What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-03-30 compared with 2020-04-06 · 706 added, 635 removed, 98 unchanged (93% of the section changed)

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS

AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

common stock has been listed on the Nasdaq Capital Market under the symbol “AVCO”

since November 5, 2018.

shares were traded previously on the OTC Market Group Inc.’s Venture Market (the “OTCQB”) since February 22,

Our common stock has been listed on the Nasdaq Capital Market

under the symbol “AVCO”

since October 18, 2016 and “GTHC”

since November 5, 2018.

Our common shares were traded previously on the OTC Market Group Inc.’s

Venture Market (the “OTCQB”) since February 22, 2016, under the symbol “AVCO”

since October 18, 2016 and

“GTHC”

prior to October 18, 2016.

following table sets forth, for each of the calendar periods indicated, the quarterly high and low bid prices for our common stock

quoted on the OTCQB Marketplace since February 22, 2016 (there were no bid prices prior to February 22, 2016) and on the Nasdaq

Capital Market since November 5, 2018.

The prices in the table represent prices between dealers and do not include adjustments

for retail mark-up, markdown or commission and may not represent actual transactions.

The following table sets forth, for each of the calendar periods

indicated, the quarterly high and low bid prices for our common stock quoted on the Nasdaq Capital Market.

The prices in the table

represent prices between dealers and do not include adjustments for retail mark-up, markdown or commission and may not represent

actual transactions.

First Quarter

6 unchanged sentences

Fourth Quarter

March 30, 2020, the closing trading price of our shares of common stock was $1.37 per share and there were 77,191,160 common shares

On that date, there were approximately 242 registered holders of record of our shares of common stock, based upon

information received from our stock transfer agent.

However, this number does not include beneficial owners whose shares were

held of record by nominees or broker dealers.

Company has never declared or paid any cash dividends on its common stock.

The Company currently intends to retain future earnings,

if any, to finance the expansion of its business.

As a result, the Company does not anticipate paying any cash dividends in the

foreseeable future.

Securities Authorized for

Issuance Under Equity Compensation Plans

presently does not have an equity compensation plan.

Recent Sales of Unregistered

Shares Issued for Services

the year ended December 31, 2019, the Company issued a total of 537,380 shares of its common stock for services rendered and to

These shares were valued at $1,318,600, 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 $1,077,442 for the year ended December

31, 2019 and reduced accrued liabilities of $116,575 and recorded prepaid expense of $124,583 as of December 31, 2019 which will

be amortized over the rest of corresponding service periods.

During the first quarter of 2020, the Company issued a total of 222,577 shares of

its common stock for services rendered and to be rendered.

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

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

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

over the rest of corresponding service periods.

Common Shares Issued for

Warrant Exercise

January 9, 2019, the Company issued 350,856 shares of its common stock upon cashless exercise of warrants to purchase 578,891

shares of common stock.

Common Shares Issued for

Option Exercise

February 27, 2019, the Company issued 158,932 shares of its common stock upon cashless exercise of options to purchase 200,000

shares of common stock.

offers, sales, and issuances of the securities described above were deemed to be exempt from registration under the Securities

Act of 1933 in reliance on Section 4(a)(2) of the Securities Act of 1933 or Regulation D promulgated thereunder as transactions

by an issuer not involving a public offering.

The recipients of securities in each of these transactions acquired the securities

for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were

affixed to the securities issued in these transactions.

Each of the recipients of securities in these transactions was an accredited

or sophisticated person and had adequate access, through employment, business or other relationships, to information about us.

On March 29, 2021,

the closing trading price of our shares of common stock was $1.10 per share and there were 84,405,614 common shares outstanding.

On that date, there were approximately 225 registered holders of record of our shares of common stock, based upon information received

from our stock transfer agent.

However, this number does not include beneficial owners whose shares were held of record by nominees

or broker dealers.

The Company has never declared or paid any cash dividends on

its common stock.

The Company currently intends to retain future earnings, if any, to finance the expansion of its business.

a result, the Company does not anticipate paying any cash dividends in the foreseeable future.

Securities Authorized for Issuance Under Equity Compensation Plans

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.

Recent Sales of Unregistered Securities

Common Shares Issued for Services

During the year ended December 31, 2020, the Company issued

a total of 1,505,921 shares of its common stock for services rendered and to be rendered.

These shares were valued at $1,892,520,

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 $1,670,166 for the year ended December 31, 2020 and reduced accrued liabilities of $187,725

and recorded prepaid expense of $34,629 as of December 31, 2020 which will be amortized over the rest of corresponding service

In January 2021, the Company issued a total of 300,000 shares of its common stock

for services rendered.

These shares were valued at $360,000, the fair market values on the grant dates using the reported closing

share prices on the dates of grant and the Company reduced accrued liabilities of $360,000.

The offers, sales, and issuances of the securities described

above were deemed to be exempt from registration under the Securities Act of 1933 in reliance on Section 4(a)(2) of the Securities

Act of 1933 or Regulation D promulgated thereunder as transactions by an issuer not involving a public offering.

The recipients

of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in

connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions.

Each of the recipients of securities in these transactions was an accredited or sophisticated person and had adequate access,

through employment, business or other relationships, to information about us.

SELECTED FINANCIAL DATA

the Company is a Smaller Reporting Company (as defined by Rule 229.10(f)(1)), the Company is not required to provide the information

under this item.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

following discussion and analysis of our financial condition and results of operations for the years ended December 31, 2019 and

2018 should be read in conjunction with our consolidated financial statements and related notes to those consolidated financial

statements that are included elsewhere in this report.

Certain information contained in the discussion and analysis set forth

below includes forward-looking statements that involve risks and uncertainties.

Note Regarding Forward-looking Statements

statements other than statements of historical fact included in this Form 10-K including, without limitation, statements under

“Management’s Discussion and Analysis of Financial Condition and Results of Operations”

regarding our financial

position, business strategy and the plans and objectives of management for future operations, are forward-looking statements.

