived tangible assets at March 31, 2020 and December 31, 2019

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEGMENT INFORMATION (continued)

Identifiable long-lived tangible assets at June 30, 2020 and December 31, 2019

Real property operating

1 unchanged sentence

Development services and sales of developed products

Identifiable long-lived tangible assets at March 31, 2020 and December 31, 2019

Identifiable long-lived tangible assets at June 30, 2020 and December 31, 2019

United States

NOTE 13 –

AND CONTINGENCIES

From time to time, the Company is subject

to ordinary routine litigation incidental to its normal business operations.

The Company is not currently a party to, and its

property is not subject to, any material legal proceedings, except as set forth below.

On October 25, 2017, Genexosome entered

into and closed a Stock Purchase Agreement with Beijing Genexosome 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.

Further, on October 25, 2017, Genexosome entered into

and closed an Asset Purchase Agreement with Dr.

Zhou, pursuant to which the Company acquired all assets, including all intellectual

property and exosome separation systems, held by Dr.

Zhou pertaining to the business of researching, developing and commercializing

exosome technologies.

COMMITMENTS AND CONTINGENCIES

time to time, the Company is subject to ordinary routine litigation incidental to its normal business operations.

is not currently a party to, and its property is not subject to, any material legal proceedings, except as set forth below.

October 25, 2017, Genexosome entered into and closed a Stock Purchase Agreement with Beijing Genexosome 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, Genexosome entered into and closed an Asset Purchase Agreement with Dr.

Zhou, pursuant to which the Company

acquired all assets, including all intellectual property and exosome separation systems, held by Dr.

Zhou pertaining to the business

of researching, developing and commercializing exosome technologies.

In consideration of the assets, Genexosome paid Dr.

Zhou $876,087 in cash, transferred 500,000 shares of

common stock of the Company to Dr.

$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.

Company had not been able to realize the financial projections provided by Dr.

Zhou at the time of the acquisition and has decided

to impair the intangible asset associated with this acquisition to zero.

Zhou was terminated as Co-CEO of Genexosome

on August 14, 2019.

Further, on October 28, 2019, Research Institute at Nationwide Children’s Hospital (“Research

Institute”) filed a Complaint in the United States District Court for the Southern District of Ohio Eastern Division against

Zhou, Li Chen, the Company and Genexosome with various claims against the Company and Genexosome including misappropriation

of trade secrets in violation of the Defend Trade Secrets Act of 2016 and violation of Ohio Uniform Trade Secrets Act.

Institute is seeking monetary damages, injunctive relief, exemplary damages, injunctive relief and other equitable relief.

Company intends to vigorously defend against this action and pursue all available legal remedies.

The proceedings are

in early stage and while there can be no assurances, the Company believes it has substantial legal and factual defenses to

the Research Institute’s claims and the likelihood of any findings of liability for the Company cannot be assessed at this

Operating Leases

Beijing Genexosome Office Lease

On February 28, 2020, Beijing Genexosome

signed an agreement to lease its office space under operating lease.

Pursuant to the signed lease, monthly rent is RMB 833 (approximately

$120) with a required security deposit of RMB 5,000 (approximately $700).

The term of the lease is 13 months commencing on March

15, 2020 and expires on April 14, 2021 with one month of free rent.

The total rent is RMB 10,000 (approximately $1,400) and paid

in full in March 2020.

For the three months ended March 31, 2020, rent expense related to the lease amounted to $55.

31, 2020, the future minimum rental payment required under this operating lease is $1,358.

AVALON GLOBOCARE CORP.

Zhou 400 shares of common

stock of Genexosome.

Further, The Company had not been able to realize the financial projections provided by Dr.

at the time of the acquisition and has decided to impair the intangible asset associated with this acquisition to zero.

Zhou was terminated as Co-CEO of Genexosome on August 14, 2019.

Further, on October 28, 2019, Research Institute

at Nationwide Children’s Hospital (“Research Institute”) filed a Complaint in the United States District Court

for the Southern District of Ohio Eastern Division against Dr.

Zhou, Li Chen, the Company and Genexosome with various claims against

the Company and Genexosome including misappropriation of trade secrets in violation of the Defend Trade Secrets Act of 2016 and

violation of Ohio Uniform Trade Secrets Act.

Research Institute is seeking monetary damages, injunctive relief, exemplary

damages, injunctive relief and other equitable relief.

The Company intends to vigorously defend against this action and pursue

all available legal remedies.

The civil case against Avalon is stayed pending resolution of the criminal proceedings

Zhou and Li Chen, and while there can be no assurances, the Company believes it has substantial legal and factual

defenses to the Research Institute’s claims and the likelihood of any findings of liability for the Company cannot be assessed

at this time.

Genexosome Office Lease

February 28, 2020, Beijing Genexosome signed an agreement to lease its office space under operating lease.

Pursuant to the signed

lease, monthly rent is RMB 833 (approximately $120) with a required security deposit of RMB 5,000 (approximately $700).

of the lease is 13 months commencing on March 15, 2020 and expires on April 14, 2021 with one month of free rent.

The total rent

is RMB 10,000 (approximately $1,400) and paid in full in March 2020.

For the three and six months ended June 30, 2020, rent expense

related to the lease amounted to $328 and $383, respectively.

As of June 30, 2020, the future minimum rental payment required

under this operating lease is $1,034.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 13 –

AND CONTINGENCIES (continued)

Operating Leases (continued)

Avalon Shanghai Office Lease

On February 24, 2020, Avalon Shanghai

entered into a lease for office space in Beijing, China, with a third party (the “Beijing Office Lease”).

to the Beijing Office Lease, the monthly rent is RMB 50,586 (approximately $7,000) with a required security deposit of RMB 164,764

(approximately $23,000).

In addition, Avalon Shanghai needs to pay monthly maintenance fees of RMB 4,336 (approximately $600).

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

COMMITMENTS AND CONTINGENCIES (continued)

Leases (continued)

Shanghai Office Lease

February 24, 2020, Avalon Shanghai entered into a lease for office space in Beijing, China, with a third party (the “Beijing

Office Lease”).

Pursuant to the Beijing Office Lease, the monthly rent is RMB 50,586 (approximately $7,000) with a required

security deposit of RMB 164,764 (approximately $23,000).

In addition, Avalon Shanghai needs to pay monthly maintenance fees of

RMB 4,336 (approximately $600).

The term of the Beijing Office Lease is 12 months commencing on March 1, 2020 and expires on February

For the three

months ended March 31, 2020, rent expense and maintenance fees related to the Beijing Office Lease amounted to approximately $8,000.

As of March 31, 2020, the future minimum rental payment required under this Beijing Office Lease is $85,301.

Operating Lease for General Business

In December 2019, the Company entered

into a lease in New York, U.S., with a third party (the “New York Lease”).

Pursuant to the New York Lease, the monthly

rent is $6,000.

The term of the New York Lease is 3 years commencing on January 1, 2020 and expires on December 31, 2022.

the three months ended March 31, 2020, rent expense related to the New York Lease amounted to $18,000.

Operating lease right-of-use asset related

to the New York Lease is included in “Right-of-use asset, operating lease”

and is included in the accompanying

consolidated balance sheets.

With respect to lease liability, operating lease liability is included in “Operating lease

obligation”

For the three and six months ended June 30, 2020, rent expense and maintenance fees related to the Beijing Office Lease

amounted to approximately $23,000 and $31,000, respectively.

As of June 30, 2020, the future minimum rental payment required under

this Beijing Office Lease is $62,185.

Lease for General Business

December 2019, the Company entered into a lease in New York, U.S., with a third party (the “New York Lease”).

to the New York Lease, the monthly rent is $6,000.

The term of the New York Lease is 3 years commencing on January 1, 2020 and

expires on December 31, 2022.

For the three and six months ended June 30, 2020, rent expense related to the New York Lease amounted

to $18,000 and $36,000, respectively.

lease right-of-use asset related to the New York Lease is included in “Right-of-use asset, operating lease”

is included in the accompanying consolidated balance sheets.

With respect to lease liability, operating lease liability is included

in “Operating lease obligation”

and “Operating lease obligation –

noncurrent portion,”

in the accompanying consolidated balance

The Company’s leases as of December 31, 2019 did not meet the requirements to be recorded as a right-of-use asset

and operating lease obligation as they were immaterial and less than 12 months in term.

Supplemental cash flow information related

to the New York lease for the three months ended March 31, 2020 is as follows:

in the accompanying

consolidated balance sheets.

