What changed in this filing

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Item 1. Financial Statements

2020-11-09 compared with 2020-08-07 · 1667 added, 1412 removed, 426 unchanged (88% of the section changed)

GLOBOCARE CORP.

Financial Statements.

AVALON GLOBOCARE

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED

BALANCE SHEETS

September 30,

CURRENT ASSETS:

7 unchanged sentences

Rent receivable - noncurrent portion

Prepaid realtors’

commission - noncurrent portion

Right-of-use asset, operating lease

23 unchanged sentences

10,000,000 shares authorized;

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

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

Common stock, $0.0001 par value;

490,000,000 shares authorized;

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

81,876,855 shares issued and 81,356,855 shares outstanding at September 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 June 30, 2020 and December 31, 2019

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

Accumulated deficit

7 unchanged sentences

Total Liabilities and Equity

accompanying notes to the condensed consolidated financial statements.

GLOBOCARE CORP.

See accompanying

notes to the condensed consolidated financial statements.

AVALON GLOBOCARE

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Real property rental

16 unchanged sentences

Other general and administrative

Impairment loss

Total Other Operating Expenses

LOSS FROM OPERATIONS

(14,285,412 )

OTHER INCOME (EXPENSE)

4 unchanged sentences

Loss from equity method investment

Total Other Expense, net

Other (expense) income

Total Other Income (Expense), net

LOSS BEFORE INCOME TAXES

3 unchanged sentences

$ (9,579,122 )

$ (13,277,810 )

NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST

13 unchanged sentences

COMPREHENSIVE LOSS

COMPREHENSIVE LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST

COMPREHENSIVE LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

(13,337,819 )

COMPREHENSIVE LOSS ATTRIBUTABLE TO NON-CONTROLLING

COMPREHENSIVE LOSS ATTRIBUTABLE

TO AVALON GLOBOCARE CORP.

COMMON SHAREHOLDERS

3 unchanged sentences

$ (12,686,398 )

NET LOSS PER COMMON SHARE ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

NET LOSS PER COMMON SHARE ATTRIBUTABLE TO AVALON

GLOBOCARE CORP.

COMMON SHAREHOLDERS:

2 unchanged sentences

Basic and diluted

accompanying notes to the condensed consolidated financial statements.

GLOBOCARE CORP.

See accompanying

notes to the condensed consolidated financial statements.

AVALON GLOBOCARE

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

the Three and Six Months Ended June 30, 2020

Avalon GloboCare Corp.

CONDENSED CONSOLIDATED

STATEMENTS OF CHANGES IN EQUITY

For the Three and

Nine Months Ended September 30, 2020

GloboCare Corp.

Stockholders’

Preferred Stock

Treasury Stock

Comprehensive

6 unchanged sentences

Foreign currency translation adjustment

Net loss for the three months ended March 31, 2020

Net loss for the three months

ended March 31, 2020

Balance, March 31, 2020

4 unchanged sentences

Foreign currency translation adjustment

Net loss for the three months ended June 30, 2020

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.

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 September 30, 2020

Balance, September 30, 2020

$ (38,941,059 )

See accompanying

notes to the condensed consolidated financial statements.

AVALON GLOBOCARE

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

the Three and Six Months Ended June 30, 2019

Avalon GloboCare Corp.

CONDENSED CONSOLIDATED

STATEMENTS OF CHANGES IN EQUITY

For the Three and

Nine Months Ended September 30, 2019

Avalon GloboCare

Stockholders’

Preferred Stock

Treasury Stock

3 unchanged sentences

$ (11,291,776 )

Issuance of common stock upon cashless exercise of stock warrants

Issuance of common stock upon cashless exercise of stock options

Issuance of common stock upon cashless

exercise of stock warrants

Issuance of common stock upon cashless

exercise of stock options

Stock-based compensation

Foreign currency translation adjustment

Net loss for the three months ended March 31, 2019

Net loss for the three months

ended March 31, 2019

Balance, March 31, 2019

4 unchanged sentences

Foreign currency translation adjustment

Net loss for the three months ended June 30, 2019

Net loss for the three months

ended June 30, 2019

Balance, June 30, 2019

(20,054,816 )

Stock-based compensation

Issuance of common stock for service

Foreign currency translation adjustment

Net loss for the three months

ended September 30, 2019

Balance, September 30, 2019

$ (23,913,011 )

accompanying notes to the condensed consolidated financial statements.

GLOBOCARE CORP.

$ (1,513,621 )

See accompanying

notes to the condensed consolidated financial statements.

AVALON GLOBOCARE

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS

For the Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

1 unchanged sentence

$ (13,277,810 )

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net loss to

net cash used in operating activities:

Bad debt provision

6 unchanged sentences

Allocated financing costs

Impairment loss

Changes in operating assets and liabilities:

14 unchanged sentences

Improvement of commercial real estate

Prepayment made for purchase of long-term assets

Additional investment in equity method investment

9 unchanged sentences

EFFECT OF EXCHANGE RATE ON CASH

NET INCREASE IN CASH

NET INCREASE (DECREASE) IN CASH

CASH - beginning of period

4 unchanged sentences

Property and equipment acquired on credit as payable

Improvement of commercial real estate acquired on credit

Common stock issued for future services

Deferred financing costs in accrued liabilities

accompanying notes to the condensed consolidated financial statements.

GLOBOCARE CORP.

See accompanying

notes to the condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ORGANIZATION AND NATURE OF OPERATIONS

GloboCare Corp.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 1 –

AND NATURE OF OPERATIONS

Avalon 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.

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.

The Company was incorporated under the laws of the State of Delaware on July

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

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”).

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, exosome technology, as well as Coronavirus (“COVID-19”) related diagnostics and therapeutics.

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™), 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 September

Avalon (BVI) Ltd.

is dormant and is in process of being dissolved.

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.

On 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.

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.

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

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

Avalon RT 9 owns this office building.

Avalon RT 9’s business consists of the ownership and operation of the income-producing real estate property in New Jersey.

As of September 30, 2020, the occupancy rate of the building is 87.0%.

On July 31, 2017, the Company formed Genexosome

Technologies Inc.

(“Genexosome”) in Nevada.

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.

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 September 30, 2020.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

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:

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 September 30, 2020 are as follows:

of Subsidiary

and date of Incorporation

Healthcare System, Inc.

Avalon Healthcare System, Inc.

(“AHS”)

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

Delaware May 18, 2015

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.

(“Avalon BVI”)

Virgin Island

January 23, 2017

is in process of being dissolved

RT 9 Properties LLC

(“Avalon RT 9”)

February 7, 2017

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

(Shanghai) Healthcare Technology Co., Ltd.

British Virgin Island January 23, 2017

100% held by AVCO

Dormant, is in process of being dissolved

Avalon RT 9 Properties LLC (“Avalon RT 9”)

New Jersey 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 Co., Ltd.