As the Company is a Smaller Reporting Company (as defined by

Rule 229.10(f)(1)), the Company is not required to provide the information under this item.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of

operations for the years ended December 31, 2020 and 2019 should be read in conjunction with our consolidated financial statements

and related notes to those consolidated financial statements that are included elsewhere in this report.

Certain information

contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-looking Statements

All statements other than statements of historical fact included in this Form 10-K

including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results

of Operations”

regarding our financial position, business strategy and the plans and objectives of management for future

operations, are forward-looking statements.

When used in this Form 10-K, words such as “anticipate,”

3 unchanged sentences

“intend”

and similar expressions, as they relate to us or our management, identify forward-looking statements.

forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available

to, our management.

Actual results could differ materially from those contemplated by the forward-looking statements as a result

of a number of factors, including those set forth under the risk factors and business sections in this Form 10-K.

Market Conditions

financial performance generally is highly dependent on the business environment in our markets where we operate.

In early 2020,

an outbreak of a novel strain of coronavirus was identified in Wuhan, China.

The coronavirus has since spread

within China and infections have been found in a number of countries around the world, including the United States.

The coronavirus and

its associated impacts on trade, travel, employee productivity and other economic activities has had, and may continue to have,

a destabilizing effect on financial markets and economic activity.

The extent of the impact of the coronavirus on our

operational and financial performance is currently uncertain and cannot be predicted and will depend on certain developments,

including, among others, the duration and spread of the outbreak, its impact on our customers, employees and vendors, and governmental,

regulatory and private sector responses, which may be precautionary, to the coronavirus.

GloboCare Corp.

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

immune effector cell therapy.

Avalon also provides strategic advisory and outsourcing services to facilitate and enhance its clients’

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

Avalon’s

subsidiary and joint venture structure contribute to investor flexibility and R&D focus, enabling Avalon to establish our

leading role in the fields of immune effector cell therapy (including CAR-T and CAR-NK), as well as exosome-based regenerative

therapeutics (our ACTEXTM platform)

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

and similar expressions, as they relate to us or our management,

identify forward-looking statements.

Such forward-looking statements are based on the beliefs of management, as well as assumptions

made by, and information currently available to, our management.

Actual results could differ materially from those contemplated

by the forward-looking statements as a result of a number of factors, including those set forth under the risk factors and business

sections in this Form 10-K.

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 negativeimpact on our operations.

Some tenants have delayed on rent payment and some of the universities and laboratories with which

we collaborate were temporarily closed.

Our general development operations have continued during the COVID-19 pandemic and we have not

had significant disruption.

However, we are uncertain if the COVID-19 pandemic will impact future operations at our laboratory, or our

ability to collaborate with other laboratories and universities.

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 2021.

We have limited cash available to fund planned operations and although we have other

sources of capital described below under “Liquidity and Capital Resources,”

management continues to pursue various

financing alternatives to fund our operations so we can continue as a going concern.

However, the COVID-19 pandemic has created

significant economic uncertainty and volatility in the credit and capital markets.

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.

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.

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.

Through its subsidiary structure with u nique integration of verticals

from innovative 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 COVID-19 related vaccine

and 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:

● Development

of Avalon Clinical-grade Tissue-specific Exosome (“ACTEX™”)

therapeutic and diagnostic targets development utilizing QTY-code protein design technology

with Massachusetts Institute of Technology (MIT)

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.

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, hematopoietic stem/progenitor cell transplant, as well as regenerative therapeutics.

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.

cell therapeutic modalities with Arbele Limited.

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, 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 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.

Avalon has recently completed the standardized bio-production process of tissue-specific, clinical-grade exosomes, a co-development

endeavor with Weill Cornell Medicine with focus on angiogenic exosomes derived from endothelial cells which promote blood vessel

formation and wound healing.

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

plan to initiate international multi-centered clinical studies in unmet medical areas of vascular diseases and wound healing,

including treatment of diabetic foot ulcer.

commercialization phase of Avalon’s ACTEXTM-based product development is underway to enter the markets of skin care, scar

removal, and hair growth through in-house development and strategic partnership.

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

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

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

is owned 60% by Unicorn and 40% by Avalon Shanghai.

Within two years of execution of the Joint Venture Agreement, Unicorn shall

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

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

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

The board of directors of Epicon shall consist of five members

with Unicorn appointing three members and Avalon Shanghai appointing two members.

Epicon will be 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 December 31, 2019, Unicorn has invested the premises of the laboratories of Nanjing BENQ hospital

as GMP level research and manufacture facility and Avalon Shanghai has contributed RMB 4,100,000 (approximately $0.6 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.

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

on accelerating commercial activities related to cell-based technology and its application in immune effector cell therapy (such

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

the use of immune effector cell therapy in oncology and other unmet medical areas.

August 6, 2018, the Company entered into a strategic partnership agreement with Weill Cornell’s cGMP Cellular Therapy Facility

and Laboratory for Advanced Cellular Engineering headed by Dr.

Yen-Michael Hsu.

This strategic partnership aims to co-develop

bio-production and standardization procedures in procurement, storage, processing, clinical study protocols, and bio-banking for

Chimeric Antigen Receptor (CAR)-T therapy, in accordance with the Foundation of Accreditation for Cellular Therapy (FACT) and

American Association of Blood Banks (AABB) standards.

This partnership also includes a CAR-T education program to support and

foster collaborative research and training programs for scientists and clinicians between Weill Cornell and Hebei Yanda LuDaopei

Hospital, which is our main affiliated clinical facility as well as the world’s single largest medical institution in CAR-T

In accordance with the strategic partnership agreement, the Company provides $400,000 annually to Weill Cornell’s

cGMP Cellular Therapy Facility and Laboratory to support the co-development projects.

In addition, the Company will on an annual

basis send one scientist or clinician to Weill Cornell’s cGMP Cellular Therapy Facility and Laboratory to receive relevant

training for three to six months.

July 22, 2019, Avalon established a strategic partnership with GE Healthcare in order to accelerate Avalon’s standardization,

automation and bio-production for clinical-grade CAR-T cells and other immune-effector cells for cellular immunotherapy, as well

as exosomes/extracellular vesicles-based regenerative therapeutics.