The Company’s leases as of December 31, 2019 did not meet the requirements to be recorded as

a right-of-use asset and operating lease obligation as they were immaterial and less than 12 months in term.

cash flow information related to the New York lease for the six months ended June 30, 2020 is as follows:

Cash paid for amounts included in the measurement of lease liabilities:

2 unchanged sentences

Operating lease

Supplemental balance sheet information related to the New York

Lease as of March 31, 2020 is as follows:

balance sheet information related to the New York Lease as of June 30, 2020 is as follows:

Operating Lease:

7 unchanged sentences

Operating lease

AVALON GLOBOCARE CORP.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 13 –

AND CONTINGENCIES (continued)

Operating Leases (continued)

The following table summarizes the maturity of lease liability

under the New York Lease as of March 31, 2020:

For the Year Ending March 31:

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

COMMITMENTS AND CONTINGENCIES (continued)

Leases (continued)

following table summarizes the maturity of lease liability under the New York Lease as of June 30, 2020:

For the Year Ending June 30:

Operating Lease

3 unchanged sentences

Total present value of operating lease liability

Equity Investment Commitment

On May 29, 2018, Avalon Shanghai entered

into a Joint Venture Agreement with Jiangsu Unicorn Biological Technology Co., Ltd.

(“Unicorn”), pursuant to which

a company named Epicon Biotech Co., Ltd.

Investment Commitment

May 29, 2018, Avalon Shanghai entered into a Joint Venture Agreement with Jiangsu Unicorn Biological Technology Co., Ltd.

(“Unicorn”),

pursuant to which a company named Epicon Biotech Co., Ltd.

(“Epicon”) was formed on August 14, 2018.

Epicon is owned 60% by Unicorn

and 40% by Avalon Shanghai.

Within two years of execution of the Joint Venture Agreement, Unicorn shall invest cash into Epicon

in an amount not less than RMB 8,000,000 (approximately $1.1 million) and the premises of the laboratories of Nanjing Hospital

of Chinese Medicine for exclusive use by Epicon, and Avalon Shanghai shall invest cash into Epicon in an amount not less than

RMB 10,000,000 (approximately $1.4 million).

Epicon is focused on cell preparation, third party testing, biological sample repository

for commercial and scientific research purposes and the clinical transformation of scientific achievements.

As of March 31, 2020,

Avalon Shanghai has contributed RMB 4,100,000 (approximately $0.6 million) that was included in equity method investment on the

accompanying consolidated balance sheets.

Avalon Shanghai intends to use its present working capital together with borrowings

from related party and equity raises to fund the project cost.

Joint Venture –

Epicon is owned

60% by Unicorn and 40% by Avalon Shanghai.

Within five years of execution of the Joint Venture Agreement, Unicorn shall invest

cash into Epicon in an amount not less than RMB 8,000,000 (approximately $1.1 million) and the premises of the laboratories of

Nanjing Hospital of Chinese Medicine for exclusive use by Epicon, and Avalon Shanghai shall invest cash into Epicon in an amount

not less than RMB 10,000,000 (approximately $1.4 million).

Epicon is focused on cell preparation, third party testing, biological

sample repository for commercial and scientific research purposes and the clinical transformation of scientific achievements.

As of June 30, 2020, Avalon Shanghai has contributed RMB 4,300,000 (approximately $0.6 million) that was included in equity method

investment on the accompanying consolidated balance sheets.

Avalon Shanghai intends to use its present working capital together

with borrowings from related party and equity raises to fund the project cost.

Venture –

AVAR BioTherapeutics (China) Co.

On October 23, 2018, Avactis Biosciences,

(“Avactis”), a wholly-owned subsidiary of the Company, and Arbele Limited (“Arbele”) agreed to the

establishment of AVAR BioTherapeutics (China) Co.

(“AVAR”), a Sino-foreign equity joint venture, pursuant to

an Equity Joint Venture Agreement (the “AVAR Agreement”), which will be owned 60% by Avactis and 40% by Arbele.

purpose and business scope of the Joint Venture is to research, develop, produce, sell, distribute and generally commercialize

CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy in China.

Avactis is required to contribute $10 million (or equivalent in

RMB) in cash and/or services, which shall be contributed in tranches based on milestones to be determined jointly by AVAR and

Avactis in writing subject to Avactis’

October 23, 2018, Avactis Biosciences, Inc.

(“Avactis”), a wholly-owned subsidiary of the Company, and Arbele Limited

(“Arbele”) agreed to the establishment of AVAR BioTherapeutics (China) Co.

(“AVAR”), a Sino-foreign

equity joint venture, pursuant to an Equity Joint Venture Agreement (the “AVAR Agreement”), which will be owned 60%

by Avactis and 40% by Arbele.

The purpose and business scope of the Joint Venture is to research, develop, produce, sell, distribute

and generally commercialize CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy in China.

Avactis is required to contribute $10

million (or equivalent in RMB) in cash and/or services, which shall be contributed in tranches based on milestones to be determined

jointly by AVAR and Avactis in writing subject to Avactis’

cash reserves.

Within 30 days, Arbele shall make a contribution of $6.66 million

in the form of entering into a License Agreement with AVAR granting AVAR with an exclusive right and license in China to its technology

and intellectual property pertaining to CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy technology and any additional technology

developed in the future with terms and conditions to be mutually agreed upon Avactis and AVAR and services.

In addition, Avactis is responsible for:

Within 30 days, Arbele shall make a contribution

of $6.66 million in the form of entering into a License Agreement with AVAR granting AVAR with an exclusive right and license

in China to its technology and intellectual property pertaining to CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy technology

and any additional technology developed in the future with terms and conditions to be mutually agreed upon Avactis and AVAR and

addition, Avactis is responsible for:

● Contributing

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of $900,000) to be paid upon mutually agreed upon milestones.

AVALON GLOBOCARE CORP.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 13 –

AND CONTINGENCIES (continued)

Joint Venture –

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

COMMITMENTS AND CONTINGENCIES (continued)

Venture –

AVAR BioTherapeutics (China) Co.

Under AVAR Agreement, Arbele shall be

responsible for the following:

Entering into a License Agreement with AVAR;

Providing AVAR with research and development expertise pertaining to clinical laboratory medicine

when hired by AVAR.

As of March 31, 2020, Avactis has paid

$800,000 to Arbele as research and development fee, and AVAR is in process of being established and the License Agreement has

not been finalized.

Line of Credit Agreement

On August 29, 2019,

the Company entered into a Line of Credit Agreement (the “Line of Credit Agreement”) providing the Company with

a $20 million line of credit (the “Line of Credit”) from Wenzhao Lu (the “Lender”), a significant shareholder

and director of the Company.

The Line of Credit allows the Company to request loans thereunder and to use the proceeds of such

loans for working capital and operating expense purposes until the facility matures on December 31, 2024.

The loans are unsecured

and are not convertible into equity of the Company.

Loans drawn under the Line of Credit bears interest at an annual rate of 5%

and each individual loan will be payable three years from the date of issuance.

The Company has a right to draw down on the line

of credit and not at the discretion of the related party Lender.

The Company may, at its option, prepay any borrowings under the

Line of Credit, in whole or in part at any time prior to maturity, without premium or penalty.

The Line of Credit Agreement

includes customary events of default.

If any such event of default occurs, the Lender may declare all outstanding loans under the Line

of Credit to be due and payable immediately.

As of March 31, 2020, $2,900,000 was outstanding under the Line of Credit.

NOTE 14 –

On April 1, 2020, the Company entered

into a Subscription Agreement with WLM Limited (“WLM”), an entity owned by Wenzhao “Daniel”

of the Board of Directors of the Company, pursuant to which WLM purchased 645,161 shares of the Company’s common stock at

a price per share of $1.55 for an aggregate purchase price of $1,000,000.

The closing occurred on April 1, 2020.

AVAR Agreement, Arbele shall be responsible for the following:

Entering into a License

Agreement with AVAR;

Providing AVAR with

research and development expertise pertaining to clinical laboratory medicine when hired by AVAR.

of June 30, 2020, Avactis has paid $900,000 to Arbele as research and development fee, and License Agreement has not been finalized.

of Credit Agreement

August 29, 2019, the Company entered into a Line of Credit Agreement (the “Line of Credit Agreement”) providing

the Company with a $20 million line of credit (the “Line of Credit”) from Wenzhao Lu (the “Lender”), a

significant shareholder and director of the Company.

The Line of Credit allows the Company to request loans thereunder and to

use the proceeds of such loans for working capital and operating expense purposes until the facility matures on December 31, 2024.

The loans are unsecured and are not convertible into equity of the Company.

Loans drawn under the Line of Credit bears interest

at an annual rate of 5% and each individual loan will be payable three years from the date of issuance.

The Company has a right

to draw down on the line of credit and not at the discretion of the related party Lender.

The Company may, at its option, prepay

any borrowings under the Line of Credit, in whole or in part at any time prior to maturity, without premium or penalty.