(“Avalon Shanghai”)

April 29, 2016

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

Technologies Inc.

PRC April 29, 2016

100% held by AHS

Provides medical related consulting services and

developing Avalon Cell and Avalon Rehab in China

Genexosome Technologies Inc.

(“Genexosome”)

July 31, 2017

proprietary diagnostic and therapeutic products using exosomes

Jieteng (Genexosome) Biotech Co., Ltd.

(“Beijing Genexosome”)

August 7, 2015

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

Biosciences Inc.

Nevada July 31, 2017

60% held by AVCO

Develops proprietary diagnostic and therapeutic

products using exosomes

Beijing Jieteng (Genexosome) Biotech Co., Ltd.

(“Beijing

Genexosome”)

PRC 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.

(“Avactis”)

July 18, 2018

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

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.

Nevada 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 LLC (“Exosome”)

Delaware 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.

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.

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.

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.

AND SUBSIDIARIES

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 2 –

BASIS OF 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, exosome technology, as well as 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.

The Company also develops related products for sale and licensure in the United States and the

People’s Republic of China.

In addition, the Company owns commercial real estate that houses its headquarters in Freehold,

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

and sales of developed products segment during the nine months ended September 30, 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.

As reflected in the accompanying unaudited

condensed consolidated financial statements, the Company had an accumulated deficit of $38,941,059 at September 30, 2020, and

has incurred recurring net loss and negative cash flow from operating activities of $9,579,122 and $6,185,198 for the nine months

ended September 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 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 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 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.

GLOBOCARE CORP.

However, there

is no assurance these plans will be realized and that any additional financings will be available to the Company on satisfactory

terms and conditions, if any.

The occurrence of an uncontrollable event such

as the COVID-19 pandemic had negatively impact on the Company’s operations.

Some tenants have delayed on rent payment and

our occupancy of our rental property has decreased.

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.

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 at the date of the financial

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

Actual results could differ from these

Significant estimates during the nine months ended September 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.

AND SUBSIDIARIES

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

available at the measurement date.

2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets,

quoted prices for identical or similar assets and liabilities in markets that are not

active, inputs other than quoted prices that are observable, and inputs derived from

or corroborated by observable market data.

3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions

on what assumptions the market participants would use in pricing the asset or liability

based on the best available information.

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.

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.

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:

● Level 1-Inputs are unadjusted

quoted prices in active markets for identical assets or liabilities available at the

measurement date.

● Level 2-Inputs are unadjusted

quoted prices for similar assets and liabilities in active markets, quoted prices for

identical or similar assets and liabilities in markets that are not active, inputs other

than quoted prices that are observable, and inputs derived from or corroborated by observable

● Level 3-Inputs are unobservable

inputs which reflect the reporting entity’s own assumptions on what assumptions

the market participants would use in pricing the asset or liability based on the best

available information.

The 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.

and Cash Equivalents

portion of the Company’s cash is maintained with state-owned banks within the PRC.

Balances at state-owned banks within

the PRC are covered by insurance up to RMB 500,000 (approximately $71,000) per bank.

Any balance over RMB 500,000 per bank in

PRC will not be covered.

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

A portion of the Company’s cash

is maintained with state-owned banks within the PRC.

Balances at state-owned banks within the PRC are covered by insurance up

to RMB 500,000 (approximately $74,000) per bank.

Any balance over RMB 500,000 per bank in PRC will not be covered.

30, 2020, cash balances held in the PRC are RMB 1,302,475 (approximately $192,000), of which, RMB 793,010 (approximately $117,000)

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.

The 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.

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.

At September 30, 2020,

the Company’s cash balances in United States bank accounts had approximately $539,000 in excess of the federally-insured

At September 30, 2020, the Company’s

cash balances by geographic area were as follows:

September 30, 2020

United States

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 June 30, 2020 and December 31, 2019.

GLOBOCARE CORP.

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 September

30, 2020 and December 31, 2019.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 3 –

SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

Concentrations

of 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

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.

in Unconsolidated Company –

Epicon Biosciences Co., Ltd.

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 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.

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

4 unchanged sentences

Recognize revenue when the company satisfies a performance obligation

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”

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”

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

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

resources that are readily available to the customer (i.e., the good or service is capable

of being distinct).

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

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

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

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.

● The customer can benefit

from the good or service either on its own or together with other resources that are

readily available to the customer (i.e., the good or service is capable of being distinct).

● The entity’s promise

to transfer the good or service to the customer is separately identifiable from other

promises in the contract (i.e., the promise to transfer the good 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 is distinct.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

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

services to its clients.

The Company is paid for its services by its clients pursuant

to the terms of the written consulting agreements.

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:

● Service fees under consulting

agreements with related parties to provide medical related consulting services to its

The Company is paid for its services by its clients pursuant to the terms of

the written consulting agreements.

Each contract calls for a fixed payment.

fees under agreements to perform development services for hospitals and other customers.

The Company does not perform contracts that are contingent upon successful results.

of developed products to hospitals and other customers.

recognition criteria:

Company recognizes revenue by providing medical related consulting services under written

service contracts with its customers.

Revenue related to its service offerings is recognized

as the services are performed.

from development services performed under written contracts is recognized as services

are provided.

from sales of developed items to hospitals and other customers is recognized when items

are shipped to customers and titles are transferred.

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.

● Service fees under agreements

to perform development services for hospitals and other customers.

The Company does not

perform contracts that are contingent upon successful results.

● Sales of developed products

to hospitals and other customers.

Revenue recognition

● The Company recognizes revenue

by providing medical related consulting services under written service contracts with

its customers.

Revenue related to its service offerings is recognized as the services

are performed.

● Revenue from development

services performed under written contracts is recognized as services are provided.

● Revenue from sales of developed

items to hospitals and other customers is recognized when items 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.

AND SUBSIDIARIES

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

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:

Three Months Ended September 30,

Nine Months Ended September 30,

Stock options

1 unchanged sentence

Reclassification

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.

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.

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.

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.

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 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.

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.

AND SUBSIDIARIES

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:

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 4 –

EXPENSES AND OTHER CURRENT ASSETS

At September 30, 2020 and December

31, 2019, prepaid expenses and other current assets consisted of the following:

September 30,

Prepaid professional fees

Prepaid research and development fees

Prepaid directors and officers liability insurance premium

Prepaid VAT on purchase

1 unchanged sentence

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.

NOTE 5 –

METHOD INVESTMENT

As of September 30, 2020 and December

31, 2019, the equity method investment amounted to $488,374 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.

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

Under the equity method,

the investment is initially recorded at cost, adjusted for any excess of the Company’s share of the incorporated-date fair

values of the investee’s identifiable net assets over the cost of the investment (if any).