This partnership combines GE Healthcare’s renowned expertise

in the design and development of innovative bio-manufacturing technologies and Avalon’s scientific and clinical expertise

for the cellular medicine industry.

This enables Avalon to execute on the complete development lifecycle from innovation through

bio-production to the delivery and management of treatment at hospitals for patients.

This infrastructure and depth of capabilities

ensures the successful execution of the company’s ongoing clinical trials.

Under this partnership, both Avalon and GE Healthcare

will strategically establish automated and standardized GMP cell production capabilities.

Avalon will be given access to GE Healthcare’s

cell processing expertise and products in the form of FlexFactory Cell Therapy platform, FastTrak process development and training

services, as well as extensive SOP and validation protocol library.

Additionally, user training will be conducted both at GE Healthcare

and on-site at Avalon’s Nanjing Epicon GMP facility with access to GE Healthcare’s expert bio-manufacturing resources.

In conjunction with Avalon’s extensive clinical network in China, this strategic partnership empowers Avalon to improve

manufacturing throughput and efficiency, alleviate cost burden, and minimize variability in the automated and standardized bio-production

process of clinical-grade cellular products (such as CAR-T, CAR-NK, and stem cell-derived exosomes/EV), therefore, accelerating

the development of Avalon’s clinical and commercialization programs in cellular medicines.

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.

and operate rental commercial real property in New Jersey, where we are headquartered.

We discontinued sales of exosome isolation

systems in China through our joint venture Genexosome Technologies, Inc.

Feedback received from our research partners is that

our exosome isolation systems did not produce consistent results and did not deliver high exosome yields and concentrations.

value of the Renminbi (“RMB”), the main currency used in China, fluctuates and is affected by, among other things,

changes in China’s political and economic conditions.

The conversion of RMB into foreign currencies such as the U.S.

have generally been based on rates set by the People’s Bank of China, which are set daily based on the previous day’s

interbank foreign exchange market rates and current exchange rates on the world financial markets.

have a limited operating history and our continued growth is dependent upon the continuation of providing medical consulting services

to our only four clients who are related

parties and generating rental revenue from our 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.

We had had an accumulated deficit of $29,361,937 at December 31, 2019, and has incurred recurring

net loss and negative cash flow from operating activities of $18,070,161 and $7,079,871 for the year ended December 31, 2019,

respectively.

In addition, the current cash balance cannot be projected to cover the operating

expenses for the next twelve months from the release date of this report.

These matters raise substantial doubt about our ability

to continue as a going concern.

Our consolidated financial statements appearing elsewhere in this report do not include any adjustments

that might result from the outcome of this uncertainty.

There are no assurances we will be successful in our efforts to generate

significant revenues or report profitable operations or to continue as a going concern, in which event investors would lose their

entire investment in our company.

ability to continue as a going concern is dependent upon our ability to carry out our business plan, achieve profitable operations,

obtain additional working capital funds from our significant shareholders, and or through debt and equity financings.

there can be no assurance that any additional financings will be available to us on satisfactory terms and conditions, if any.

the Company is planning to either borrow funds or raise additional capital through equity financing.

However, we cannot be certain

that such capital (from our stockholders or third parties) will be available to us or whether such capital will be available on

terms that are acceptable to us.

Any such financing likely would be dilutive to existing stockholders and could

result in significant financial operating covenants that would negatively impact our business.

If we are unable to raise sufficient

additional capital on acceptable terms, we will have insufficient funds to operate our business or pursue our planned growth.

accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification

of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue

as a going concern.

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,

time which leads to the advantage of prompt treatment to patients where timing is important related hematologic malignancies.

Avalon has successfully completed the first-in-human clinical trial of its AVA-001 anti-CD19 CAR-T cell therapy as a bridge

to allogeneic bone marrow transplantation for patients with relapsed/refractory B-cell acute lymphoblastic leukemia at the Lu

Daopei Hospital (registered clinical trial number NCT03952923) with excellent efficacy (90% complete remission rate) and minimal

adverse side effects.

Avalon is currently expanding the patient recruitment for AVA-001

to include relapsed/refractory non-Hodgkin lymphoma patients.

● 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.

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 RNA-based, non-viral FLASH-CAR™

co-developed with the Company’s strategic partner Arbele Limited.

The adaptable

FLASH-CAR™

platform can be used to create personalized cell therapy from a patient’s

own cells, as well as off-the-shelf cell therapy from a universal donor.

Our leading candidate, AVA-011, is currently at process development

stage to generate clinical-grade cell-therapy products for subsequent clinical studies.

● 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

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 Avalon (Shanghai) Healthcare Technology

Co., Ltd., or Avalon Shanghai.

We also own and operate rental commercial real property in New Jersey, where we are headquartered.

The value of the Renminbi (“RMB”), the main currency used in China,

fluctuates and is affected by, among other things, changes in China’s political and economic conditions.

The conversion

of RMB into foreign currencies such as the U.S.

dollar have generally been based on rates set by the People’s Bank of China,

which are set daily based on the previous day’s interbank foreign exchange market rates and current exchange rates on the

world financial markets.

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.

Through its subsidiary structure with unique integration of verticals from innovative

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.

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

in Freehold, New Jersey and provides outsourced, customized international healthcare services

to the rapidly changing health care industry primarily focused in the People’s Republic of China.

The Company did

not generate any revenue from development services and sales of developed products segment during the year ended December 31,

These consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which

contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business.

As reflected in the accompanying consolidated financial statements, the Company

had an accumulated deficit of $42,041,375 at December 31, 2020, and has incurred recurring net loss and generated negative cash

flow from operating activities of $12,679,438 and $7,546,100 for the year ended December 31, 2020, respectively.

The Company has

a limited operating history and its continued growth is dependent upon the continuation of providing medical consulting services

to its only few clients who are related parties and generating rental revenue from its income-producing real estate property in

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

and other customers;

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

arising from normal business operations.

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 had negatively

impact on the Company’s operations.