Line of Credit Agreement includes customary events of default.

If any such event of default occurs, the Lender may declare all

outstanding loans under the Line of Credit to be due and payable immediately.

As of June 30, 2020, $2,900,000 was outstanding

under the Line of Credit.

SUBSEQUENT EVENTS

On December 13, 2019, the Company entered

into an Open Market Sale Agreement SM (the “Sales Agreement”) with Jefferies LLC, as sales agent (“Jefferies”).

From April 1, 2020 to May 13, 2020, Jefferies sold an aggregate of 925,867 shares of common stock at an average price of $1.81

From July 1, 2020 to August 5, 2020, Jefferies sold an aggregate of 479,590 shares of common stock at an average price of $1.83

per share to investors.

The Company received net cash proceeds of $852,069, net of commission paid for sales agent of $26,353.

MANAGEMENT’S DISCUSSION

AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 three months ended March 31, 2020 and 2019

should be read in conjunction with our unaudited condensed consolidated financial statements and related notes to those unaudited

condensed consolidated financial statements that are included elsewhere in this report.

discussion and analysis of our financial condition and results of operations for the three and six months ended June 30, 2020

and 2019 should be read in conjunction with our unaudited condensed consolidated financial statements and related notes to those

unaudited condensed consolidated financial statements that are included elsewhere in this report.

Our discussion includes forward-looking

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and similar expressions to identify forward-looking statements.

Impact of Coronavirus

(“COVID-19”) on our Operations, Financial Condition, Liquidity and Results of Operations

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, and any additional preventative and protective actions that governments, or us, may determine

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.

of COVID-19 on our Operations, Financial Condition, Liquidity and Results of Operations

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, and any additional preventative and protective actions that governments,

or us, may determine are needed.

occurrence of COVID-19 pandemic had negatively impact on our operations.

Some tenants have delayed on rent payment.

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.

In addition, we are unsure if the COVID-19 pandemic will impact future clinical trials.

We have experienced

reduced rental income at our commercial real estate facility in Freehold, New Jersey.

Some tenants have asked for rent abatement

or rent deferment.

We are unsure of the short and long term financial impact of COVID -19 on our ability to collect rental income

or on our overall building occupancy rate.

We have limited cash

available to fund planned operations and although we have other sources of capital described below under “Liquidity and

Capital Resources,”

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 but is expected to adversely impact the Company’s business for the year of 2020.

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

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that capital available to us in any future financing will be on acceptable terms.

We are a clinical-stage, vertically-integrated,

leading CellTech bio-developer dedicated to advancing and empowering innovative, transformative immune effector cell therapy and

exosome technology.

We also provide strategic advisory and outsourcing services to facilitate and enhance our clients’

development, as well as competitiveness in healthcare and CellTech industry markets.

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/NK), exosome technology (ACTEX TM ),

and regenerative therapeutics.

Avalon achieves and fosters seamless integration

of unique verticals to bridge and accelerate innovative research, bio-process development, clinical programs and product commercialization.

are a clinical-stage, vertically-integrated, leading CellTech bio-developer dedicated to

advancing and empowering innovative, transformative immune effector cell therapy, exosome technology, as well as COVID-19

related diagnostics and therapeutics.

We also provide strategic advisory and outsourcing

services to facilitate and enhance our clients’

growth and development, as well as competitiveness in healthcare and CellTech

industry markets.

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/NK), exosome technology (ACTEX TM ), and regenerative therapeutics.

achieves and fosters seamless integration of unique verticals to bridge and accelerate innovative research, bio-process development,

clinical programs and product commercialization.

Avalon’s upstream innovative research includes:

Co-development of Avalon Clinical-grade Tissue-specific Exosome (“ACTEXTM”)

with Weill Cornell Medicine

Novel therapeutic and diagnostic targets development utilizing QTY-code protein

design technology with Massachusetts Institute of Technology (MIT)

Co-development of next generation, transposon-based, multi-target CAR-T,

CAR-NK and other immune effector cell therapeutic modalities with Arbele Corp.

Avalon’s midstream bio-processing

and bio-production facility is located in Nanjing, China with state-of-the-art, automated GMP and QC/QA infrastructure for standardized

Co-development

of Avalon Clinical-grade Tissue-specific Exosome (“ACTEXTM”) with Weill Cornell Medicine

therapeutic and diagnostic targets development utilizing QTY-code protein design technology with Massachusetts Institute of

Technology (MIT)

Co-development

of next generation, transposon-based, multi-target CAR-T, CAR-NK and other immune effector cell therapeutic modalities with

Avalon’s midstream bio-processing and

bio-production facility is located in Nanjing, China with state-of-the-art, automated GMP and QC/QA infrastructure for standardized

bio-manufacturing of clinical-grade cellular products involved in our clinical programs in immune effector cell therapy, regenerative

therapeutics, as well as bio-banking.

Avalon’s downstream medical team

and facility consists of top-rated affiliated hospital network and experts specialized in hematology, oncology, cellular immunotherapy,

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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of relapsed/refractory B-cell acute lymphoblastic leukemia and non-Hodgkin Lymphoma.

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 advantage

of prompt treatment to patients with these dreadful hematologic malignancies.

Avalon has plans to recruit 20 patients (under registered

clinical trial NCT03952923) for safety and efficacy studies.

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 advantage of prompt

treatment to patients with these dreadful hematologic malignancies.

Avalon has plans to recruit 20 patients (under registered clinical

trial NCT03952923) for safety and efficacy studies.

Avalon’s transposon-based,

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it intends to pursue first-in-human clinical study of this next generation of potentially more effective and safer CAR-T candidate.

Avalon has recently completed

the standardized bio-production process of tissue-specific, clinical-grade exosomes, a co-development endeavor with Weill Cornell

Medicine with focus on angiogenic exosomes derived from endothelial cells which promote blood vessel formation and wound healing.

Avalon is further developing this technology platform into a therapeutic candidate, AVA-202, and plan to initiate international

multi-centered clinical studies in unmet medical areas of vascular diseases and wound healing, including treatment of diabetic

The commercialization phase of Avalon’s

ACTEXTM-based product development is underway to enter the markets of skin care, scar removal, and hair growth through in-house

development and strategic partnership.

On July 22, 2019, Avalon established a strategic partnership with

GE Healthcare in order to accelerate Avalon’s standardization, automation and bio-production for clinical-grade CAR-T cells

and other immune-effector cells for cellular immunotherapy, as well as exosomes/extracellular vesicles-based regenerative therapeutics.

This partnership combines GE Healthcare’s renowned expertise in the design and development of innovative bio-manufacturing

technologies and Avalon’s scientific and clinical expertise for the cellular medicine industry.

The Company expects to execute

on the complete development lifecycle from innovation through bio-production to the delivery and management of treatment at hospitals

for patients.

Under this partnership, it is expected that both Avalon and GE Healthcare will strategically establish automated

and standardized GMP cell production capabilities.

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 Weill Cornell Medicine.

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 Weill Cornell Medicine.

FLASH-CAR™:

The Company advanced

its next generation immune cell therapy using 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.

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.

We generated revenue by providing medical related

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current exchange rates on the world financial markets.

Critical Accounting

Use of Estimates

Our discussion and analysis of our financial

condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance

with accounting principles generally accepted in the United States.

The preparation of these consolidated financial statements

requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and

related disclosure of contingent assets and liabilities.

We continually evaluate our estimates, including those related to the allowance

for doubtful accounts, 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, and valuation of stock-based

compensation.

We base our estimates on historical

experience and on various other assumptions that we believed to be reasonable under the circumstances, the results of which form

the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, expenses,

assets and liabilities.

Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition

We recognize revenue under Accounting

Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”).

principle of this new revenue standard is that a company should recognize revenue to depict the transfer of promised goods or

services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for

those goods or services.

Accounting Policies

discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements,

which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of

these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets,

liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

We continually evaluate our estimates,

including those related to the allowance for doubtful accounts, 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, and valuation of stock-based compensation.

our estimates on historical experience and on various other assumptions that we believed to be reasonable under the circumstances,

the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily

apparent from other sources.

Any future changes to these estimates and assumptions could cause a material change to our reported

amounts of revenues, expenses, assets and liabilities.

Actual results may differ from these estimates under different assumptions

or conditions.

recognize revenue under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers

(“ASC 606”).

The core principle of this new revenue standard is that a company should recognize revenue to depict

the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects

to be entitled in exchange for those goods or services.

The following five steps are applied to achieve that core principle:

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Determine the transaction price

Allocate the transaction price to the performance obligations in

Allocate the transaction price to the performance obligations in the contract

Recognize revenue when the company satisfies a performance obligation

In order to identify the performance obligations

in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised

goods or service that is distinct.