Thereafter, the investment is

adjusted for the post incorporation change in the Company’s share of the investee’s net assets and any impairment

loss relating to the investment.

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:

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.

Under the equity method, the investment is initially recorded

at cost, adjusted for any excess of the Company’s share of the incorporated-date fair values of the investee’s identifiable

net assets over the cost of the investment (if any).

Thereafter, the investment is adjusted for the post incorporation change

in the Company’s share of the investee’s net assets and any impairment loss relating to the investment.

For the three months ended September 30,

2020 and 2019, the Company’s share of Epicon’s net loss was $14,966 and $25,266, respectively, which was included

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

For the nine months ended September 30, 2020 and 2019, the Company’s share of Epicon’s net loss was $35,382

and $48,353, respectively, which was included in loss from equity-method investment in the accompanying unaudited condensed consolidated

statements of operations and comprehensive loss.

Activity 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

Epicon's net loss attributable to the Company

Foreign currency fluctuation

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

Equity investment carrying amount at September 30, 2020

The tables below

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

September 30,

Current assets

2 unchanged sentences

Noncurrent liabilities

GLOBOCARE CORP.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

EQUITY METHOD INVESTMENT (continued)

For the Three Months Ended

For the Six Months Ended

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 5 –

METHOD INVESTMENT (continued)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Loss from operation

ACCRUED LIABILITIES AND OTHER PAYABLES

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

NOTE 6 –

LIABILITIES AND OTHER PAYABLES

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

September 30,

Accrued professional fees

4 unchanged sentences

Accrued utilities

Accrued liability insurance premium

RELATED PARTY TRANSACTIONS

Related Consulting Services Revenue from Related Parties and Accounts Receivable –

Deferred rental income

NOTE 7 –

PARTY TRANSACTIONS

Medical Related Consulting Services

Revenue from Related Parties and Accounts Receivable –

Related Party

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

During the three and nine months ended

September 30, 2020 and 2019, medical related consulting services revenue from related parties was as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Medical related consulting services provided to:

2 unchanged sentences

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 June 30, 2020 and December 31,

GLOBOCARE CORP.

* Beijing Daopei, Shanghai Daopei, and Hebei Daopei are subsidiaries

of an entity whose chairman is Wenzhao Lu, the largest shareholder of the Company.

Accounts receivable –

related party

at September 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 September 30, 2020 and December 31, 2019.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

RELATED PARTY TRANSACTIONS (continued)

Liabilities and Other Payables –

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 7 –

PARTY TRANSACTIONS (continued)

Accrued Liabilities and Other Payables

Related Parties

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.

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

As of September 30, 2020 and December

31, 2019, the Company owed David Jin, its shareholder, chief executive officer, president and board member, $33,968 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.

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 –

As of September 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.

At September 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

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

parties on the accompanying consolidated balance sheets.

The Company acquired Beijing Genexosome

for a cash payment of $450,000.

As of September 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 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

As of September 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 $125,363 and $49,194, respectively, and have been included in accrued liabilities and other

payables –

related parties on the accompanying consolidated balance sheets.

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

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.

Borrowings from Related Party

Promissory Note

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.

The Company repaid principal of $410,000

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

As of September 30, 2020 and December

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

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.

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 September 30, 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 September 30,

2020 and 2019, the interest expense related to above borrowings amounted to $41,531 and $8,842, respectively, and has been included

in interest expense –

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

For the nine months ended September 30, 2020 and 2019, the interest expense related to above borrowings amounted to $126,169

and $23,425, respectively, and has been included in interest expense –

related party on the accompanying unaudited condensed

consolidated statements of operations and comprehensive loss.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 7 –

PARTY TRANSACTIONS (continued)

Borrowings from Related Party (continued)

Line of Credit (continued)

As of September 30, 2020 and December

31, 2019, the related accrued and unpaid interest for above borrowings was $125,363 and $49,194, respectively, and has been included

in accrued liabilities and other payables –

related parties on the accompanying condensed consolidated balance sheets.

Common Shares

Sold to Related Party

On 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).

from Related Party

Beijing Genexosome

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

NOTE 8 –

2020 Incentive

Company held its annual meeting on August 4, 2020.

During its annual meeting, the Company approved 2020 Incentive Stock Plan and

reserved 5,000,000 shares of common stock for issuance thereunder.

Common Shares

Sold for Cash

On 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.

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.

the nine months ended September 30, 2020, Jefferies sold an aggregate of 3,468,315 shares of common stock at an average price

of $1.80 per share to investors.

The Company recorded net proceeds of $5,875,755, net of commission and other offering costs of

Common Shares

Issued for Services

During the nine months ended September

30, 2020, the Company issued a total of 1,032,577 shares of its common stock for services rendered and to be rendered.

were valued at $1,309,480, 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 $1,248,159 for the nine months ended September 30, 2020 and reduced

accrued liabilities of $35,325 and recorded prepaid expense of $25,996 as of September 30, 2020 which will be amortized over the

rest of corresponding service periods.

AVALON 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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 8 –

The following table summarizes the shares

of the Company’s common stock issuable upon exercise of options outstanding at September 30, 2020:

Options Outstanding

Options Exercisable

Outstanding at

Contractual Life

Exercisable at

$ 0.50 –

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

Range of Exercise Price

Number Outstanding at September 30, 2020

Weighted Average Remaining Contractual Life

Weighted Average Exercise Price

Number Exercisable at September 30,

Weighted Average Exercise

activities for the nine months ended September 30, 2020 were as follows:

Number of Options

Weighted Average Exercise Price

Outstanding at January 1, 2020

Terminated / Exercised

Outstanding at June 30, 2020

Options exercisable at June 30, 2020

Outstanding at September 30, 2020

Options exercisable at September 30, 2020

Options expected to vest

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

model with the following assumptions:

volatility of 137.42% - 139.58%, risk-free rate of 0.25% - 1.67%, annual dividend yield

of 0% and expected life of 3.00 –

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:

The aggregate intrinsic values of both

stock options outstanding and stock options exercisable at September 30, 2020 was $1,597,500.

The fair values of options granted during

the nine months ended September 30, 2020 were estimated at the date of grant using the Black-Scholes option-pricing model with

the following assumptions:

volatility of 134.32% - 139.58%, risk-free rate of 0.25% - 1.67%, annual dividend yield of 0% and expected

life of 3.00 –

The aggregate fair value of the options granted during the nine months ended September 30, 2020

was $2,702,401.

Stock-based compensation expense associated

with stock options granted amounted to $739,362 and $1,916,193, of which, $605,555 and $1,803,829 was recorded as compensation

and related benefits, $110,970 and $112,364 was recorded as professional fees, $22,837 and $0 was recorded as research and development

expenses, for the three months ended September 30, 2020 and 2019, respectively.