Some tenants have delayed on rent payment and our occupancy of our rental property has

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

The accompanying consolidated financial statements do not include any adjustments

related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that

may result should the Company be unable to continue as a going concern.

Critical Accounting

Use of Estimates

Our discussion

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

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

The preparation of these

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

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

We continually evaluate our estimates,

including those related to the allowance for doubtful accounts, the useful life of property and equipment and investment

in real estate and intangible assets, 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.

We believe the following critical accounting policies affect our more significant judgments and estimates used

in the preparation of the consolidated financial statements.

January 1, 2018, the Company began recognizing revenue under Accounting Standards Codification (“ASC”) Topic 606,

Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective transition method.

of adopting the new revenue standard was not material to the Company’s consolidated financial statements and there was no

adjustment to beginning accumulated deficit on January 1, 2018.

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:

We continually evaluate our

estimates, including those related to 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 the 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

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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 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

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 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 good or service to the customer is separately

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

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 its clients.

The Company is paid for its services by its 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 distinct.

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:

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.

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.

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:

Revenue recognition criteria:

Company recognizes revenue by providing medical related consulting services under written

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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 recorded a “Straight-line rent receivable”

on the consolidated balance sheets.

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

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 .

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

The cumulative difference between lease revenue recognized under the straight-line method and contractual lease payments

are included in rent receivable on the consolidated balance sheets.

We do not offer promotional payments, customer coupons, rebates or other cash redemption

offers to our customers.

We are governed by the income tax

laws of China and the United States.

Income taxes are accounted for pursuant to ASC 740 “Accounting for Income

Taxes,”

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

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

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

Non-controlling

of December 31, 2019, Yu Zhou, a director and former co-chief executive officer of Genexosome, owns 40% of the equity interests

of Genexosome, which is not under our control.

Accounting Standards

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

our consolidated financial statements accompanying this report.

OF OPERATIONS

of Results of Operations for the Years Ended December 31, 2019 and 2018

the year ended December 31, 2019, we had real property rental revenue of $1,155,677, as compared to $1,121,483 for the year ended

December 31, 2018, an increase of $34,194, or 3.0%.

The slight increase was primarily attributable to the increase of a tenant

We expect that our revenue from real property rent will continue to increase in the near future.

the year ended December 31, 2019, we had medical related consulting services revenue from related parties of $355,544, as compared

to $269,287 for the year ended December 31, 2018, an increase of $86,257, or 32.0%.

In 2019, we strengthened our efforts in expanding

our services to various medical related fields.

Therefore, our medical related consulting services revenue increased.

our revenue from medical related consulting services will remain at or near the current yearly level for the near future.

the year ended December 31, 2019, we had revenue from contract services through performing development services for hospitals

and other customers and sales of developed products to hospitals and other customers of $35,084, as compared to $171,516 for the

year ended December 31, 2018, a decrease of $136,432, or 79.5%.

In 2019, 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.

Therefore, our revenue from this segment significantly decreased.

We expect that our revenue from this segment

will decrease in 2020 and beyond due to the loss of customers, and, it may be necessary for us to discontinue this segment.

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 year ended December 31, 2019, our real property operating expenses amounted to $818,662, as compared to $793,714 for the year

ended December 31, 2018, an increase of $24,948, or 3.1%.

The increase was mainly due to an increase in real property management

fee of approximately $31,000 and an increase in depreciation from building improvement of approximately $25,000, offset by a decrease

in other miscellaneous items of approximately $31,000.

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 year ended December 31, 2019, costs of medical related consulting services amounted to $284,472, as compared to $250,320 for

the year ended December 31, 2018, an increase of $34,152, or 13.6%.

The increase was primarily attributable to increase in medical

related consulting services revenue.

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 year ended December 31, 2019, costs of development services for hospitals and other customers and sales of developed products

to hospitals and other customers amounted to $103,258, as compared to $130,238 for the year ended December 31, 2018, a decrease

of $26,980, or 20.7%.

The decrease was mainly due to the significant decrease in revenue from development services and sales of

developed products, offset by the increase in depreciation related to our newly purchased manufacturing equipment.

Property Operating Income

real property operating income for the year ended December 31, 2019 was $337,015, representing an increase of $9,246, or 2.8%,

as compared to $327,769 for the year ended December 31, 2018.

The slight increase was mainly attributable the increase in rental

revenue resulting from the increase of a tenant as described above.

We expect our real property operating income will continue

to increase in the near future.

Profit from Medical Related Consulting Services and Gross Margin

profit from medical related consulting services for the year ended December 31, 2019 was $71,072, as compared to $18,967 for the

year ended December 31, 2018, a change of $52,105, or 274.7%.

margin increased to 20.0% for the year ended December 31, 2019 from gross margin of 7.0% for the year ended December 31, 2018.

The different medical related consulting services agreement in the year ended December 31, 2019 had an effect of improving gross

margin as compared to the year ended December 31 2018.

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

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

Deferred tax is accounted for using the balance sheet liability method in respect

of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements

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

In principle, deferred tax liabilities are recognized

for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probably that taxable profit

will be available against which deductible temporary differences can be 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.

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 consolidated financial statements accompanying this report.

RESULTS OF OPERATIONS

Comparison of Results of Operations for the Years Ended December 31, 2020 and

For the year ended December 31, 2020, we had real property rental

revenue of $1,206,854, as compared to $1,155,677 for the year ended December 31, 2019, an increase of $51,177, or 4.4%.

was primarily attributable to the increase of tenants in 2020.

We expect that our revenue from real property rent will increase

in the near future since our occupancy of our rental property increased in subsequent period.

For the year ended December 31, 2020, we had medical related consulting services

revenue from related parties of $170,908, as compared to $355,544 for the year ended December 31, 2019, a decrease of $184,636,

The decrease was mainly attributable to the decreased demand for our consulting service from our related parties.

expect that our revenue from medical related consulting services will increase in the near future.

For the year ended December 31,

2020, we did not have any revenue from contract services through performing development services for hospitals and other customers and

sales of developed products to hospitals and other customers.