A performance obligation meets ASC 606’s definition of a “distinct”

or service (or bundle of goods or services) if both of the following criteria are met:

order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services

in the contract and identify each promised goods or service that is distinct.

A performance obligation meets ASC 606’s definition

of a “distinct”

goods or service (or bundle of goods or services) if both of the following criteria are met:

customer can benefit from the goods or service either on its own or together with other

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of being distinct).

entity’s promise to transfer the goods or service to the customer is separately

identifiable from other promises in the contract (i.e., the promise to transfer the goods

or service is distinct within the context of the contract).

If a goods or service is not distinct,

the goods or service is combined with other promised goods or services until a bundle of goods or services is identified that

The transaction price is the amount of

consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer,

excluding amounts collected on behalf of third parties (for example, some sales taxes).

The consideration promised in a contract

with a customer may include fixed amounts, variable amounts, or both.

Variable consideration is included in the transaction price

only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur

when the uncertainty associated with the variable consideration is subsequently resolved.

The transaction price is allocated to

each performance obligation on a relative standalone selling price basis.

The transaction price allocated to each performance

obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

Types of revenue:

a goods or service is not distinct, the goods or service is combined with other promised goods or services until a bundle of goods

or services is identified that is distinct.

transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised

goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes).

The consideration

promised in a contract with a customer may include fixed amounts, variable amounts, or both.

Variable consideration is included

in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue

recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

transaction price is allocated to each performance obligation on a relative standalone selling price basis.

The transaction price

allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over

time as appropriate.

fees under consulting agreements with related parties to provide medical related consulting

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of developed products to hospitals and other customers.

Revenue recognition criteria:

recognition criteria:

recognize revenue by providing medical related consulting services under written service

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are shipped to customers and titles are transferred.

We have determined that the 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.

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 our customers.

We are governed by the income tax laws

of China and the United States.

Income taxes are accounted for pursuant to ASC 740 “Accounting for Income Taxes,”

which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected

future tax consequences of events that have been recognized in our financial statements or tax returns.

The charge for taxes is

based on the results for the period as adjusted for items, which are non-assessable or disallowed.

It is calculated using tax

rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is accounted for using the

balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets

and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit.

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

Deferred tax is calculated using tax rates

that are expected to apply to the period when the asset is realized or the liability is settled.

Deferred tax is charged or credited

in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred

tax is changed to equity.

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.

Recent Accounting Standards

For details of applicable new accounting

standards, please, refer to Recent Accounting Standards in Note 3 of our unaudited condensed consolidated financial

statements accompanying this report.

RESULTS OF OPERATIONS

Comparison of Results of Operations

for the Three Months Ended March 31, 2020 and 2019

For the three months ended March 31, 2020,

we had real property rental revenue of $296,956, as compared to $266,626 for the three months ended March 31, 2019, an increase

of $30,330, or 11.4%.

The increase was primarily attributable to the increase of tenants in the first quarter of 2020.

that our revenue from real property rent will decrease in the near future.

For the three months ended March 31, 2020,

we did not have any medical related consulting services revenue since there was no demand for our consulting service from our

related parties and there was no order for our medical related consulting services from third party in the period.

maintain close working relationships with our related parties, the consulting agreements with our related parties expired as of

December 31, 2019.

There was no order from related party and third party customers in the first quarter of 2020.

Currently, we

are negotiating with our potential customers and consulting services agreements are not finalized.

For the three months ended

March 31, 2019, we had medical related consulting services revenue from related parties of $14,260.

For the three months ended March 31, 2020, we did not have any revenue

from contract services through performing development services for hospitals and other customers and sales of developed products

to hospitals and other customers.

For the three months ended March 31, 2019, we had revenue from contract services through performing

development services for hospitals and other customers and sales of developed products to hospitals and other customers of $3,278.

Feedback received from our research partners is that our exosome isolation system does not produce consistent results and does

not deliver high exosome yields and concentrations and needs revision.

We have discontinued sales of our exosome isolation system

have determined that the ASC 606 does not apply to rental contracts, which are within the scope of other revenue recognition accounting

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

do not offer promotional payments, customer coupons, rebates or other cash redemption offers to our customers.

are governed by the income tax laws of China and the United States.

Income taxes are accounted for pursuant to ASC 740 “Accounting

for Income Taxes,”

which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities

for the expected future tax consequences of events that have been recognized in our financial statements or tax returns.

for taxes is based on the results for the period as adjusted for items, which are non-assessable or disallowed.

It is calculated

using tax rates that have been enacted or substantively enacted by the balance sheet date.

tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between

the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation

of assessable tax profit.

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.

tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled.

Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to

equity, in which case the deferred tax is changed to equity.

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

Accounting Standards

details of applicable new accounting standards, please, refer to Recent Accounting Standards in Note 3 of

our unaudited condensed consolidated financial statements accompanying this report.

OF OPERATIONS

of Results of Operations for the Three and Six Months Ended June 30, 2020 and 2019

the three months ended June 30, 2020, we had real property rental revenue of $301,267, as compared to $264,889 for the three months

ended June 30, 2019, an increase of $36,378, or 13.7%.

For the six months ended June 30, 2020, we had real property rental revenue

of $598,223, as compared to $531,515 for the six months ended June 30, 2019, an increase of $66,708, or 12.6%.

The increase was

primarily attributable to the increase of tenants in the first half of 2020.

We expect that our revenue from real property rent

will remain in its current quarterly level with minimal decrease in the near future.

We are unsure of the short and long term

financial impact of COVID -19 on our ability to collect rental income or on our overall building occupancy rate.

the three and six months ended June 30, 2020, we did not have any medical related consulting services revenue since there was

no demand for our consulting service from our related parties and there was no order for our medical related consulting services

from third party in the periods.

Although we maintain close working relationships with our related parties, the consulting agreements

with our related parties expired as of December 31, 2019.

There was no order from related party and third party customers in the

first half of 2020.

Currently, we are negotiating with our potential customers and expect to enter consulting services agreements

by the end of August 2020.

For the three and six months ended June 30, 2019, we had medical related consulting services revenue

from related parties of $111,434 and $125,694, respectively.

the three and six months ended June 30, 2020, we did not have any revenue from contract services through performing development

services for hospitals and other customers and sales of developed products to hospitals and other customers.

For the three and

six months ended June 30, 2019, we had revenue from contract services through performing development services for hospitals and

other customers and sales of developed products to hospitals and other customers of $23,404 and $26,682, respectively.

received from our research partners is that our exosome isolation system does not produce consistent results and does not deliver

high exosome yields and concentrations and needs revision.

We have discontinued sales of our exosome isolation system product.

However, we are actively developing other unrelated proprietary exosome related products for sale or licensure.

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.

For the three months ended March 31, 2020,

our real property operating expenses amounted to $254,501, as compared to $230,759 for the three months ended March 31, 2019,

an increase of $23,742, or 10.3%.

The increase was mainly due to an increase in real property repairs and maintenance expenses

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.

the three months ended June 30, 2020, our real property operating expenses amounted to $272,764, as compared to $192,676 for the

three months ended June 30, 2019, an increase of $80,088, or 41.6%.

The increase was mainly due to an increase in electric utility

of approximately $25,000, and an increase in other miscellaneous items of approximately $55,000.

Costs of medical related consulting services

include the cost of internal labor and related benefits, travel expenses related to medical related consulting services, subcontractor

costs, other related consulting costs, and other overhead costs.

Subcontractor costs were costs related to medical related consulting

services incurred by our subcontractor, such as medical professional’s compensation and travel costs.

For the three months ended March 31, 2019,

costs of medical related consulting services amounted to $13,091.

There were no comparative revenue and related costs of revenue

from our medical related consulting services for the three months ended March 31, 2020 since there was no demand for our consulting

service from our related parties in the period and there was no order for our medical related consulting services from third party.

Costs of development services and sales

of developed products include inventory costs, materials and supplies costs, internal labor and related benefits, depreciation,

other overhead costs and shipping and handling costs incurred.

For the three months ended March 31, 2019,

costs of development services for hospitals and other customers and sales of developed products to hospitals and other customers

amounted to $30,307.

Since we lost our customers, we had neither revenue nor cost of revenue from this segment in the first quarter

Real Property Operating Income

Our real property operating income for the

three months ended March 31, 2020 was $42,455, representing an increase of $6,588, or 18.4%, as compared to $35,867 for the three

months ended March 31, 2019.

The increase was mainly attributable to the increase in rental revenue resulting from the increase

of tenants as described above.

We expect our real property operating income will decrease in the near future since some tenants

asked for rent abatement or rent deferment in subsequent period.