Stock-based compensation expense associated

with stock options granted amounted to $2,251,312 and $5,713,079, of which, $1,975,245 and $5,155,983 was recorded as compensation

and related benefits, $240,162 and $557,096 was recorded as professional fees, $35,905 and $0 was recorded as research and development

expenses, for the nine months ended September 30, 2020 and 2019, respectively.

A summary of the status of the Company’s

nonvested stock options granted as of September 30, 2020 and changes during the nine months ended September 30, 2020 is presented

Number of Options

Weighted Average Exercise Price

Nonvested at January 1, 2020

Nonvested at June 30, 2020

GLOBOCARE CORP.

Nonvested at September 30, 2020

AVALON 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

the statutory reserve.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

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.

The profit arrived at must be set

off against any accumulated losses sustained by the Company in prior years, before allocation is made to the statutory reserve.

Appropriation to the statutory reserve must be made before distribution of dividends to shareholders.

appropriation is required until the statutory reserve reaches 50% of the registered capital.

This statutory reserve is not distributable

in the form of cash dividends.

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

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

The appropriation is required

until the statutory reserve reaches 50% of the registered capital.

This statutory reserve is not distributable in the form of

cash dividends.

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

the nine months ended September 30, 2020 as they incurred net losses in the period.

NOTE 10 –

RESTRICTED NET ASSETS

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

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.

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.

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.

The Company’s PRC subsidiaries’

net assets as of September 30, 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 and nine months ended September

30, 2020 and 2019.

Three Months Ended September 30,

Nine Months Ended September 30,

A (Hebei Daopei, a related party)

* Less than 10%

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 September 30, 2020, accounted for 62.6% of the Company’s total outstanding accounts receivable, accounts

receivable –

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

AVALON 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 –

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 11 –

CONCENTRATIONS

Customers (continued)

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 –

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

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.

No supplier accounted for 10% or more

of the Company’s purchase during the three and nine months ended September 30, 2020 and 2019.

One supplier, whose outstanding payable

accounted for 10% or more of the Company’s total outstanding accounts payable at September 30, 2020, accounted for 93.6%

of the Company’s total outstanding accounts payable at September 30, 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 and nine months ended September

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 nine months ended September 30, 2020 and 2019

was as follows:

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEGMENT INFORMATION (continued)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 12 –

INFORMATION (continued)

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Real property operations

Medical related consulting services - related parties

Medical related consulting services - related party

Development services and sales of developed products

1 unchanged sentence

Real property operations

Medical related consulting services - related parties

Medical related consulting services - related party

Development services and sales of developed products

1 unchanged sentence

Real property operations

Medical related consulting services - related parties

Medical related consulting services - related party

Development services and sales of developed products

1 unchanged sentence

Real property operations

Medical related consulting services - related parties

Medical related consulting services - related party

Development services and sales of developed products

6 unchanged sentences

Real property operations

Medical related consulting services - related parties

Medical related consulting services - related party

Development services and sales of developed products

1 unchanged sentence

Total other income (expense)

Net income (loss)

Real property operations

Medical related consulting services - related parties

Medical related consulting services - related party

Development services and sales of developed products

Corporate/Other

GLOBOCARE CORP.

(11,085,274 )

$ (3,251,959 )

$ (4,334,058 )

$ (9,579,122 )

$ (13,277,810 )

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEGMENT INFORMATION (continued)

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 12 –

INFORMATION (continued)

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

September 30,

Real property operating

1 unchanged sentence

Development services and sales of developed products

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

Identifiable long-lived tangible assets at September 30, 2020 and December

September 30,

United States

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.

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.

In consideration of the assets, Genexosome paid Dr.

$876,087 in cash, transferred 500,000 shares of common stock of the Company to Dr.

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

common stock of the Company to Dr.

Zhou and issued Dr.

Zhou 400 shares of common

stock of Genexosome.

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

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

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).

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 civil case against

Avalon is stayed pending resolution of the criminal proceedings against Dr.

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.

Operating Leases

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 $24,000).

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 28, 2021.

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”

For the three

and nine months ended September 30, 2020, rent expense and maintenance fees related to the Beijing Office Lease amounted to approximately

$36,000 and $67,000, respectively.

As of September 30, 2020, the future minimum rental payment required under this Beijing Office

Lease is $40,438.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 13 –

AND CONTINGENCIES (continued)

Operating Leases (continued)

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 and nine months ended September 30, 2020, rent expense related to the New York Lease amounted to $18,000 and $54,000,

respectively.

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”

and “Operating lease obligation –

noncurrent portion,”

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:

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 nine months ended September 30, 2020 is as follows:

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

2 unchanged sentences

Operating lease

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

Supplemental balance sheet information related to the New York

Lease as of September 30, 2020 is as follows:

Operating Lease:

7 unchanged sentences

Operating lease

GLOBOCARE CORP.

AND SUBSIDIARIES

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:

The following table summarizes the maturity of lease liability

under the New York Lease as of September 30, 2020:

For the Year Ending September 30:

Operating Lease

3 unchanged sentences

Total present value of operating lease liability

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.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 13 –

AND CONTINGENCIES (continued)

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.

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

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 –

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 $1.2 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 $1.5 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 September 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.

Joint Venture –

AVAR BioTherapeutics (China) Co.

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’

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’

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

addition, Avactis is responsible for:

● Contributing

registered capital of RMB 5,000,000 (approximately $0.7 million) for working capital

purposes as required by local regulation, which is not required to be contributed immediately

and will be contributed subject to Avactis’

AVAR in setting up its business operations and obtaining all required permits and licenses

from the Chinese government;

AVAR in recruiting, hiring and retaining personnel;

AVAR with access to various hospital networks in China to assist in the testing and commercialization

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:

● Contributing registered capital

of RMB 5,000,000 (approximately $0.7 million) for working capital purposes as required

by local regulation, which is not required to be contributed immediately and will be

contributed subject to Avactis’

● assist AVAR in setting up

its business operations and obtaining all required permits and licenses from the Chinese

● assisting AVAR in recruiting,

hiring and retaining personnel;

● providing AVAR with access

to various hospital networks in China to assist in the testing and commercialization

of the CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy technology in China;

AVAR in managing the Good Manufacturing Practices (GMP) facility and clinic to be developed

AVAR with advice pertaining to conducting clinicals in China;

6 days of signing the AVAR Agreement, Avactis is required to pay to Arbele $300,000 as

a research and development fee with an additional two payments of $300,000 (for a total

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

GLOBOCARE CORP.

● assisting AVAR in managing

the Good Manufacturing Practices (GMP) facility and clinic to be developed by AVAR;

● providing AVAR with advice

pertaining to conducting clinicals in China;

● Within 6 days of signing

the AVAR Agreement, Avactis is required to pay to Arbele $300,000 as a research and development

fee with an additional two payments of $300,000 (for a total of $900,000) to be paid

upon mutually agreed upon milestones.