For the year ended December 31, 2019, we had revenue from contract services

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

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.

Costs and Expenses

Real property operating expenses consist of property management fees, property insurance,

real estate taxes, depreciation, repairs and maintenance fees, utilities and other expenses related to our rental properties.

For the year ended December 31, 2020, our real property operating

expenses amounted to $851,754, as compared to $818,662 for the year ended December 31, 2019, an increase of $33,092, or 4.0%.

increase was mainly due to an increase in property management fees of approximately $11,000, and an increase in other miscellaneous

items of approximately $22,000.

Costs of medical related consulting services include the cost of labor and related

benefits, travel expenses related to medical related consulting services, other related consulting costs, and other overhead costs.

For the year ended December 31, 2020, costs of medical related consulting services

amounted to $135,805, as compared to $284,472 for the year ended December 31, 2019, a decrease of $148,667, or 52.3%.

was mainly due to the decrease in medical related consulting services revenue.

Costs of development services and sales of developed products include inventory

costs, materials and supplies costs, labor and related benefits, depreciation, other overhead costs and shipping and handling

costs incurred.

For the year ended December 31, 2019, costs of development services for hospitals

and other customers and sales of developed products to hospitals and other customers amounted to $103,258.

We had neither revenue

nor cost of revenue from this segment in the year ended December 31, 2020.

Real Property Operating Income

Our real property

operating income for the year ended December 31, 2020 was $355,100, representing an increase of $18,085, or 5.4%, as compared

to $337,015 for the year ended December 31, 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.

expect our real property operating income will increase in the near future since our occupancy rate increased in subsequent

Gross Profit from Medical Related Consulting Services

and Gross Margin

Gross profit from medical related consulting services for the year ended December

31, 2020 was $35,103, as compared to $71,072 for the year ended December 31, 2019, a change of $35,969, or 50.6%.

Gross margin increased to 20.5% for the year ended December 31, 2020 from gross

margin of 20.0% for the year ended December 31, 2019.

We estimate that our gross margin from medical related consulting services

segment will remain at its current yearly level.

(Loss) Profit from Development Services and Sales of Developed Products and Gross Margin

gross loss from development services and sales of developed products for the year ended December 31, 2019 was $68,174, as compared

to gross profit of $41,278 for the year ended December 31, 2018, a change of $109,452, or 265.2%.

margin decreased to (194.3)% for the year ended December 31, 2019 from 24.1% for the year ended December 31, 2018.

The significant

decrease in gross margin for the year ended December 31, 2019 as compared to the year ended December 31, 2018 were primarily attributable

(i) the reduced scale of operations resulting from lower revenue, which is reflected in the allocation of fixed costs, mainly

consisting of depreciation and labor costs, to cost of development services and sales of developed products;

(ii) the overhead

costs were allocated to less production volume due to the reduced operations during 2019.

We anticipate that our gross margin

from this segment will continue to be negative in 2020 because we are not optimistic about the market for our development service

and developed products.

Operating Expenses

the years ended December 31, 2019 and 2018, other operating expenses consisted of the following:

Advertising expenses

Compensation and related benefits

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 year ended December 31, 2020.

Our gross loss from development services and sales of developed products for the

year ended December 31, 2019 was $68,174, with a gross margin of (194.3)%.

Other Operating Expenses

For the years ended

December 31, 2020 and 2019, other operating expenses consisted of the following:

Years Ended December 31,

Professional fees

Compensation and related benefits

Research and development

Advertising expenses

Travel and entertainment

Directors and officers liability insurance premium

Rent and related utilities

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Impairment loss

the year ended December 31, 2019, advertising expenses increased by $349,164 or 103.9%.

as compared to the year ended December 31, 2018.

The increase was primarily due to increased

advertising activities incurred to publicize and enhance our image.

We expect that our

advertising expenses will remain in its current level with minimal increase in the near

the year ended December 31, 2019, compensation and related benefits increased by $6,028,368,

or 222.0%, as compared to the year ended December 31, 2018.

The significant increase

was primarily attributable to an increase in stock-based compensation of approximately

$5,407,000 which reflected the value of options granted and vested to our management,

an increase in salary for our three key officers of approximately $354,000, and an increase

in cash compensation for our directors of approximately $379,000, offset by a decrease

in compensation and related benefits for other employees of approximately $112,000, mainly

due to the termination of employment in 2019.

We expect that our compensation and related

benefits will decrease since the stock-based compensation which reflects the value of

options granted to our management will decrease in 2020.

● Professional

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

3 unchanged sentences

by $558,880, or 9.3%, as compared to the year ended December 31, 2019.

was mainly attributable to an increase in consulting fees of approximately $830,000 mainly

due to the increase in share-based consulting fees;

an increase in legal services fee

of approximately $1,077,000 which is primarily attributable to we intend to vigorously

defend against legal action and pursue all available legal remedies as disclosed elsewhere

in this report;

and an increase in investor relations service charges of approximately

$698,000 which mainly attributable to the increase in share-based investor relations

service fees and as a result of the increase in use of investor relations service providers;

offset by a decrease in other miscellaneous items of approximately $88,000.

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

The increase was

primarily attributable to an increase in consulting fees of approximately $989,000 mainly

due to the increase in stock-based consulting fees resulting from the increase in use

of consulting service providers, an increase in accounting service charges of approximately

$103,000 as a result of the increase in stock-based accounting fees and an increase in

other miscellaneous items of approximately $49,000, offset by a decrease in legal service

fees of approximately $582,000 as a result of decrease in use of legal service providers.

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

increase in the near future.

the year ended December 31, 2020, compensation and related benefits decreased by $4,587,541,

or 52.5%, as compared to the year ended December 31, 2019.

The significant decrease was

primarily attributable to a decrease in stock-based compensation of approximately $4,133,000

which reflected the value of options granted and vested to our management, and a decrease

in bonus for our three key officers of approximately $354,000, and a decrease in compensation

and related benefits for other employees and directors of approximately $101,000, mainly

due to the termination of employment in August 2019.