We are unsure of the short and long term financial impact of COVID

-19 on our ability to collect rental income or on our overall building occupancy rate.

Gross Profit from Medical Related

Consulting Services and Gross Margin

We did not generate any gross profit from

medical related consulting services in the three months ended March 31, 2020.

Our gross profit from medical related consulting

services for the three months ended March 31, 2019 was $1,169, with a gross margin of 8.2%.

Gross Loss from Development Services

and Sales of Developed Products and Gross Margin

We did not generate any gross profit from

development services and sales of developed products in the three months ended March 31, 2020.

Our gross loss from development

services and sales of developed products for the three months ended March 31, 2019 was $27,029, with a gross margin of (824.6)%.

Other Operating Expenses

For the three months ended March 31, 2020

and 2019, other operating expenses consisted of the following:

the six months ended June 30, 2020, our real property operating expenses amounted to $527,265, as compared to $423,435 for the

six months ended June 30, 2019, an increase of $103,830, or 24.5%.

The increase was mainly due to an increase in real property

repairs and maintenance expenses of approximately $11,000, an increase in electric utility of approximately $15,000, and an increase

in other miscellaneous items of approximately $78,000.

of medical related consulting services include the cost of internal labor and related benefits, travel expenses related to medical

related consulting services, subcontractor costs, other related consulting costs, and other overhead costs.

Subcontractor costs

were costs related to medical related consulting services incurred by our subcontractor, such as medical professional’s

compensation and travel costs.

the three and six months ended June 30, 2019, costs of medical related consulting services amounted to $95,375 and $108,466, respectively.

There were no comparative revenue and related costs of revenue from our medical related consulting services for the three and

six months ended June 30, 2020 since there was no demand for our consulting service from our related parties in the period and

there was no order for our medical related consulting services from third party.

of development services and sales of developed products include inventory costs, materials and supplies costs, internal labor

and related benefits, depreciation, other overhead costs and shipping and handling costs incurred.

the three and six months ended June 30, 2019, costs of development services for hospitals and other customers and sales of developed

products to hospitals and other customers amounted to $31,784 and $62,091, respectively.

We had neither revenue nor cost of revenue

from this segment in the three and six months ended June 30, 2020.

Property Operating Income

real property operating income for the three months ended June 30, 2020 was $28,503, representing a decrease of $43,710, or 60.5%,

as compared to $72,213 for the three months ended June 30, 2019.

Our real property operating income for the six months ended June

30, 2020 was $70,958, representing a decrease of $37,122, or 34.3%, as compared to $108,080 for the six months ended June 30,

The decrease was mainly attributable to the increase in real property operating expenses, offset by the increase in rental

revenue resulting from the increase of tenants as described above.

We expect our real property operating income will remain in

its current quarterly level with minimal increase in the near future.

We are unsure of the short and long term financial impact

of COVID -19 on our ability to collect rental income or on our overall building occupancy rate.

Profit from Medical Related Consulting Services and Gross Margin

did not generate any gross profit from medical related consulting services in the three months ended June 30, 2020.

profit from medical related consulting services for the three months ended June 30, 2019 was $16,059, with a gross margin of 14.4%.

did not generate any gross profit from medical related consulting services in the six months ended June 30, 2020.

Our gross profit

from medical related consulting services for the six months ended June 30, 2019 was $17,228, with a gross margin of 13.7%.

Loss from Development Services and Sales of Developed Products and Gross Margin

did not generate any gross profit from development services and sales of developed products in the three months ended June 30,

Our gross loss from development services and sales of developed products for the three months ended June 30, 2019 was $8,380,

with a gross margin of (35.8)%.

did not generate any gross profit from development services and sales of developed products in the six months ended June 30, 2020.

Our gross loss from development services and sales of developed products for the six months ended June 30, 2019 was $35,409, with

a gross margin of (132.7)%.

Operating Expenses

the three and six months ended June 30, 2020 and 2019, other operating expenses consisted of the following:

Three Months Ended

Six Months Ended

Professional fees

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to being a public company.

For the three months ended March 31, 2020, professional fees

increased by $85,472, or 5.8%, as compared to the three months ended March 31, 2019.

The increase was mainly attributable to an increase in an increase in legal services

fee of approximately $386,000 which is primarily attributable to we intend to vigorously

defend against legal action and pursue all available legal remedies as disclosed elsewhere

in this report, and an increase in investor relations service charges of approximately

$214,000 as a result of the increase in use of investor relations service providers,

offset by a decrease in consulting fees of approximately $493,000 mainly due to the decrease

in stock-based consulting fees, and a decrease in other miscellaneous items of approximately

We expect that our professional fees will remain in its current quarterly level

with minimal increase in the near future.

the three months ended March 31, 2020, compensation and related benefits decreased by

$971,687, or 46.3%, as compared to the three months ended March 31, 2019.

For the three months ended June 30, 2020, professional fees

increased by $769,164, or 97.1%, as compared to the three months ended June 30, 2019.

The increase was mainly attributable to an increase in consulting fees of approximately

$642,000 mainly due to the increase in use of consulting service providers, and an increase

in other miscellaneous items of approximately $127,000.

For the six months ended June

30, 2020, professional fees increased by $854,636, or 37.8%, as compared to the six months

ended June 30, 2019.

The increase was mainly attributable to an increase in an increase

in legal services fee of approximately $479,000 which is primarily attributable to we

intend to vigorously defend against legal action and pursue all available legal remedies

as disclosed elsewhere in this report, an increase in consulting fees of approximately

$150,000 mainly due to the increase in stock-based consulting fees, an increase in investor

relations service charges of approximately $90,000 as a result of the increase in use

of investor relations service providers, and an increase in other miscellaneous items

of approximately $136,000.

We expect that our professional fees will remain in its current

quarterly level with minimal increase in the near future.

the three months ended June 30, 2020, compensation and related benefits decreased by

$1,046,126, or 49.8%, as compared to the three months ended June 30, 2019.

The significant

1 unchanged sentence

$1,060,000 which reflected the value of options granted and vested to our management.

expect that our compensation and related benefits will remain at its current quarterly

For the six months ended June 30, 2020, compensation and related benefits decreased by

$2,017,813, or 48.0%, as compared to the six months ended June 30, 2019.

The significant

decrease was primarily attributable to a decrease in stock-based compensation of approximately

$1,982,000 which reflected the value of options granted and vested to our management.

We expect that our compensation and related benefits will remain at its current quarterly

level in the rest of 2020.

the three months ended March 31, 2020, research and development expenses increased by

$122,942, or 80.6%, as compared to the three months ended March 31, 2019.

was primarily due to the increased research and development activities incurred.

our research and development expenses will continue to increase in the near future.

the three months ended March 31, 2020, advertising expenses decreased by $173,697 or

71.0% as compared to the three months ended March 31, 2019.

The decrease was primarily

due to decreased advertising activities incurred.

We expect that our advertising expenses

will remain at its current quarterly level with minimal increase in the near future.

● For the three months ended March 31, 2020, amortization expense

from intangible assets decreased by $81,893, or 100.0%, as compared to the three months ended March 31, 2019.

At the end of September

2019, our intangible assets were impaired to zero and therefore, no amortization expense was recorded related to intangible assets

in the first quarter of 2020.

the three months ended March 31, 2020, travel and entertainment expense decreased by

$113,856, or 60.7%, as compared to the three months ended March 31, 2019.

was mainly due to decreased business travel activities and decreased entertainment expenditure

resulting from COVID-19.

In the first quarter of 2020, the spread of COVID-19 has caused

public health officials to recommend precautions to mitigate the spread of the virus,

such as, cease traveling to non-essential jobs and curtail all unnecessary travel, and

stay at home as much as possible.

the three months ended June 30, 2020, research and development expenses decreased by

$788,610, or 83.0%, as compared to the three months ended June 30, 2019.

months ended June 30, 2020, research and development expenses decreased by $665,668,

or 60.4%, as compared to the six months ended June 30, 2019.

Our first project with Arbele

was completed in January 2020 and no further research and development project was incurred

in the first half of 2020.

Our research and development contract with Weill Cornell Medicine

expired as of November 2019 and expect to enter another agreement in the fourth quarter

Therefore, our research and development expenses in 2020 periods decreased as

compared to the corresponding periods of 2019.

We expect our research and development

expenses will remain in its current quarterly level with minimal increase in the near

the three months ended June 30, 2020, advertising expenses decreased by $178,280 or 80.6%

as compared to the three months ended June 30, 2019.

For the six months ended June 30,

2020, advertising expenses decreased by $351,977 or 75.6% as compared to the six months

ended June 30, 2019.

The decrease was primarily due to decreased advertising activities

incurred as a result of stricter control on corporation spending.