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 September 30, 2020, Avactis has

paid $900,000 to Arbele as research and development fee, and License Agreement has not been finalized.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

COMMITMENTS AND CONTINGENCIES (continued)

Venture –

AVAR BioTherapeutics (China) Co.

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 13 –

AND CONTINGENCIES (continued)

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

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 September 30, 2020, $2,900,000 was outstanding under the Line of Credit.

NOTE 14 –

On October 20, 2020, the Company entered

into a Distribution Agreement with Adial Pharmaceuticals, Inc.

(“Adial”) (the “Adial Agreement”).

to the Adial Agreement, the Company was appointed as a non-exclusive sub-distributor of Adial’s SARS-CoV-2 antibody tests

and antigen tests and other medical devices and equipment worldwide.

Stilley, a director of the Company as well as a member

of the Nominating and Corporate Governance Committee and Audit Committee, is the Chief Executive Officer and a director of Adial.

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 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

From October 1, 2020 to November 9, 2020, Jefferies sold an aggregate of 41,909 shares of common stock at an average price of $1.55

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

The Company received net cash proceeds of $63,197, net of commission paid to sales agent of $1,955.

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 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

statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and

Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements

as a result of a number of factors, including those set forth under the Risk Factors, Special Note Regarding Forward-Looking Statements

and Business sections in our Form 10-K as filed with the Securities and Exchange Commission on April 6, 2020.

We use words such

as “anticipate,”

discussion and analysis of our financial condition and results of operations for the three and nine months ended September 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 statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives,

expectations and intentions.

Actual results and the timing of events could differ materially from those anticipated in these forward-looking

statements as a result of a number of factors, including those set forth under the Risk Factors, Special Note Regarding Forward-Looking

Statements and Business sections in our Form 10-K as filed with the Securities and Exchange Commission on April 6, 2020.

words such as “anticipate,”

“estimate,”

11 unchanged sentences

and similar expressions to identify forward-looking statements.

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.

Impact of 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 are needed.

The 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.

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

as a going concern.

However, the COVID-19 pandemic has created significant economic uncertainty and volatility in the credit and

capital markets.

Management plans to secure the necessary financing through the issue of new equity and/or the entering into of

strategic partnership arrangements but the ultimate impact of the COVID-19 pandemic on our ability to raise additional capital

is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including

the duration of the COVID-19 outbreak and new information which may emerge concerning the severity of the COVID-19 pandemic.

may not be able to raise sufficient additional capital and may tailor our operations based on the amount of funding we are able

to raise in the future.

Nevertheless, there is no assurance that these initiatives will be successful.

Further, there is no assurance

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

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.

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.

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.

We have limited cash available to fund

planned operations and although we have other sources of capital described below under “Liquidity and Capital Resources,”

management continues to pursue various financing alternatives to fund our operations so we can continue as a going concern.

the COVID-19 pandemic has created significant economic uncertainty and volatility in the credit and capital markets.

plans to secure the necessary financing through the issue of new equity and/or the entering into of strategic partnership arrangements

but the ultimate impact of the COVID-19 pandemic on our ability to raise additional capital is unknown and will depend on future

developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak

and new information which may emerge concerning the severity of the COVID-19 pandemic.

We may not be able to raise sufficient additional

capital and may tailor our operations based on the amount of funding we are able to raise in the future.

Nevertheless, there is

no assurance that these initiatives will be successful.

Further, there is no assurance that capital available to us in any future

financing will be on acceptable terms.

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™), 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.

Avalon’s upstream innovative research includes:

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

Co-development of Avalon Clinical-grade Tissue-specific Exosome (“ACTEX™”) with Weill Cornell Medicine.

Novel therapeutic and diagnostic targets development utilizing QTY-code protein design technology with Massachusetts Institute of Technology (MIT) including using the QTY code protein design technology for development of a hemofiltration device to treat Cytokine Storm.

Co-development of next generation, transposon-based,

multi-target CAR-T, CAR-NK and other immune effector cell therapeutic modalities with Arbele Corp

Strategic partnership with the University of

Natural Resources and Life Sciences (BOKU) in Vienna, Austria to develop an S-layer vaccine that can be administered by an intranasal

or oral route against SARS-CoV-2, the novel coronavirus that causes COVID-19 disease.

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.

Our major clinical programs include:

Avalon has initiated its first-in-human

clinical trial of CD19 CAR-T candidate, AVA-001 in August 2019 at the Hebei Yanda Lu Daopei Hospital and Beijing Lu Daopei Hospital

in China (the world’s single largest CAR-T treatment network with over 600 patients being treated with CAR-T) for the indication

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.

Avalon’s transposon-based,

multi-targeted CAR-T candidate, AVA-101 (co-developed with Arbele Corp.) will enter pre-clinical process development and validation

AVA-101 features non-viral, transposon-engineered CAR-T with multiple anti-cancer targets, as well as possessing molecular

safety-switch mechanism to minimize the side effects, such as cytokine release syndrome and neurotoxicity, often associated with

conventional CAR-T cellular therapy.

Following the pre-clinical process development and validation phase, Avalon anticipates that

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

Avalon has initiated its first-in-human clinical trial of CD19

CAR-T candidate, AVA-001 in August 2019 at the Hebei Yanda Lu Daopei Hospital and Beijing Lu Daopei Hospital in China (the world’s

single largest CAR-T treatment network with over 600 patients being treated with CAR-T) for the indication of relapsed/refractory

B-cell acute lymphoblastic leukemia and non-Hodgkin Lymphoma.

The AVA-001 candidate (co-developed with China Immunotech Co.

is characterized by the utilization of 4-1BB (CD137) co-stimulatory signaling pathway, conferring a strong anti-cancer activity

during pre-clinical study.

It also features a shorter bio-manufacturing time which leads to the advantage of prompt treatment to

patients where timing is important related hematologic malignancies.

Avalon has plans to recruit 20 patients (under registered

clinical trial NCT03952923) for safety and efficacy studies.

Avalon’s transposon-based, multi-targeted CAR-T candidate, AVA-101 (co-developed

with Arbele Corp.) will enter pre-clinical process development and validation phase.

AVA-101 features non-viral, transposon-engineered

CAR-T with multiple anti-cancer targets, as well as possessing molecular safety-switch mechanism to minimize the side effects,

such as cytokine release syndrome and neurotoxicity, often associated with conventional CAR-T cellular therapy.

Following the pre-clinical

process development and validation phase, Avalon anticipates that it intends to pursue first-in-human clinical study of this next

generation of potentially more effective and safer CAR-T candidate.

● 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.