We expect that our compensation

and related benefits will remain in its current yearly level with minimal increase in

the near future.

the year ended December 31, 2019, research and development expenses increased by $1,742,808,

the year ended December 31, 2020, research and development expenses

decreased by $898,014, or 50.4%, as compared to the year ended December 31, 2019.

Our first project with Arbele was completed in

January 2020 and no further research and development project was incurred in 2020.

Our research and development contract with Weill

Cornell Medicine expired as of November 2019.

Therefore, our research and development expenses decreased.

We expect our research

and development expenses will increase in the near future.

the year ended December 31, 2020, advertising expenses decreased by $390,712 or 57.0%

as compared to the year ended December 31, 2019.

The significant increase was primarily

due to the increased research and development activities.

We expect our research and

development expenses will continue to increase in 2020.

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 year ended December 31, 2020, amortization expense from intangible assets decreased

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At the end of

September 2019, our intangible assets were impaired to zero as described elsewhere in

this report and no amortization expense from intangible assets in the fourth quarter

Therefore, amortization expense decreased.

the year ended December 31, 2019, travel and entertainment expense increased by $119,493,

September 2019, our intangible assets were impaired to zero and therefore, no amortization

expense was recorded related to intangible assets in the year ended December 31, 2020.

the year ended December 31, 2020, travel and entertainment expense decreased by $347,505,

or 66.5%, as compared to the year ended December 31, 2019.

The decrease was mainly due

to decreased business travel activities and decreased entertainment expenditure resulting

from COVID-19.

In the year ended December 31, 2020, the spread of COVID-19 has caused

public health officials to recommend precautions to mitigate the spread of the virus,

such as, cease traveling to non-essential jobs and curtail all unnecessary travel, and

stay at home as much as possible.

the year ended December 31, 2020, Directors and Officers Liability

Insurance premium increased by $91,605, or 49.7%, as compared to the year ended December 31, 2019.

The increase was mainly due

to increased business travel activities incurred and increased entertainment expenditure

in order to enhance our visibility.

the year ended December 31, 2019, rent and related utilities expenses decreased by $11,674,

to different insurance provider with different premium.

the year ended December 31, 2020, rent and related utilities expenses increased by $1,337,

or 1.5%, as compared to the year ended December 31, 2019.

The decrease was primarily

attributable to the termination of our two office leases in the fourth quarter of 2018.

general and administrative expenses mainly consisted of academic sponsorship, Directors

and Officers Insurance, and other miscellaneous items.

For the year ended December 31,

2019, other general and administrative expenses increased by $24,864, or 4.0%, as compared

to the year ended December 31, 2018, which was due to our business expansion.

general and administrative expenses mainly consisted of NASDAQ listing fee, academic

sponsorship, and other miscellaneous items.

For the year ended December 31, 2020, other

general and administrative expenses decreased by $45,282, or 9.9%, as compared to the

year ended December 31, 2019, which was mainly due to a decrease in academic sponsorship

expenditure of approximately $95,000, offset by an increase in other miscellaneous items

of approximately $50,000.

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

We have not been able to realize the financial projections provided by Yu Zhou

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

We have not been able to realize the financial projections provided by Dr.

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

3 unchanged sentences

We did not record any impairment charge for the year ended December 31, 2020.

from Operations

a result of the foregoing, for the year ended December 31, 2019, loss from operations amounted to $19,377,230, as compared to

$7,631,135 for the year ended December 31, 2018, a change of $11,746,095, or 153.9%.

Income (Expense)

income (expense) mainly includes interest expense, change in fair value of warrants liabilities, allocated financing costs, loss

from equity-method investment, foreign currency transaction gain (loss), and loss from noncontrolling interest deficit adjustment.

income, net, totaled $1,307,069 for the year ended December 31, 2019, as compared to other expense, net, $421,161 for the year

ended December 31, 2018, a change of $1,728,230, which was primarily attributable to an increase in change in fair value of warrants

liabilities of approximately $2,817,000, a decrease in interest expense of approximately $232,000, a decrease in foreign currency

transaction loss of approximately $120,000, offset by an increase in allocated financing expense of approximately $525,000, an

increase in loss from noncontrolling interest deficit adjustment of approximately $862,000, and a decrease in other income of

approximately $50,000.

did not have any income taxes expense for the years ended December 31, 2019 and 2018 since we incurred losses in the periods.

a result of the factors described above, our net loss was $18,070,161 for the year ended December 31, 2019, as compared to $8,052,296

for the year ended December 31, 2018, a change of $10,017,865 or 124.4%.

Attributable to Avalon GloboCare Corp.

Common Shareholders

Loss from Operations

As a result of the foregoing, for the year

ended December 31, 2020, loss from operations amounted to $12,454,019, as compared to $19,377,230 for the year ended December

31, 2019, a decrease of $6,923,211, or 35.7%.

Other Income (Expense)

Other income (expense) mainly includes interest expense, change

in fair value of warrants liabilities, allocated financing costs, loss from equity method investment, and loss from noncontrolling

interest deficit adjustment .

Other expense, net, totaled $225,419 for the year ended December 31, 2020, as compared

to other income, net, of $1,307,069 for the year ended December 31, 2019, a decrease of $1,532,488, or 117.2%, which was primarily

attributable to a decrease in change in fair value of warrants liabilities of approximately $2,817,000, an increase in interest

expense of approximately $86,000, a decrease in other income of approximately $21,000, offset by a decrease in allocated financing

expense of approximately $525,000, a decrease in loss from noncontrolling interest deficit adjustment of approximately $862,000,

and a decrease in loss from equity method investment of approximately $4,000.

We did not have any income taxes expense for the years ended December 31, 2020 and

2019 since we incurred losses in these periods.

As a result of the factors described above, our net loss was $12,679,438 for the

year ended December 31, 2020, as compared to $18,070,161 for the year ended December 31, 2019, a decrease of $5,390,723 or 29.8%.