We expect that our

advertising expenses will continue to decrease in the near future.

the three months ended June 30, 2020, amortization expense from intangible assets decreased

by $81,893, or 100.0%, as compared to the three months ended June 30, 2019.

months ended June 30, 2020, amortization expense from intangible assets decreased by

$163,786, or 100.0%, as compared to the six months ended June 30, 2019.

At the end of

September 2019, our intangible assets were impaired to zero and therefore, no amortization

expense was recorded related to intangible assets in the first half of 2020.

the three months ended June 30, 2020, travel and entertainment expense decreased by $78,345,

or 71.5%, as compared to the three months ended June 30, 2019.

For the six months ended

June 30, 2020, travel and entertainment expense decreased by $192,201, or 64.7%, as compared

to the six months ended June 30, 2019.

The decrease was mainly due to decreased business

travel activities and decreased entertainment expenditure resulting from COVID-19.

the first half of 2020, the spread of COVID-19 has caused public health officials to

recommend precautions to mitigate the spread of the virus, such as, cease traveling to

non-essential jobs and curtail all unnecessary travel, and stay at home as much as possible.

general and administrative expenses mainly consisted of Directors and Officers Liability

Insurance, NASDAQ listing fee, academic sponsorship, and other miscellaneous items.

the three months ended March 31, 2020, other general and administrative expenses decreased

by $77,954, or 32.4%, as compared to the three months ended March 31, 2019, which was

mainly due to a decrease in academic sponsorship expenditure of approximately $95,000,

offset by an increase in other miscellaneous items of approximately $17,000.

As a result of

the foregoing, for the three months ended March 31, 2020, loss from operations amounted to $3,222,192, as compared to $4,465,313

for the three months ended March 31, 2019, a decrease of $1,243,121, or 27.8%.

Other income (expense) mainly includes

interest expense and loss from equity-method investment.

Other expense, net, totaled $48,589 for

the three months ended March 31, 2020, as compared to $39,616 for the three months ended March 31, 2019, an increase of $8,973,

or 22.6%, which was primarily attributable to an increase in interest expense of approximately $15,000, offset by a decrease in

loss from equity-method investment of approximately $4,000 and an increase in other income of approximately $2,000,

We did not have any income taxes expense

for the three months ended March 31, 2020 and 2019 since we incurred losses in the periods.

As a result of the factors described above,

our net loss was $3,270,781 for the three months ended March 31, 2020, as compared to $4,504,929 for the three months ended March

31, 2019, a decrease of $1,234,148 or 27.4%.

Net Loss Attributable to Avalon

GloboCare Corp.

the three months ended June 30, 2020, other general and administrative expenses increased

by $11,776, or 7.0%, as compared to the three months ended June 30, 2019, which was mainly

due to an increase in Directors and Officers Liability Insurance premium of approximately

$24,000, offset by a decrease in other miscellaneous items of approximately $12,000.

For the six months ended June 30, 2020, other general and administrative expenses decreased

by $66,178, or 16.2%, as compared to the six months ended June 30, 2019, which was mainly

due to a decrease in academic sponsorship expenditure of approximately $95,000, offset

by an increase in other miscellaneous items of approximately $29,000.

from Operations

a result of the foregoing, for the three months ended June 30, 2020, loss from operations amounted to $3,002,827, as compared

to $4,343,752 for the three months ended June 30, 2019, a decrease of $1,340,925, or 30.9%.

a result of the foregoing, for the six months ended June 30, 2020, loss from operations amounted to $6,225,019, as compared to

$8,809,065 for the six months ended June 30, 2019, a decrease of $2,584,046, or 29.3%.

Income (Expense)

income (expense) mainly includes interest expense, change in fair value of warrants liabilities,

allocated financing costs, and loss from equity-method investment .

expense, net, totaled $53,555 for the three months ended June 30, 2020, as compared to $95,071 for the three months ended June

30, 2019, a decrease of $41,516, or 43.7%, which was primarily attributable to a decrease in allocated financing expense of approximately

$525,000, offset by an increase in change in fair value of warrants liabilities of approximately $462,000, and an increase in

interest expense of approximately $21,000.

expense, net, totaled $102,144 for the six months ended June 30, 2020, as compared to $134,687 for the six months ended June 30,

2019, a decrease of $32,543, or 24.2%, which was primarily attributable to a decrease in allocated financing expense of approximately

$525,000, a decrease in loss from equity method investment of approximately $3,000, and an increase in other miscellaneous income

of approximately $1,000, offset by an increase in change in fair value of warrants liabilities of approximately $462,000, and

an increase in interest expense of approximately $35,000.

did not have any income taxes expense for the three and six months ended June 30, 2020 and 2019 since we incurred losses in the

a result of the factors described above, our net loss was $3,056,382 for the three months ended June 30, 2020, as compared to

$4,438,823 for the three months ended June 30, 2019, a decrease of $1,382,441 or 31.1%.

a result of the factors described above, our net loss was $6,327,163 for the six months ended June 30, 2020, as compared to $8,943,752

for the six months ended June 30, 2019, a decrease of $2,616,589 or 29.3%.

Loss Attributable to Avalon GloboCare Corp.

Common Shareholders

The net loss attributable to Avalon GloboCare

common shareholders was $3,270,781 or $(0.04) per share (basic and diluted) for the three months ended March 31, 2020, as

compared with $4,405,816, or $(0.06) per share (basic and diluted) for the three months ended March 31, 2019, a change of $1,135,035

Foreign Currency Translation Adjustment

Our reporting currency is the U.S.

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 and Beijing Genexosome, is the Chinese Renminbi (“RMB”).

The financial statements

of our subsidiaries whose functional currency is the RMB are translated to U.S.

dollars using period end rates of exchange for

assets and liabilities, average rate of exchange for revenues, costs, and expenses and cash flows, and at historical exchange

rates for equity.

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 $22,066 and a foreign currency translation gain of $43,482 for the three months ended March 31, 2020 and 2019, respectively.

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 $3,292,847 and $4,461,447 for the three months ended March 31, 2020 and 2019, respectively.

Liquidity and Capital Resources

The occurrence of

an uncontrollable event such as the COVID-19 pandemic is likely to negatively affect the Company’s operations.

contain the spread of the coronavirus have intensified, including social distancing, travel bans and quarantine, and

these are likely to negatively impact our tenants, employees and consultants.

net loss attributable to Avalon GloboCare Corp.

common shareholders was $3,056,382 or $(0.04) per share (basic and diluted) for

the three months ended June 30, 2020, as compared with $4,357,224, or $(0.06) per share (basic and diluted) for the three months

ended June 30, 2019, a change of $1,300,842 or 29.9%.

net loss attributable to Avalon GloboCare Corp.

common shareholders was $6,327,163 or $(0.08) per share (basic and diluted) for

the six months ended June 30, 2020, as compared with $8,763,040, or $(0.12) per share (basic and diluted) for the six months ended

June 30, 2019, a change of $2,435,877 or 27.8%.

Currency Translation Adjustment

reporting currency is the U.S.

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 and Beijing Genexosome, is the Chinese Renminbi (“RMB”).

The financial statements of our subsidiaries whose functional currency is the RMB are translated to U.S.

dollars using period

end rates of exchange for assets and liabilities, average rate of exchange for revenues, costs, and expenses and cash flows, and

at historical exchange rates for equity.

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 gain of $3,309 and a foreign currency translation loss of $34,103 for the three months ended June 30, 2020 and 2019,

respectively.

As a result of foreign currency translations, which are a non-cash adjustment, we reported a foreign currency translation

loss of $18,757 and a foreign currency translation gain of $9,379 for the six months ended June 30, 2020 and 2019, respectively.

This non-cash gain/loss had the effect of decreasing/increasing our reported comprehensive loss.

Comprehensive

a result of our foreign currency translation adjustment, we had comprehensive loss of $3,053,073 and $4,472,926 for the three

months ended June 30, 2020 and 2019, respectively.

a result of our foreign currency translation adjustment, we had comprehensive loss of $6,345,920 and $8,934,373 for the six months

ended June 30, 2020 and 2019, respectively.

and Capital Resources

Company has a limited operating history and its continued growth is dependent upon the re-commencing of medical consulting services

which was completed in December 2019 to its only few clients who are related parties and generating rental revenue from its income-producing

real estate property in New Jersey and performing development services for hospitals and other customers and sales of developed

products to hospitals and other customers;

hence generating revenues, and obtaining additional financing to fund future obligations

and pay liabilities arising from normal business operations.

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.

The ability of the Company to continue as a going concern is

dependent on the Company’s ability to raise additional capital, implement its business plan, and generate significant revenues.

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.

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.

occurrence of an uncontrollable event such as the COVID-19 pandemic is likely to negatively affect the Company’s operations.