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 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.

be used to create personalized cell therapy from a patient’s own cells, as well as off-the-shelf cell therapy from a universal

● 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

consulting services in advanced areas of immunotherapy and second opinion/referral services through our wholly-owned subsidiary

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.

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 consulting services in advanced areas of immunotherapy and second opinion/referral services through our wholly-owned subsidiary

Avalon (Shanghai) Healthcare Technology Co., Ltd., or Avalon Shanghai.

12 unchanged sentences

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.

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”).

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:

Identify the contract with the customer

Identify the performance obligations in the contract

Identify the performance obligations in the

Determine the transaction price

Allocate the transaction price to the performance obligations in the contract

Recognize revenue when the company satisfies a performance obligation

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

resources that are readily available to the customer (i.e., the goods or service is capable

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:

● The customer can benefit from the goods or service

either on its own or together with other resources that are readily available to the customer (i.e., the goods or service is capable

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

● The 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).

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

services to our clients.

We are paid for our services by our clients pursuant to

the terms of the written consulting agreements.

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 is

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:

● Service fees under consulting agreements with related

parties to provide medical related consulting services to our clients.

We are paid for our services by our clients pursuant

to the terms of the written consulting agreements.

Each contract calls for a fixed payment.

fees under agreements to perform development services for hospitals and other customers.

● Service fees under agreements to perform development

services for hospitals and other customers.

We do not perform contracts that are contingent upon successful results.

of developed products to hospitals and other customers.

recognition criteria:

recognize revenue by providing medical related consulting services under written service

contracts with our customers.

● Sales of developed products to hospitals and other

Revenue recognition criteria:

● We recognize revenue by providing medical related

consulting services under written service contracts with our customers.

Revenue related to our service offerings is recognized

as the services are performed.

from development services performed under written contracts is recognized as services

are provided.

from sales of developed items to hospitals and other customers is recognized when items

are shipped to customers and titles are transferred.

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.

● Revenue from development services performed under

written contracts is recognized as services are provided.

● Revenue from sales of developed items to hospitals

and other customers is recognized when items 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,”

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.

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.

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 and Nine Months Ended September 30, 2020 and 2019

For the three months ended September 30,

2020, we had real property rental revenue of $324,982, as compared to $264,141 for the three months ended September 30, 2019, an

increase of $60,841, or 23.0%.

For the nine months ended September 30, 2020, we had real property rental revenue of $923,205, as

compared to $795,656 for the nine months ended September 30, 2019, an increase of $127,549, or 16.0%.

The increase was primarily

attributable to the increase of tenants in 2020 periods.

We expect that our revenue from real property rent 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.

For the three and nine months ended September

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 these 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 nine months ended September 30,

Currently, we are negotiating with our potential customers and expect to enter consulting services agreements in the first

quarter of 2021.

For the three and nine months ended September 30, 2019, we had medical related consulting services revenue from

related parties of $108,520 and $234,214, respectively.

For the three and nine months ended September

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 nine months ended September 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 $10,555 and $37,237, respectively.

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 product.

However, we are actively developing other unrelated proprietary exosome related products for sale or licensure.

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.

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:

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 September 30,

2020, our real property operating expenses amounted to $135,821, as compared to $193,738 for the three months ended September 30,

2019, a decrease of $57,917, or 29.9%.

The decrease was mainly due to a decrease in maintenance fees of approximately $10,000,

and a decrease in other miscellaneous items of approximately $48,000.

For the nine months ended September 30,

2020, our real property operating expenses amounted to $663,086, as compared to $617,173 for the nine months ended September 30,

2019, an increase of $45,913, or 7.4%.

The increase was mainly due to an increase in real property repairs and maintenance expenses

of approximately $9,000, an increase in electric utility of approximately $14,000, and an increase in other miscellaneous items

of approximately $23,000.

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 and nine months ended September

30, 2019, costs of medical related consulting services amounted to $94,442 and $202,908, respectively.

There were no comparative

revenue and related costs of revenue from our medical related consulting services for the three and nine months ended September

30, 2020 since there was no demand for our consulting service from our related parties in these periods 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 and nine months ended September

30 2019, costs of development services for hospitals and other customers and sales of developed products to hospitals and other

customers amounted to $41,808 and $103,899, respectively.

We had neither revenue nor cost of revenue from this segment in the three

and nine months ended September 30, 2020.

Real Property Operating Income

Our real property operating income for

the three months ended September 30, 2020 was $189,161, representing an increase of $118,758, or 168.7%, as compared to $70,403

for the three months ended September 30, 2019.

The increase was mainly attributable to the increase in rental revenue resulting

from the increase of tenants and the decrease in real property operating expenses as described above.

Our real property operating

income for the nine months ended September 30, 2020 was $260,119, representing an increase of $81,636, or 45.7%, as compared to

$178,483 for the nine months ended September 30, 2019.

The increase was mainly attributable to the increase in rental revenue resulting

from the increase of tenants as described above, offset by the increase in real property operating expenses.

We expect our real

property operating income 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

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 September 30, 2020.

Our gross profit from medical related consulting

services for the three months ended September 30, 2019 was $14,078, with a gross margin of 13.0%.

We did not generate any gross profit from

medical related consulting services in the nine months ended September 30, 2020.

Our gross profit from medical related consulting

services for the nine months ended September 30, 2019 was $31,306, with a gross margin of 13.4%.

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 September 30, 2020.

Our gross loss from development

services and sales of developed products for the three months ended September 30, 2019 was $31,253, with a gross margin of (296.1)%.

We did not generate any gross profit from

development services and sales of developed products in the nine months ended September 30, 2020.

Our gross loss from development

services and sales of developed products for the nine months ended September 30, 2019 was $66,662, with a gross margin of (179.0)%.

Other Operating Expenses

For the three

and nine months ended September 30, 2020 and 2019, other operating expenses consisted of the following:

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Professional fees

3 unchanged sentences

Travel and entertainment

Directors and officers liability insurance premium

Other general and administrative

● Professional

fees primarily consisted of accounting fees, audit fees, legal service fees, consulting

fees, investor relations service charges and other fees incurred for service related

to being a public company.

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

Impairment loss

● Professional fees primarily consisted of accounting

fees, audit fees, legal service fees, consulting fees, investor relations service charges and other fees incurred for service

related to being a public company.

For the three months ended September 30, 2020, professional fees increased by $122,355, or

7.5%, as compared to the three months ended September 30, 2019.

The increase was primarily attributable to an increase in consulting

fees of approximately $690,000 mainly due to the increase in use of consulting service providers, offset by a decrease in legal

services fees of approximately $486,000 primarily due to the decrease in use of legal service providers, and a decrease in other

miscellaneous items of approximately $82,000.

For the nine months ended September 30, 2020, professional fees increased by $976,991,

or 25.1%, as compared to the nine months ended September 30, 2019.