Net Loss Attributable to Avalon GloboCare Corp.

common shareholders was $18,070,161 or $(0.24) per share (basic and diluted) for

the year ended December 31, 2019, as compared with $7,774,122, or $(0.11) per share (basic and diluted) for the year ended December

31, 2018, a change of $10,296,039 or 132.4%.

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 loss of $20,887 and $143,498 for the year ended December 31, 2019 and 2018, respectively.

This non-cash loss had the

effect of increasing our reported comprehensive loss.

Comprehensive

a result of our foreign currency translation adjustment, we had comprehensive loss of $18,091,048 and $8,195,794 for the year

ended December 31, 2019 and 2018, respectively.

and Capital Resources

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 December 31, 2019 and 2018, we had cash balance of approximately $765,000 and $2,252,000, respectively.

The net loss attributable to Avalon GloboCare Corp.

common shareholders was $12,679,438

or $(0.16) per share (basic and diluted) for the year ended December 31, 2020, as compared with $18,070,161, or $(0.24) per share

(basic and diluted) for the year ended December 31, 2019, a change of $5,390,723 or 29.8%.

Foreign Currency Translation Adjustment

Our reporting currency is the U.S.

The functional currency of our parent

company, AHS, Avalon RT 9, Genexosome, Avactis, and Exosome, is the U.S.

dollar and the functional currency of Avalon Shanghai

and Beijing Genexosome, is the Chinese Renminbi (“RMB”).

The financial statements of our subsidiaries whose functional

currency is the RMB are translated to U.S.

dollars using period end rates of exchange for assets and liabilities, average rate

of exchange for revenues, costs, and expenses and cash flows, and at historical exchange rates for equity.

Net gains and losses

resulting from foreign exchange transactions are included in the results of operations.

As a result of foreign currency translations,

which are a non-cash adjustment, we reported a foreign currency translation gain of $67,237 and a foreign currency translation

loss of $20,887 for the years ended December 31, 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 $12,612,201 and $18,091,048 for the years ended December 31, 2020 and 2019, respectively.

Liquidity and Capital Resources

The Company has a limited operating history and its continued growth is dependent

upon the providing medical consulting services to its only few clients who are related parties and generating rental revenue from

its income-producing real estate property in New Jersey and performing development services for hospitals and other customers

and sales of developed products to hospitals and other customers;

hence generating revenues, and obtaining additional financing

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

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

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 2021.

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 December 31, 2020 and 2019, we had

cash balance of approximately $727,000 and $765,000, respectively.

These funds are kept in financial institutions located as follows:

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’

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

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.

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, 2018 to December 31, 2019:

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’

shareholder has a tax treaty

with China that provides for a different withholding arrangement.

The following table sets forth a summary of changes in our working capital from

December 31, 2019 to December 31, 2020:

Working capital deficit:

Total current assets

$ (2,054,337 )

Total current liabilities

2 unchanged sentences

$ (1,264,368 )

Our working capital

decreased by $3,748,080 to working capital deficit of $1,264,368 at December 31, 2019 from working capital of $2,483,712 at December

The decrease in working capital was primarily attributable to a decrease in cash of approximately $1,487,000, a decrease

in security deposit of approximately $102,000, a decrease in prepaid expenses and other current assets of approximately $622,000,

an increase in accrued professional fees of approximately $1,077,000, and an increase in accrued research and development fees

of approximately $650,000, offset by an increase in accounts receivable –

related party of approximately $215,000, and a

decrease in accrued payroll liability of approximately $156,000.

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 Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018

following summarizes the key components of our cash flows for the years ended December 31, 2019 and 2018:

capital deficit increased by $41,688 to $1,306,056 at December 31, 2020 from $1,264,368 at December 31, 2019.

increase in working capital deficit was primarily attributable to a decrease in accounts receivable –

related party of

approximately $215,000, a decrease in deferred financing costs of approximately $89,000, an increase in accrued liabilities

and other payables of approximately $89,000, an increase in accrued liabilities and other payables of approximately $71,000,

an increase in accrued liabilities and other payables –

related parties of approximately $119,000, and an increase in

operating lease obligation of approximately $76,000, offset by an increase in prepaid expenses and other current assets of

approximately $51,000, a decrease in accrued research and development fees of approximately $136,000, and a decrease in

accrued payroll liability and directors’

compensation of approximately $334,000.

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 Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019

The following summarizes

the key components of our cash flows for the years ended December 31, 2020 and 2019:

Years Ended December 31,

Net cash used in operating activities

6 unchanged sentences

$ (1,487,396 )

cash flow used in operating activities for the year ended December 31, 2019 was $7,079,871, which primarily reflected our consolidated

net loss of approximately $18,070,000, the non-cash item adjustment consisting of change in warrants derivative liabilities of

approximately $2,817,000, and the changes in operating assets and liabilities, primarily consisting of an increase in accounts

receivable –

related party of approximately $217,000, offset by a decrease in prepaid expenses and other current assets

of approximately $480,000, and an increase in accrued liabilities and other payables of approximately $1,230,000, and the add-back

of non-cash items mainly consisting of depreciation and amortization of approximately $507,000, stock-based compensation and service

expense of approximately $9,209,000, allocated financing costs of approximately $525,000, impairment loss of approximately $1,010,000,

and loss from noncontrolling interest deficit adjustment of approximately $862,000.

cash flow used in operating activities for the year ended December 31, 2018 was $4,396,024, which primarily reflected our net

loss of approximately $8,052,000, and the changes in operating assets and liabilities, primarily consisting of an increase in

prepaid expenses and other current assets of approximately $468,000, and an increase in security deposit of approximately $97,000,

offset by an increase in accrued liabilities and other payables of approximately $642,000, and the add-back of non-cash items

mainly consisting of depreciation and amortization expense of approximately $523,000 and stock-based compensation and service

expense of approximately $3,093,000.

our cash used in operating activities to increase due to the following:

Net cash flow used in operating activities for the year

ended December 31, 2020 was $7,546,100, which primarily reflected our consolidated net loss of approximately $12,679,000, and

the changes in operating assets and liabilities, primarily consisting of an increase in prepaid expenses and other current assets

of approximately $207,000, a decrease in accrued liabilities and other payables of approximately $837,000, offset by a decrease

in accounts receivable –

related party of approximately $217,000, an increase in accrued liabilities and other payables

related parties of approximately $119,000, and the non-cash items adjustment primarily consisting of depreciation and

amortization of approximately $315,000, and stock-based compensation and service expense of approximately $5,494,000.