Efforts to contain the spread of the coronavirus have intensified, including social distancing, travel bans and quarantine,

and these are likely to negatively impact our tenants, employees and consultants.

These, in turn, will not only impact our operations,

2 unchanged sentences

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 but is expected to adversely impact our business for the

year of 2020.

the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise

the related financial effect cannot be reasonably estimated at this time but is expected to adversely impact our business for

the year of 2020.

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.

At March 31, 2020 and December 31, 2019, we had cash balance of approximately $635,000 and $765,000,

At June 30, 2020 and December 31, 2019, we had cash balance of approximately $1,249,000 and $765,000,

respectively.

These funds are kept in financial institutions located as follows:

March 31, 2020

December 31, 2019

United States

Under applicable PRC regulations, foreign

invested enterprises, or FIEs, in China may pay dividends only out of their accumulated profits, if any, determined in accordance

with PRC accounting standards and regulations.

In addition, a foreign invested enterprise in China is required to set aside at

least 10% of its after-tax profit based on PRC accounting standards each year to its general reserves until the cumulative amount

of such reserves reach 50% of its registered capital.

These reserves are not distributable as cash dividends.

In addition, a portion of our businesses

and assets are denominated in RMB, which is not freely convertible into foreign currencies.

All foreign exchange transactions

take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the

exchange rates quoted by the People’s Bank of China.

Approval of foreign currency payments by the People’s Bank of

China or other regulatory institutions requires submitting a payment application form together with suppliers’

shipping documents and signed contracts.

These currency exchange control procedures imposed by the PRC government authorities

may restrict the ability of our PRC subsidiary to transfer its net assets to the Parent Company through loans, advances or cash

The current PRC Enterprise Income Tax

(“EIT”) Law and its implementing rules generally provide that a 10% withholding tax applies to China-sourced income

derived by non-resident enterprises for PRC enterprise income tax purposes unless the jurisdiction of incorporation of such enterprises’

shareholder has a tax treaty with China that provides for a different withholding arrangement.

The following table sets forth a summary

of changes in our working capital from December 31, 2019 to March 31, 2020:

applicable PRC regulations, foreign invested enterprises, or FIEs, in China may pay dividends only out of their accumulated profits,

if any, determined in accordance with PRC accounting standards and regulations.

In addition, a foreign invested enterprise in

China is required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its general

reserves until the cumulative amount of such reserves reach 50% of its registered capital.

These reserves are not distributable

as cash dividends.

addition, a portion of our businesses and assets are denominated in RMB, which is not freely convertible into foreign currencies.

All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy

and sell foreign currencies at the exchange rates quoted by the People’s Bank of China.

Approval of foreign currency payments

by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with

suppliers’

invoices, shipping documents and signed contracts.

These currency exchange control procedures imposed by the

PRC government authorities may restrict the ability of our PRC subsidiary to transfer its net assets to the Parent Company through

loans, advances or cash dividends.

current PRC Enterprise Income Tax (“EIT”) Law and its implementing rules generally provide that a 10% withholding

tax applies to China-sourced income derived by non-resident enterprises for PRC enterprise income tax purposes unless the jurisdiction

of incorporation of such enterprises’

shareholder has a tax treaty with China that provides for a different withholding

following table sets forth a summary of changes in our working capital from December 31, 2019 to June 30, 2020:

Working capital deficit:

3 unchanged sentences

$ (1,264,368 )

Our working capital deficit increased

by $420,281 to $1,684,649 at March 31, 2020 from $1,264,368 at December 31, 2019.

The increase in working capital deficit was

primarily attributable to a decrease in cash of approximately $130,000, a decrease in accounts receivable –

related party

of approximately $88,000, an increase in accrued professional fees of approximately $182,000, an increase in accrued liabilities

and other payables of approximately $69,000, an increase in operating lease obligation of approximately $88,000, offset by a decrease

in accrued research and development fees of $175,000.

Because the exchange rate conversion is

different for the consolidated balance sheets and the consolidated statements of cash flows, the changes in assets and liabilities

reflected on the consolidated statements of cash flows are not necessarily identical with the comparable changes reflected on

the consolidated balance sheets.

Cash Flows for the Three Months Ended

March 31, 2020 Compared to the Three Months Ended March 31, 2019

The following summarizes the key components

of our cash flows for the three months ended March 31, 2020 and 2019:

Three Months Ended

working capital deficit decreased by $468,563 to $795,805 at June 30, 2020 from $1,264,368 at December 31, 2019.

in working capital deficit was primarily attributable to an increase in cash of approximately $484,000, a decrease in accrued

professional fees of approximately $273,000, and a decrease in accrued research and development fees of approximately $142,000,

offset by a decrease in accounts receivable –

related party of approximately $215,000, an increase in accrued liabilities

and other payables –

related parties of approximately $84,000, and an increase in operating lease obligation of approximately

the exchange rate conversion is different for the consolidated balance sheets and the consolidated statements of cash flows, the

changes in assets and liabilities reflected on the consolidated statements of cash flows are not necessarily identical with the

comparable changes reflected on the consolidated balance sheets.

Flows for the Six Months Ended June 30, 2020 Compared to the Six Months Ended June 30, 2019

following summarizes the key components of our cash flows for the six months ended June 30, 2020 and 2019:

Six Months Ended

Net cash used in operating activities

4 unchanged sentences

Effect of exchange rate on cash

Net decrease in cash

Net cash flow used in operating activities

for the three months ended March 31, 2020 was $1,998,796, which primarily reflected our consolidated net loss of approximately

$3,271,000, and the changes in operating assets and liabilities, primarily consisting of an increase in prepaid expenses and other

current assets of approximately $97,000, offset by a decrease in accounts receivable –

related party of approximately $86,000,

and the non-cash items adjustment primarily consisting of depreciation and amortization of approximately $77,000, and stock-based

compensation and service expense of approximately $1,189,000.

Net cash flow

used in operating activities for the three months ended March 31, 2019 was $1,422,311, which primarily reflected our consolidated

net loss of approximately $4,505,000, offset by the changes in operating assets and liabilities, primarily consisting of a decrease

in prepaid expenses and other current assets of approximately $194,000, an increase in accrued liabilities and other payables

of approximately $415,000, and the add-back of non-cash items mainly consisting of depreciation and amortization of approximately

$139,000, and stock-based compensation and service expense of approximately $2,273,000.

We expect our cash used in operating activities

to increase due to the following:

Net increase in cash

cash flow used in operating activities for the six months ended June 30, 2020 was $3,924,902, which primarily reflected our consolidated

net loss of approximately $6,327,000, and the changes in operating assets and liabilities, primarily consisting of an increase

in prepaid expenses and other current assets of approximately $124,000, and a decrease in accrued liabilities and other payables

of approximately $387,000, offset by a decrease in accounts receivable –

related party of approximately $213,000, an increase

in accrued liabilities and other payables –

related parties of approximately $84,000, and the non-cash items adjustment

primarily consisting of depreciation and amortization of approximately $153,000, and stock-based compensation and service expense

of approximately $2,449,000.

cash flow used in operating activities for the six months ended June 30, 2019 was $3,920,258, which primarily reflected our consolidated

net loss of approximately $8,944,000, the non-cash item adjustment consisting of changes in warrants derivative liabilities of

approximately $461,000, and the changes in operating assets and liabilities, primarily consisting of an increase in accounts receivable

of approximately $92,000, and a decrease in accrued liabilities and other payables of approximately $501,000, offset by a decrease

in prepaid expenses and other current assets of approximately $379,000, a decrease in security deposit of $100,000, and the add-back

of non-cash items primarily consisting of depreciation and amortization of approximately $284,000, stock-based compensation and

service expense of approximately $4,718,000, and allocated financing costs of approximately $525,000.

expect our cash used in operating activities to increase due to the following:

development and commercialization of new products;

2 unchanged sentences

we expand within existing markets or enter new markets.

There were no

investing activities during the three months ended March 31, 2020.

Net cash flow

used in investing activities was $87,371 for the three months ended March 31, 2019.

During the three months ended March 31, 2019,

we made payment for purchase of property and equipment of approximately $76,000 and made payment for improvement of commercial

real estate of approximately $11,000.

Net cash flow provided by financing activities

was $1,874,877 for the three months ended March 31, 2020 as compared to $1,000,000 for the three months ended March 31, 2019.

During the three months ended March 31, 2020, we received proceeds from related party borrowings of $300,000 and net proceeds

from equity offering of approximately $1,575,000 (net of cash paid for commission of approximately $49,000).

During the three

months ended March 31, 2019, we received proceeds from note payable –

cash flow used in investing activities was $28,437 for the six months ended June 30, 2020 as compared to $150,988 for the six

months ended June 30, 2019.