The increase was primarily attributable to an increase in consulting

fees of approximately $840,000 mainly due to the increase in stock-based consulting fees, an increase in accounting service charges

of approximately $89,000 as a result of the increase in stock-based accounting fees and an increase in other miscellaneous items

of approximately $48,000.

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

decrease was primarily attributable to a decrease in stock-based compensation of approximately

$1,060,000 which reflected the value of options granted and vested to our management.

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.

We expect that our professional fees will remain in its current quarterly level with minimal increase

in the near future.

● For the three months ended September 30, 2020, compensation

and related benefits decreased by $1,129,389, or 51.6%, as compared to the three months ended September 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 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.

decrease was primarily attributable to a decrease in stock-based compensation of approximately $1,198,000 which reflected the

value of options granted and vested to our management.

For the nine months ended September 30, 2020, compensation and related

benefits decreased by $3,147,202, or 49.3%, as compared to the nine months ended September 30, 2019.

The significant decrease

was primarily attributable to a decrease in stock-based compensation of approximately $3,181,000 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.

● For the three months ended September 30, 2020, research

and development expenses decreased by $26,707, or 10.1%, as compared to the three months ended September 30, 2019.

months ended September 30, 2020, research and development expenses decreased by $692,375, or 50.6%, as compared to the nine months

ended September 30, 2019.

Our first project with Arbele was completed in January 2020 and no further research and development

project was incurred in the nine months ended September 30, 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 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.

expired as of November 2019 and expect to enter another agreement by the end of fourth quarter of 2020.

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 increase in the near future.

● For the three months ended September 30, 2020, advertising

expenses decreased by $38,628 or 27.4% as compared to the three months ended September 30, 2019.

For the nine months ended September

30, 2020, advertising expenses decreased by $390,605 or 64.4% as compared to the nine months ended September 30, 2019.

was primarily due to decreased advertising activities incurred as a result of stricter control on corporation spending.

that our advertising expenses will continue to decrease in the near future.

● For the three months ended September 30, 2020, amortization

expense from intangible assets decreased by $81,892, or 100.0%, as compared to the three months ended September 30, 2019.

the nine months ended September 30, 2020, amortization expense from intangible assets decreased by $245,678, or 100.0%, as compared

to the nine months ended September 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 nine months ended September 30, 2020.

● For the three months ended September 30, 2020, travel

and entertainment expense decreased by $59,352, or 64.5%, as compared to the three months ended September 30, 2019.

months ended September 30, 2020, travel and entertainment expense decreased by $251,553, or 64.6%, as compared to the nine months

ended September 30, 2019.

The decrease was mainly due to decreased business travel activities and decreased entertainment expenditure

resulting from COVID-19.

In the nine months ended September 30, 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.

● For the three months ended September 30, 2020, directors

and officers liability insurance premium increased by $23,805, or 43.2%, as compared to the three months ended September 30, 2019.

For the nine months ended September 30, 2020, directors and officers liability insurance premium increased by $72,167, or 58.8%,

as compared to the nine months ended September 30, 2019.

The increase was mainly due to different insurance provider with different

● Other general and administrative expenses mainly consisted

of NASDAQ listing fee, academic sponsorship, and other miscellaneous items.

For the three months ended September 30, 2020, other

general and administrative expenses increased by $49,963, or 76.3%, as compared to the three months ended September 30, 2019,

which was mainly due to an increase in fee from NASDAQ of approximately $29,000, and an increase in other miscellaneous items

of approximately $21,000.

For the nine months ended September 30, 2020, other general and administrative expenses decreased by

$64,577, or 15.9%, as compared to the nine months ended September 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 $30,000.

● In September 2019, we assessed our intangible assets

for any impairment and concluded that there were indicators of impairment as of September 30, 2019 and we calculated that the

estimated undiscounted cash flows were less than the carrying amount of those intangible assets.

We have not been able to realize

the financial projections provided by Dr.

Zhou at the time of the intangible assets purchase and have decided to impair the intangible

assets to zero.

Based on our analysis, we recognized an impairment loss of $1,010,011 for the three and nine months ended September

30, 2019, which reduced the value of intangible assets purchased to zero.

We did not record any impairment charge for the three

and nine months ended September 30, 2020.

a result of the foregoing, for the three months ended September 30, 2020, loss from operations amounted to $3,190,558, as compared

to $5,476,347 for the three months ended September 30, 2019, a decrease of $2,285,789, or 41.7%.

a result of the foregoing, for the nine months ended September 30, 2020, loss from operations amounted to $9,415,577, as compared

to $14,285,412 for the nine months ended September 30, 2019, a decrease of $4,869,835, or 34.1%.

Other income (expense) mainly includes

interest expense, change in fair value of warrants liabilities, allocated financing

costs, and loss from equity-method investment .

Other expense, net, totaled $61,401 for

the three months ended September 30, 2020, as compared to other income, net, of $1,142,289 for the three months ended September

30, 2019, a decrease of $1,203,690, or 105.4%, which was primarily attributable to a decrease in change in fair value of warrants

liabilities of approximately $1,160,000, an increase in interest expense of approximately $30,000, a decrease in other income approximately

$24,000, offset by a decrease in loss from equity method investment of approximately $10,000.

Other expense, net, totaled $163,545 for

the nine months ended September 30, 2020, as compared to other income, net, of $1,007,602 for the nine months ended September 30,

2019, a decrease of $1,171,147, or 116.2%, which was primarily attributable to a decrease in change in fair value of warrants liabilities

of approximately $1,622,000, an increase in interest expense of approximately $66,000, a decrease in other income approximately

$22,000, offset by a decrease in allocated financing expense of approximately $525,000 and a decrease in loss from equity method

investment of approximately $13,000.

We did not have any income taxes expense

for the three and nine months ended September 30, 2020 and 2019 since we incurred losses in the periods.

As a result of the factors described above,

our net loss was $3,251,959 for the three months ended September 30, 2020, as compared to $4,334,058 for the three months ended

September 30, 2019, a decrease of $1,082,099 or 25.0%.

As a result of the factors described above,

our net loss was $9,579,122 for the nine months ended September 30, 2020, as compared to $13,277,810 for the nine months ended

September 30, 2019, a decrease of $3,698,688 or 27.9%.

Net Loss Attributable to Avalon GloboCare

Common Shareholders

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,

financial condition and demand for our medical related consulting services but our 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 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 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:

The net loss attributable to Avalon GloboCare

common shareholders was $3,251,959 or $(0.04) per share (basic and diluted) for the three months ended September 30, 2020,

as compared with $3,858,195, or $(0.05) per share (basic and diluted) for the three months ended September 30, 2019, a change of

$606,236 or 15.7%.

The net loss attributable to Avalon GloboCare

common shareholders was $9,579,122 or $(0.12) per share (basic and diluted) for the nine months ended September 30, 2020,

as compared with $12,621,235, or $(0.17) per share (basic and diluted) for the nine months ended September 30, 2019, a change of

$3,042,113 or 24.1%.

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

Net gains and losses resulting from foreign exchange transactions are included in the results of operations.

of foreign currency translations, which are a non-cash adjustment, we reported a foreign currency translation gain of $39,698 and

a foreign currency translation loss of $69,388 for the three months ended September 30, 2020 and 2019, respectively.

of foreign currency translations, which are a non-cash adjustment, we reported a foreign currency translation gain of $20,941 and

a foreign currency translation loss of $60,009 for the nine months ended September 30, 2020 and 2019, respectively.

This non-cash

gain/loss had the effect of decreasing/increasing our reported comprehensive loss.

Comprehensive Loss

As a result of our foreign currency translation

adjustment, we had comprehensive loss of $3,212,261 and $4,403,446 for the three months ended September 30, 2020 and 2019, respectively.

As a result of our foreign currency translation

adjustment, we had comprehensive loss of $9,558,181 and $13,337,819 for the nine months ended September 30, 2020 and 2019, respectively.

Liquidity and Capital Resources

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, if any.

The 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, financial condition and demand for our medical related consulting

services but our 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 our business for the year of 2020.

Liquidity is the ability of a company to

generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis.

At September 30, 2020 and December 31, 2019, we had cash balance of approximately $1,396,000 and $765,000, respectively.

funds are kept in financial institutions located as follows:

September 30,

United States

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:

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’

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.

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’

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 September 30, 2020:

September 30,

Working capital deficit:

3 unchanged sentences

$ (1,264,368 )

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

Our working capital deficit decreased by

$978,373 to $285,995 at September 30, 2020 from $1,264,368 at December 31, 2019.

The decrease in working capital deficit was primarily

attributable to an increase in cash of approximately $631,000, an increase in rent receivable of approximately $74,000, an increase

in prepaid expenses and other current assets of approximately $181,000, a decrease in accrued professional fees of approximately

$280,000, a decrease in accrued research and development fees of approximately $208,000, a decrease in accrued payroll liability

of approximately $127,000, offset by a decrease in accounts receivable –

related party of approximately $215,000, a decrease

in deferred financing costs of approximately $83,000, an increase in accrued liabilities and other payables of approximately

$66,000, an increase in accrued liabilities and other payables –

related parties of approximately $75,000, and an increase

in operating lease obligation of approximately $76,000.

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 Nine Months Ended

September 30, 2020 Compared to the Nine Months Ended September 30, 2019

The following summarizes the key components

of our cash flows for the nine months ended September 30, 2020 and 2019:

Nine Months Ended

September 30,

Net cash used in operating activities

4 unchanged sentences

Effect of exchange rate on cash

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;

increase in professional staff and services;

increase in public relations and/or sales promotions for existing and/or new brands as

we expand within existing markets or enter new markets.

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 –

Net increase (decrease) in cash

$ (1,179,947 )

Net cash flow used in operating activities

for the nine months ended September 30, 2020 was $6,185,198, which primarily reflected our consolidated net loss of approximately

$9,579,000, and the changes in operating assets and liabilities, primarily consisting of an increase in rent receivable of approximately

$94,000, an increase in prepaid expenses and other current assets of approximately $353,000, a decrease in accrued liabilities

and other payables of approximately $681,000, offset by a decrease in accounts receivable –

related party of approximately

$214,000, an increase in accrued liabilities and other payables –

related parties of approximately $75,000, and the non-cash

items adjustment primarily consisting of depreciation and amortization of approximately $233,000, and stock-based compensation

and service expense of approximately $3,965,000.

Net cash flow used in operating activities

for the nine months ended September 30, 2019 was $5,318,165, which primarily reflected our consolidated net loss of approximately

$13,278,000, the non-cash item adjustment consisting of change in warrants derivative liabilities of approximately $1,622,000,

and the changes in operating assets and liabilities, primarily consisting of an increase in accounts receivable –

parties of approximately $175,000, offset by a decrease in prepaid expenses and other current assets of approximately $241,000,

a decrease in security deposit of approximately $101,000, and an increase in accrued liabilities and other payables of approximately

$327,000, and the add-back of non-cash items mainly consisting of depreciation and amortization of approximately $430,000, stock-based

compensation and service expense of approximately $7,003,000, allocated financing costs of approximately $525,000, and impairment

loss of approximately $1,010,000.

We expect our cash used in operating activities

to increase due to the following:

● the development and commercialization of new products;

● an increase in professional staff and services;

● an increase in public relations and/or sales promotions

for existing and/or new brands as we expand within existing markets or enter new markets.

Net cash flow used in investing activities

was $28,594 for the nine months ended September 30, 2020 as compared to $538,368 for the nine months ended September 30, 2019.

During the nine months ended September 30, 2020, we made additional investment in equity method investment of approximately $29,000.

During the nine months ended September 30, 2019, we made payment for purchase of property and equipment of approximately $379,000,

made payment for improvement of commercial real estate of approximately $16,000, made prepayment for purchase of long-term assets

of approximately $26,000, and made payment for equity method investment of approximately $117,000.

Net cash flow provided by financing activities

was $6,841,783 for the nine months ended September 30, 2020 as compared to $4,693,704 for the nine months ended September 30, 2019.

During the nine months ended September 30, 2020, we received proceeds from related party borrowings of $300,000 and net proceeds

from equity offering of approximately $6,742,000 (net of cash paid for commission and offering costs of approximately $492,000),

offset by repayments made for note payable –

related party of $200,000.

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.

During the nine months ended September 30, 2019,

we received proceeds from note payable –

related party of $1,000,000, and net proceeds for equity offering of approximately

$5,104,000, offset by repayments made for note payable –

related party of $410,000, and repayments for loan payable of $1,000,000.

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

● 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.

The note is not convertible to equity.

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.

As of September 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.

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.

As of September 30, 2020, we sold a total of 3,606,910

shares of our common stock through Jefferies with an aggregate offering price of $6,507,414 and we have approximately $8.5 million

offering price remaining available under 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.

However, the trading price of our common stock and a downturn in the U.S.

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.

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 September 30, 2020, and the effect these obligations

are expected to have on our liquidity and cash flows in future periods.

Payments Due by Period

7 unchanged sentences

AVAR joint venture commitment

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 .

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 September 30, 2020 and 2019, we had an unrealized foreign currency translation gain of approximately

$40,000 and an unrealized foreign currency translation loss of approximately $69,000, respectively, because of changes in the exchange

For the nine months ended September 30, 2020 and 2019, we had an unrealized foreign currency translation gain of approximately

$21,000 and an unrealized foreign currency translation loss of approximately $60,000, 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

As 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