Net cash flow used in operating

activities for the year ended December 31, 2019 was $7,079,871, which primarily reflected our consolidated net loss of

approximately $18,070,000, the non-cash item adjustment consisting of change in warrants derivative liabilities of

approximately $2,817,000, and the changes in operating assets and liabilities, primarily consisting of an increase in

accounts receivable –

related party of approximately $217,000, offset by a decrease in prepaid expenses and other

current assets of approximately $480,000, and an increase in accrued liabilities and other payables of approximately

$1,230,000, and the add-back of non-cash items mainly consisting of depreciation and amortization of approximately $507,000,

stock-based compensation and service expense of approximately $9,209,000, allocated financing costs of approximately

$525,000, impairment loss of approximately $1,010,000, and loss from noncontrolling interest deficit adjustment of

approximately $862,000.

We 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 $552,967 for the year ended December 31, 2019 as compared to $1,307,813 for the year

ended December 31, 2018.

During the year ended December 31, 2019, we made payment for purchase of property and equipment of approximately

$377,000, made payment for improvement of commercial real estate of approximately $16,000, and made payment for equity method

investment of approximately $159,000.

During the year ended December 31, 2018, we made payment for purchase of property

and equipment of approximately $113,000, made payment for improvement of commercial real estate of approximately $392,000, made

payment for previously acquired business of approximately $350,000, and made payment for equity method investment of approximately

cash flow provided by financing activities was $6,154,910 for the year ended December 31, 2019 as compared to $5,042,217 for the

year ended December 31, 2018.

During the year ended December 31, 2019, we received proceeds from borrowings from a related party

of $3,600,000, and net proceeds from equity offering of approximately $5,365,000 (net of offering costs of approximately $909,000),

offset by repayments made to a related party for borrowings of $410,000, repayments for loan payable of $1,000,000, and payment

made for repurchase of warrants of 1,400,000.

During the year ended December 31, 2018, we received net proceeds from equity

offering of approximately $7,065,000 (net of offering costs of approximately $486,000), offset by repayments made for loan of

approximately $500,000, repurchase of common stock of approximately $523,000, and refund for refundable deposit in connection

with Share Subscription Agreement of approximately $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 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 $169,185

for the year ended December 31, 2020 as compared to $552,967 for the year ended December 31, 2019.

During the year ended December

31, 2020, we made payment for improvement of commercial real estate of approximately $111,000 and made additional investment in

equity method investment of approximately $58,000.

During the year ended December 31, 2019, we made payment

for purchase of property and equipment of approximately $377,000, made payment for improvement of commercial real estate of approximately

$16,000, and made payment for equity method investment of approximately $159,000.

Net cash flow provided by financing activities was $7,664,281 for the year ended

December 31, 2020 as compared to $6,154,910 for the year ended December 31, 2019.

During the year ended December 31, 2020, we

received proceeds from related party borrowings of $600,000 and net proceeds from equity offering of approximately $7,264,000

(net of cash paid for commission and offering costs of approximately $540,000), offset by repayments made for note payable –

related party of $200,000.

During the year ended December 31, 2019, we received proceeds from borrowings from

a related party of $3,600,000, and net proceeds from equity offering of approximately $5,365,000 (net of offering costs of approximately

$909,000), offset by repayments made to a related party for borrowings of $410,000, repayments for loan payable of $1,000,000,

and payment made for repurchase of warrants of 1,400,000.

Our 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

3 unchanged sentences

cost of being a public company.

In the third quarter

of 2019, we had secured a $20 million credit facility 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

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 the date that we filed our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, the prospectus

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

of the date hereof, the aggregate market value of our outstanding common stock held by non-affiliates, or public float,

was approximately $39.564 million, based on 23.691 million 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 January 30, 2020 (a date within 60 days of the date hereof), calculated in accordance with General Instruction I.B.6 of Form S-3.

a result of our lower public float calculation, the available shares of our common stock under the Sales Agreement will be reduced

from $20.0 million to $13.1 million as of the date hereof.

will need to raise additional funds, particularly if we are unable to generate positive cash flow as a result of our operations.

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.

Other than funds received from the sale of our equity and advances from our related

parties, and cash resource generating from our operations, we presently have no other significant alternative source of working

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.

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 December 31, 2020, the total

principal amount outstanding under the Credit Line was $3.2 million and we have approximately $16.8 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.

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.

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.

As of December 31, 2020, we sold a total of 4,052,008 shares of our common stock through Jefferies

with an aggregate offering price of $7,077,835 and we have approximately $7.9 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.

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 financing.

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 December 31, 2019, and the effect these obligations are expected to have on our liquidity and cash flows in future periods.

Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing

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

equity and debt markets could make it more

difficult to obtain financing through the issuance of equity or debt securities.

Even if we are able to raise the funds required,

it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us

to seek alternative 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

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.

have not considered this alternative, nor do we view it as a likely occurrence.

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

Office leases commitment

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 December 31, 2020, and the effect these obligations are expected to have on

our liquidity and cash flows in future periods.

Payments Due by Period

Contractual obligations:

Less than 1 year

Operating lease commitment

Acquisition consideration

4 unchanged sentences

AVAR joint venture commitment

Sheet Arrangements

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 years ended December 31, 2019 and 2018, we had unrealized foreign currency translation

loss of approximately $21,000 and $143,000, respectively, because of changes in the exchange rate.

effect of inflation on our revenue and operating results was not significant.

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 years ended December 31, 2020 and 2019,

we had an unrealized foreign currency translation gain of approximately $67,000 and an unrealized foreign currency translation

loss of approximately $21,000, respectively, because of changes in the exchange rate.

The 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.

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-K

Item 5. Market for Registrant’s Common Equity