During the six months ended June 30, 2020, we made additional investment in equity method investment

of approximately $28,000.

Net cash flow used in investing activities was $150,988 for the six months ended June 30, 2019.

During the six months ended June 30, 2019, we made payment for purchase of property and equipment of approximately $140,000 and

made payment for improvement of commercial real estate of approximately $11,000.

cash flow provided by financing activities was $4,441,943 for the six months ended June 30, 2020 as compared to $5,103,704 for

the six months ended June 30, 2019.

During the six months ended June 30, 2020, we received proceeds from related party borrowings

of $300,000 and net proceeds from equity offering of approximately $4,342,000 (net of cash paid for commission and offering costs

of approximately $362,000), offset by repayments made for note payable –

related party of $200,000.

Our capital requirements for the next

twelve months primarily relate to working capital requirements, including salaries, fees related to third parties’

services, reduction of accrued liabilities, mergers, acquisitions and the development of business opportunities.

These uses of

cash will depend on numerous factors including our sales and other revenues, and our ability to control costs.

All funds received

have been expended in the furtherance of growing the business.

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, including ongoing

research and development programs, clinical studies, as well as commercial strategies;

the use of capital for mergers, acquisitions and the development of business opportunities;

addition of administrative personnel as the business grows;

the cost of being a public company.

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.

During the six

months ended June 30, 2019, we received proceeds from note payable –

related party of $1,000,000, net proceeds from financing

of approximately $5,104,000, offset by repayments made for loan payable of $1,000,000.

capital requirements for the next twelve months primarily relate to working capital requirements, including salaries, fees related

to third parties’

professional services, reduction of accrued liabilities, mergers, acquisitions and the development of

business opportunities.

These uses of cash will depend on numerous factors including our sales and other revenues, and our ability

to control costs.

All funds received have been expended in the furtherance of growing the business.

The following trends are reasonably

likely to result in a material decrease in our liquidity over the near to long term:

increase in working capital requirements to finance our current business, including ongoing research and development programs,

clinical studies, as well as commercial strategies;

use of capital for mergers, acquisitions and the development of business opportunities;

of administrative personnel as the business grows;

cost of being a public company.

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.

The note is not convertible to equity.

As of March 31, 2020, the total principal amount outstanding under the Credit Line was $2.9 million and we have approximately

$17.1 million remaining available under the Line Credit.

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.

On April 6, 2020, the date on which we filed our Annual Report

on Form 10-K for the fiscal year ended December 31, 2019, our registration statement became subject to the offering

limits set forth in General Instruction I.B.6 of Form S-3.

As of April 6, 2020, the aggregate market value of our outstanding

common stock held by non-affiliates, or public float, was $39,564,237, based on 23,691,160 shares of our outstanding

common stock that were held by non-affiliates on such date and a price of $1.67 per share, which was the price at which

our common stock was last sold on The Nasdaq Capital Market on February 19, 2020 (a date within 60 days of the date hereof), calculated

in accordance with General Instruction I.B.6 of Form S-3.

We have not offered any securities pursuant to General

Instruction I.B.6 of Form S-3 in the 12 calendar months preceding the date of this prospectus supplement.

prospectus supplement to amend and supplement the information in our prospectus and original prospectus supplement based on the

amount of securities that we are eligible to sell under General Instruction I.B.6 of Form S-3.

After giving effect

to the $13,000,000 offering limit imposed by General Instruction I.B.6 of Form S-3, we may offer and sell additional

shares of our common stock having an aggregate offering price of up to $13,000,000 from time to time through Jefferies acting

as our sales agent in accordance with the terms of the sales agreement.

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.

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.

We will need to raise significant additional capital to fund our operations and to provide working capital

for our ongoing operations and obligations.

Therefore, our future operation is dependent on our ability to secure additional financing.

Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms.

As of June 30, 2020, the total principal amount outstanding under the Credit Line was $2.9

million and we have approximately $17.1 million remaining available under the Line Credit.

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.

2020, the date on which we filed our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, our

registration statement became subject to the offering limits set forth in General Instruction I.B.6 of Form S-3.

of April 6, 2020, the aggregate market value of our outstanding common stock held by non-affiliates, or public float,

was $39,564,237, based on 23,691,160 shares of our outstanding common stock that were held by non-affiliates on such

date and a price of $1.67 per share, which was the price at which our common stock was last sold on The Nasdaq Capital Market

on February 19, 2020 (a date within 60 days of the date hereof), calculated in accordance with General Instruction I.B.6 of Form S-3.

have not offered any securities pursuant to General Instruction I.B.6 of Form S-3 in the 12 calendar months preceding

the date of this prospectus supplement.

We filed a prospectus supplement to amend and supplement the information in our prospectus

and original prospectus supplement based on the amount of securities that we are eligible to sell under General Instruction I.B.6

After giving effect to the $13,000,000 offering limit imposed by General Instruction I.B.6 of Form S-3, we

may offer and sell additional shares of our common stock having an aggregate offering price of up to $13,000,000 from time to

time through Jefferies acting as our sales agent in accordance with the terms of the sales agreement.

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.

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.

We will need to raise significant additional capital to fund our

operations and to provide working capital for our ongoing operations and obligations.

Therefore, our future operation is dependent

on our ability to secure additional financing.

Financing transactions may include the issuance of equity or debt securities, obtaining

credit facilities, or other financing mechanisms.

However, the trading price of our common stock and a downturn in the U.S.

equity and debt markets could make it more difficult

to obtain financing through the issuance of equity or debt securities.

Even if we are able to raise the funds required, it is possible

that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek alternative

Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the

new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock.

The inability

to obtain additional capital may restrict our ability to grow and may reduce our ability to continue to conduct business operations.

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.

Contractual Obligations and Off-Balance

Sheet Arrangements

Contractual Obligations

We have certain fixed contractual obligations

and commitments that include future estimated payments.

Changes in our business needs, cancellation provisions, and other factors

may result in actual payments differing from the estimates.

We cannot provide certainty regarding the timing and amounts of payments.

We have presented below a summary of the most significant assumptions used in our determination of amounts presented in the tables,

in order to assist in the review of this information within the context of our consolidated financial position, results of operations,

and cash flows.

The following tables summarize our contractual obligations as of March 31, 2020, and the effect these obligations

are expected to have on our liquidity and cash flows in future periods.

and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities.

are able to raise the funds required, it is possible that we could incur unexpected costs and expenses or experience unexpected

cash requirements that would force us to seek alternative financing.

Furthermore, if we issue additional equity or debt securities,

stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior

to those of existing holders of our common stock.

The inability to obtain additional capital may restrict our ability to grow

and may reduce our ability to continue to conduct business operations.

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.

Obligations and Off-Balance Sheet Arrangements

have certain fixed contractual obligations and commitments that include future estimated payments.

Changes in our business needs,

cancellation provisions, and other factors may result in actual payments differing from the estimates.

We cannot provide certainty

regarding the timing and amounts of payments.

We have presented below a summary of the most significant assumptions used in our

determination of amounts presented in the tables, in order to assist in the review of this information within the context of our

consolidated financial position, results of operations, and cash flows.

The following tables summarize our contractual obligations

as of June 30, 2020, and the effect these obligations are expected to have on our liquidity and cash flows in future periods.

Payments Due by Period

Contractual obligations:

Less than 1 year

Operating lease commitment

5 unchanged sentences

AVAR joint venture commitment

Off-balance Sheet Arrangements

We presently do not have off-balance sheet arrangements.

Foreign Currency Exchange Rate Risk

A portion of our operations are in China.

Thus, a portion of our revenues and operating results may be impacted by exchange rate fluctuations between RMB and US dollars.

For the three months ended March 31, 2020 and 2019, we had an unrealized foreign currency translation loss of approximately $22,000

and an unrealized foreign currency translation gain of approximately $43,000, respectively, because of changes in the exchange

The effect of inflation on our revenue

and operating results was not significant.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this

Sheet Arrangements

presently do not have off-balance sheet arrangements.

Currency Exchange Rate Risk

portion of our operations are in China.

Thus, a portion of our revenues and operating results may be impacted by exchange rate

fluctuations between RMB and US dollars.

For the three months ended June 30, 2020 and 2019, we had an unrealized foreign currency

translation gain of approximately $3,000 and an unrealized foreign currency translation loss of approximately $34,000, respectively,

because of changes in the exchange rate.

For the six months ended June 30, 2020 and 2019, we had an unrealized foreign currency

translation loss of approximately $19,000 and an unrealized foreign currency translation gain of approximately $9,000, respectively,

because of changes in the exchange rate.

effect of inflation on our revenue and operating results was not significant.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required

by this Item .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements